2015 (11) TMI 1028 - AT - Central Excise

Cenvat Credit - Supplementary invoices - transfer of Credit by paper transaction by the Job worker - Held that - In the absence of any evidence to show that the appellant had not paid the amount of ₹ 47,64,194/- and ₹ 8,73,600/-, for taking back the CENVAT credit of 16% it would be difficult to assume that a party would pay 100% towards value. Unless it is shown that this amount was not paid or this was a paper transaction, it is difficult to take a view that this was a planned operation to extract the CENVAT credit. The amount has been paid in reality by the appellant and in the absence of contrary evidence on record that would be obvious conclusion. There was a possibility of the Revenue taking a view that the job worker having realized the excess value should have debited the CENVAT credit and paid the amount in cash and commencement of proceedings against the job-worker if the appellant had not ensured that the job worker had paid the differential duty arising because of the transaction. That being the situation, one cannot really come to the conclusion that this was a planned operation to extract Cenvat credit. The department could have had a better case if there was any evidence to show that there was no payment by the appellant to the job-worker but it was paper transaction and only credit was transferred. - Decided in favour of assessee.

Summary

Issues:
1. Utilization of CENVAT credit by the appellant through a job-worker.
2. Discontinuation of contract with the job-worker and subsequent return of goods.
3. Demand for CENVAT credit availed by the appellant, interest, and penalty imposed.

Analysis:

Issue 1: Utilization of CENVAT credit
The appellant utilized CENVAT credit through a job-worker, leading to proceedings initiated by the department. The appellant instructed the job-worker to raise supplementary invoices for chocolate chips and machines, paying duty utilizing the CENVAT credit. The appellant's counsel argued that the credit of duty paid by the supplier is admissible to the recipient, citing relevant Tribunal decisions. The Tribunal Member referred to the Supreme Court case of MDS Switchgear Ltd., stating that the appellant's case can be disposed of in their favor based on this precedent. The argument that the operation was planned to utilize CENVAT credit was countered by the lack of evidence showing non-payment by the appellant to the job-worker, leading to the conclusion that the amount was paid in reality.

Issue 2: Discontinuation of contract and return of goods
After the contract with the job-worker was discontinued, the job-worker returned chocolate chips and machines to the appellant under invoices. Subsequently, the appellant instructed the job-worker to raise supplementary invoices for differential amounts and to pay duty, utilizing CENVAT credit. The absence of evidence indicating a paper transaction or non-payment by the appellant led to the conclusion that the operation was not solely aimed at extracting CENVAT credit.

Issue 3: Demand for CENVAT credit, interest, and penalty
The department initiated proceedings resulting in the confirmation of demand for CENVAT credit availed by the appellant, along with interest and penalty. However, the Tribunal Member applied the Supreme Court decision to the case's facts, concluding that the appellant's appeal should be allowed with consequential relief. The lack of evidence to support the claim that the operation was solely to extract CENVAT credit weakened the department's position, leading to the decision in favor of the appellant.

In conclusion, the judgment favored the appellant, emphasizing the importance of evidence in establishing the intent behind transactions involving CENVAT credit utilization.