2011 (9) TMI 708 - AT - Central Excise

Levy of penalty when duty has been paid - CBFS used as substitute for furnace oil - Held that - Appellants did not receive inputs and secondly inputs in question claimed to have been used was not usable on the basis of technical report issued by a Government Department. Certificate issued by Friends Forgings shows that it is not used on regular basis. Plea of appellant that duty paid before issue of notice is not sustained (UOI vs. Rajasthan Spg. & Wvg. Mills 2009 (5) TMI 15 - SUPREME COURT OF INDIA). Thus penalty to be levied but reduced to 25%.

Summary

Issues:
1. Usability of CBFS as substitute for furnace oil and its input for manufacture.
2. Allegations of fake documents and non-receipt of goods by the appellant.
3. Failure to explain the nature and property of CBFS by the appellant.
4. Technical reports from government authorities regarding the usability of CBFS.
5. Adjudication based on lack of evidence and failure to prove receipt and use of goods.
6. Imposition of penalty despite payment of duty before the show cause notice.
7. Consideration of reducing penalty based on legal precedents.

Analysis:
1. The appellant argued that CBFS was a valid input for manufacture as a substitute for furnace oil, supported by certificates indicating its usability. However, the Revenue dismissed these claims based on technical reports from various authorities stating CBFS was not suitable as a fuel substitute. The appellant's failure to address the technical aspects led to the rejection of their appeal.

2. The Revenue contended that the appellant did not receive CBFS in their factory but claimed credit based on fake documents. Statements from industry personnel and technical reports indicated discrepancies in the appellant's assertions, leading to the conclusion that they did not genuinely receive or use the goods in question.

3. Despite opportunities to explain the nature of CBFS, the appellant failed to provide satisfactory evidence of receipt and usage, leading to the rejection of their claims. The appellate order highlighted the appellant's lack of substantiation, which resulted in the sustainability of the adjudication against them.

4. Technical reports from government departments and public sector entities highlighted the unsuitability of CBFS as a furnace oil substitute due to its properties. The appellant's reliance on past tribunal decisions was deemed baseless, as the current case presented a negative opinion against them, further compounded by the absence of goods receipt.

5. The appellate authority found the show cause notice well-founded, citing the appellant's failure to prove receipt and usage of goods, which aligned with legal precedents shifting the burden of proof onto the appellant. The lack of evidence to counter the allegations in the notice led to the dismissal of the appeals on merit.

6. Despite the appellant's plea that duty was paid before the show cause notice, the imposition of penalty was upheld, citing legal precedents that did not support waiving penalties in such cases. The appellant's argument for remand was rejected, emphasizing their obligation to substantiate their claims adequately.

7. The appellant's request for penalty reduction was considered, citing relevant legal judgments supporting the reduction of penalties in certain circumstances. The penalty was ultimately reduced to 25% of the duty payable due to the disallowance of Cenvat credit, providing partial relief to the appellant.

In conclusion, the appeals were dismissed on merit, with partial relief granted on the quantum of penalty based on legal precedents and the specific circumstances of the case.