2013 (9) TMI 1015 - AT - Central Excise

Availment of wrongful credit - Penalty u/s 11AC - Held that - The department sought to deny Modvat credit on the inputs used by the respondents in the manufacture of their final product copper powder on the ground that the scrap millscale/sludge cannot be directly used without oxidization and supplier/suppliers have in their statements submitted that they have never supplied the scrap in the form of millscale/sludge. - Commissioner has considered all the aspects raised in the appeal. The department could not produce anything contrary - receipt of the scrap by respondent is not in dispute and the department could not show that the respondents have clandestinely removed or disposed the said scrap - No reason to interfere with the finding of the ld. Commissioner (Appeals). Therefore, the impugned order is upheld - Decided against Revenue.

Summary

Issues:
1. Appeal against the order of the ld. Commissioner (Appeals) setting aside the lower adjudicating authority's order.
2. Denial of Modvat credit on inputs used in the manufacture of copper powder.
3. Dispute over the nature of copper scrap received by the respondents.
4. Allegations of inadmissible credit, interest, and penalty under Sec. 11AC.
5. Admittance by Plant Manager regarding raw materials used in the final product.
6. Lack of evidence supporting the claim of receiving scrap in the form of millscale or sludge.
7. Consideration of evidence and documentation by the ld. Commissioner (Appeals).
8. Sustainability of the ld. Commissioner (Appeals) order based on presumption and assumption.

Analysis:
1. The appeal was filed against the order of the ld. Commissioner (Appeals) setting aside the lower adjudicating authority's decision and allowing the appeal of the respondents. The department initiated proceedings against the respondents for availing Modvat credit on copper scrap used in manufacturing copper powder during January 1996 to June 1997. The department alleged that the scrap was not suitable for the final product due to its composition and lack of oxidization facility.

2. The dispute centered around the denial of Modvat credit on the inputs used by the respondents for manufacturing copper powder. The department issued a show cause notice proposing to recover inadmissible credit along with interest and penalties. The lower adjudicating authority confirmed the proposal, leading to the appeal before the Commissioner (Appeals).

3. The contention arose regarding the nature of the copper scrap received by the respondents. The department argued that the scrap in the form of millscale or sludge was not suitable for manufacturing copper powder. The Plant Manager of the respondents admitted to using specific raw materials, but there was a lack of evidence supporting the claim of receiving scrap in the disputed form.

4. The department sought to recover inadmissible credit, interest, and penalties under Sec. 11AC based on the allegations of improper use of copper scrap in the manufacturing process. The lower adjudicating authority upheld the allegations, leading to the appeal and subsequent decision by the ld. Commissioner (Appeals).

5. The Plant Manager's admission regarding the raw materials used in the final product was a crucial point of contention. The department highlighted discrepancies between the raw materials received and the requirements for manufacturing copper powder, leading to the initiation of proceedings and the subsequent appeal.

6. The lack of evidence supporting the claim of receiving scrap in the form of millscale or sludge raised doubts about the validity of the department's allegations. The respondents presented documentation demonstrating the receipt and disposal of inputs, which was considered by the ld. Commissioner (Appeals) in making the decision.

7. The ld. Commissioner (Appeals) thoroughly considered the submissions, oral arguments, and documentary evidence presented by both parties. The decision was based on a detailed analysis of the facts and documentation provided, leading to the conclusion that the department's allegations were based on presumption and assumption.

8. The sustainability of the ld. Commissioner (Appeals) order was upheld based on the lack of contradictory evidence from the department and the absence of proof of clandestine removal or misuse of the received scrap. The decision to dismiss the department's appeal was supported by the documentation and the absence of concrete evidence supporting the allegations made in the show cause notice.