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2007 (9) TMI 235 - AT - Central ExciseCredit taken by the appellant on the goods returned by purchaser - appellant not produced any evidence to prove that the very same finished goods were received back - no plausible explanation as to why there was so much delay of 40 to 140 days in receiving back the finished goods from the date of clearance credit deniable in respect of goods found unaccounted, explanation of appellant that such goods were in process of final packing is not disputed by dept. so confiscation is not justified
Issues Involved:
1. Denial of Cenvat credit of Rs. 59,46,244/-. 2. Imposition of penalty of Rs. 5 lakhs under Rule 25 of Central Excise Rules. 3. Confiscation of seized goods worth Rs. 40.91 lakhs. 4. Imposition of penalty on the Managing Director. Issue-Wise Detailed Analysis: 1. Denial of Cenvat Credit of Rs. 59,46,244/- The appellant-company claimed Cenvat credit on goods reportedly returned by M/s. TELCO under Rule 16 of the Central Excise Rules. However, M/s. TELCO denied receiving or rejecting the goods covered under 263 invoices. The Commissioner found that the appellant fabricated documents to show the return of goods and denied the credit, imposing a penalty equivalent to the disallowed credit amount. The Tribunal upheld this decision, stating that the burden of proving the return of goods lies with the appellant. The Tribunal noted discrepancies such as no evidence of demurrage payment, non-payment of transport charges for the return journey, and lack of storage evidence in Pune. The Tribunal concluded that the goods were not returned, and the documents were fabricated to claim credit fraudulently. 2. Imposition of Penalty of Rs. 5 Lakhs under Rule 25 of Central Excise Rules The Commissioner imposed a penalty of Rs. 5 lakhs on the appellant under Rule 25(1) of the Central Excise Rules. However, Member (Judicial) found no justification for this penalty, stating that the confiscation of goods was unwarranted in the absence of evidence of intended clearance without payment of duty. The Tribunal, agreeing with Member (Judicial), set aside the penalty under Rule 25(1). 3. Confiscation of Seized Goods Worth Rs. 40.91 Lakhs The Commissioner confiscated goods valued at Rs. 40.91 lakhs for not being entered in the RG1 record. The appellant argued that these goods were not finished and were still in the process of final packing. Member (Judicial) found that the goods were not liable for confiscation as they were lying in the factory and there was no evidence of intended clearance without payment of duty. The Tribunal, agreeing with Member (Judicial), set aside the confiscation. 4. Imposition of Penalty on the Managing Director The Commissioner imposed a penalty of Rs. 5 lakhs on the Managing Director under Rule 26. However, the Tribunal found no direct or reliable evidence of his personal involvement in the manipulation of records and set aside the penalty. Separate Judgments Delivered by Judges: Member (Technical) upheld the denial of Cenvat credit, imposition of penalty equivalent to the disallowed credit, and interest on fraudulently taken credit but did not address the penalty under Rule 25(1) or the confiscation of goods. Member (Judicial) disagreed, setting aside the denial of credit, penalties, and confiscation of goods, arguing that the appellant's records and explanations were sufficient and that the discrepancies pointed out by the Revenue were not substantial enough. Member (Judicial) M.V. Ravindran, resolving the difference, upheld the denial of Cenvat credit, interest, and penalty equivalent to the disallowed credit but set aside the penalty under Rule 25(1) and the confiscation of goods. Final Order: 1. Denial of Cenvat credit of Rs. 59,46,244/- along with confirmation of interest and penalty of equivalent amount imposed upon M/s. Gujarat Setco Clutch Ltd. is upheld. 2. Penalty of Rs. 5 lakhs imposed upon the appellant under Rule 25 of Central Excise Rules is set aside. 3. Confiscation of the excess found goods is set aside. 4. Penalty imposed on the Managing Director is set aside. Both appeals are disposed of in these terms.
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