2018 (6) TMI 919 - AT - Central Excise

CENVAT credit - material rejected by their buyers which was brought back into the factory - Rule 16 of Cenvat Credit Rules - If the said goods were disposed of in terms of Rule 16 or not? - Held that - The appellants were receiving goods rejected by their buyer and they were availing credit. The appellants have not maintained any record to show that the goods were processed and cleared on payment of duty after repairs. After the case was booked, the appellants have created a table on the basis of the memory as dictated by the CEO. The same cannot be admitted as any evidence - the appellants have not been able to establish that the goods on which credit was taken were processed and cleared on payment of duty - appeal dismissed. Penalty on Biravu Navin Rai - Held that - It is noticed that he had tried to fabricate and introduce a chart as evidence in the proceedings. It is obvious that he was fully aware of the issue and therefore, his liability to penalty cannot be set aside - decided against appellant. Appeal dismissed.

Summary

Issues:
Appeal against demand of duty and imposition of penalties based on availing cenvat credit under rule 16 of Cenvat Credit Rules for material rejected by buyers brought back into the factory.

Detailed Analysis:

1. Availment of Cenvat Credit:
The appellants, manufacturers of rubber products, claimed cenvat credit under Rule 16 for rejected material brought back into the factory. The main issue was whether the goods were disposed of in compliance with Rule 16. The appellants asserted they processed and returned 85% of the goods after payment of duty, supported by a computerized statement. However, revenue found no maintenance of such records when the case was detected. Statements from various employees indicated that the rejected goods were cut and scrapped, not repaired as claimed by the appellants.

2. Lack of Records and Evidence:
The appellants failed to produce concrete evidence or records to show that the rejected goods were processed and cleared on payment of duty after repairs. The CEO's table created post-revenue detection based on memory dictation was deemed insufficient as evidence. Statements from key personnel, including the CEO and GMs, confirmed the absence of records or processing of rejected goods. The statement by Ajith Kumar T.V. Nair highlighted that the goods were not in repairable condition and needed to be cut and scrapped.

3. Argument and Counter-Argument:
The appellants argued that the absence of separate records should not negate the credit availed, emphasizing that no specific records were prescribed under Rule 16. However, the authorized representative contended that statements from employees and the CEO indicated no processing of rejected goods. The reliance on statements from various personnel to refute the appellants' claims was a significant point in the counter-argument.

4. Dismissal of Appeal and Penalty:
Upon reviewing the submissions, the Tribunal found that the appellants did not substantiate that the goods for which credit was claimed were processed and cleared after repairs. The post-detection table and lack of concrete evidence led to the dismissal of the appeal. Additionally, Biravu Navin Rai's attempt to introduce a fabricated chart as evidence resulted in the confirmation of his penalty liability.

5. Conclusion:
The Tribunal dismissed the appeal against the demand of duty and penalties, as the appellants failed to prove the processing and clearance of rejected goods in compliance with Rule 16. The attempt to introduce fabricated evidence further solidified the decision to uphold the penalty. The judgment was pronounced on 25.5.18 by the Tribunal members, Shri Ramesh Nair and Shri Raju.