2012 (11) TMI 637 - AT - Central Excise

Cenvat credit - duty paid goods was sold by assessee - goods were not accepted by the buyers, it was returned back - buyer issued invoices wherein duty payment column showed as nil Held that - They have made exercise on the basis of audit advice - authorities should independently examine the allegation, if any, and if required, conduct inquiry and then it should come to a rational conclusion discharging the statutory duties. Such an essential exercise is absent in the orders passed by both the authorities below - order merely pointed out certain defects. Neither there was any inquiry conducted against the buyer nor any investigation made into the record of the appellant with the version of supply of goods. In absence of proper inquiry into the material fact an arbitrary order passed becomes unsustainable - appeal is required to be allowed dispensing requirement of pre-deposit

Summary

Issues:
Claim of Cenvat credit on duty paid goods returned by buyer operating in a duty exempted area.

Analysis:
The appellant claimed Cenvat credit of Rs. 1,68,510/- on duty paid goods returned by a buyer, as the goods were not accepted and returned with invoices showing duty payment as "nil." However, the audit contended that such documents did not entitle the appellant to the credit. None of the authorities found evidence of the supply of goods by the appellant to the buyer. The buyer operated in a duty exempted area, leading to the argument that the goods returned should not disentitle the appellant from claiming Cenvat credit.

The learned DR supported the lower authority's order, which was based on audit advice. However, the appellate tribunal noted that the authorities below did not independently examine the allegations, conduct any inquiry, or make a rational conclusion. The tribunal emphasized that authorities must fulfill their statutory duties by conducting proper inquiries and investigations before reaching a decision. In this case, there was a lack of essential exercise in examining the material facts, making the arbitrary order unsustainable.

Consequently, the tribunal held that in the absence of a proper inquiry and examination of material facts, the appeal must be allowed, and the requirement of pre-deposit should be dispensed with. The tribunal emphasized the importance of authorities independently examining allegations and conducting inquiries to reach rational conclusions in matters concerning duty payments and Cenvat credit claims.