2015 (5) TMI 1069 - AT - Central Excise

Recovery of irregularly availed cenvat credit - partnership firm engaged in the manufacture of Parts of Motors & Generators, parts of Railway Locomotives and Threaded Articles of Iron & Steel - raw materials MS Plates, HR Plates, Sheets, Angles, Channels, Rounds, Square, Bar, Steel Wire and Welding Electrodes, Bearing and Paints etc - cenvat credit of ₹ 17,49,974/- availed fraudulently on the basis of documents without receipt of 716.1225 MT of MS Steel/Sheets - Held that - the lower Authorities have held the case in favor of the Respondent by holding that there was no error involved in availing credit. The quantity of the goods in terms of weight cannot be compared with the number of the parts/ equipments sold, as complete details of purchase made have not been provided to the department. The allegation of non-receipt of raw material and availment of cenvat credit on proper documents are not sustainable because from clearance of so much value of finished goods, used quantity of raw material, the value addition must be more than 300% of raw material cost, which is not acceptable for considering the nature of goods handled by the Respondent. The purchase transactions were made only through cheque i.e. bank transactions - the allegation of non-receipt of the input goods not sustainable. The balance amount after utilization of CENVAT credit has been paid by the Respondent from their PLA account, which shows that there is no fraudulent availment of Cenvat Credit. Denial of CENVAT credit and recovery of amount not justified - appeal rejected - decided against Revenue.

Summary

Issues: Alleged fraudulent availing of cenvat credit based on documents without receipt of raw materials.

In this case, the respondent, a partnership firm engaged in manufacturing various goods, was accused of fraudulently availing cenvat credit without receiving a significant amount of raw materials. The Central Excise Department initiated proceedings based on an investigation that revealed irregularities in the cenvat credit availed by the respondent. The Joint Commissioner of Central Excise adjudicated the matter, dropping the proposals made in the show cause notice. The Revenue appealed to the Commissioner (Appeals), who dismissed the appeal, leading to the present appeal before the Tribunal.

The Tribunal analyzed the case and noted that both lower authorities had ruled in favor of the respondent. The findings included that the buyers did not provide complete details to the Central Excise Department regarding purchases from the respondent, making it difficult to compare the quantity of goods sold with the raw materials used. The authorities also found that the respondent maintained proper cenvat records, showing receipt and issue of raw materials, and that the cenvat credit was utilized for clearances of finished products. Ultimately, the Tribunal found no infirmity in the lower authorities' decision to drop the duty demand proposed in the show cause notice. Therefore, the appeal filed by the Revenue was dismissed, and the cross objection filed by the respondent was also disposed of.