2015 (11) TMI 777 - AT - Central Excise

Disallowance of CENVAT Credit - denial of credit on the ground that goods removed / cleared free of cost - the value of inputs received by them was subsequently adjusted/reduced by way of issuance of debit notes - Held that - The assertion in the show cause notice and the conclusion in the orders passed by the authorities below do not refer to any probative material or evidence to support Revenue s assertion that the appellant availed cenvat credit on those inputs which resulted in the manufacture of final goods, some of which were returned to the appellant and are covered by the debit notes. Thus, Revenue failed to establish its assertion that the appellant had availed cenvat credit, an assertion which is clearly and categorically denied by the appellant and on which aspect no finding whatsoever stands recorded either by the primary authority or by the lower appellate authority. Thus the enquiry on the second aspect as to any correlation between the debit notes and invoices under which the goods were supplied to third parties by the appellant is an enquiry which is non sequitor. - burden of establishing availment of cenvat credit is on Revenue since it is Revenue s assertion that appellant had availed cenvat credit of those inputs which were used in the manufacture of final goods some of which were returned and on which debit notes were issued. Since Revenue failed to establish availment of cenvat credit by bringing on record evidence support to claim, reference to RG-23 register or any other probative material, it must be held to have been failed to shift the onus to the appellant to prove that it had not availed cenvat credit. - Decided in favour of assessee.

Summary

Issues:
- Appeal against order disallowing cenvat credit and imposing penalty
- Allegation of contravention of Cenvat Credit Rules and CEA, 2002
- Dispute over availing cenvat credit on inputs used in final products
- Burden of proof on Revenue to establish cenvat credit availment
- Lack of evidence supporting Revenue's assertion
- Failure to shift burden of proof to appellant

Analysis:
The judgment pertains to an appeal against an order disallowing cenvat credit and imposing a penalty, challenging the decision of the ld. Commissioner (Appeals) and the Additional Commissioner. The appellant, a manufacturer of CPP films, faced allegations of contravening Cenvat Credit Rules and CEA, 2002 by availing cenvat credit on inputs and capital goods used in manufacturing final products. The primary issue revolved around the appellant's availing of cenvat credit on inputs utilized in the production of goods supplied to third parties, some of which were returned, leading to the recording of debit notes.

A show cause notice was issued, accusing the appellant of availing cenvat credit improperly during a specific period and not reversing the credit on returned goods. Despite initial orders for recovery and penalty, the matter was remanded by the Tribunal for re-examination due to discrepancies in document consideration. Subsequently, the adjudicating authority passed a fresh order rejecting the appeal. The judgment emphasized two key aspects: first, the appellant's availing of cenvat credit on inputs used in manufacturing goods supplied to third parties, and second, the correlation between debit notes and invoices related to returned goods.

The burden of proof regarding the appellant's cenvat credit availment rested on the Revenue, which failed to provide substantial evidence supporting its claim. The appellant consistently denied the allegations, asserting a lack of proof of receiving goods for which cenvat credit was taken. The judgment highlighted the Revenue's failure to establish the appellant's cenvat credit availment, leading to the conclusion that the burden of proof had not shifted to the appellant.

Ultimately, the judgment deemed the concurrent orders of the primary and lower appellate authorities unsustainable, quashing them and allowing the appeal. It was held that there would be no order as to costs. The judgment underscored the importance of the burden of proof lying with the Revenue in establishing cenvat credit availment, emphasizing the necessity of probative material to support claims in such cases.