2014 (2) TMI 875 - AT - Central Excise

Denial of CENVAT Credit - Penalty under Rule 15(1) of CENVAT Credit Rules, 2004 and Rule 15(2) of the said Rules read with Section 11AC of the Central Excise Act - Enhancement in penalty - Held that - appellant issued the purchase order for purchasing the CI scrap. They received the CI scrap accompanied with invoices indicated as CI scrap. Rule 9(3) of the CENVAT Credit Rules as it stood at the material period provides that the manufacturer of excisable goods taking CENVAT credit on inputs shall take reasonable steps to ensure that the input or capital goods in respect of which he has taken the CENVAT credit on which the appropriate duty of excise as indicated in the documents accompanying the goods has been paid. The Explanation to Rule 9(3) of the said Rules provides that the manufacturer shall be deemed to have been taken reasonable steps if he satisfies himself about the identity and address of the manufacturer or supplier as the goods may be showing the documents evidencing payment of excise duty either from his personal knowledge or on the basis of the certificate given by a person. Dealer is registered under Central Excise Rules and they are in existence in their address. There is no material available that the CENVAT invoices accompanied with goods are not genuine. So, in my considered opinion, the appellant had satisfied the conditions as provided under Rule 9(3) of the said Rules. Hence, there is no reason to deny the credit on the appellant. The dispute raised by the Revenue of value of the goods, cannot be reason for denial of CENVAT credit subject to fulfillment of condition of CENVAT Credit Rules. Apart from that, the transaction of the goods at a lower price is within the domain of buyer and seller - impugned order is modified insofar as the demand of duty along with interest and penalty imposed on the appellant are set aside - Decided in favour of assessee.

Summary

Issues:
1. Denial of CENVAT credit on inputs purchased from dealers.
2. Confirmation of duty demand, interest, and penalties by adjudicating authority.
3. Appeals filed before Commissioner (Appeals) by both assessee and revenue.
4. Arguments presented by the appellant and the revenue.
5. Examination of facts and legal provisions by the Tribunal.
6. Application of Rule 9(3) of CENVAT Credit Rules.
7. Relevance of case laws cited by the parties.
8. Decision on the appeal and relief granted.

Analysis:
1. The case involved a dispute regarding the denial of CENVAT credit on inputs, specifically MS scrap, purchased by the appellants from registered dealers. The issue arose when a show-cause notice was issued to deny CENVAT credit of Rs.58,940/- based on invoices from the dealers.

2. The adjudicating authority confirmed the duty demand, interest, and penalties under CENVAT Credit Rules, 2004, and Central Excise Act. Penalties were imposed on the dealers as well. This decision was challenged through appeals before the Commissioner (Appeals).

3. Both the assessee and revenue filed appeals before the Commissioner (Appeals). The impugned order upheld the duty demand, interest, and enhanced penalties, while setting aside a portion of the penalty imposed earlier. Subsequently, the assessee appealed against this decision.

4. The appellant argued that they purchased CI scrap from the dealers, received duty-paid goods, and complied with CENVAT Credit Rules. They contended that irregularities at the dealer's end should not affect their CENVAT credit eligibility, citing relevant Tribunal decisions.

5. The revenue contended that the dealers supplied non-duty paid scrap at lower values, indicating collusion with the appellants. They relied on Tribunal decisions to support their argument. After hearing both sides and examining the records, the Tribunal analyzed the statements and evidence provided.

6. The Tribunal analyzed Rule 9(3) of the CENVAT Credit Rules, emphasizing the manufacturer's responsibility to ensure duty payment on inputs. It found that the appellant had taken reasonable steps to verify the genuineness of the invoices and the dealers' compliance with excise rules.

7. The Tribunal distinguished the case laws cited by the revenue, highlighting the difference in the goods received by the appellants. The relevance of the case laws was deemed inapplicable to the present case based on the nature of the inputs received.

8. Finally, the Tribunal modified the impugned order, setting aside the duty demand, interest, and penalties imposed on the appellant. The appeal was allowed, granting consequential relief. The decision was pronounced in open court, providing relief to the appellant based on the analysis of facts and legal provisions.