2012 (7) TMI 841 - AT - Central Excise

Demand of duty - Availment/utilization of MODVAT credit of CVD paid on HDPE granules - Imposition of penalty - Held that - On 12-10-1995, the Central Excise Range Superintendent visited the appellant s factory and conducted physical stock verification of the raw materials and also conducted a scrutiny of statutory records. A quantity of 4,725 Kgs. of HDPE granules of Indian origin was found in the factory and the same was noted in a mahazar; that no evidence of the imported raw materials having been received in the factory was also noted in the same mahazar. In the mahazar, it was also noted that the General Manager of the factory, who was present, stated that a quantity of 686 bags of imported HDPE granules had not been received in the factory but, nevertheless, Modvat credit was taken on that quantity also at the behest of the Management. The General Manager s inability to produce documentary evidence of actual utilization of any part of the imported granules in the manufacture of HDPE bags was also recorded in the mahazar. Department has not substantiated their case insofar as the MODVAT credit of Rs. 2,51,399.25 is concerned. The total credit taken by the party on the three consignments of HDPE granules covered by the three bills of entry is Rs. 3,63,319.95, out of which credit of Rs. 2,51,399.25 was found to have been utilized. The unutilized MODVAT credit is the difference between these two figures. At best, to this extent, the Revenue s case can be accepted. In the result, the denial of Cenvat credit to the extent of Rs. 1,11,920.70 is upheld and the rest of the demand raised on the appellant is set aside. In the facts and circumstances of this case, the penalty imposed on the appellant is reduced to Rs. 7,500 - Decided partly in favour of assessee.

Summary

Issues:
Demand of duty arising from MODVAT credit utilization on imported HDPE granules.

Analysis:
The appeal was filed against the demand of duty of Rs. 3,63,320/- due to the utilization of MODVAT credit on CVD paid on HDPE granules imported by the appellant. The case had been remanded for de novo adjudication in a previous round of litigation. The Assistant Commissioner disallowed the MODVAT credit and ordered recovery, imposing a penalty. The learned Commissioner (Appeals) upheld this order, leading to the present appeal.

The admitted facts of the case state that the appellant imported HDPE granules in two consignments and took MODVAT credit on them. During a physical verification, discrepancies were noted regarding the receipt of imported raw materials in the factory. The General Manager admitted that Modvat credit was taken on unreceived materials at the behest of the Management. Despite claims of receiving the imported granules, evidence of transportation from the port to the factory was lacking. The Superintendent found no entry of the raw materials from the third bill of entry in the factory records. The Assistant Commissioner's order indicated that the MODVAT credit was utilized for payment of duty on the final product, but the department failed to prove that Indian origin granules were used in manufacturing. The Tribunal held that the department failed to substantiate their case regarding the MODVAT credit utilization, upholding the denial of credit to a certain extent and setting aside the rest of the demand. The penalty imposed on the appellant was reduced in light of the circumstances.

In conclusion, the Tribunal disposed of the appeal by upholding the denial of a portion of the Cenvat credit, setting aside the remaining demand, and reducing the penalty imposed on the appellant. The judgment highlighted the importance of substantiating claims of credit utilization and the necessity of proper documentation and evidence in such cases.