2013 (5) TMI 406 - AT - Central Excise

Cenvat Credit - allegation of non receipt of inputs - clandestine clearances Held that - In view of the judicial pronouncements of Apex Court in the case of State of Rajasthan vs. Mohan Lal 2009 (4) TMI 559 - SUPREME COURT OF INDIA and Collector of Customs, Madras vs. D. Bhoormull 1974 (4) TMI 33 - SUPREME COURT OF INDIA , department has reasonably discharged the burden that inputs were not received by the appellants. No manufacturer can be expected to keep documentary evidences of its clandestine activities. The order passed by Commissioner (Appeals) is, thus, correct and legal. So far as the appeal filed by, Director of M/s. Gyscoal Alloys Limited, against the personal penalty imposed upon him is concerned, it is seen from the records that he was aware of the bringing of inputs without actually receipt of the same and therefore, the penalty has been rightly imposed on the Director.

Issues Involved:
1. Whether the appellant company received the inputs on which Cenvat credit was taken.
2. Whether the inputs purchased were used in the manufacture of final products.
3. Whether the penalty imposed on the Director of the appellant company was justified.

Detailed Analysis:

1. Whether the appellant company received the inputs on which Cenvat credit was taken:
The core issue revolves around the receipt of inputs for which Cenvat credit was availed by the appellant company. The Commissioner (Appeals) concluded that the inputs were not received in the factory, based on RTO reports and the admission of the Director. The appellant argued that the Commissioner (Appeals) relied solely on these findings without fully considering their points. The appellant cited several judgments to support their claim that Cenvat credit was rightly availed, including Adhunik Ferro Alloys Limited and Hiren Aluminium Limited. However, the Tribunal noted that the judgment in the case of Ranjeev Alloys Limited, which is the latest interpretation, found that inputs could not have been received in the vehicles mentioned in the invoices, establishing that the inputs were not transported to the factory. The Tribunal upheld the findings that the appellant failed to prove the receipt of inputs, thus denying the Cenvat credit.

2. Whether the inputs purchased were used in the manufacture of final products:
The Commissioner (Appeals) held that the inputs purchased by the appellants were not used in the manufacture of final products. The Tribunal agreed with this conclusion, emphasizing that the shortage of raw materials and finished goods indicated that the inputs were not utilized in manufacturing. The Tribunal referenced the case of Bhagwati Steelcast Limited, where it was established that the transportation used was incapable of carrying the inputs, shifting the burden to the assessee to prove receipt of inputs in the factory. The Tribunal found the appellant's reversal of Cenvat credit to be an afterthought and upheld the denial of Cenvat credit.

3. Whether the penalty imposed on the Director of the appellant company was justified:
The Tribunal examined the personal penalty imposed on the Director under Rule 26 of the Central Excise Rules, 2002. It was noted that the Director was aware of the inputs being brought without actual receipt. The Tribunal upheld the penalty, stating that the Director's awareness justified the imposition of the penalty. The Tribunal referenced judicial pronouncements indicating that the department had reasonably discharged its burden of proving that the inputs were not received, affirming the penalty imposed on the Director.

Conclusion:
The appeals filed by the appellants were rejected, and the order of the Commissioner (Appeals) was upheld. The Tribunal concluded that the department had sufficiently demonstrated that the inputs were not received by the appellants, and the penalties imposed were justified. The judgment emphasized the importance of documentary evidence and the burden of proof in establishing the receipt and utilization of inputs for availing Cenvat credit.

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