2017 (3) TMI 1502 - AT - Central Excise

CENVAT credit - Sodium Saccharine - Acrylamide - Titanium Dioxide - N. Butanol - Dicyandiamide - denial on the ground that the said chemicals/inputs are not inputs for manufacturing of their final product and have not been transported to their factory - Held that - the appellant has filed regular declaration/undertaking with regard to usage of these inputs and manufacturing of their final product as back as 1995-96 to the inputs in question has been used by the assessee in manufacturing of disproportionate resins/camphor and usage - As these facts have neither been examined and nor been contravened by the adjudicating authority, therefore, it cannot be held that these chemicals are not inputs for manufacturing of their final products. Therefore on this ground, the cenvat credit cannot be denied. The investigation for transportation of goods has been conducted in respect to the only one transporter M/s ABG Carrier in 2007 whereas, the goods have been transported during the period 2002-2003 to 2003-2004. It is only presumption that the goods have not transported by transporter. In fact, the invoices have mentioned the lorry numbers and no investigation has been conducted with the owner s of lorry or drivers of the said lorry. There are three others transporters, who have transported the goods, these transporters were not examined, therefore, in the absence of any positive evidence that cenvat credit cannot be denied to the asssessee. Demand set aside - appeal allowed - decided in favor of assessee.

Summary

Issues:
- Denial of cenvat credit on imported chemicals
- Allegations of non-receipt of chemicals by the factory
- Dispute over whether the chemicals are inputs for final product manufacturing
- Existence of transporter and transportation of goods
- Adjudication of demand, interest, and penalty

Analysis:
The case involves an appeal against an order regarding the denial of cenvat credit on imported chemicals by the assessee, located in Jammu & Kashmir, under exemption Notification No.56/2002-CE. The investigation revealed that certain chemicals were not received by the factory, leading to a show cause notice for denial of credit amounting to ?83,66,313. The adjudicating authority confirmed a demand of ?47,77,690 along with interest and penalty, partially dropping a demand of ?35,88,623 due to lack of evidence. The appellant contended that the disputed chemicals were used in manufacturing disproportionate resins/camphor, supported by historical declarations and audit records, challenging the Revenue's allegations. The Revenue argued that the chemicals were not inputs for the final product, disputing the cenvat credit.

The Tribunal found that the appellant had consistently declared the usage of the disputed chemicals in manufacturing their final products since 1995-96, supported by detailed processes and patents. The adjudicating authority failed to counter these facts, leading to a conclusion that the chemicals were indeed inputs for the final products. Regarding the alleged non-existence of the transporter M/s ABG Carrier, the Tribunal noted that investigations were limited to 2007, whereas the goods were transported in 2002-2004. Lack of examination of other transporters and failure to link lorry numbers to the alleged non-existent transporter weakened the Revenue's case. Additionally, the show cause notice targeted five chemicals, while cenvat credit for six chemicals transported by M/s ABG Carrier was not disputed, further undermining the Revenue's position.

Consequently, the Tribunal set aside the demands against the assessee, ruling out any penalty imposition. The appeal filed by the Revenue was dismissed, while the appeal by the assessee was allowed with consequential relief. The judgment emphasized the importance of examining historical declarations, transportation evidence, and the Revenue's failure to provide substantial proof, ultimately favoring the assessee in the dispute over cenvat credit on the imported chemicals.