2002 (3) TMI 406 - Commissioner - Customs

Summary

Issues Involved:
1. Inadmissible Cenvat credit availed by the assessee.
2. Imposition of penalty under Rule 173Q(1) and/or Rule 9(1) of CER, 1944.
3. Interest on the said credit utilized by the assessee.
4. Legality, propriety, and correctness of the order passed by the A.C.C.Ex., Vasai Division.

Issue-wise Detailed Analysis:

1. Inadmissible Cenvat Credit:
The core issue revolves around whether the assessee, M/s. Neon Laboratories Limited, correctly availed Cenvat credit amounting to Rs. 2,19,220/- on inputs purchased from a 100% EOU. The department argued that the assessee contravened Rule 57AB of CER, 1944 by availing excess Cenvat credit, which included Basic Customs duty, Auxiliary duty, and SAD, whereas credit should be restricted to the additional duty under Section 3 of the Customs Tariff Act, 1975. The assessee countered by citing tribunal decisions, including the Larger Bench decision in M/s. Vikram Ispat v. CCE, Mumbai, which supported their claim of correctly availing the credit.

2. Imposition of Penalty:
The Show Cause Notice (SCN) issued to the assessee proposed a penalty under Rule 173Q(1) and/or Rule 9(1) of CER, 1944 for availing inadmissible Cenvat credit. However, the adjudicating authority, after considering the assessee's submissions and previous tribunal rulings, found no grounds for imposing such penalties and dropped the proceedings.

3. Interest on Cenvat Credit:
The SCN also proposed charging interest at 24% per annum on the said credit utilized by the assessee under Rule 57A(11) of CER, 1944 r/w Section 11AA of CEA, 1944. The adjudicating authority, considering the principles of natural justice and relevant tribunal decisions, concluded that the credit availed was in conformity with the applicable notifications and thus, interest charges were not warranted.

4. Legality, Propriety, and Correctness of the Order:
The Commissioner of Central Excise, Mumbai-III Commissionerate, reviewed the order passed by the A.C.C.Ex., Vasai Division and found it neither legal nor proper. The review emphasized that credit should be restricted to the additional customs duty paid by the 100% EOU. However, the adjudicating authority, citing the Larger Bench decision in Vikram Ispat and other tribunal rulings, held that the credit availed by the assessee was correct and in line with the relevant notifications. The review appeal was thus dismissed, reaffirming the legality and correctness of the original order.

Conclusion:
The appeal filed by the department was dismissed, upholding the order of the A.C.C.Ex., Vasai Division, which had dropped the SCN proceedings against the assessee. The adjudicating authority found that the assessee correctly availed the Cenvat credit and no penalties or interest were warranted. The decision was based on established tribunal rulings and principles of natural justice, ensuring the order's legality, propriety, and correctness.