Denial of CENVAT credit of duty paid on Rough Castings on ground of Short Payment of Duty: CESTAT quashes Order [Read Order]

The Chennai bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) quashed the order passed by denying the CENVAT Credit of duty paid on rough castings on the ground of short payment of duty. 

Indo Shell Cast Pvt. Ltd, the appellant assessee was engaged in the manufacture of rough castings and supplied to another unit for further processing into machined castings and both the units are registered separately under Central Excise Rules. 

The assessee appealed against the order passed by the adjudicating authority for confirming the demand of differential duty along with interest and m penalty. 

M.S. Nagaraja, the counsel for the assessee contended that the actual cost of production of the goods (Rough Castings) for payment of duty in terms of Rule 8 of the Valuation Rules, 2000 cannot be determined at the time of clearance of the goods and the actual cost of production can be ascertained only on finalization of accounts for each financial year and certification of CAS 4 by the Cost Auditors. 

Further submitted that there was no evasion of duty and the short payment occurred only because the actual cost of production could not be ascertained at the time of clearance of goods. 

Rudra Pratap Singh, the counsel for the department contended that the credit had been denied alleging that excess duty paid by the assessee on the rough castings cannot be considered to be ‘duty’ and therefore credit is ineligible and there are no grounds for denying credit to the assessee when the duty had been paid as per Central Excise law. 

The bench observed that When the duty had been paid by the unit company as per the invoices, the credit cannot be denied to the receiving unit. 

The two-member bench comprising Sulekha Beevi (Judicial) and Vasa Seshagiri Rao (Technical) held that the denial of credit cannot sustain and is liable to be quashed while allowing the appeal filed by the assessee. 

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