2013 (8) TMI 305 - AT - Central Excise

Waiver of pre-deposit - cenvat credit - duty paying documents - M/s. Praveen Foundry Pvt. Ltd. (Applicant No.1) is a manufacturer of castings of automobiles. They purchased MS scrap and SS scrap from registered dealers and used in the manufacture of castings. Original authority confirmed the demand of duty and imposed penalty of equal amount along with interest on the ground that they received MS scrap but the duty paying documents were showing the goods as MS channels and angles, rods, rounds etc Held that - Applicant No.2, Shri A. Radhakrishnan, M.D. of Applicant No.1 company in his statement dated 24.9.2008 categorically stated the details regarding process of receiving M.S. scrap, Lab test, storage and use in the manufacturing of finished goods. In the context of the present case, he stated that they received virgin materials and treated them as scrap. Prima facie, it is difficult to accept that a prudent business would use virgin material as scrap and such statement is contrary to the statements of dealers and this virgin materials usually cannot be used in melting scrap in the Furnace. We find that Rule 9 (5) of Cenvat Credit Rules, 2004 provides that the burden of proof regarding admissibility of the Cenvat credit shall lie upon the manufacturer taking such credit. It is apparent from the evidences, namely statements, process of manufacture etc. that the applicant received non-duty paid M.S. scrap, S.S. scrap in the guise of MS & HR plates, MS Wire coil, MS Round coils etc. from various registered dealers and availed cenvat credit, which is not permissible under Cenvat Credit Rules - Prima facie, the applicant failed to discharge the burden of proof that they received duty paid MS scrap, SS scrap on the basis of Central Excise invoices - Applicant No.1 is directed to deposit Rs.13,00,000/-(Rupees Thirteen lakhs only) within 6 weeks - Upon such deposit, predeposit balance duty along with interest and penalty on the applicant-company as well as penalty on its Managing Director (Applicant No.2) shall stand waived.

Summary

Issues involved:
1. Delay in filing appeals and condonation of delay.
2. Demand of duty, penalty imposition, and availing of cenvat credit on MS scrap.
3. Penalty imposition on registered dealers for supplying non-duty paid scrap.
4. Burden of proof on manufacturer for availing cenvat credit.
5. Compliance and predeposit requirements for the applicants.

Detailed Analysis:
1. The judgment addressed the issue of delay in filing appeals and the condonation of the delay. The applicants filed applications for condoning a 3-day delay in filing their appeals, citing urgent business work as the reason for the delay. The advocate submitted that the appeals were prepared within the stipulated period but were not filed due to the applicant being out of town. The Tribunal considered the circumstances and condoned the delay, allowing the COD applications.

2. The case involved the demand of duty, penalty imposition, and availing of cenvat credit on MS scrap by the manufacturer. The manufacturer, a castings producer, purchased MS scrap but the duty paying documents indicated the goods as MS channels and angles, rods, rounds, etc. The original authority confirmed the duty demand and imposed penalties. The Tribunal found that the manufacturer availed credit based on invoices showing higher-duty material received from registered dealers, who supplied non-duty paid scrap to claim cenvat credit.

3. The judgment also addressed the penalty imposition on registered dealers for supplying non-duty paid scrap. The dealers issued invoices with various descriptions of goods like M.S. Wire, M.S. Wire coil, etc., which did not match the actual material supplied. The advocate for the dealers argued that penalties should not be imposed as the dealers duly recorded the material in their records. Reference was made to a previous Tribunal case for similar situations.

4. The burden of proof on the manufacturer for availing cenvat credit was a crucial aspect of the judgment. The Tribunal analyzed statements and evidence to determine that the manufacturer received non-duty paid scrap in the guise of virgin materials like MS & HR plates, which were not permissible under Cenvat Credit Rules. The manufacturer failed to prove the receipt of duty-paid MS scrap and SS scrap based on Central Excise invoices, leading to the decision for a deposit and waiver of penalties upon compliance.

5. Finally, the judgment outlined compliance requirements for the applicants. Applicant No.1 was directed to deposit a specified amount within a timeframe, with penalties and recovery stayed during the appeal pendency upon compliance. Similarly, Applicant Nos.3 to 11 were directed to deposit a percentage of the penalty amounts imposed against them within a specified period, with the balance penalty waived upon compliance. All applicants were required to report compliance on a specified date.

This detailed analysis of the judgment covers the issues of delay in filing appeals, duty demand and penalty imposition, penalty on registered dealers, burden of proof for availing cenvat credit, and compliance requirements for the applicants.