2018 (3) TMI 547 - AT - Central Excise

CENVAT credit - inputs such as, iron and steel, waste & scrap, sponge iron, pig iron etc. are used by the appellant during the manufacturing activity - According to the Department, such availment of credit is in contravention to Rule 15 (2) of the CCR 2004 read with Section 11AC of the CEA 1994 - Held that - it is seen that the employees of the said input manufacturer have stated before the investigating authority that they were engaged into cutting of TMT rods into pieces in their factory of M/s. Industrial Associates during the period in question. Such cutting of TMT rods constitutes of iron and steel, which is the inputs required by the appellants. This fact has not been disputed by the Revenue and reliance is placed only on the statement of the Director and employees laying down that cenvatable inputs were not transported by them. The bank statement stands produced showing the payment of invoices to M/s. Industrial Associates by Account Payee Cheques. There is no allegation for such cheques which were encashed and there is no allegation that such cheques were encashed and subsequently refunded to the respondent. Reliance is placed on the decision of the Hon ble Jharkhand High Court in the case of Commr. Of C.Ex., East Singhbhum vs. Tata Motors Ltd. 2010 (9) TMI 949 - JHARKHAND HIGH COURT has held that it is presumed that when payments were made on the inputs, buyer is entitled to claim cenvat credit on such inputs. Appeal allowed - decided in favor of appellant.

Summary

Issues:
- Incorrect availment of Cenvat Credit
- Compliance with Cenvat Credit Rules
- Evidence of receipt and utilization of inputs
- Compliance with Rule 9(3) of Cenvat Credit Rules
- Reliance on legal precedents for Cenvat Credit availment

Analysis:
1. Incorrect availment of Cenvat Credit:
The case involved the appellant being accused of wrongly taking and utilizing Cenvat Credit during a specific period based on invoices issued by a supplier. The Department alleged a contravention of Rule 15(2) of the Cenvat Credit Rules, 2004. A show-cause notice was issued, demanding the credit availed along with interest and penalty. The Adjudicating Authority confirmed the demand, which was upheld by the Commissioner (Appeals), leading to the appeal before the Tribunal.

2. Compliance with Cenvat Credit Rules:
The appellant contended that they had procured iron and steel scraps from the supplier, and despite allegations against the supplier's infrastructure, they had duly discharged duty on the goods received and recorded them in their statutory records. The Tribunal noted that the appellant's records were subject to scrutiny by Central Excise Officers, and the credits were availed with the knowledge of the Revenue. The appellant's Director confirmed the receipt of supplies under proper documentation, including excise invoices and VAT declarations.

3. Evidence of receipt and utilization of inputs:
The Tribunal observed that the inputs received by the appellant were duly recorded in their records, and the final products were manufactured using these inputs, which were cleared after payment of duty. There was a lack of evidence from the Revenue regarding the source of such a significant quantity of inputs used in the manufacturing process. The appellant's compliance with Rule 9(3) of the Cenvat Credit Rules, regarding knowing the supplier's identity, was also noted.

4. Compliance with Rule 9(3) of Cenvat Credit Rules:
The Tribunal found that the appellant had fulfilled the requirement of Rule 9(3) by acquainting themselves with the supplier's identity through proper documentation. By referencing the supplier's address and registration number, the appellant was deemed to have known their dealer, as required by the rule.

5. Reliance on legal precedents for Cenvat Credit availment:
The Tribunal cited legal precedents, including decisions by the Hon'ble Jharkhand High Court and various Tribunal cases, to support the appellant's claim for Cenvat Credit. These precedents emphasized that the buyer could claim credit on inputs if payments were made, and the credit would be available even in cases of invoices issued by registered dealers involved in fraudulent transactions. Based on these discussions and legal precedents, the Tribunal set aside the impugned order and allowed both appeals in favor of the appellants.