2009 (1) TMI 632 - AT - Central Excise

Cenvat/Modvat - Held that - the inputs were actually received by the appellant, though in some of the cases fresh invoices were raised by the dealers, in between with a sole purpose of availing sales tax benefit, credit cannot be denied on that ground - appeal allowed.

Issues Involved:
1. Disallowance of Modvat credit.
2. Imposition of penalties on the company and associated parties.
3. Allegations of non-receipt of inputs and issuance of fake invoices.
4. Incorrect vehicle numbers mentioned in invoices.
5. Compliance with statutory records and actual use of inputs in manufacturing.
6. Alleged clandestine removal of goods.

Issue-wise Detailed Analysis:

1. Disallowance of Modvat Credit:
The Commissioner of Central Excise, Vapi disallowed Modvat credit of around Rs. 3.82 crores to M/s. Hiren Aluminium Ltd. (Hiren) and imposed penalties. Hiren was engaged in manufacturing aluminum wire rods/bars and availed input stage duty credit under Modvat/Cenvat rules. The raw materials were purchased from primary producers and consignment agents.

2. Imposition of Penalties:
Penalties were imposed on Hiren, its directors, dealers, and transporters. The investigation revealed that the invoices raised by the dealers mentioned vehicle numbers incapable of transporting heavy materials, suggesting that no actual inputs were received by Hiren. The Commissioner confirmed the demands and imposed penalties based on these findings.

3. Allegations of Non-receipt of Inputs and Issuance of Fake Invoices:
The Revenue alleged that Hiren did not receive any inputs and the consignment dealers only issued invoices showing the sale of inputs. Investigations showed that the vehicle numbers mentioned in the invoices were not capable of transporting heavy materials. Hiren contended that the goods were transported in the same trucks as from the primary producers and that different vehicle numbers were shown to avail sales tax exemption.

4. Incorrect Vehicle Numbers Mentioned in Invoices:
Hiren admitted that some vehicle numbers in the invoices were incorrect but argued that credit should not be denied on this ground. They provided evidence, including RTO certificates, showing that some vehicles were indeed trucks. They explained that the incorrect vehicle numbers were mentioned to benefit from sales tax exemptions.

5. Compliance with Statutory Records and Actual Use of Inputs in Manufacturing:
Hiren argued that all inputs were recorded in statutory records and were used in manufacturing the final product, which was cleared on payment of duty. They provided a table showing the consumption of inputs and the recorded final production, arguing that the final product could not have been manufactured from a lesser quantity of inputs. The Commissioner's order acknowledged that inputs were used in manufacturing the final product but maintained that Hiren only received invoices and not actual inputs.

6. Alleged Clandestine Removal of Goods:
The Revenue suggested that Hiren might have shown excess production to accommodate non-received inputs and cleared them to another unit, M/s. Apurva Aluminium Corporation Ltd., on payment of duty. The adjudicating authority's findings were based on assumptions and lacked concrete evidence. The Tribunal noted that charges of clandestine removal must be based on tangible evidence, not probabilities.

Conclusion:
The Tribunal concluded that the inputs were actually received by Hiren, despite the incorrect vehicle numbers in some invoices. The credit could not be denied based on these discrepancies, as there was no concrete evidence to prove non-receipt of inputs or their diversion. The Tribunal allowed the appeals, setting aside the Commissioner's order and granting consequential relief to the appellants.

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