2017 (11) TMI 476 - AT - Central Excise

CENVAT credit - diversion of imported goods - Held that - In view of the fact that on the date of presentation of the ERE on 29.07.2005, the same were in the custody of the Customs Department, the matter is proved beyond any shadow of doubt that the same were not removed from the Port of Import to the factory of the appellant for use in or in relation to manufacture of the final product - Since, without receipt of the goods covered under the Bill of Entry, Cenvat Credit was availed by the appellant, same in my considered opinion, is not permissible under Rule 3 ibid - appeal dismissed - decided against appellant.

Summary

Issues: Alleged diversion of imported goods, disallowance of Cenvat credit, non-movement of goods from port to factory, receipt of goods, statutory provisions compliance.

In this case, the appellant, engaged in manufacturing aluminum alloy ingots, imported aluminum scrap for production. The Department alleged that the imported goods were diverted to a third party instead of reaching the appellant's factory, leading to the initiation of show cause proceedings. The Department disallowed Cenvat credit availed by the appellant, imposing penalties. The appellant argued that the Department failed to prove the non-receipt of goods at their factory and diversion to a third party. They presented evidence such as consignment notes and ERE forms to support their claim. The Revenue contended that the goods were diverted, and the appellant's Cenvat credit was not in compliance with statutory provisions. The Commissioner (Appeals) upheld the demand, emphasizing the non-movement of goods to the factory and the appellant's failure to provide evidence of receipt. The Tribunal concurred, stating that the goods were not physically moved to the factory, rendering the Cenvat credit invalid as per Rule 3 of the Cenvat Credit Rules, 2004. The Tribunal dismissed the appeal, finding no fault in the impugned order's decision to reject the appellant's appeal.

This judgment revolves around the alleged diversion of imported goods, the disallowance of Cenvat credit, and the non-compliance with statutory provisions regarding the movement and receipt of goods for availing credit. The appellant's arguments, supported by evidence, were countered by the Revenue's claim of diversion. The decision hinged on the lack of physical movement of goods to the factory, leading to the rejection of the appellant's appeal. The judgment underscores the importance of substantiating the receipt and use of imported goods for availing Cenvat credit, highlighting the burden of proof on the taxpayer to demonstrate compliance with statutory requirements.