2016 (4) TMI 541 - AT - Central Excise

Admissibility of Cenvat credit - Goods not received in the factory - Revenue contended that it is not the responsibility of the Revenue to establish that the goods were not received but the responsibility of petitioner - Held that - it is clear from the text of the Rule that the onus of establishing that the goods have been received is on the person who has taken the credit. The show-cause notice invoked the said rule and produced certain evidence in the shape of statements and documents. Some statements have been retracted, however, there has been no effort on the part of respondents to fulfill the requirement of Rule 9(5) by proving the receipt of goods by them in terms of Rule 9(5) of the Cenvat Credit Rules. The Commissioner (Appeals) has wrongly placed the onus on the Revenue to establish that the goods have not been received. Therefore, the impugned order to that extent is set aside and for establishing the receipt of goods in terms of Rule 9(5) of the Cenvat Credit Rules , the matter is remanded back. Imposition of penalty - Rule 15/15(2) of the CCR, 2004 read with Section 11AC of the Central Excise Act, 1944 - Held that - by following the decision of Hon ble Bombay High Court in the case of Ashok Kumar H Fulwadhya 2010 (1) TMI 229 - BOMBAY HIGH COURT , the penalties imposed under Rule 15/15(2) of CCR on other respondents are set aside. - Appeal disposed of

Summary

Issues:
1. Denial of credit based on lack of accompanying materials.
2. Invocation of Rule 9(5) of the Cenvat Credit Rules, 2004.
3. Imposition of penalties under Rule 15/15(2) and Rule 15 of the Cenvat Credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944.
4. Responsibility to establish non-receipt of goods.
5. Applicability of penalties under Rule 15 to persons other than the one availing credit.

Issue 1: Denial of credit based on lack of accompanying materials:
The respondents were issued a show-cause notice alleging that credit taken on certain documents lacked accompanying materials, rendering it inadmissible. Evidence in the form of statements from various parties was recorded to support the claim. However, some statements were retracted. The original adjudicating authority confirmed the show-cause notice invoking Rule 9(5) of the Cenvat Credit Rules, 2004, imposing penalties ranging from ?10 lakhs to 20 lakhs. The Commissioner (Appeals) set aside the demand, emphasizing the department's responsibility to conclude the investigation logically.

Issue 2: Invocation of Rule 9(5) of the Cenvat Credit Rules, 2004:
Rule 9(5) places the burden of proof on the person availing credit to establish the receipt of goods. The Commissioner (Appeals) wrongly placed the onus on the Revenue to prove non-receipt. The matter was remanded to the original adjudicating authority to allow the respondents to demonstrate the receipt of goods as per Rule 9(5).

Issue 3: Imposition of penalties under Rule 15/15(2) and Rule 15 of the Cenvat Credit Rules, 2004:
Penalties under Rule 15/15(2) were imposed on the respondents, but the Commissioner (Appeals) observed that only the manufacturer could be liable for such penalties under Section 11AC of the Central Excise Act, 1944. The penalties were set aside based on the interpretation that only the manufacturer availing credit could be penalized.

Issue 4: Responsibility to establish non-receipt of goods:
The responsibility to prove non-receipt of goods rested on the person availing credit as per Rule 9(5) of the Cenvat Credit Rules, 2004. The Commissioner (Appeals) erred in placing this burden on the Revenue. The matter was remanded for the respondents to establish the receipt of goods satisfactorily.

Issue 5: Applicability of penalties under Rule 15 to persons other than the one availing credit:
Penalties under Rule 15 were challenged as being applicable only to the person availing credit, i.e., the manufacturer. Relying on a decision of the Hon'ble Bombay High Court, it was argued that penalties could not be imposed on individuals such as directors, employees, transporters, or material suppliers who were not directly availing the credit. The penalties on other respondents were set aside in line with this interpretation.

In conclusion, the Tribunal remanded the matter to the original adjudicating authority for the respondents to establish the receipt of goods as per Rule 9(5) of the Cenvat Credit Rules, 2004. The penalties imposed under Rule 15 were set aside for individuals not directly availing the credit, aligning with the legal interpretation that penalties under such rules apply only to the manufacturer availing the credit.