2017 (5) TMI 694 - AT - Central Excise

CENVAT credit - spring steel bars (SS Bars) - denial on the ground that these items are not purchased from authorized dealers as approved by railways and further these items are not used in the manufacture of Elastic Rail Clips to be supplied to railways - Held that - No evidence of these items having been not received in the premises of the appellant or having been diverted without put into use has been recorded by the lower authorities - The denial of credit cannot be only on the basis that the raw materials are from non-approved sources or similarly placed manufacturer has asserted that these items are not required even for trial or testing - the duty paid raw material if used in relation to manufacture of dutiable final products, credit cannot be denied. Seizure of 36.986 tonnes of raw material SS bars on the ground that these items are not approved raw material for the manufacture of rail clips for the railways - Rule 15 of Cenvat Credit Rules, 2004 - Held that - the confiscation ordered in the present case is due to non-accountal of these raw materials in the statutory records. If these raw materials are not accounted in the records, the question of availing credit on them does not arise. Accordingly, for non-accounted raw material Rule 15 of Cenvat Credit Rules, 2004 has no application. Raw materials found short in the premises - demand of ₹ 4,84,586/- - Held that - it is noticed that there is no discussion or finding in the impugned order dated 15/04/2010 by the Commissioner (Appeals). This issue has to be re-examined by the Commissioner (Appeals) for a decision - matter on remand. Appeal allowed in part - part matter on remand - appeal disposed off.

Summary

Issues involved:
1. Denial of Cenvat credit on SS Bars procured from non-approved sources.
2. Confiscation of raw material SS Bars and imposition of penalties.
3. Recovery of Cenvat credit towards shortage of raw material found.
4. Imposition of penalties on the partners of the appellant firm.

Detailed analysis:
1. The core issue in this judgment revolves around the denial of Cenvat credit on SS Bars procured from non-approved sources by two main appellants engaged in manufacturing Elastic Rail Clips for railways. The investigation revealed that these raw materials were not prescribed by railways and were procured from unauthorized suppliers. The lower authorities upheld the denial of credit based on these grounds. However, the appellate tribunal found that the denial of credit solely on the basis of non-standard raw materials and procurement from non-approved sources was not justified. The duty paid raw material, if used in the manufacture of final products, should not lead to credit denial solely based on procurement sources.

2. Another significant issue addressed in the judgment is the seizure and confiscation of raw material SS Bars by invoking Rule 15 of Cenvat Credit Rules, 2004. The tribunal observed that confiscation was ordered due to non-accounting of these raw materials, which led to the denial of credit. However, the tribunal found that the confiscation was misdirected as the raw materials were accounted for and used in the manufacturing process. Therefore, the confiscation and denial of credit on this basis were deemed unsustainable.

3. The judgment also delves into the recovery of Cenvat credit towards shortage of raw material found in the premises of one of the appellants. The tribunal noted a lack of discussion or findings in the impugned order regarding this issue. As a result, the matter was remanded to the Commissioner (Appeals) for re-examination and a fresh decision, allowing the appellant an opportunity to present their case.

4. Lastly, the judgment addresses the imposition of penalties on the partners of the appellant firm. The tribunal did not provide specific details on this issue but disposed of the appeals accordingly, setting aside the impugned orders except for the demand and recovery of a specific amount of Cenvat credit, which required further examination by the Commissioner (Appeals).

Overall, the judgment scrutinized the denial of Cenvat credit, confiscation of raw materials, recovery of credit towards shortages, and penalties imposed, providing detailed analysis and legal reasoning for each issue to arrive at a comprehensive decision.