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2019 (8) TMI 674

..... eriod June 2011 to March 2013 - whether penalty and interest can be imposed for availing Cenvat credit on inputs stored outside the factory? HELD THAT:- The Ld. Commissioner has made a detailed examination of the ER-1 returns filed by the appellant, on perusal of which he has given a specific finding that availment and reversal of credits have duly been reflected in the said returns which is based on the RG-23A Pt-II registers maintained at both the places - within the factory as well as the Storage tank located outside the factory. He also observed that said availment of credit has been shown under the head of “other payment” in ER-1 returns. Moreover, he has admitted that merely because of error in availment of credit when the entire input covered in an invoice are received in the factory, the substantial benefit of cenvat credit cannot be denied. Demand of interest - HELD THAT:- The fact that adequate credit balance is available during the material period and is not in dispute. Despite that credit has been pre-maturely reflected in the RG-23 register and ER-1 return since goods were not received in the factory, there is no consequent short payment of duty and hence n .....

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..... gally entitled to avail and utilize the Credit in question, dropped the proposal for recovery of credit amounting to ₹ 4,18,06,826/-. He however observed that there was a procedural irregularity in availing the credit on inputs stored outside the factory and accordingly, imposed penalty and interest. 3. Sri Rajeev Kr. Agarwal, C.A. appeared for the appellant and Shri K. Chowdhury, Supdt. (AR) appeared for the Revenue. 4. The Ld. CA appearing for the appellant drew my attention to the findings made by the Ld. Commissioner in Para 5.10, pg. no.15 of OIO wherein the Ld. Commissioner has categorically observed that the assessee had sufficient credit balance, excluding the Cenvat credit availed and utilized on the subject invoices which are in dispute. The Ld. Commissioner also noted that the appellant assessee, while dispatching the inputs from the storage tank to the factory, debited the applicable credit amount from its Register maintained at the outside storage and re-credited the subject credit when the subject input entered the factory premises. The said entries have been duly reflected in ER-1 under the head other payments . It is the submission of the Ld. CA that two impor .....

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..... urns and hence the allegation of suppression of facts cannot be sustained. Moreover, there is no basis as to how the huge penalty amount of ₹ 5 lakhs has been quantified. 7. In support of his submissions he relied upon the following decisions:- Savio India Ltd. v. Commr. of Customs and C.EX and S.Tax, Coimbatore 2016 (340) ELT 735 (Tri-Chennai) Commr. of C.Ex., Puducherry Commissionerate vs. CESTAT, Chennai [2016 68 taxmaan.com 193 (Madras)]. CCE, Delhi vs. Maruti Udyog Limited [2007 (214) E.L.T. 173 (P & H)] upheld by the Hon ble Supreme Court as reported in Commissioner v. Maruti Udyog Ltd. - 2007 (214) E.L.T. A50 (S.C.) CCE, Ghaziabad vs. Ashoka Metal Decor (P) Ltd.[2011 (21) S.T.R. 469 (All.)] 8. As an alternative argument, he pleaded that the Ld. Commissioner has duly accepted that the storage tank is an extension of the factory . Having accepted the settled legal principle that the storage tank is an extension of factory , the inputs received in the storage tank would be legally eligible for credit without any further procedural requirement. On this count also, the availment of credit cannot be said to be pre-mature, and hence interest is not leviable. With regard t .....

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..... priated in the adjudication order towards adjudged dues. He emphasized that the mere fact that there was a sufficient credit balance will not absolve the assessee from imposition of interest and penalty. He relied on the decision of the Tribunal in the case of Madras Cements Ltd. vs. CCE, Hyderabad 2016 (336) ELT 175 (Tri-Hyd) wherein it has been held that interest is payable in case of premature availment of credit as the credit of balance 50% should be availed in subsequent year in case of procurement of capital goods. Based on the above, the Ld. DR submitted that the appellant could not plead immunity from interest liability for premature availment of credit together with penalty as rightly imposed by the Ld. Commissioner in the adjudication order for contravention of the conditions prescribed for availing the facility to store goods outside the factory. 10. Heard both sides and perused the appeal records. 11. I find that the issues that arise for consideration before me is whether penalty and interest can be imposed for availing Cenvat credit on inputs stored outside the factory. 11.1 First, I deal with the issue regarding the imposition of penalty. I find that the Ld. Commissi .....

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..... e no loss to exchequer. I find that the decision of the Tribunal in the case of KRCD Ltd (Supra) relied by the Ld. Commissioner in para 5.13 for imposition of interest pertained to the situation where the assessee had taken 100% credit for receipt of capital goods, in place of 50% in the year of receipt of goods which was the maximum entitlement, resulting short payment of output duty causing loss to the exchequer. The decision in the aforesaid case of KRCD Ltd (Supra) is therefore not applicable to the facts of the present case. Moreover, as the Ld. Commissioner himself has observed that for mere procedural lapse, the substantial benefit of credit cannot be denied, more particularly in case where there is a sufficient credit balance always available during the period in dispute. I also take note of the ratio of the decision rendered in Savio India Ltd. v. Commr of Customs and C.EX and S.Tax, Coimbatore 2016 (340) ELT 735 (Tri- Chennai) wherein it has been held that - .........That indicates that there was sufficient balance of Cenvat Credit in the statutory record maintained by the appellant, which is RG-23 Part II register. The worksheet is also annexed to that letter exhibiting .....

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