2016 (8) TMI 787 - AT - Central Excise

Cenvat credit - received only invoices without the receipt of inputs in question - clearance of defective CTD bars and rods by showing them as scrap which amounted to almost 80% of the production - Held that - there is nothing on record to show that the goods were not actually received by the present appellant, which stands duly reflected by them in their RG-23 Part A register and stand utilized by them in the manufacture of their final product. Further, as seen from the impugned order of the Commissioner (Appeals), he has observed that there is circumstantial evidence available on record to indicate that the defective rounds produced by the manufacturer were not scrap. Such circumstantial evidence referred to by the Commissioner (Appeals) is the fact that the original manufacturing unit has shown more clearance of defective rounds than the prime quality rounds. There is otherwise no evidence to show that such excess cleared defective rounds were received by the present appellant. They may have received defective goods/ scrap, which was admittedly defective and was capable of melting in the furnace. In the absence of any evidence to the contrary, it is found that the denial of Cenvat Credit on the basis of investigations conducted at the third party end cannot be adopted as the sole basis for denial of credit. - Decided in favour of appellant

Summary

Issues: Denial of Cenvat Credit based on investigations at manufacturer's end

In this case, the issue revolves around the denial of Cenvat Credit amounting to ?15,84,550 to the appellant due to the alleged receipt of only invoices without the actual receipt of inputs. The lower authorities based their decision on investigations conducted at the manufacturer's end, M/s Aggarwal Steel Rolling Mills & Metal Industries, where it was found that defective CTD bars and rods were being cleared as scrap, leading to a significant amount of scrap being cleared from the factory. The Revenue contended that prime quality bars were being cleared as defective bars, with corresponding melting scrap being cleared under the invoices.

The appellant argued that there was no evidence to show that the goods were not actually received by them, as reflected in their RG-23 Part A register and utilized in the manufacture of final products. The Commissioner (Appeals) noted circumstantial evidence indicating that the excess cleared defective rounds were not scrap, as the original manufacturing unit showed more clearance of defective rounds than prime quality rounds. However, there was no evidence to prove that the excess cleared defective rounds were received by the appellant. The appellant may have received defective goods or scrap capable of melting in the furnace, but in the absence of contrary evidence, the denial of Cenvat Credit solely based on investigations at the manufacturer's end was deemed inappropriate. Consequently, the impugned order was set aside, and the appeal was allowed with consequential relief to the appellant.