2015 (10) TMI 1664 - AT - Central Excise

Denial of CENVAT Credit - Misdeclaration - Held that - Cenvat credit sought to be denied on two grounds (a) the value of raw material is higher than the value of finished goods, (b) there is mis-match of vehicle number on invoice and GR. Although the appellant has explained both the issues, during the course of investigation, by saying that average price of finished goods is much higher than the average price of raw material and the supplier has transported the goods up to his godown in his own truck and also have explained to the investigating team. Thereafter, the goods have been transported by the transporter to the appellant s premises. This explanation has not been considered by both the lower authorities. If same would have been considered then the appellant would not have travelled up to this Tribunal. As appellant has explained the discrepancy sought by the audit team, I do not find any discrepancy in the explanation given by the appellant and Revenue has not come up with any corroborative evidence to allege the allegations made in the show cause notice. In these circumstances, I hold that the appellant has correctly taken the credit consequently the impugned order is set aside - Decided in favour of assessee.

Summary

Issues:
1. Denial of Cenvat credit on steel wire and HB redraw wire due to procurement price exceeding 25% of selling price.
2. Discrepancy in truck numbers on invoice and GR leading to denial of Cenvat credit.

Analysis:
1. The appellant contested the denial of Cenvat credit, arguing that during the impugned period, the average price of finished goods was higher than the cost price, justifying the procurement of raw material at a higher rate. The appellant explained that due to a shortage of raw material, they had to procure it at a higher price. The appellant clarified that the supplier transported goods up to their godown, after which a transporter carried the goods to the appellant's premises in a different truck, causing the mismatch in truck numbers. The appellant's explanation was not considered by the lower authorities. The appellant's counsel emphasized that the procurement of raw material at a higher price should not be a reason to deny Cenvat credit. The Tribunal found the appellant's explanation satisfactory and held that the denial of Cenvat credit was unjustified. Consequently, the impugned order denying Cenvat credit, demanding duty, and imposing penalties was set aside, and the appeal was allowed.

2. The Revenue argued that prudent individuals would not buy raw material at a higher rate than the finished goods and highlighted the discrepancy in the vehicle numbers on the invoice and GR. The Revenue contended that since the raw material's price exceeded 25% of the finished goods' value and the truck numbers did not match, the denial of credit and duty imposition were justified. However, the Tribunal found the appellant's explanation regarding the mismatch in truck numbers reasonable. The Tribunal observed that the appellant's clarification during the investigation was not adequately considered by the lower authorities. As the Revenue failed to provide corroborative evidence supporting the allegations in the show cause notice, the Tribunal held in favor of the appellant, allowing the appeal and granting consequential relief.