2017 (6) TMI 45 - AT - Central Excise

CENVAT credit - ground for present appeal is that the Department has done theoretical calculation for admissible Cenvat credit on the basis of Charted Engineer s Certificate and that the Department did not do actual verification of consumption of inputs - Held that - there is no basis for arriving at the quantity of inputs which is presumed to be excess of the so called appropriate quantity of inputs for manufacture - it is beyond the jurisdiction of adjudicating authority to decide as to what is the appropriate quantity of input required for manufacture of specified quantity of final product - the SCN is issued on the basis of presumption and therefore and not sustainable - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Admissibility of Cenvat credit
- Calculation of Cenvat credit
- Verification of consumption of inputs
- Presumption in demand confirmation
- Basis for confirming demand

Admissibility of Cenvat credit:
The case involved M/s Hardayal Engineering Works Pvt. Ltd. manufacturing Pulp Paper Machinery and Parts, utilizing Cenvat credit. The Revenue alleged the party of utilizing more credit than required, leading to a show cause notice for recovery of excess credit. The party contested the notice, arguing that the demand was based on theoretical calculations without actual verification of input consumption. The party claimed that bills of inputs were available for verification, but the Department did not conduct such verification.

Calculation of Cenvat credit:
The Revenue based the demand on a Chartered Engineer's certificate, alleging an excess Cenvat credit of ?53,25,383/- from 2003-04 to 2006-07. The party had already deposited ?57,52,649/-, which the original authority considered as admission of allegations, confirming the demand. The party contended that pre-deposit should not determine liability, and the authority should rely on independent evidence to establish liability.

Verification of consumption of inputs:
The party argued that the demand was presumptive, lacking actual verification of input consumption for manufacturing machines. Despite the availability of input bills and supplier details for verification, the Department did not conduct a thorough verification process. The party emphasized that the demand was unsustainable due to its presumptive nature.

Presumption in demand confirmation:
The Tribunal noted that the show cause notice was based on presumption, lacking a proper basis for determining the excess quantity of inputs required for manufacturing. The adjudicating authority exceeded its jurisdiction by deciding the appropriate input quantity for production. Consequently, the Tribunal found the show cause notice unsustainable and set aside the Order-in-Original, allowing both appeals.

Basis for confirming demand:
The Tribunal concluded that the demand confirmation lacked a valid basis, as it was primarily presumptive and lacked proper verification of input consumption. Setting aside the Order-in-Original, the Tribunal emphasized the need for independent evidence to establish liability, rather than relying on pre-deposits as admissions of allegations. Consequential relief regarding duty already deposited was to be considered by the appropriate authority.