2015 (1) TMI 448 - AT - Central Excise

Denial of CENVAT Credit - appellants did not produce purchase orders for the finished goods sold by them after processing - Held that - There is no finding on the claim of the appellants that the finished goods have been processed; there is no finding of the Commissioner that the flow chart was not based on fact; there is no finding on the submission that appellants had maintained detailed accounts and they had documents for issue of the material and use of the same; there is no finding that the processed goods had in fact not been sold in the Indian market / export market by the appellants on payment of duty; there is no finding that the claim of the appellants that the products were sold at much higher price and therefore the CENVAT credit availed by them had been completely reversed is wrong; there is no finding that there was actually no clearances of the finished goods to the customers. Purchase order is not statutory document and in the absence of it being a statutory requirement even if the purchase order is not there, the appellant cannot be found fault with if they had sold the goods and in the absence of any finding that the goods have not been sold or the documents shown regarding sale were fictitious /bogus and in the absence of finding that the goods were not manufactured by the appellant, just because the appellants had made a declaration that they were transferring the finished goods at the time of conversion, it cannot be said that they became disentitled to CENVAT credit. In this case basically, the case is based on complete facts and as per the facts, the appellants used the intermediate products and the finished goods in the manufacture of final products which they cleared on payment of duty/export. That being the position, the appellant is eligible for CENVAT credit utilised by them and in our opinion, there is no case for the Revenue at all. - Decided in favour of assesse.

Summary

Issues:
1. Admissibility of CENVAT credit on duty paid on intermediates and finished goods.
2. Denial of CENVAT credit by the Commissioner based on various grounds.
3. Imposition of penalty along with the demand for CENVAT credit.
4. Lack of findings on crucial aspects by the Commissioner.
5. Applicability of CENVAT Credit Rules and the eligibility criteria for claiming credit.

Admissibility of CENVAT Credit on Duty Paid on Intermediates and Finished Goods:
The appellant, a 100% EOU converted to a DTA unit, paid duty liability on intermediates and finished goods upon debonding. They claimed CENVAT credit of duties paid, supported by self-invoices, since the inputs were used in the same factory. The Commissioner denied the claim, stating that in continuous processes, intermediate goods may not become dutiable. Additionally, without clearance to other units with appropriate duty payment, CENVAT credit transfer was not allowed. The appellant's eligibility for credit required proof of input usage in various stages of final product manufacture. The Tribunal's precedent was cited to support the denial of credit on yarn stock at debonding.

Denial of CENVAT Credit and Imposition of Penalty:
The denial of CENVAT credit was primarily due to the lack of purchase orders for finished goods sold post-processing. The appellant contended that inadvertently declared goods were used as inputs and sold domestically or exported. Despite providing flow charts and processing details, credit for intermediate and finished goods was disallowed for false declaration. The absence of purchase orders led to demand confirmation and penalty imposition.

Lack of Findings on Crucial Aspects:
The Tribunal found discrepancies in the Commissioner's decision, noting the absence of findings on whether finished goods were processed, flow chart accuracy, detailed accounts maintenance, actual sale of goods, and duty payment reversals. The Commissioner failed to establish non-sale or fictitious sales, undermining the denial of CENVAT credit. The appellant's compliance with CENVAT Credit Rules was highlighted, emphasizing the need for duty payment on claimed inputs, proper usage, and final product clearance.

Applicability of CENVAT Credit Rules and Eligibility Criteria:
The Tribunal deemed the initiation of proceedings and subsequent penalties as unwarranted, given the appellant's acknowledgment of errors and voluminous document submission. Despite opposition, the Tribunal concluded that the appellant rightfully utilized intermediate and finished goods in final product manufacturing, clearing them with duty payments. The lack of a case for the Revenue led to the appeal's allowance, emphasizing the appellant's eligibility for CENVAT credit under the circumstances.

This detailed analysis of the judgment addresses the admissibility of CENVAT credit, grounds for denial, penalty imposition, lack of findings, and the application of CENVAT Credit Rules to determine the appellant's eligibility for credit.