2013 (5) TMI 186 - AT - Central Excise

Deemed credit taken disallowed along with interest and imposition of penalty - as per dept. merchant manufacture for whom the goods were manufactured has exported goods by forging documents - Grey fabrics received by the appellants on which deemed credit was taken - Held that - It is not the case of the department that the inputs on which deemed credit was taken has been cleared by the appellants as such. The goods on which deemed credit was taken were duly processed/manufactured and cleared. It was only the merchant exporter who diverted the goods by forging exporter documents. On the ground of diversion of these goods by merchant exporter, it cannot be considered that grey fabrics on which deemed credit was taken were not further manufactured and accordingly cenvat credit is not deniable. In favour of assessee.

Summary

Issues:
Deemed credit disallowance, interest imposition, penalty imposition due to forged documents in export.

Deemed Credit Disallowance:
The appeal involved the disallowance of deemed credit taken by the appellants due to the merchant manufacturer exporting goods by forging documents. The Tribunal observed that the goods on which deemed credit was taken were duly processed and cleared by the appellants, and it was the merchant exporter who diverted the goods through fraudulent means. The department did not claim that the inputs were cleared by the appellants without further manufacturing. The Tribunal held that the diversion by the merchant exporter did not negate the fact that the goods were processed by the appellants, making the denial of cenvat credit unwarranted. The judgment in a similar case was cited to support this reasoning, leading to the appeal being allowed and the Commissioner's order set aside.

Interest and Penalty Imposition:
The issue of interest and penalty imposition was intertwined with the disallowance of deemed credit. The Tribunal's decision to allow the appeal and set aside the Commissioner's order also implied the rejection of interest and penalty imposition. The Tribunal's analysis focused on the fact that the goods were processed and cleared by the appellants, and the diversion by the merchant exporter did not invalidate the legitimate manufacturing activities undertaken by the appellants. Consequently, the imposition of interest and penalty was deemed unjustified in light of the circumstances surrounding the case.

Legal References:
During the proceedings, the appellants relied on a judgment from the Ahmedabad Bench of the Tribunal in a specific case, which supported their argument regarding the legitimacy of taking deemed credit in similar circumstances. The Tribunal considered this precedent and found it applicable to the current case, further strengthening the appellants' position and leading to the decision to allow the appeal. The legal references played a crucial role in shaping the Tribunal's analysis and ultimate decision in favor of the appellants.

In conclusion, the judgment by the Appellate Tribunal CESTAT Ahmedabad addressed the issues of deemed credit disallowance, interest imposition, and penalty imposition in a case where goods were exported using forged documents. The Tribunal's detailed analysis focused on the legitimate manufacturing activities of the appellants, the lack of evidence of wrongdoing on their part, and the applicability of legal precedents supporting the allowance of deemed credit in such situations. The decision to allow the appeal and set aside the Commissioner's order was based on these key considerations, highlighting the importance of proper assessment and legal references in resolving complex issues related to credit disallowance and penalty imposition in indirect tax matters.