2012 (12) TMI 346 - AT - Central Excise

Benefit of exemption under Notification No. 56/2002-C.E - AI claimed exemption under Notification No. 56/2002-C.E. dated 14-11-2002 as a unit situated in Jammu - As per this notification whatever duty is paid by AI through PLA is refunded to AI. Further the buyer of the product is able to take Cenvat credit of the duty paid by AI alleged that such refunds were taken in respect of goods not manufactured in Jammu - Revenue is proposing to recover the refund amount both at the end of AI and at the end of the buyers shown in the invoices issued by AI Held that - Revenue s argument that no processing was done in Jammu is not consistent with the observations recorded during the investigative visits. Arriving at the quantum of excise duty evasion done by the applicants requires much more detailed hearing and examination of case records - demands confirmed at the supplier s end and buyer s end amounts to recovering the same amount twice once at the end of AI and again at the end of the buyers. A strict interpretation of the notification authorising refund and the Cenvat Credit Rules authorising taking of credit may result in such an outcome if the fraud made out by Revenue is held to be proved - waiver of pre-deposit allowed

Summary

Issues Involved:
1. Jurisdiction of investigating and adjudicating authorities.
2. Legitimacy of refunds claimed by AI under Notification No. 56/2002-C.E.
3. Alleged fraudulent manufacturing activities by AI.
4. Double recovery of excise duties from AI and buyers.
5. Denial of cross-examination rights to the appellants.

Issue-wise Detailed Analysis:

1. Jurisdiction of Investigating and Adjudicating Authorities:
The appellants argued that the investigating authority (DGCEI, New Delhi) and the adjudicating authority (Commissioner, New Delhi) lacked jurisdiction. However, this issue was not argued during the hearing, and thus, the Tribunal did not address it in detail.

2. Legitimacy of Refunds Claimed by AI:
AI claimed exemptions under Notification No. 56/2002-C.E., which allows refunds for units in Jammu. The Revenue alleged that AI fraudulently claimed refunds for goods not genuinely manufactured in Jammu. The Tribunal noted that refunds obtained through mis-declaration or fraud could be recovered without appealing the original refund order.

3. Alleged Fraudulent Manufacturing Activities by AI:
The Revenue contended that AI did not manufacture the goods or the quantity claimed, instead generating invoices to create Cenvat credit. The Tribunal reviewed ten pieces of evidence, including discrepancies in machinery, test reports, and statements from AI employees, suggesting that AI did not conduct genuine manufacturing activities. AI's defense included mahazars confirming the presence of necessary equipment and certifications from the District Industry Centre, Jammu. However, the Tribunal found the Revenue's evidence merited detailed examination.

4. Double Recovery of Excise Duties:
The Revenue sought to recover duties from both AI and the buyers, leading to potential double recovery. The Tribunal acknowledged that while strict interpretation of the rules might justify this, it would be unfair to demand pre-deposits from both ends. Consequently, the Tribunal decided to restrict the quantum of pre-deposit considering the double recovery issue.

5. Denial of Cross-Examination Rights:
The appellants argued that they were denied the right to cross-examine witnesses whose statements were used against them. The Tribunal noted that the statements were from AI employees, who were also appellants, and thus, the opportunity to rebut through replies to the Show Cause Notice was deemed sufficient. The denial of cross-examination was not considered a serious issue.

Conclusion:
The Tribunal ordered the appellants (AI, SMIL, SAIL, SECL, and NE) to deposit 15% of the demanded duty within six weeks as a condition for hearing their appeals. For individual appellants (partners and managing directors), there was a waiver of pre-deposit, subject to compliance by the respective companies. Compliance was to be reported by June 15, 2012.