2011 (7) TMI 866 - AT - Central Excise

Cenvat credit in respect of input and capital goods - unaccounted excess consumption of raw materials/inputs - Clandestine removals - According to the Appellant, the cost accountant have not considered the wastage of the raw materials, and if the waste of Rs. 22.84 crores is added to the raw material consumption, cost of Rs. 368.11 crores determined by the Auditors and which does not include waste, there would not be any discrepancy - According to the Department, in view of Cost Accountant s report, the actual consumption of inputs/raw materials used in the manufacture of the finished goods shown in the books of accounts is much less than that shown in the profit & loss account and the balance quantity of inputs has been used for manufacture of finished goods, which have not been accounted for and have been cleared without payment of duty - Decided in favor of the assessee Regarding cenvat credit demand of Rs. 2,89,12,900 - The dispute here is that while according to the Appellant, the entire credit wrongly taken was reversed during the same financial year, according to the Department, the credit to the tune of about Rs. 1.93 crores was not reversed, as after reversal, the same was taken again - While this point can be examined only at the time of regular hearing, after carefully considering the claims and counter claims of both the sides and examining the records, at this stage, it can be said that on this point, this is not a case for total waiver - Decided in favor of the assessee by way of direction to deposit Rs. 50 Lakhs

Summary

Issues:
- Allegation of unaccounted excess consumption of raw materials and duty demand
- Allegation of wrongly availed cenvat credit and penalty imposition
- Appeal against the Commissioner's order and subsequent remand for de novo adjudication
- Confirmation of duty and cenvat credit demands, imposition of penalties, and subsequent appeals

Allegation of unaccounted excess consumption of raw materials and duty demand:
The case involved allegations of unaccounted excess consumption of raw materials and the resulting duty demand. The Cost Accountants' report highlighted discrepancies in the Appellant Company's consumption of raw materials, leading to duty evasion allegations. However, the Appellant argued that the Cost Accountants failed to consider waste in their calculations, which, when added, reconciled the figures. The Tribunal found no evidence of unaccounted purchases or clandestine removal of goods. Citing a Supreme Court case precedent, the Tribunal noted that input-output ratios alone cannot prove duty evasion. As a result, the Tribunal found a prima facie case in favor of the Appellant regarding the duty demand.

Allegation of wrongly availed cenvat credit and penalty imposition:
Regarding the allegation of wrongly availed cenvat credit and penalty imposition, the Appellant admitted to wrongly taking credit but claimed to have reversed the amount during the same financial year. The Department contested this, stating that a significant portion of the credit was not reversed. The Tribunal acknowledged the need for further examination during a regular hearing but indicated that total waiver was not warranted at that stage. The issue of interest on the wrongly taken credit was also highlighted.

Appeal against the Commissioner's order and subsequent remand for de novo adjudication:
Following appeals against the Commissioner's order, the Tribunal set aside the initial decision and remanded the matter for de novo adjudication. Subsequently, the Commissioner reconfirmed the duty and cenvat credit demands, along with penalties. The Appellants then filed further appeals against this decision, leading to the current hearing.

Confirmation of duty and cenvat credit demands, imposition of penalties, and subsequent appeals:
The Tribunal directed the Appellant to deposit a specified amount within a set timeframe, with the waiver of the balance subject to compliance. While the duty demand aspect favored the Appellant prima facie, the Tribunal indicated that total waiver was not appropriate for the cenvat credit demand. The Tribunal also waived the penalty pre-deposit for the Divisional Manager (Stores) due to lack of evidence justifying the penalty. The stay application for the Divisional Manager was allowed, pending the appeal's disposal.