Cenvat vCredit is substantive right and cannot be denied for procedural defect

PJ/Case Laws/2012-13/1077

Case: M/s SHAH YARN TEX (P) LTD Vs COMMISSIONER OF CENTRAL EXCISE, COIMBATORE

Citation: 2008-TIOL-1975-CESTAT-MAD

Issue:- Demand of duty with interest confirmed – Cenvat credit being a substantive right cannot be denied on ground of non-following of procedure.

Brief Facts:- Appellants in one appeal were engaged in the manufacture of mercerized cotton yarn during the period of dispute (01.04.2003 to 01.11.2003). They had procured duty-paid grey yarn and mercerized the same and cleared the product without payment of duty during the said period. Admittedly, during the said period, mercerized yarn was dutiable, though, both prior to and after that period, it was exempted.

The Original Authority confirmed demand of duty on the mercerized yarn cleared by appellant during the above period. It also imposed a penalty on them. The decision of the Original Authority was upheld by the Commissioner (Appeals).

Hence appeal is filed before the Tribunal.

The Second appeal is filed by a Director of the appellant-company against the penalty imposed on him by the Lower Authorities under Rule 26 of the Central Excise Rules, 2002.

Reasoning of Judgment:- The Tribunal found no valid ground against the demand of duty on mercerized yarn. However, rejection, by the lower Authorities, of the appellant's prayer for grant of input-duty credit is apparently unjustifiable. Where duty is demanded on final product, the assessee should, in the normal course, be allowed to utilise input-duty credit to pay such duty. The reason stated by the lower Authorities in this case for denial of CENVAT credit on input (grey yarn) is that the appellants did not follow the procedure like filing of declaration etc. It is trite law that a substantive right is not to be denied on the ground of infraction of procedural provision. After all, procedure is only a handmaid of justice.

Decision:- Appeal is partly allowed.

Comment:- When the duty is demanded for the past period then the cenvat credit should also be allowed. It is settled principle now. But the department goes on denying the same. We have come across a situation where the adjudication officer said that since the manufacturer was not registered with the department then the cenvat cannot be allowed. When we asked him whether the department will demand duty from us as we were not registered? Then there was no answer available.

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PJ/Case Laws/2012-13/1077

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