2013 (10) TMI 56 - HC - Central Excise

Penalty Set Aside - Whether the Tribunal had committed substantial error in setting aside penalty imposed under Rule 13 of the Cenvat Credit Rules Held that - Merely because the addresses of the firms which received the challans were incomplete or not found, the inference on the part of the Revenue authorities that they were not in existence was not justified - It was observed that the assessee was maintaining a lot register and the entries were on record indicating the payments received from the merchant-manufacturers - Those entries were acceptable and not required to be doubted as the payment was by account payee cheques - Those merchants were found to have filed return of income also - The Commissioner (Appeals) could not have held against the assessee citing a ground only that the assessee had not maintained production record in particular form. Whether the challans were of non-existent firms or not was a question which was to be determined on the basis of material in that regard - The Tribunal has on consideration of relevant material and by drawing conclusions therefrom held against the Revenue - They are the findings based on appreciation of facts and material - We are in agreement with the findings recorded by the Tribunal - The findings being factual and the Tribunal being a final fact finding authority, no substantial questions of law arises for consideration and the order is not liable to be interfered with Decided against the revenue.

Summary

Issues:
Appeal under Section 35-G of the Central Excise Act, 1944 against setting aside penalty under Rule 13 of the Cenvat Credit Rules.

Analysis:
The case involved an appeal by the Department against a judgment setting aside a penalty imposed on the respondent under Rule 13 of the Cenvat Credit Rules. The respondent was engaged in processing grey fabrics on job charges supplied by different parties. The respondent availed deemed credit benefit in April 2002, based on grey fabrics purportedly supplied by a merchant. However, it was later discovered that the merchant had obtained rebates on false export documents, indicating paper transactions without actual movement of goods. A show cause notice was issued to the respondent for wrongly availing the credit, leading to a demand confirmed by the Assistant Commissioner.

The Appellate Commissioner dismissed the appeal, considering the penalty under Rule 13 of the Cenvat Credit Rules as illegal due to fraudulent transactions. The Tribunal, however, allowed the appeal of the assessee, emphasizing that the case was based on incomplete or non-existent supplier addresses and statements of the merchant manufacturer. The Tribunal noted that the credit taken was deemed and not linked to payment, and the Revenue's case lacked evidence due to incomplete supplier addresses. The Tribunal also highlighted the maintenance of lot registers and record of payments received by the assessee from merchant-manufacturers.

The Tribunal rejected the Revenue's inference regarding non-existent firms receiving challans, emphasizing the acceptability of entries backed by account payee cheques and filed income tax returns by the merchants. The Tribunal concluded that the findings were based on factual appreciation and material considerations, agreeing with the assessee's contentions. As the Tribunal was the final fact-finding authority, no substantial questions of law arose for consideration, leading to the dismissal of the appeal as devoid of merit.