2013 (12) TMI 113 - AT - Central Excise

Denial of cenvat credit No contrary evidence with the revenue to substantiate the claim - Assessee followed first in first out method for clearance of goods Held that - The officers had visited and verified the stock for the purpose of availment of CENVAT credit - During such visit if they could not and did not verify whether there was any stock received from other than manufacturers and result was availment of CENVAT credit on the quantity declared, demand for CENVAT credit availed attributing a portion of the same to the traders cannot be sustained unless backed by investigation and evidence - in this case, the investigation conducted has strengthened the case of the appellants since in the statements the concerned representatives have stated that the appellants were following the practice of storing goods received from manufacturers and traders separately and using them separately and at the time when verification was conducted only raw materials received from manufacturers was taken into account - In the absence of any contrary evidence unearthed during investigation other than arithmetical calculations, the order cannot be sustained Decided in favour of Assessee.

Summary

Issues:
Appeals filed by three units of the same company against the same Order-in-Original regarding CENVAT credit availment.

Analysis:
The appeals were filed by three units of a company against the same Order-in-Original, all related to the issue of CENVAT credit availment. The company operated three steel rolling mills in Karnataka, eligible for Modvat credit until 1997. After Section 3A was introduced in 1997, the duty regime changed, and CENVAT credit became applicable from April 2000 under Rule 57AB of the Central Excise Rules.

A circular issued by the CBEC in 2000 allowed CENVAT credit on inputs/raw materials in stock as of April 1, 2000, supported by duty paying documents. The appellants filed stock declarations of inputs with the Central Excise Department, which were verified and found correct. Subsequently, they availed CENVAT credit based on duty paid documents.

During a verification visit by Preventive Unit officers, certain records related to CENVAT credit were examined, and statements from company officers were recorded. The Department alleged that the appellants did not follow the 'first in first out' principle for materials received before April 2000, leading to a denial of CENVAT credit.

The appellants argued that they had filed stock declarations and had duty paying documents for the entire quantity, with a practice of storing materials from traders separately to ensure immediate consumption. The Department contended that without separate accounts, the 'first in first out' principle was correctly applied. However, the officers did not verify the source of stock during the visit.

The Tribunal found that the Department's demand for CENVAT credit denial was not substantiated by evidence. The investigation actually supported the appellants' case, as statements confirmed the practice of storing materials separately. Without contrary evidence beyond calculations, the impugned order was unsustainable. Consequently, all appeals were allowed with any consequential relief for the appellants.

This detailed analysis highlights the issues surrounding CENVAT credit availment, the regulatory framework, circulars, stock verification, statements recorded during investigation, and the Tribunal's decision based on the lack of evidence supporting the denial of CENVAT credit to the appellants.