2015 (7) TMI 624 - AT - Central Excise

CENVAT Credit - Capital goods - Imposition of penalty - the appellant took the stand that these items have been used as inputs. However, they were not able to produce any evidence to show as to where exactly these items have been used and which components / accessories have been manufactured out of these inputs and used in their factory. - Held that - There is a difference between Bajaj Hindusthan Ltd. case and the present case. In the case of Bajaj Hindusthan Ltd. (2013 (3) TMI 365 - ALLAHABAD HIGH COURT), it was the claim of the appellants that they had maintained proper records but on verification it was found that this was not so. In this case, I also take note of the fact that total amount involved is less than ₹ 1.40 lakhs. It was also submitted by learned counsel that credit was taken during construction of factory and therefore, some mistake could have happened. Having regard to the facts and circumstances, I consider that in this case, it may not be necessary to impose penalty. - Demand for Cenvat credit with interest is upheld. Penalty imposed on the appellant is set aside. - Decided in favour of assessee.

Summary

Issues:
Admissibility of Cenvat credit on MS Angles, Channels, Squares, Beams, Flat Bars, Flats; Burden of proof on the assessee to show usage of materials in factory; Maintenance of records under Rule 9(5) of Cenvat Credit Rules, 2004; Comparison with the case of Bajaj Hindustan Ltd. regarding evidence of usage; Imposition of penalty limited to 25%; Distinction in penalty imposition based on facts and amount involved.

Analysis:
The judgment addresses the issue of the admissibility of Cenvat credit on various materials used in the factory. The Revenue contended that the credit was inadmissible as the materials were not covered under the definition of capital goods. The assessee failed to provide evidence of how the materials were used in their factory, leading to the confirmation of the demand for Cenvat credit with interest. The responsibility to maintain records of receipt and usage lies with the assessee as per Rule 9(5) of the Cenvat Credit Rules, 2004.

The judgment draws a parallel with the case of Bajaj Hindustan Ltd., emphasizing the importance of maintaining proper records to substantiate the usage of inputs for manufacturing capital goods. The lack of evidence regarding the usage of materials such as angles, channels, plates, etc., as components or accessories in machinery or equipment worked against the appellants. Despite the plea for remand to produce records, the tribunal rejected the request, stating that the absence of evidence over the years weakened the credibility of producing it at a later stage.

Regarding the penalty imposition, the tribunal differentiated this case from Bajaj Hindustan Ltd., where penalty equal to the duty was sustained. In this instance, despite suppression/misdeclaration, the penalty was limited to 25% due to the lower amount involved and the context of the credit being taken during the factory's construction. Ultimately, the penalty was set aside considering the circumstances, and the demand for Cenvat credit with interest was upheld based on the lack of evidence and non-compliance with record-keeping requirements.

The judgment highlights the significance of maintaining accurate records to support Cenvat credit claims and underscores the burden on the assessee to demonstrate the legitimate usage of materials in the manufacturing process. It also showcases the tribunal's discretion in penalty imposition based on the specific facts and context of each case, emphasizing fairness and proportionality in such decisions.