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PJ/CASE LAW/2015-16/2850

Reversal of credit on “As such” clearance of imported goods amounts to non-availment of credit.

Case:-JSW STEEL LTD. VERSUS COMMISSIONER OF C. EX., THANE-I

Citation:- 2014 (308) E.L.T. 775 (Tri. - Mumbai)

Brief Facts:-The appellant is in appeal against the impugned order wherein demand of Rs. 10,96,41,251/- has been confirmed against them on account of wrongful availment of Cenvat credit along with interest and equivalent amount of penalty. The brief facts of the case are that appellant imported H.R. Carbon Steel Plates through Bill of Entry No. 829881, dated 19-3-2008 and 838049, dated 5-5-2008, and availed Cenvat credit of the CVD, Education Cess, Secondary and Higher Education Cess. The allegation of the Revenue is that the impugned goods are neither their inputs nor capital goods, and these goods are the finished goods, therefore, the appellant has purchased the said goods for their trading activity and no manufacturing activities are involved in the said goods. As the appellant has not taken necessary permission to bring the said goods in their premises for trading purpose, therefore, they are not entitled to take Cenvat credit on the said goods. Accordingly, show cause notice was issued to deny the Cenvat credit on the said goods along with interest and imposition of penalty. The show cause notice was adjudicated and impugned order was passed. Aggrieved from the said order, appellant is before Tribunal.

Appellants Contention:-Shri M.H. Patil, ld. Counsel for the appellant appeared and submits that in this case the appellant is manufacturer of HR MS Plates. The appellant imported the said goods for rolling purpose to reduce the thickness of the same and thereafter to clear in the market, after doing the process of manufacturing after importation of the said goods. The appellant was not able to process the goods for quality reasons/the process was not viable. The appellant decided to clear the said goods on payment of duty under Rule 3(5) of the Cenvat Credit Rules, 2004 by reversing the Cenvat credit availed on the said goods. It is submitted that quantity of 8.876 MTs was issued for conversion and same has been cleared on payment of duty rest of the goods were cleared as such. It is also submitted that as they have cleared the goods, as such they are not required to pay duty at all and the intention of the appellant was not to do any trading activity therefore no permission was required. Hence, the impugned order is required to be set aside and appeal be allowed.

Respondents Contention:-On the other hand, learned AR opposed the contention of the ld. Counsel and submits that the appellant is a manufacturer of HR Mild Steel and the impugned goods are H.R. Carbon Steel Plates, therefore, these goods are not required for the appellant as input moreover these goods were not issued for production at all as per their production slips. He further submits that these goods have been cleared showing description in the invoice HR MS, therefore, by no stretch of imagination it can be said that it is the same goods which were cleared by the appellant on reversal of the Cenvat credit. Hence, impugned order is required to be upheld.

Reasoning Of Judgement:-Heard both sides and considered the submissions. In this case it is no doubt that the appellant has imported HR Carbon Steel Plates. It is also not in doubt that the description while clearing the said goods which the appellant shows is HR MS Plates but the invoice clearly indicates that they have reversed the credit taken on the said goods under Rule 3(5) of the Cenvat Credit Rules, 2004. This discrepancy came to the knowledge during the course of audit conducted in the factory of the appellant. When a invoice showing that the assessee has cleared the goods as such by reversal of the Cenvat credit under Rule 3(5) of the Cenvat Credit Rules, 2004, no inquiry has been conducted at the end of the buyer and it has also not ascertained from the records that under which invoice the credit has been taken on the said goods. Further, tribunal find that it is not alleged that the appellant has not reversed the Cenvat credit availed on the said goods. In these circumstances, the allegation of the department that the appellant has imported the said goods for trading activity and not sought any permission for their trading activity is not acceptable. As it is apparent from the record that appellant is a manufacturer of HR MS plates and the impugned goods have been imported by them for conversion into lesser thickness. The said contention of the appellant has not been rebutted by the Revenue with any cogent evidence. In these circumstances, the contention of the appellant is accepted that the appellant imported the said goods for manufacturing activity as the manufacturing activity was not viable for them, therefore, the said goods were cleared as such by reversal of the Cenvat credit as per Rule 3(5) of the Cenvat Credit Rules, 2004, and the reversal of credit is not disputed by the department. In these circumstances, they hold that the duty paid by the appellant at the time of clearance of these goods by reversal of Cenvat credit amounts to non-availment of the Cenvat credit of the said goods. Therefore the impugned order is not sustainable. With these observations, the impugned order is set aside, appeal is allowed with consequential relief if any.

Decision:- Appealallowed.

Comment:- The crux of the case is that as HR MS Plates were imported for conversion into lesser thickness for manufacturing purpose but as process was held to be not viable due to quality reasons, said goods were cleared on payment of duty by reversing Cenvat credit under Rule 3(5) of Cenvat Credit Rules, 2004 and therefore it cannot be held that the appellant had wrongly availed cenvat credit on trading of goods. Moreover, reversing credit amounts to non-availment of cenvat credit.

Prepared By:- Neelam Jain
 

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