2014 (3) TMI 85 - AT - Central Excise

Waiver of pre deposit - Fraudulent transactions - Availment of higher Cenvat Credit on rolled products which were described as Non Alloy Steel SLR, Bars & Rods of Non-Alloy Steel Rejected Cut pieces, Bars and Rods of Non-alloy Steel, Non-Alloy Steel Rounds(Rejected), Non-Alloy Steel Rounds (Rejected cut pieces), Round Bar S/L Rejected Round Bar Small Pieces, M. S. Round Cuttings and Non-Alloy Steel Round S/L Rejected. - Held that - it does not make any economic sense in a competitive world to make the price of final product costlier by buying costly raw-materials as waste which is useable as such - In the normal trade parlance, no one will buy these types of products of rolling industry making it economically unviable and thus creating non-justification of such purchase. There is no justification in appellant s plea that rolling materials have been purchased to improve the quality of their finished product. - balance of convenience clearly indicates paper transactions with intent to avail fraudulent credit. - once credit is Prima facie taken on finished goods in the guise of scrap, fraudulent activity clearly surfaces, Prima facie case is in the favour of Revenue - Stay granted partly.

Summary

Issues:
1. Availment of Cenvat Credit on certain goods other than waste and scrap.
2. Consumption of HR/CR Sheets for manufacturing.
3. Purchase of rejected wire.
4. Availment of Cenvat credit on old and used parts.

Analysis:
1. The appeal before the Tribunal involved the confirmation of demand and penalty imposed on the appellant for availing Cenvat Credit on items like Bars, Rounds, and other steel products. The Commissioner found discrepancies in the classification of these items as scrap, which were actually usable for further manufacturing processes in industries like cycle parts and auto parts. Statements from various suppliers confirmed the overpricing of these materials compared to scrap rates, casting doubt on the genuineness of transactions. The Tribunal observed that the items in question were actually finished products of the rolling industry, not scrap, leading to the denial of Cenvat Credit.

2. The Tribunal scrutinized the consumption of HR/CR Sheets for manufacturing purposes, noting discrepancies in the records and statements provided by suppliers. It was revealed that the CR Sheets were not used for the intended purpose, leading to doubts about the legitimacy of availed credits under Cenvat Credit Rules. The Commissioner's findings highlighted the lack of proper documentation and usage of materials as per the defined rules, resulting in the denial of credit on these items.

3. The purchase of rejected wire raised concerns regarding the admissibility of Cenvat Credit, as the supplier admitted that the material sold was damaged and not usable as intended. The onus of proving the admissibility of credit lay with the appellant, who failed to provide sufficient evidence to support their claim. Rule 2(5) of Cenvat Credit Rules was cited to emphasize the responsibility of the credit availing party, leading to the unfavorable decision against the appellant.

4. An additional issue arose concerning the availment of Cenvat credit on old and used parts supplied by a specific entity. The appellant manipulated prices and descriptions to mislead the authorities, resulting in a change in the classification of goods to claim unwarranted credits. The Tribunal found discrepancies in the appellant's actions, leading to the denial of credit on these items and highlighting the fraudulent activities undertaken to avail benefits under the Cenvat Credit scheme.

In conclusion, the Tribunal directed the appellant to deposit a specified amount as a partial pre-deposit due to the prima facie evidence of fraudulent activities and non-compliance with Cenvat Credit regulations. The decision highlighted the importance of adhering to prescribed rules and providing accurate documentation to support credit claims, ultimately emphasizing the need for transparency and compliance in availing tax benefits.