2017 (12) TMI 1430 - AT - Central Excise

CENVAT credit - inputs not received - basic allegations in the Show Cause Notice was that M/s Arora Aromatics did not receive inputs on which they availed Cenvat credit basically on the contention of Revenue that M/s Ruchi Infotech System, Jammu did not have facility to manufacture the inputs received by M/s Arora Aromatics and that the goods did not move from Jammu & Kashmir to the appellants factory and therefore, Cenvat credit was not admissible. Held that - The present system of assessment in Central Excise is record based. The Officer assessing the duty is not required to be present when the goods are being manufactured to witness the process of manufacture. The adjudication is to be done on the basis of evidence produced before the Adjudicating Authority. As per Evidence Act evidence in totality is to be taken into consideration and therefore, finding recorded in the impugned Order by the Original Authority who passed the said Order dated 29/01/2010 is bad in law. The Original Authority did not understand the process either of assessments or of adjudication. Further the investigations were not undertaken to find out wherefrom the inputs were received by the appellant for the goods they manufactured and on which they paid duty and which were exported, if they had been received the inputs from M/s Ruchi Infotech System, Jammu or the other suppliers of inputs. The Original Authority was pre-determined to adjudicate the matter in the manner in which he has decided the issue and he was not just and fair and did not discharge his duty as an independent adjudicator. Demand set aside - appeal allowed - decided in favor of appellant.

Issues Involved:

1. Denial of Cenvat credit on inputs allegedly not received.
2. Adequacy of manufacturing facilities and processes at M/s Ruchi Infotech System, Jammu.
3. Validity of transportation and documentation of inputs.
4. Overlapping demand for rebate recovery.
5. Investigation and findings regarding other suppliers of raw materials.
6. Adjudication process and evidence consideration by the Original Authority.

Detailed Analysis:

1. Denial of Cenvat Credit on Inputs Allegedly Not Received:
The core issue revolves around the denial of Cenvat credit to M/s Arora Aromatics on the grounds that inputs were allegedly not received from M/s Ruchi Infotech System, Jammu. The Original Authority contended that M/s Ruchi Infotech System did not manufacture the inputs supplied to M/s Arora Aromatics, thus making the availed Cenvat credit fraudulent. The evidence provided by M/s Arora Aromatics, including an Order-in-Original by the Commissioner of Central Excise, Jammu, which confirmed the manufacturing process at M/s Ruchi Infotech System, was not accepted by the Original Authority. The Original Authority's rejection was based on the absence of direct observation of the manufacturing process by the Commissioner, which was deemed legally flawed.

2. Adequacy of Manufacturing Facilities and Processes at M/s Ruchi Infotech System, Jammu:
The Original Authority questioned the presence of adequate manufacturing facilities at M/s Ruchi Infotech System, Jammu. M/s Arora Aromatics provided evidence of melting tanks and other machinery through invoices and certificates from engineers, which were dismissed by the Original Authority as afterthoughts. The Original Authority also disregarded PBC checks and other verifications conducted by Central Excise Officers, which confirmed the presence of manufacturing activities. The Tribunal found these rejections unjustified, emphasizing that the assessment should be based on the totality of evidence, not on the physical presence of the assessing officer during manufacturing.

3. Validity of Transportation and Documentation of Inputs:
The Original Authority raised doubts about the transportation of raw materials from U.P. to Jammu, suggesting that only invoices were issued without actual movement of goods. M/s Arora Aromatics countered this with RTI-obtained documents from the Department of Trade Taxes, Punjab, which confirmed the movement of goods. The Tribunal accepted these documents as credible evidence, dismissing the Original Authority's findings as unsustainable.

4. Overlapping Demand for Rebate Recovery:
The Original Authority demanded the recovery of rebate amounting to ?6,71,18,555, which was sanctioned for duty-paid exported goods. M/s Arora Aromatics argued that this demand overlapped with the denial of Cenvat credit, as the rebate was claimed from the same Cenvat credit amount. The Tribunal agreed with this contention, finding the demand for rebate recovery redundant and overlapping.

5. Investigation and Findings Regarding Other Suppliers of Raw Materials:
The Original Authority's findings were primarily focused on M/s Ruchi Infotech System and M/s National Chemicals, with no substantial investigation into other suppliers like M/s Abhay Chemicals, M/s Rajdhani Aromatics, and others. M/s Arora Aromatics provided various documents supporting the receipt of raw materials from these suppliers, which the Original Authority failed to consider adequately. The Tribunal noted this lack of investigation and evidence as a significant oversight.

6. Adjudication Process and Evidence Consideration by the Original Authority:
The Tribunal criticized the Original Authority for not understanding the assessment and adjudication processes properly. The rejection of substantial evidence, such as PBC checks, verification reports, and RTI-obtained documents, indicated a pre-determined mindset. The Tribunal emphasized that the adjudication should be fair and based on the totality of evidence, setting aside the Original Authority's orders as legally flawed.

Conclusion:
The Tribunal allowed all the appeals filed by M/s Arora Aromatics, setting aside the impugned Orders-in-Original dated 29/01/2010 and 29/03/2011. It concluded that the Original Authority's findings were legally unsustainable, and M/s Arora Aromatics were entitled to consequential relief. All demands and penalties imposed were annulled. The Tribunal's decision underscored the importance of a fair and evidence-based adjudication process.

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