Denial of Cenvat Credit due to procedural lapse

PJ/Case Laws/2011-12/1507

Case: COMMR. OF C. EX, CUS & S.T., DAMAN versus J.J. POLYPLAST LTD.

Citation: 2010 (252) E.L.T. 511 (Guj.)

Issue:- Cenvat Credit cannot be denied due to procedural lapse which is rectifiable.

Brief Facts:- The penalty was imposed on the respondent assessee under Rule 25 of the Central Excise Rules, 2002 read with Section 11AC of the Central Excise Act. M/s. J.J. Polyplast Ltd., Unit No. 6 Gitanjali Apartment, Daman, was registered as dealer with Central Excise Range-III, North Daman Division. However, the said Unit had surrendered its registration certificate on 1-6-2005 and thereafter imported goods under Bill of Entry No. 888064 dated 9-6-2005. On the strength of said Bill of Entry, M/s. J.J. Polyplast Limited, Mumbai, who has registered as a dealer with Mumbai-II Commissionerate, availed credit on the basis of documents issued by M/s. J.J. Polyplast, Mumbai.

Revenue filed appeal before the High Court on the issue that Whether in the facts and circumstances of the case, the CESTAT is right in law in allowing the Appeal of the assessee against penalty imposed under Rule 25 of the Central Excise Rules, 2002 read with Section 11AC of the Central Excise Act after holding that the assessee’s contravention of provisions of Rule 9(1)(a)(iii) of CENVAT Credit Rules, 2004 read with Rule 11 of the Central Excise Rules, 2002 is rectifiable procedural lapse/defects?”

Appellant’s Contention:- It is submitted the penalty was rightly imposed on the respondent assessee under Rule 25 of the Central Excise Rules, 2002 read with Section 11AC of the Central Excise Act and the alleged contravention cannot be said to be rectifiable procedural lapse/defects. It was further submitted that M/s. J.J. Polyplast Ltd., Unit No. 6 Gitanjali Apartment, Daman, was registered as dealer with Central Excise Range-III, North Daman Division. However, the said Unit had surrendered its registration certificate on 1-6-2005 and thereafter imported goods under Bill of Entry No. 888064 dated 9-6-2005. On the strength of said Bill of Entry, M/s. J.J. Polyplast Limited, Mumbai, who has registered as a dealer with Mumbai-II Commissionerate, availed credit on the basis of documents issued by M/s. J.J. Polyplast, Mumbai. It is further submitted that there is statutory violation and penalty was rightly imposed, the Tribunal has committed error in deleting the said penalty.

Reasoning of Judgment:- The High Court based its judgment on the order passed by Tribunal. In the order passed by tribunal has specifically held in its order that apart from the fact that Rule 25 is applicable only to manufacturer, the issue as to whether Head Office can issue modavatable invoices in respect of the goods imported by the respondent in the name of unit, stands decided by various decisions of the Tribunal.

The Tribunal thereafter held that the invoices could have been endorsed by the Daman Office of the same appellant in the name of their Mumbai Office. This is rectifiable defect and can be rectified at any point of time. There being no dispute otherwise about the entitlement of the Modvat Credit, such procedural lapse should not result in denial of benefits to them otherwise admissible credit. After considering this position of law, the Tribunal has set aside the impugned order of penalty and allowed the Appeal with consequential relief in favour of the respondent assessee.

The High Court did not find any infirmity in the order passed by the Tribunal that could raise any substantial question of law.

Decision:- Appeal summarily dismissed.

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PJ/Case Laws/2011-12/1507

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