Admissibility of Cenvat Credit

PJ/Case Laws/2011-12/1293

Case: COMMISSIONER OF C. EX., BANGALORE-III v/s HIMALAYA DRUG CO. LTD.

Citation: 2011(270) E.L.T. 171 (Kar.)

Issue:- Availability of cenvat credit on goods received by sister unit from assessee who initially did not pay duty but paid the same afterwards.

Brief Facts:- Assessee has a factory at New Delhi where they manufacture semi-finished ayurvedic medicines. His understanding was the said products were not excisable. Therefore, assessee cleared those goods to their sister unit at Bangalore without payment of duty.

Department was of the view that it is excisable to tax. When it was demanded by the Excise officials, assessee has deposited the said amount. After depositing the said amount, the assessee took cenvat credit at the Bangalore factory.

However, they challenged the decision of the Commissioner of Central Excise, New Delhi in appeal. The assessee's contention was accepted and it was held that the case does not warrant imposing of penalty and set aside the penalty imposed and the said proceedings have reached finality.

The Excise Authorities at Bangalore proceeded against the assessee on the ground that credit taken by them is irregular. The said decision was challenged by the assessee before the Commissioner (Appeals) which dismissed the appeal on the ground that the assessee had not taken credit on the basis of the invoices issued at the time of clearance of the goods. It is at a later point of time, he has made certain deposits and therefore, he could not avail the cenvat credit.

Aggrieved by the said order, the assessee preferred an appeal to the Tribunal. The Tribunal held that this is an exceptional case and the assessee is entitled for the credit of duty deposited by him.

Against the decision of the Tribunal, Revenue is in appeal before the High Court.

Reasoning of Judgment:- The High Court held that though the excise duty was not paid at the time of clearance strictly in accordance with rules governing the same, the assessee cannot be found fault with because according to the assessee the said goods were not excisable to tax. Now the said stand has been vindicated by the order of the Appellate authority, which has become final. Because of the insistence of the Department in order to gain peace, the assessee has deposited the said amount. Once assessee deposited the amount in principle, he is entitled to avail the benefit of cenvat credit, which he has done at Bangalore Factory. The manufacturer has to pay tax at the point of clearance and then collect it from his customers. Once, he pays the tax, he is entitled to avail the credit and subsequently utilize the same. At any rate, for the fault of the department, the assessee cannot be made to suffer.

Decision:- Appeal dismissed.

Comments

S.L.Bansal on 25 August, 2011 wrote:

Excellent judgment. It can help so many assessees who are ignorant. The ratio is apslo applicable to bonafide short levy of duty which is being paid at subsequent stage.

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PJ/Case Laws/2011-12/1293

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