2011 (7) TMI 557 - AT - Central Excise

Penalty under section 11AC - Cenvat credit denied and penalty imposed on the ground that the supplier did not have the infrastructure for manufacture of the goods - Held that - As the supplier was in existence for 15 years, had availed cenvat credit of more than Rs.18 crores would show that the supplier did have some standing in the market - Since the cenvat credit availed by the appellant is reflecting the duty paid on the goods by the supplier for which no evidence is available to show to the contrary and in view of the above circumstances, it will not be appropriate to demand duty and deny the cenvat credit from the appellant - Moreover, find that in agreement with the view canvassed by the learned advocate that once it is held that there was no suppression or mis-declaration on the part of the appellants and no penalty is imposed on them, duty demand invoking extended period also cannot be sustained if challenged - Thus on merit as well as on limitation, the appellants succeed.

Summary

Issues:
1. Availment of cenvat credit based on invoices from a supplier without necessary infrastructure.
2. Demand for cenvat credit repayment, interest, and penalty under Section 11AC of the Central Excise Act, 1944.
3. Allegations against the supplier regarding lack of infrastructure and non-manufacture of goods supplied.
4. Adjudication of the case based on supplier's cenvat credit history and operational details.

Analysis:
1. The appellant availed cenvat credit based on invoices from a supplier, M/s. Ashok Electrical Stampings Pvt. Ltd., Kolkata, amounting to Rs.4,17,920. Departmental officers found the supplier lacked necessary infrastructure, leading to an alert notice and subsequent proceedings against the appellant for wrongly availing the credit.

2. The appellant argued that credit was taken based on valid invoices, goods were received and installed, and no penalty was imposed, indicating no intention to evade duty. Citing precedents, the appellant contended that duty demand beyond the normal limitation period is unjustified without evidence of suppression or offense.

3. The Departmental Representative (DR) highlighted the completion of proceedings against the supplier, where it was concluded that the supplier lacked manufacturing infrastructure. The supplier's claim of using job workers was debunked, rendering the documents invalid, and placing responsibility on the appellant to verify the source of goods.

4. Upon review, it was noted that the supplier had a significant cenvat credit history and was a registered excise assessee paying duty. The department failed to prove any malpractice by the supplier, who had been operational for 15 years with machinery and raw material supplies. The judgment emphasized the supplier's compliance, challenging the department's assertion of non-manufacture.

5. The tribunal found the appellant justified in availing cenvat credit based on the supplier's duty payments and operational history. With no evidence of malpractice or suppression, the demand for repayment and penalty was deemed unjustified, aligning with the appellant's contentions. The appeal was allowed, granting relief to the appellant based on merit and limitation considerations.