100% CENVAT Credit taken on capital goods in the first year itself, whether assessee liable to reverse the credit and pay interest, penalty?

PJ/CASE LAW/2015-16/2978

Case-BOMBAY PAINTS LTD. Versus COMMISSIONER OF C. EX., MUMBAI-II

Citation-2015 (326) E.L.T. 335 (Tri. - Mumbai)

Brief Facts-Brief facts of the case are that the appellant is manufacturers of enamel, paints, thinner and varnish. They procured Steatite Ceramic, used in the manufacture of paints, and took CENVAT Credit of duty paid on these goods. Revenue was of the view that as the “Steatite Ceramic” falls under CTH 6804 therefore the goods are capital goods and the appellants are not entitled to take 100% CENVAT Credit in the first year. Proceedings were initiated against the appellant and CENVAT Credit was denied to the extent of 50%, interest was demanded and penalty was also imposed on the appellant. Aggrieved by the said order, the appellant is before tribunal.

Appelants Contention-The appellant is in appeal against the impugned order for denying CENVAT Credit on “Steatite Ceramic” falling under CTH 6804.

Respondents Contention-Revenue was of the view that as the “Steatite Ceramic” falls under CTH 6804 therefore the goods are capital goods and the appellants are not entitled to take 100% CENVAT Credit in the first year.

Reasoning Of Judgement-Heard both sides. Although the appellant is not in dispute as these are not capital goods and they are entitled to take CENVAT Credit to the tune of 50% of duty paid in the first year as per Rule 4(b) of Cenvat Credit Rules, 2004. Therefore, for the first year availment of CENVAT Credit is restricted to 50% of the duty paid but the appellant is entitled to take the remaining 50% CENVAT Credit in the subsequent year. In the circumstance, at the most, interest for the intervening period was required to be demanded from the appellant. The adjudicating authority has directed the appellant to reverse the excess 50% of CENVAT Credit for the first year along with the interest and also imposed penalty which were not required. In these circumstances, the tribunal dispose of the appeal of the appellant by confirming the demand of interest for the intervening period and setting aside the demand of duty and penalty against the appellant. Tribunal had also gone through the case law relied upon by the learned A.R. in the case, of SRF Ltd. - 2012-TIOL-695-CESTAT-MAD = 2012 (280) E.L.T. 554 (Tri.-Chen.) wherein the penalty was levied on the appellant. They have seen in the impugned order the penalty is imposed under Section 11AC read with Rule 15 of the Cenvat Credit Rules, 2004 the same are not imposable on the appellant but in the case of SRF Ltd. (supra) the penalty was imposed on the appellant for contravening of Rule 3(4) of the Cenvat Credit Rules, 2004 but in this case duty was demanded under Section 11A of the Central Excise Act, 1944. Therefore, the said case law is not applicable to the facts of this case. In the above term, the appeal is partly allowed with consequential relief (if any) as discussed here-in-above.

Decision-Appeal partly allowed

Comment-The gist of the case is that as per Rule 4(b) of Cenvat Credit Rules, 2004 cenvat credit on capital goods is restricted to 50% for the first year but the assessee can take remaining 50% credit in the subsequent year.And, since in the given case the assessee has taken 100% credit in the first year only he is liable to pay interest for the intervening period.But the reversal in excess of 50% of Cenvat credit for the first year and imposition of penalty were not required under Section 11AC of Central Excise Act, 1944 and Rule 15 of Cenvat Credit Rules, 2004.And, accordingly the appeal is partly allowed.

Prepared By-Neelam Jain

Comments

PJ/CASE LAW/2015-16/2978

Post a Comment

Query