1. The present appeal is directed against the impugned order dated 23.3.2009 passed by the Commissioner (A) whereby the Commissioner (A) has rejected the appeal of the appellant and upheld the Order-in-Original.
2. Briefly the facts of the present case are that the appellants are manufacturers of P & P Medicaments falling under Chapter 30 of Central Excise Tariff Act, 1985 and are availing benefit of CENVAT credit under the provisions of CENVAT Credit Rules, 2004. On verification of the records by the internal audit party, it was noticed that the appellants have procured inputs from M/s. Mahima Life Sciences Pvt. Ltd., 100% Export Oriented Unit (EOU) and have availed CENVAT credit in excess of the amount actually eligible. On these allegations, a show-cause notice dated 25.1.2008 was issued to the appellant proposing to demand and recover the irregular credit along with interest and also proposed penalty under Rule 15 of the CENVAT Credit Rules (CCR), 2004 read with Section 11AC. After following due process of law, the adjudicating authority has held that in respect of invoice No. 141 dated 18.7.2007 and Invoice No. 191 dated 23.8.2007 issued by the said supplier, the appellant has availed CENVAT credit in excess of the actual eligibility to the extent of Rs. 1,44,130/- which is determined as per formula prescribed under Rule 3(7) of the CCR, 2004. The adjudicating authority has demanded the irregular credit along with interest and imposed penalty. Aggrieved by the said order, appellant filed appeal before the Commissioner (A) and the Commissioner (A) vide the impugned order has rejected the appeal, hence the present appeal.
3. Heard both the parties and perused the material on record.
4. Learned counsel for the appellant submitted that the impugned order is not sustainable in law as the same has been passed without appreciating the evidence on record and also passed contrary to the binding judicial precedents. He further submitted that the Commissioner (A) has denied the eligible benefit of CENVAT credit by misconceiving the factual position and even as per the formula prescribed in the said Rule 3(7) of the CCR, by essentially not taking into account the revised assessable value but has upheld the said computation as ordered in the Order-in-Original dated 22.7.2008 based on the original assessable value as indicated in the said two invoices i.e., Invoice No. 141 dated 18.7.2007 and Invoice No. 197 dated 23.8.2007. He further submitted that as per the worksheet furnished by the said supplier M/s. Mahima Life Sciences Pvt. Ltd., it would become clear that the amount involved on the special processing charges of Rs. 4,20,000/- (Invoice No. 141 dated 18.7.2007) and Rs. 4,80,000/- (Invoice No. 197 dated 23.8.2007) had been included for payment of entire differential duty including basic customs duty and concessional customs duty, etc., and the same would become factually established even from the details furnished in the calculation chart prepared and enclosed at page 56 of the appeal paper-book and hence, the question of adopting two different assessable value, as assumed while passing the impugned Order-in-Original dated 23.3.2009 would be prima facie established as unsustainable in law. He also submitted that when the fact of payment of said differential duty has not been doubted or disputed, the lower authorities should have determined the eligibility, even for the purposes of the said prescribed formula, only by adopting the revised assessable value for determining the eligible quantum of credit on the said two invoices, in which case, it would get established beyond any doubt that the credit availed by the appellant herein would be actually less than the eligible credit available to be taken, even as per the formula thereof. He also submitted that the letter furnished by the 100% EOU supplier viz., M/s. Mahima Life Sciences Pvt. Ltd. has in effect furnished only a confirmation for payment of differential customs duty on the special processing charges involved and hence the said document would also become a valid document for availing the said credit by the appellant. He further submitted that even otherwise, assuming that the credit could have been taken by the appellant herein of the said differential duty amount involved only after the receipt of the said certificate during December 2007, still the appellant herein had a sufficient balance in the CENVAT credit account and the same remained only a book entry and hence eligible credit could not have been denied merely because the said confirmation and the certificate was furnished later on during December 2007. For this submission, he relied upon the decision of the Gujarat High Court in the case of CCE vs. Gujarat Propack : 2009 (234) ELT 409. He further submitted that even otherwise taking of the said differential credit of Rs. 1,44,130/- would be inconformity with the principles laid down inter alia in the following cases.
* CCE vs. H.K. Moulders : 2011 (268) ELT 43 (Guj.)
* Crompton Greaves Ltd. vs. CCE : 2013 (296) ELT 470 (Tri.-Mum.)
* Molex (India) Pvt. Ltd. vs. CCE : 2016 (341) ELT 463 (Tri.-Bang.)
He also submitted that the said credit remained a mere book entry during the period from August 2007 to December 2007, when the eligibility arose as per the letter issued by the M/s. Mahima Life Sciences Pvt. Ltd. duly certified by the jurisdictional Superintendent in-charge of the 100% EOU on 18.12.2007 have been obtained and furnished to the Department and therefore, the credit availed deserves to be held as correct. He further submitted that the credit availed was not utilized and therefore, he is not liable to interest and penalty as per the decisions cited below:
* CCE vs. Bill Forge Pvt. Ltd.: 2011-TIOL-799-HC-KAR-CX
* Reid and Taylor (India) Ltd. vs. CCE: 2016-TIOL-2020-CESTAT-BANG.
5. On the other hand, the learned AR reiterated the findings of Commissioner (A) and submitted that the CENVAT credit was taken before it became due and he further submitted that the appellant has violated Rule 9 of CCR during the material period.
6. After considering the submission of both the parties and perusal of the material on record and the decisions cited supra, I am of the opinion that the impugned order is not sustainable in law as the same has been passed based on the original assessable value indicated in the said two invoices No. 141 dated 18.7.2007 and Invoice No. 197 dated 23.8.2007 and not taking into account the revised assessable value. Moreover, I also find that subsequently during December 2007, a certificate was received from the supplier M/s. Mahima Life Sciences Pvt. Ltd., a 100% EOU and it was duly certified by the jurisdictional Superintendent in-charge of the 100% EOU on 18.12.2007. Further, I also find that the appellants have only availed CENVAT credit but have not utilized the same as there was sufficient balance
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lying in the CENVAT credit during the relevant period and therefore, by following the decision in the case of Bill Forge cited supra, the appellants are not liable to pay interest and penalty also and this Tribunal in the case of Reid and Taylor cited supra, has followed the binding judicial precedent of the Karnataka High Court and set aside the demand. In this case also by following the ratio of Bill Forge and Reid and Taylor cited supra, I allow the appeal of the appellant but since there was some procedural violation committed by the appellant, therefore I impose a nominal penalty of Rs. 5,000/- (Rupees Five Thousand Only) under 15 of CCR, 2004 on the appellant. With this modification, the impugned order is set aside by allowing the appeal of the appellant.