2003 (11) TMI 502 - AT - Central Excise

Cenvat/Modvat - Duty demand - Modvat credit wrongly availed on H.R. Steel coils - penalty - non-accountal for receipt of consignments - Absence of proof of Octroi payment - transportation discrepancies - validity of Cost Audit Report - HELD THAT - There is nothing on record to show that the appellants received inputs from any other source so as to be able to manufacture their final products. There is also no evidence on record that the consignments in question were found elsewhere. Murbad unit was also visited and records verified as to whether coils were slitted and sent to Dombivli and nothing incriminating has been found as seen from the statement of Shri N. Hariharan, Asstt. Manager, Excise of the Murbad plant. Records seized from the Murbad plant have not been relied upon against the appellants. In the above circumstances, we hold that the maintenance of separate register is not sufficient proof of non-receipt of inputs in the appellants factory. Regarding the finding of the Commissioner that the consignments in dispute could not have been transported on the vehicles on which they are stated to have been transported - There is no material to show that the transporters records do not show the transport of the goods in question during the period in question. Therefore, the mere fact that the actual weight of the 98 consignments of H.R. Coils was in excess of the rear load capacity of the vehicles cannot justify the conclusion that no goods were carried on those vehicles. The non-production of octroi receipts for transport of these consignments is also not sufficient to hold that the goods were not actually transported as held by the Tribunal in the case of Commissioner of Central Excise v. Dashmesh Casting (P) Ltd. 2000 (10) TMI 965 - CEGAT, DELHI . Further, the report of the Cost Audit - This report has been brushed aside by the Commissioner on the ground that the audit was conducted on the basis of records made available to the Auditors and facts of suppression or manipulation were no brought to their notice. We are of the view that Cost Audit Report cannot be discarded on the above grounds, as we find that the scope of the excise audit included enquiry on source of receipt of raw materials, whether there has been suppression on production/clearance, important modus operandi etc. Thus, we hold that the burden of proving non-receipt of inputs on which Modvat credit was availed has not been discharged by the Revenue on whom such burden lies. We, therefore, extend the benefit of doubt to the appellants, set aside the duty demand and penalties and allow the appeals.

Summary

Issues involved: Duty demand on Modvat credit wrongly availed, penalty imposition on company and individual, non-accountal for receipt of consignments, absence of proof of octroi payment, transportation discrepancies, non-production of octroi receipts, validity of Cost Audit Report.

Duty Demand and Penalty Imposition: The Commissioner confirmed a duty demand and imposed penalties on the company and an individual for wrongly availing Modvat credit without actual receipt of consignments. The basis for this decision included non-accountal for receipt of 98 consignments in regular registers, transportation discrepancies, and absence of octroi payment proof.

Receipt of Raw Materials: Registers maintained by the assessee showed entries of raw material receipt, with separate registers for materials received from different locations. The explanation provided by the company officials regarding the separate register for materials from different plants was considered plausible. Internal records and verification confirmed the receipt and consumption of inputs, with no evidence of receiving inputs from other sources.

Transportation Discrepancies: The appellants explained that transporters often carry loads exceeding vehicle capacity, and the transporters confirmed the transportation of disputed consignments. Lack of evidence to show discrepancies in transport records led to the conclusion that excess weight on vehicles did not prove non-transportation of goods.

Absence of Octroi Receipts: Non-production of octroi receipts for transporting the consignments was not deemed sufficient evidence to conclude that the goods were not actually transported, citing a previous Tribunal case as precedent.

Validity of Cost Audit Report: The Cost Audit Report, indicating physical receipt and consumption of inputs, was disregarded by the Commissioner on procedural grounds. The Tribunal found the report relevant as it covered aspects such as source of raw materials, production suppression, and operational methods, leading to the decision that the burden of proving non-receipt of inputs was not met by the Revenue.

Conclusion: Due to the lack of evidence proving non-receipt of inputs, the burden of proof was not discharged by the Revenue. Therefore, the Tribunal extended the benefit of doubt to the appellants, setting aside the duty demand and penalties imposed, ultimately allowing the appeals.