2021 (9) TMI 1509 - HC - Central Excise

CENVAT Credit - inputs - credit denied to the party on the basis of presumptions and assumptions - no manufacture of menthol solution and de-mentholised oil took place - HELD THAT - In the adjudication proceedings penalty was imposed on the appellant. The Tribunal has set aside the penalty after examining the entire material on record. It has reached a conclusion that other than the generalised opinion formed by the Meerut Commissionerate that no quantity of menthol and DMO were sold by the farmers inside the State of U.P. to the manufacturing unit in the erstwhile State of Jammu Kashmir, there is no material to accept the charge of manufactured commodities having not been sold to the present assessee. Tribunal has also taken note of the other reports of the Central Excise Authorities at Punjab Haryana and Jammu Kashmir that clearly suggest that the transportation of menthol and DMO from inside Uttar Pradesh to Jammu Kashmir took place, and further that the manufacturing units in the erstwhile State of Jammu Kashmir - such as M/s Abhay Chemicals were up and running at the relevant time. The transportation of the manufactured goods is also stated to have been duly verified. There are no specific instances having been thoroughly investigated to bring out a specific charge with respect to any particular transaction - appeal dismissed.

Summary

Issues:
- Appeal against order of Customs, Excise and Service Tax Appellate Tribunal
- Disallowance of CENVAT Credit based on investigation evidence
- Allegations regarding purchase of menthol products
- Imposition of penalty on appellant
- Tribunal's findings and conclusion based on evidence

Analysis:
The High Court heard the appeal filed by the revenue challenging the order of the Customs, Excise and Service Tax Appellate Tribunal. The main issue raised in the appeal was whether the Tribunal was correct in disregarding crucial evidence gathered by the Department during the investigation and allowing the CENVAT Credit to the respondent. The case revolved around the purchase of menthol products by the assessee from a company in Jammu and Kashmir, with the revenue alleging that these purchases were not genuine. As a result, a penalty was imposed on the appellant, which was later set aside by the Tribunal after a thorough examination of the material on record. The Tribunal found that there was no concrete evidence to support the revenue's claim that the menthol and de-mentholised oil were not sold to the assessee. Additionally, reports from Central Excise Authorities in Punjab & Haryana and Jammu & Kashmir confirmed the transportation of the goods from Uttar Pradesh to Jammu & Kashmir, supporting the legitimacy of the transactions.

The Tribunal's decision was based on the evidence presented, including reports verifying the transportation of goods and the operational status of manufacturing units in Jammu & Kashmir. The High Court observed that the revenue authorities failed to provide specific instances or thoroughly investigate the alleged transactions, leading to the conclusion that the revenue's claims were not supported by credible material or evidence on record. The Court upheld the Tribunal's findings, stating that they were grounded in the material available and that the appeal lacked merit. Consequently, the appeal was dismissed, affirming the Tribunal's decision in favor of the respondent.