2011 (4) TMI 1095 - HC - Central Excise

Cenvat credit disallowed - Whether CESTAT is correct in law by allowing the Cenvat Credit based on invoices, issued by dealers who did not exist at the address given in the invoices and which are not valid as per law - dealer who has issued the invoice has shifted the premises and that the premises from where the invoices were issued are the premises where the dealer did not have any office or business activity going on Held that - authority has not recorded any finding that there is no such dealer in existence or that no inputs were supplied by him or that any duty was paid on such inputs, there is also no finding that the inputs were not received in the factory premises or it was not used in the manufacturing process, decision in favour of the assessee and against the revenue

Summary

Issues:
Challenge to Tribunal's order disallowing Modvat credit.

Analysis:
The appeal was filed by the revenue challenging the Tribunal's decision to set aside the order disallowing Modvat credit. The case involved the assessee availing Cenvat credit on inputs, specifically MS ingots, for manufacturing final products. The authorities issued a show cause notice alleging irregular availment of credit as the dealer from whom the inputs were purchased had shifted premises. The assessee defended by stating that the inputs were received under valid invoices and used in their factory. Despite this, the demand was confirmed, and the assessee was directed to pay interest and penalty. On appeal, the Tribunal noted that the inputs were duty paid and consumed in the factory premises, leading to the decision to grant the Cenvat credit benefit. The revenue challenged this decision by raising substantial questions of law.

The substantial questions of law raised for consideration were whether the Tribunal was correct in allowing Cenvat credit based on invoices issued by non-existent dealers and if the benefit was rightly granted when the manufacturer failed to verify the supplier's identity and address as per Cenvat Credit Rules. The material on record revealed that the dealer had shifted premises and did not have business activities at the mentioned address. However, it was undisputed that duty-paid inputs were received and used by the assessee in their factory. The invoices contained all necessary details, and there was no evidence to suggest that the dealer did not exist, did not supply inputs, or that duty was not paid. The Tribunal concluded that denying Cenvat credit to a dealer who paid duty without such findings was unwarranted. Consequently, the Tribunal's decision was upheld, ruling in favor of the assessee and against the revenue.

In summary, the judgment emphasized the importance of duty-paid inputs being received and utilized in the manufacturing process, irrespective of the dealer's premises shifting. As long as the necessary documentation and payment of duty were in order, the Cenvat credit benefit could not be denied. The Tribunal's decision was deemed well-considered and justified, leading to the resolution of substantial legal questions in favor of the assessee.