2002 (12) TMI 303 - AT - Central Excise

Summary

Issues:
Appeal against penalty imposed for wrongly passing on Cenvat Credit to buyers.

Analysis:
The Appellants, engaged in trading of various materials, appealed against a penalty for passing on Cenvat Credit to buyers. The Appellants, registered as a dealer with the Central Excise department, received consignments directly from manufacturers, accompanied by invoices indicating the consignee as the Appellants. The Appellants then sold these goods to industrial consumers under proper invoices. The penalty was imposed on the grounds that the Appellants were not supposed to pass on Cenvat credit to buyers based on invoices in another person's name. The Commissioner upheld the penalty, stating that Cenvat Credit could only be availed by the end user. However, the Appellants argued that the invoices clearly indicated the dealers from whom they purchased the goods, and there was no dispute about the duty paid nature of the goods or the correlation between goods received and sold. The Appellants contended that no penalty should be imposed as there was no provision for pre-authentication of invoices by second stage dealers, and Rule 57G(2) allowed credit if certain procedural requirements were met.

Counterarguments by the Revenue stated that the Appellants, as second stage dealers, could not issue Modvatable invoices to customers as the manufacturer's invoices did not show the Appellants as buyers. However, the Tribunal noted that the manufacturer's invoices did mention the Appellants' name, and the duty paid goods were received by the Appellants, even though other parties were listed as buyers. These parties were identified as first stage dealers who requested direct consignment to the Appellants to save transportation costs. The Revenue did not dispute that the buyers listed in the manufacturer's invoices had issued commercial invoices to the Appellants, and the receipt of duty paid goods was confirmed. Under Rule 57AE, an invoice issued by a second stage dealer was a duty paying document for Cenvat credit. The Tribunal found no reason to impose a penalty, as the duty paid nature of the goods and receipt by the Appellants were established, overturning the impugned Order and allowing the appeal.