2014 (6) TMI 303 - AT - Central Excise

Waiver of pre-deposit of duty - availment of cenvat credit on inputs without receiving the input materials or processed materials from the job workers - equal amount of penalty under Section 11AC - Held that - that none of the job workers were found to have been engaged by the applicant. The applicant did not dispute this allegation of the Department. The number of workers were only five, is also not in dispute. The inspection carried out by the Chartered engineer was in the presence of the Director, Shri Ashok Kumar Kar. Is also not in dispute. During investigation, the Director admitted that he would not issue any challan for sending goods to job workers and the goods after finishing were directly sent to customer s premises from the job worker as is clear from the reply to question Nos. 17 to 20 respectively. The inspection of Chartered Engineer shows that the machines/machineries are old and rusted, there was very low consumption of electricity, workers as low as five in number and the diesel engine was not operating condition. Admittedly, the Director of the Company was present during inspection. Thus, prima-facie, it is revealed that the applicant indulged in irregular availment of cenvat credit on inputs without receiving the input materials or processed materials in their factory for manufa cture of finished goods and passed the same purported credit to various consignees in the guise of duty paid on their finished final products, when the goods were neither manufactured in their factory nor manufactured through job workers. The applicant did not follow the procedure prescribed under Notification 214/86 CE dated 25.3.1986. In these circumstance s , the applicant is not able to make out a prima facie case for total waiver of pre deposit. - stay granted partly.

Summary

Issues involved:
- Waiver of pre-deposit of duty and penalty under Section 11A C of the Central Excise Act, 1994
- Irregular availment of cenvat credit on inputs without receiving materials from job workers
- Allegations of passing purported credit to consignees on the guise of duty paid on finished goods
- Non-compliance with prescribed procedures under Notification 214/86-CE dated 25.03.1986
- Financial hardship plea by the applicant

Analysis:
1. The applicant filed for waiver of pre-deposit of duty and penalty, contesting allegations of irregular cenvat credit availment without receiving input materials from job workers. The Department's case was based on the lack of engagement of job workers as claimed by the Director, supported by inspection findings of old machines, low electricity consumption, and minimal workforce presence.

2. The applicant argued they maintained meticulous records, received raw materials from reputable sources, and dispatched finished goods to customers after job work. They refuted the inspection report's presumptive nature and highlighted proper utilization of machinery for manufacturing engineering equipment in adherence to design specifications.

3. The Department presented statements indicating discrepancies, such as the Director's admission of not issuing challans to job workers and job workers confirming no orders from the applicant. The Chartered Engineer's report criticized the lack of essential records for regular production, questioning the factory's operational efficiency.

4. The Tribunal noted the absence of engaged job workers, contradictory statements regarding goods receipt, and discrepancies in transportation arrangements. Considering the balance of convenience and lack of evidence supporting financial hardship, the Tribunal directed a 25% pre-deposit of total duty within eight weeks, with remaining dues waived upon compliance, pending appeal. Failure to comply would result in dismissal of the appeal without further notice.