2016 (11) TMI 919 - AT - Central Excise

CENVAT credit on PET Pre-forms - whether PET Pre-forms are not an input for their finished product-PS Radiators and Cylinders? - Held that - Even though the appellant had filed reply stating that the PET Pre-forms are part of water purifier system exported by them, the department has not cared to consider the incorrect fact stated in the show cause notice. The department is very well aware that the impugned inputs were part of consignment exported by appellants. There is no case for department that PS Radiators or Cylinders were exported by appellants. But the notice is issued stating that PET Pre-forms are not for manufacture of Radiators and Cylinders. The allegations in the show cause notice does not have any legs to stand as it is based on wrong set of facts. On such score, I find that the demand is unsustainable - appeal allowed.

Summary

Issues:
- Availment of credit on PET Pre-forms
- Classification of PET Pre-forms as input for finished products
- Correctness of show cause notice allegations
- Appeal against demand confirmation

Analysis:
1. Availment of credit on PET Pre-forms:
The appellants, registered manufacturers of PS Radiators and Cylinders, availed credit on PET Pre-forms. The Department contended that PET Pre-forms were not inputs for their finished products, leading to a show cause notice proposing to deny the credit availed. The appellant argued that PET Pre-forms were part of a water purifying system exported by them and were inputs for the exported product, not for PS Radiators or Cylinders as alleged.

2. Classification of PET Pre-forms as input for finished products:
The adjudicating authority confirmed the demand, overlooking the appellant's contention that PET Pre-forms were integral to the water purifier system exported. The Commissioner (Appeals) upheld the decision, asserting that PET Pre-forms were not inputs for PS Radiators or Cylinders. However, the Tribunal noted that the show cause notice was based on incorrect facts, as the Department failed to consider that the PET Pre-forms were part of the consignment exported by the appellants. The Tribunal emphasized that the allegations in the notice lacked substance as they were grounded on a mistaken premise.

3. Correctness of show cause notice allegations:
The Tribunal observed that the Department's notice inaccurately stated that PET Pre-forms were not for the manufacture of Radiators and Cylinders, despite the appellants exporting a different product where PET Pre-forms were essential components. The Tribunal found the demand unsustainable due to the flawed foundation of the notice, highlighting the discrepancy between the Department's assertions and the actual export details provided by the appellants.

4. Appeal against demand confirmation:
Ultimately, the Tribunal set aside the impugned order and allowed the appeal, granting consequential reliefs as necessary. The decision emphasized the importance of accurate factual considerations in show cause notices and the need for alignment between allegations and the actual circumstances of the case. The judgment underscored the significance of a sound legal basis for demands raised by the Department, ensuring fairness and adherence to procedural correctness in tax matters.