2018 (10) TMI 630 - AT - Central Excise

Clandestine removal - stock found short - HR Coils, GP coils and Zinc - it was alleged that such short found stock stands cleared by the appellant without payment of duty - Held that - Even though we find that the appellants have tendered a plausible explanation for such shortages, inasmuch as the visiting officers did not take into account the slitted coils and the Zinc available in the tanks, we are of the view that even if the shortages are accepted to be correct reflection of facts, the demand of duty cannot be sustained - demand set aside. CENVAT Credit - apart from making a bald allegation that various iron and steel items are not Cenvatable, in terms of Cenvat Credit Rules, the Revenue has not examined the use of the same in the assessee s factory - Held that - Even if the Revenue s stand that such goods were used as structurals is accepted, the credit would still be available to the appellant - Credit allowed. CENVAT Credit of duty paid on the pipes purchased by them from other manufacturers - denial on the sole ground that no manufacturing activity has taken place in the appellant s factory - Held that - Even the said issue is no more res integra and majority decision of the Tribunal in the case of Asian Colour Coated Ispat Ltd. v. CCE 2014 (9) TMI 974 - CESTAT NEW DELHI has held that even if no manufacturing as taken place, but the goods have been cleared finally on payment of duty, the assessee would be entitled to the Cenvat Credit of duty paid on the raw materials - credit allowed. Appeal allowed in toto.

Summary

Issues:
1. Shortage of stock of inputs leading to duty demand
2. Availment of Cenvat credit on iron and steel items
3. Denial of Cenvat credit on pipes purchased from other manufacturers

Issue 1: Shortage of stock of inputs leading to duty demand
The appellant, engaged in the manufacture of pipes and tubes, faced a duty demand of ?57,94,909 due to alleged shortages of HR Coils, GP coils, and Zinc found during a visit by Central Excise officers. The Revenue suspected the clearance of the short-found stock in a clandestine manner. However, the appellant explained that the coils were issued for further processing and the Zinc was used in tanks, with actual consumption reflected in the raw material account. Despite a plausible explanation, the demand was made. The Tribunal held that even if the shortages were accurate, duty demand couldn't be sustained solely based on shortages, citing precedents like Commissioner of Central Excise v. Minakshi Castings and Puran Sons Alloys P. Ltd. v. Commissioner of Central Excise.

Issue 2: Availment of Cenvat credit on iron and steel items
The Revenue questioned the appellant's Cenvat credit of ?23,67,477 on iron and steel items like plates, angles, channels, etc., availed during a specific period. The Revenue alleged that these items were not Cenvatable under the Cenvat Credit Rules. However, the Tribunal noted that the Revenue failed to examine the usage of these items in the appellant's factory. Despite the Revenue's argument that the items were used as structures, citing Vandana Global Ltd. v. CCE, the Tribunal held that even if used as structures, the credit should be available to the appellant, citing the Gujarat High Court's decision in Mundara Ports and Special Economic Zone and the Madras High Court's decision in India Cements Ltd.

Issue 3: Denial of Cenvat credit on pipes purchased from other manufacturers
A significant demand of ?2,21,94,816 was confirmed against the appellant by denying Cenvat credit on duty paid for pipes purchased from other manufacturers, as no manufacturing activity was undertaken in the appellant's factory. However, the Tribunal referred to the majority decision in Asian Colour Coated Ispat Ltd. v. CCE, which held that even if no manufacturing took place but goods were cleared on payment of duty, the Cenvat credit should be allowed. The Tribunal also cited the Bombay High Court's decision in CCE v. Ajitya Enterprises to support the appellant's entitlement to the credit. Consequently, the demand was set aside. The impugned order confirming demands and imposing penalties was set aside, and the appeal was allowed with consequential relief, if any.