2007 (8) TMI 756 - AT - Central Excise

Summary

Issues involved: Challenge to order of Commissioner (Appeals) upholding dropping of proceedings against respondent for availing modvat credit on input scrap procured from dealers under questionable circumstances.

The Revenue alleged that the respondent failed to take reasonable steps as per Notification No. 466/86 before availing credit of duty on inputs wrongly mentioned in invoices of dealers who did not undertake actual transactions of the goods. Show cause notice proposed recovery of credit amount taken during a specific period.

The respondent contended that they procured scrap from registered dealers with whom they had agreements for supply at contracted prices. They argued that necessary precautions were taken in selecting dealers, and they had submitted required documents to ensure genuineness of goods. Cited Tribunal decisions to support their position that action should be taken against dealers for irregularities, not against purchasers.

The department argued that the goods were not manufactured by the supposed manufacturer, questioning the legitimacy of passing on modvat credit based on spurious invoices. They highlighted discrepancies in electricity consumption, lack of transport and weighing slips, and suspicious pricing of goods sold to respondent by dealers. Emphasized the need for the respondent to ensure duty payment on inputs for claiming cenvat credit.

Both lower authorities confirmed receipt and consumption of goods by respondent for manufacturing final products. Found that respondent had taken adequate steps to verify goods' authenticity, including procuring from registered dealers and providing sample invoices showing duty payment. Disputed claims of fraudulent transactions based on payment methods and pricing.

Tribunal referred to previous decisions supporting respondent's entitlement to credit based on documents from registered dealers. Noted that a previous decision in respondent's favor was binding and required to be followed.

The appeal was dismissed based on the findings that there was no substance in the Revenue's challenge, and the decision was pronounced in open court.