2007 (5) TMI 63 - AT - Central Excise

Cenvat/Modvat - Alleged that assessee have purchased the off-cuts at the lower value and availed the credit at higher value and accordingly demand were made alongwith penalty - Held that allegation was not correct and set aside demand and penalty

Summary

Issues:
- Allegations of purchasing MS off-cuts at lower values than original manufacturers
- Availing credit on higher value
- Confirmation of demands and penalties
- Interpretation of Central Excise Act regarding duty paid goods
- Rights and obligations of registered dealers
- Pricing control under Central Excise Act
- Sorting and selling goods by dealers
- Prohibition on altering duty quantum on documents
- Validity of invoices issued by scrap dealers
- Denial of credits and penalties

Analysis:

The case involved appeals arising from the same order, where the appellants, manufacturers of MS ingots, were accused of purchasing MS off-cuts at lower values than those paid by the dealers to the original equipment manufacturers. The show cause notice alleged that the appellants availed credit on the higher value at which the off-cuts were cleared by the manufacturers. The demands and penalties were confirmed, and the Commissioner (Appeals) upheld the orders, leading to the present appeals.

Upon hearing both sides, the Tribunal found that registered dealers under the Central Excise Act have the right to obtain duty paid goods from manufacturers and sell them to other manufacturers who can avail credit based on the documents provided by the dealers. The law mandates dealers to reference original duty paying documents and prohibits altering the duty quantum shown on these documents. The price at which dealers procure and sell goods is not under Central Excise Control, allowing dealers to sell goods at any price they can obtain. Sorting and selling goods at different prices by dealers is permissible, as long as the excise duty component remains unchanged.

The Tribunal emphasized that invoices issued by scrap dealers at lower values but showing the duty at original rates, and the subsequent availing of duty credits based on these documents, cannot be questioned if the goods supplied match those received from the original manufacturers. Therefore, there were no grounds to deny the credits or impose penalties on the dealers or the manufacturer appellants. Consequently, all appeals were allowed, with the judgment pronounced on 11-5-2007.