2017 (3) TMI 649 - AT - Central Excise

CENVAT credit - why cenvat credit amounting to ₹ 55,30,722/- taken on the strength of 97 invoices issued by M/s SPM Enterprises not be disallowed and recovered from them under Rule 14 of Cenvat Credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944? - The Revenue mainly alleges that in case of 97 invoices the subject inputs were not received by M/s GPIL and they were accordingly not utilised for manufacturing and, therefore, cenvat credit was not admissible - Held that - the assessee M/s GPIL was a bonafide purchaser and it has not been proved that the said goods were not received by them - the goods were received by the Haridwar unit of Respondent-assessee. The Department has not submitted any substantial evidence to prove otherwise than the findings arrived at by the Commissioner in the impugned order - credit allowed - appeal dismissed - decided against Revenue. Clandestine removal - denial of credit - demand of duty with penalty - Held that - the impugned order does not anywhere discuss to arrive at the conclusion that 109.512 MT of PP granules on which cenvat credit demand of ₹ 10,66,300/- has been confirmed was either diverted or clandestinely removed. Without the fact of clandestine removal being on record, it is not legal to disallow cenvat credit for the subject goods, if the same had been received by assessee-appellant in the factory - The impugned order notes that the subject goods were received by the appellant and when there is no diversion or clandestine removal of 109.552 MT of material, the denial of cenvat credit on the same cannot be legally sustained. Therefore, this issue needs fresh examination - appeal allowed by way of remand.

Issues:
1. Admissibility of cenvat credit disallowed to the appellant.
2. Allegation of non-receipt of inputs by the appellant.
3. Cross-examination of witnesses relied upon by the department.
4. Confirmation of demand and penalty imposition on the appellant.
5. Legal reasoning for disallowance of cenvat credit.

Admissibility of Cenvat Credit Disallowed to the Appellant:
The impugned order dated 31.12.2012 adjudicated on the show cause notice issued to the appellant, M/s Genus Power Infrastructures Limited, disallowing cenvat credit of ?10,66,300 and imposing a penalty under Rule 15(2) of Cenvat Credit Rules, 2004. The appellant contested this demand, arguing that the inputs were actually received and used in manufacturing, supported by documentation and ledgers. The Commissioner observed that the appellant was a bona fide purchaser, and the goods were received for further use in manufacturing the final product. The impugned order concluded that the goods were received by the appellant, and the Revenue's appeal lacked substance as no substantial evidence was provided to prove otherwise.

Allegation of Non-Receipt of Inputs by the Appellant:
The Revenue alleged that cenvat credit of ?55,30,722 availed by the appellant based on 97 invoices was wrongly claimed as the inputs were not received. However, the impugned order found that the appellant was a bonafide purchaser, and the goods were received for manufacturing the final product. The Commissioner noted that there was no evidence to prove non-receipt of inputs, and the Revenue's appeal lacked merit as the cited case laws were inapplicable. Consequently, the Revenue's appeal was rejected.

Cross-Examination of Witnesses Relied Upon by the Department:
The appellant argued for the allowance of cross-examination of witnesses relied upon by the department, citing legal precedents requiring examination in chief and cross-examination of witnesses. However, the impugned order did not address this issue, leading to the conclusion that the inputs were received by the appellant. The appellant's appeal was allowed by way of remand for fresh examination by the original adjudicating authority, ensuring a fair opportunity for cross-examination and production of evidence.

Confirmation of Demand and Penalty Imposition on the Appellant:
The confirmation of the demand of ?10,66,300 against the appellant was based on presumptive reasoning not alleged in the show cause notice. The appellant argued that vague allegations in the notice deprived them of a proper opportunity to respond. The impugned order discussed the issue of non-use of raw material for manufacturing and confirmed the inadmissible cenvat credit. However, without evidence of diversion or clandestine removal, the denial of credit could not be legally sustained. The appellant's appeal was allowed for a fresh examination by the adjudicating authority.

Legal Reasoning for Disallowance of Cenvat Credit:
The impugned order detailed the use and non-use of raw material for manufacturing by the appellant, leading to the confirmation of the demand. However, without evidence of diversion or clandestine removal, the denial of cenvat credit could not be upheld. The order required a fresh examination by the adjudicating authority, allowing the appellant an opportunity for a fair hearing and production of evidence. The appellant's appeal was allowed by way of remand for a de novo decision within four months.

This comprehensive analysis of the legal judgment from the Appellate Tribunal CESTAT NEW DELHI covers all the issues involved, providing a detailed breakdown of the arguments and conclusions for each aspect of the case.

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