2015 (6) TMI 1007 - AT - Central Excise

Denial of cenvat credit - denial of claim on strength of six invoices issued by second stage dealer - demanding duty along with interest and imposing penalty - Held that - On being asked, the manufacturer supplier invoice was not provided for verification as same is not relied upon documents. When the manufacturer invoices has not been relied to allege against the appellant that they have taken inadmissible cenvat credit on the strength of second stage dealer invoices, the foundation of show cause notice is totally weak. As manufacturer invoices has not been relied, therefore, the invoices against which the appellant has taken cenvat credit is the correct invoice and description shown in the said invoice is correct and it is the invoice on which has been suffered duty. Therefore, the appellant is entitled to take cenvat credit on the strength of invoices issued by second stage dealer. Moreover, it is not the case of the Revenue that appellant has not received the goods against these invoices as per the show cause notice. Both the lower authorities have gone beyond the allegation in the show cause notice holding that appellant has received the invoices not the goods. Therefore, finding of both the lower authorities is beyond the scope of show cause notice as the appellant has received the goods in their factory against duty paid invoices, therefore, they have correctly taken the cenvat credit. - Decided in favour of assessee

Summary

Issues:
1. Denial of cenvat credit based on invoices issued by second stage dealer.
2. Denial of refund on duty paid during investigation.
3. Allegation of mis-match in goods description on invoices.

Analysis:
1. The appellant appealed against the denial of cenvat credit by the impugned orders due to discrepancies in invoices issued by M/s. Regal Metals & Ferro Alloys. The appellant, a manufacturer of gear and shafts, procured steel rods from the second stage dealer and availed cenvat credit. The investigation revealed discrepancies in the description of goods on the invoices, leading to the denial of cenvat credit, duty demand, interest, and penalty imposition. The appellant argued that the second stage dealer's understanding led to the description mismatch, but the rate of duty was the same. The Tribunal found that the foundation of the show cause notice was weak as the manufacturer invoices were not relied upon, and the appellant had correctly taken the cenvat credit based on the second stage dealer's invoices. The Tribunal held in favor of the appellant, allowing the appeal and setting aside the impugned order.

2. In the appeal related to the denial of refund on duty paid during the investigation, which was a consequence of the first appeal, the appellant had reversed the cenvat credit during the investigation but later filed a refund claim. Both lower authorities rejected the refund claim, leading to the second appeal. The appellant's counsel argued that the appellant had received the goods against duty paid invoices and correctly availed the cenvat credit. The Tribunal noted that the appellant had indeed received the goods and paid the duty, and the lower authorities had gone beyond the scope of the show cause notice by alleging receipt of invoices, not goods. Consequently, the Tribunal allowed the second appeal as a consequential relief of the first appeal, ruling in favor of the appellant.

3. The dispute revolved around the alleged mis-match in goods description on the invoices, leading to the denial of cenvat credit. The appellant contended that the goods received matched the description on the invoices issued by the second stage dealer, and the duty was paid accordingly. The Revenue argued against the cenvat credit based on the mis-match in goods description as per the show cause notice. However, the Tribunal found that the appellant had correctly availed the cenvat credit based on the invoices issued by the second stage dealer, and the goods received were in line with the description on those invoices. Therefore, the Tribunal allowed both appeals, emphasizing that the appellant was entitled to the cenvat credit and had correctly taken it based on the invoices provided by the second stage dealer.