2008 (7) TMI 199 - HC - Central Excise

Non-use of imported materials (inputs) - availment of credit on the inputs which were not received and were not utilised in mfg. - contravening the provisions of Rules 57A(4) and 57G(3) of CER intention to evade payment of duty - Balance sheet shows non-receipt of inputs - Tribunal has committed a grave error in accepting the supplementary balance sheet and in allowing the assessee s appeal Appeal of revenue is allowed by way of remand to tribunal

Summary

Issues:
Challenging the Legality and correctness of the order passed by the Customs, Excise and Service Tax Appellate Tribunal.

Analysis:
The case involved an appeal by the Revenue challenging the order passed by the Customs, Excise and Service Tax Appellate Tribunal. The Commissioner of Central Excise had issued a show-cause notice to the respondents for contravening certain provisions and availing ineligible Modvat credit. The Commissioner's order disallowed the Modvat credit and imposed a penalty, which was then appealed by the respondents before the Tribunal. The Tribunal found that a major portion of the disallowed credit related to non-use of imported materials, and there were discrepancies in the balance sheet. The Tribunal concluded that the disallowance of Modvat credit was unsustainable, as the imported raw materials had been used by the respondents. The Tribunal also noted that the Revenue had not properly investigated the case and had to prove any allegations with evidence. The Tribunal allowed the appeal, leading to the Revenue challenging this decision.

The main issue revolved around whether the Tribunal was justified in holding that the appellant had failed to prove that the material had not been utilized by the respondents, leading to the disallowance of Modvat credit. The Revenue argued that the burden of proof should have been on the respondents, especially considering discrepancies in the balance sheet. On the other hand, the respondents contended that once the receipt of the material was accepted, it was the appellant's responsibility to prove non-utilization. The High Court found that the Tribunal had erred in relying solely on the supplementary balance sheet without proper consideration of the facts. The Court emphasized that the burden of proof lay with the respondents to demonstrate how the imported material was used in manufacturing, especially when they claimed to have received it. The Court concluded that the Tribunal's decision lacked proper consideration of the evidence and ordered the matter to be remanded for fresh consideration in accordance with the law.

In conclusion, the High Court allowed the appeal, setting aside the Tribunal's order and remanding the matter for a fresh consideration. The Court highlighted the importance of proper evidence and burden of proof in such cases, emphasizing the need for a thorough examination of facts before reaching a decision.