2016 (5) TMI 778 - AT - Central Excise

Demand of duty alongwith interest and imposition of penalty - Fraudulent availment of modvat credit on GP sheet which was neither an input nor it was used for the manufacture of OE parts - No positive evidence on record for diversion of the goods GP sheets and procurement of HR/CR sheets - Held that - this Tribunal on identical issue in the case of Silence Auto vs. CCE, Chandigarh 2014 (6) TMI 306 - CESTAT NEW DELHI , wherein this Tribunal has held that the adjudications are made against the appellants on the basis of surmises and conjectures without any corroborative evidence and in the facts and circumstances of the case the demand is not sustainable. Therefore, by following the same, the credit on GP sheets cannot be denied to the appellants without corroborative evidence. - Decided in favour of appellant with consequential relief

Issues Involved:
1. Denial of Modvat credit on GP sheets.
2. Alleged fraudulent availing of Modvat credit.
3. Use of GP sheets versus HR/CR sheets in manufacturing.
4. Evidence of clandestine sale of GP sheets.
5. Limitation period for raising demand.

Detailed Analysis:

1. Denial of Modvat Credit on GP Sheets:
The appellants, manufacturers of motor vehicle/tractor parts, were denied Modvat credit on GP sheets. The show cause notice issued for the period October 1996 to March 1998 alleged that the appellants fraudulently availed Modvat credit on GP sheets, which were neither inputs nor used in the manufacture of OE parts. The investigation revealed that the appellants purchased GP sheets, claimed credit on them, but used HR/CR sheets in manufacturing OE parts.

2. Alleged Fraudulent Availing of Modvat Credit:
The investigation indicated that OE manufacturers required parts made from HR/CR sheets, but the appellants purchased GP sheets and claimed Modvat credit. It was alleged that the appellants sold GP sheets clandestinely and used HR/CR sheets without invoices. The adjudicating authority confirmed the demand for duty, interest, and imposed penalties on the appellants for fraudulent availing of Modvat credit.

3. Use of GP Sheets versus HR/CR Sheets in Manufacturing:
The appellants contended that GP sheets could be used in manufacturing by de-galvanizing them. They argued that the process involved dipping GP sheets in sulfuric acid to remove the zinc coating, converting them into HR/CR sheets. However, the lower authorities rejected this explanation, considering it economically unviable and based on assumptions.

4. Evidence of Clandestine Sale of GP Sheets:
The Tribunal observed that the Revenue failed to produce any evidence of clandestine sale of GP sheets. There was no identification of buyers or documentary evidence to support the allegation. The Tribunal noted that the Revenue's case was based on assumptions and lacked corroborative evidence. The absence of proof regarding the sale of GP sheets and procurement of HR/CR sheets from alternate sources weakened the Revenue's position.

5. Limitation Period for Raising Demand:
The Tribunal also addressed the issue of limitation. The appellants had availed credit by reflecting it in statutory records and filed requisite returns, which were assessed by the jurisdictional Central Excise authorities. The Tribunal found no misstatement or suppression by the appellants to justify invoking the extended period of limitation. Consequently, the demand was held to be barred by limitation.

Conclusion:
The Tribunal set aside the impugned orders, holding that the denial of credit on GP sheets was based on surmises and conjectures without corroborative evidence. The appeals were allowed with consequential relief, emphasizing that judicial decisions should not be based on assumptions but on concrete evidence. The demand for duty and penalties was not sustainable, and the extended period of limitation was not applicable.

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