2021 (7) TMI 1352 - AT - Central Excise

Recovery of Cenvat credit - demand is based only on the incorrect interpretation of the consumption figures as per the stock account maintained by the Appellant for all the three units or not - difference in consumption of raw materials as per ER 6 and as per the stock records maintained by the Appellant or not - invocation of extended period of limitation - HELD THAT - In the instant case, it is seen that the Adjudicating Authority has confirmed the demand of recovery of Cenvat credit only on the ground that there are differences in consumption of inputs as per stock register and ER 6 filed by the Appellant. It is the case of the department that the said Appellant has tried to suppress the relevant facts of availment and utilization of irregular Cenvat credit in fraudulent manner by way of showing higher quantity of consumption of inputs for production of finished goods in their stock statement as compared to their ER 6 return during the said periods - it is seen that such allegation is only on the basis of the figure work of the department without production of any other evidences for demand of reversal of Cenvat credit such as any investigations of suppliers of raw materials, recording of input output ratio of the Appellants finished goods etc. The Appellant have produced a CA certificate showing the detailed reconciliation of each raw material type along with appeal paper book which goes to prove that the adjudicating authority has incorrectly understood the total matter at hand and proceeded to confirm the demand on irrelevant grounds. There are no investigation has been conducted by the department to prove the allegation of excess consumption apart from incorrect assumptions and calculations in the case and thus the recovery of Cenvat credit merely based on differences in figures of consumption cannot be made by the department - the demand has been raised for the period 2012-13 to 2015-16 in 2017. No explanation has been furthered by the Department in respect of such gross delay in proceeding with the matter. Therefore, the invocation of the extended period of limitation is not justified. The demand for recovery of Cenvat credit only on assumption and presumptions cannot be sustained is accordingly set aside. Since demand of recovery of Cenvat credit is set aside, penalty and interest are also not sustainable - Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Confirmation of demand of excise duty for the period 2012-13 to 2015-16.
2. Allegations of excess availment of Cenvat credit based on consumption of raw materials.
3. Invocation of extended period of limitation.
4. Justification of the order of the lower authority.
5. Reconciliation of raw material consumption and inter-unit transfers.
6. Bar on recovery of Cenvat credit and penalty.

Issue 1: Confirmation of demand of excise duty for the period 2012-13 to 2015-16:
The appeal was filed by the assessee against the Order-in-Original confirming the demand of excise duty amounting to Rs.5,65,53,696/- for the specified period. The appellant contended that the demand was not justified due to discrepancies in the interpretation of consumption figures between stock records and ER 6 returns without substantial evidence of excess procurement or clandestine removal of finished goods.

Issue 2: Allegations of excess availment of Cenvat credit based on consumption of raw materials:
The department alleged that the appellant had availed excess Cenvat credit based on higher consumption figures in stock records compared to ER 6 returns. However, the appellant argued that inter-unit transfers of raw materials within the same manufacturing complex were accounted for in stock records and ER 6 returns, negating the claim of excess consumption.

Issue 3: Invocation of extended period of limitation:
The demand for recovery of Cenvat credit covered the period from 2012-13 to 2015-16, with the Show Cause Notice issued in 2017, beyond the normal period of limitation. The Tribunal found the invocation of the extended period of limitation unjustified due to the lack of explanation for the delay in proceedings.

Issue 4: Justification of the order of the lower authority:
The Adjudicating Authority confirmed the demand based on consumption discrepancies without substantial evidence of excess procurement or utilization of irregular Cenvat credit. The Tribunal noted that the demand lacked concrete basis and physical inspections to support the allegations.

Issue 5: Reconciliation of raw material consumption and inter-unit transfers:
The appellant provided detailed reconciliation and evidence of inter-unit transfers in stock records to demonstrate that no excess consumption of raw materials occurred. The Tribunal found that the demand was based on incorrect assumptions and calculations without proper investigation by the department.

Issue 6: Bar on recovery of Cenvat credit and penalty:
The Tribunal set aside the demand for recovery of Cenvat credit, penalty, and interest, citing the lack of evidence and justification for the allegations. The recovery based solely on differences in consumption figures was deemed unsustainable, leading to the allowance of the appeal with consequential relief.

Overall, the Tribunal ruled in favor of the appellant, emphasizing the importance of concrete evidence and proper investigation to support allegations of excess availment of Cenvat credit. The judgment highlighted the necessity for adherence to legal precedents and limitations in such cases.