2018 (8) TMI 609 - AT - Central Excise

CENVAT Credit - Whether a demand can be raised seeking reversal of CENVAT credit on the ground that the inputs could not have been used in manufacture of final products because the losses were much higher as per the standard industry norms? - Held that - The suspicions by themselves cannot form a basis for demand unless investigations can establish as to what had happened in that case - the demand in the show cause notice is based on the mathematical calculations based on the average losses as per the benchmark of actual losses and on the presumption that the differential amount relates to inputs which have been clandestinely removed. The amount of duty sought to be reversed is also calculated based on the average value of the inputs and average rates of duty - such demand based on mathematical calculation is not supported by law. Whether the assessee is entitled to the credit of CENVAT on invoices which show that the goods were received in vehicles which on verification were found to be not capable of transporting the goods? - Held that - It is evident that it is impossible to carry inputs weighing in tonnes in these vehicles. If the assessee asserts that they had, in fact, received the goods in these vehicles, it is for them to show how. It is a well established principle that he who asserts must prove . This is especially true when one claims an evident impossibility to be a fact - the assessee could not have received inputs in them and is not entitled to the CENVAT credit on the invoices under which the goods were supposed to have been received from M/s Lakshmi Gayatri Iron and Steel Ltd. - The penalty on the assessee under Rule 15(2) of the CENVAT Credit Rules r/w Section 11AC is also reduced to ₹ 2,26,303/-. The penalty on Shri Anil Kedia, Managing Director of assessee is reduced to ₹ 50,000/-. Appeal allowed in part.

Issues:
1. Challenge to personal penalty imposed on the Managing Director of the assessee.
2. Misuse of CENVAT credit on inputs.
3. Allegations related to abnormal process loss and invisible loss.
4. CENVAT credit reversal demand.
5. Non-receipt of inputs from a supplier.
6. Calculation of assessable value and duty payable.
7. Time bar for the demand.
8. Entitlement to CENVAT credit on questionable invoices.

Issue 1: Challenge to Personal Penalty:
The appeal involved a challenge to the personal penalty imposed on the Managing Director of the assessee. The Tribunal examined the grounds of appeal, which included contentions regarding abnormal burning loss, non-receipt of inputs, challenges to maintaining an arithmetic equation for input and output, and the demand being hit by the time bar. The departmental representative relied on legal precedents to support the Order-in-Original.

Issue 2: Misuse of CENVAT Credit:
The case revolved around the misuse of CENVAT credit on inputs by the assessee, a manufacturer of TMT Bars. The investigation revealed discrepancies in the process loss recorded by the assessee, leading to suspicions of misuse of credit. The show cause notice demanded the reversal of CENVAT credit, interest, and penalties based on calculations derived from the alleged unaccounted losses.

Issue 3: Allegations of Abnormal Process Loss:
Allegations of abnormal process loss and invisible loss were raised against the assessee, suggesting potential diversion of materials or clandestine removal of TMT bars. The show cause notice discussed possible reasons for the excess process loss and ruled out one ground based on the quality of raw materials and equipment used by the assessee.

Issue 4: CENVAT Credit Reversal Demand:
The show cause notice demanded the reversal of CENVAT credit based on discrepancies in the recorded losses and suspicions of clandestine removal of inputs or final products. The Tribunal scrutinized the legal basis for such demands and concluded that a demand solely based on mathematical calculations without concrete evidence is not supported by law.

Issue 5: Non-Receipt of Inputs:
The case also addressed the non-receipt of inputs from a supplier due to discrepancies in the transport vehicles used for transportation. The Tribunal analyzed the evidence presented and established that the vehicles mentioned in the invoices were not suitable for transporting the claimed quantities of goods, leading to a partial rejection of the demand.

Issue 6: Calculation of Assessable Value:
The Order-in-Original confirmed the demands, including interest and penalties, based on calculations of assessable value and duty payable. The Tribunal reviewed the calculations and reduced the penalty amounts imposed on both the assessee and the Managing Director, considering the findings on the CENVAT credit demands.

Issue 7: Time Bar for the Demand:
The assessee argued that the demand was time-barred, relying on statutory records to support their position. The Tribunal assessed the evidence provided by both parties and considered the lack of proof for clandestine removal of goods or inputs in determining the sustainability of penalties and interest.

Issue 8: Entitlement to CENVAT Credit:
The final issue addressed the entitlement of the assessee to claim CENVAT credit on invoices indicating the receipt of goods in vehicles unsuitable for transportation. The Tribunal emphasized the burden of proof on the assessee to demonstrate the receipt of goods in such vehicles, ultimately setting aside a portion of the demand while upholding another based on the evidence presented.

In conclusion, the Tribunal partially allowed the appeals, reducing penalties and confirming demands based on the detailed analysis of each issue raised by the parties involved in the case. The judgment highlighted the importance of concrete evidence and legal support for demands related to CENVAT credit, process losses, and transportation discrepancies, emphasizing the need for substantiated claims in excise matters.

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