- (1.) We have heard Sri Nikhil Agarwal, the learned counsel for the appellant and Sri B.K.S. Raghuvanshi, the learned counsel for the central excise department.
(2.) The petitioner is a manufacturer of Brake Shoe Castings and availed Cenvat credit on the basis of relevant cenvatable invoices under Rule 9 of the Cenvat Credit Rules, 2004 (hereinafter referred to as the Rules of 2004). Departmental audit was carried out by an audit party in which a credit of Rs.2,92,401/- was disallowed on LDO/furnace oil. Interest of duty amounting to Rs.43,806/- was also added. The said amount was debited from RG23A. Subsequently, the appellant noticed that under the Rules of 2004 Cenvat credit can be claimed on furnace oil and, accordingly, intimated the Assistant Commissioner, Customs and Central Excise, Ghaziabad vide letter dated 25th April, 2005 that they had wrongly debited the credit of Rs.2,63,446/- and informed the department that they are taking the relevant credit entry again by reversal of entry under Rule 7 of the Rules of 2004. By the said letter, the appellant not only informed the department about taking credit afresh but also enclosed the original copy of the invoice bills. The list indicating the details of the description of inputs, invoice number and date and details of credit taken on each invoice bill was also filed. No orders were passed and, accordingly, the assessee made a reversal of the entries to the tune of Rs.3,02,969/- and indicated reversal on their registers, namely, RG23A.
(3.) Subsequently, a show cause notice dated 27th October, 2005 was issued alleging that credit of Rs.2,63,446/- in their Cenvat account had again been taken without any refund order or permission from the proper authority and without proper documents as required under Rule 9 of the Rules of 2004 and such credit being taken without any order under Section 11B of the Central Excise Act, 1944 (hereinafter referred to as the Act) was wholly arbitrary and, therefore, recoverable under Rule 14 of the Rules of 2004 read with Section 11A of the Act. The assessee filed a reply and thereafter, an order dated 18th January, 2006 was passed by the Assistant Commissioner confirming the demand of Rs.2,63,446/- as well as the amount of Rs.39,513/- towards interest and directing the recovery of the said amount along with interest and penalty. The assessee filed an appeal, which was dismissed and, thereafter, filed a second appeal before the Tribunal, which was partly allowed. The imposition of penalty was quashed but the demand of Cenvat credit and interest was upheld. The Tribunal held that the appellant could not recredit the amount suo moto in the Cenvat account and that appropriate orders was required to be passed by the proper authority. The Tribunal was also of the view that the appellant could apply for refund under the Act but could not take suo moto recredit of the duty. The appellant, being aggrieved, has filed the present appeal, which was admitted on the following substantial question of law:- 1. "Whether, the appellant being legally entitled to the claim of Cenvat Credit on furnace oil used as input for the manufacture of "Brake Shoe Castings", there is no application of Rule 14 relating to recovery of Cenvat Credit wrongly taken or erroneously refunded, read with Rule 15 of the Cenvat Credit Rules, 2004 relating to confiscation and penalty and the Customs, Excise and Service Tax Appellate Tribunal was not legally justified in upholding the applicability of the same? 2. Whether, in view of the fact that the admissibility of Cenvat Credit of Rs.2,63,466/- on account of use of furnace oil as input in manufacture of Brake Shoe Casting having not been disputed by the lower authorities, the Customs, Excise and Service Tax Appellate Tribunal was legally justified in upholding the order of the lower authority demanding an amount of Rs.2,63,466/- and interest thereon?";