2018 (10) TMI 944 - AT - Central Excise

CENVAT Credit - substitution of re-rollable scrap with kabari scrap - procurement of higher valued scrap, diverting the same in open marker without issuance of any Central Excise invoice and substituting the same with the kabari scrap for maintaining the inventory of stocks of raw material - scope of SCN - Held that - The facts of the case are contrary to the allegation made in the show cause notice as it is alleged in the show cause notice that the appellant/assessee has substituted the re-rollable scrap with kabari scrap which means the re-rollable scrap was reached to the factory of the appellant and thereafter, the same was substituted with kabari scrap to maintain their statutory records - The two allegations of the Revenue itself are contrary to each other which shows that proper investigation was not conducted to establish the fact whether the re-rollable scrap was not reached in the factory or the same has substituted by the appellant with kabari scrap. Benefit of doubt goes in favour of the appellant/assessee - cenvat credit cannot be denied on the basis of assumption and presumption and without any specific allegation. Moreover, no investigation has been conducted to establish the fact that the appellant/assessee has received kabari scrap in their factory instead of re-rollable scrap. As the investigation is deficient, in that circumstances, we hold that the appellant/assessee has taken cenvat credit correctly. Denial of credit not justified - imposition of penalty also not justified - appeal allowed - decided in favor of appellant.

Summary

Issues:
Denial of cenvat credit on re-rollable scrap, Allegations of substituting re-rollable scrap with kabari scrap, Lack of evidence regarding procurement of kabari scrap, Allegations of diversion of re-rollable scrap without proper documentation, Contradictory allegations by Revenue, Benefit of doubt in favor of appellant/assessee, Insufficient investigation, Applicability of precedent case law.

Analysis:
The judgment by the Appellate Tribunal CESTAT CHANDIGARH revolves around the denial of cenvat credit on re-rollable scrap and the allegations of substituting it with kabari scrap without proper documentation. The Revenue alleged that the appellant/assessee diverted re-rollable scrap for maintaining inventory, leading to the denial of cenvat credit and imposition of penalties. The appellant/assessee argued that the Revenue failed to provide evidence of how the kabari scrap was procured and how the re-rollable scrap was diverted. They emphasized that the Revenue's case lacked proof of substitution and transportation of the scrap, shifting the burden of proof to the Revenue.

During the proceedings, the Revenue presented statements from the investigation indicating discrepancies in the transportation vehicles used for re-rollable scrap. They relied on a previous Tribunal decision, affirmed by the High Court, to support their case. However, upon hearing both sides and considering the submissions, the Tribunal found contradictions in the Revenue's allegations. The Revenue claimed that the vehicles used were not suitable for transporting re-rollable scrap, raising doubts about the proper investigation conducted to establish the facts. The Tribunal concluded that the benefit of doubt should favor the appellant/assessee due to the inconsistent allegations by the Revenue.

The Tribunal highlighted the lack of investigation into the receipt of kabari scrap in the factory instead of re-rollable scrap. Due to this deficiency in the investigation, the Tribunal held that the appellant/assessee had correctly availed cenvat credit. Consequently, the impugned order denying cenvat credit and imposing penalties was deemed unsustainable. The Tribunal dismissed the Revenue's appeal and allowed the appeal filed by the appellant/assessee, emphasizing the importance of thorough investigation and specific allegations in such cases.

In summary, the judgment underscores the significance of concrete evidence, proper investigation, and consistent allegations in cases involving the denial of cenvat credit and allegations of scrap substitution. The decision serves as a reminder of the burden of proof on the Revenue and the need for a robust factual basis to support allegations in such matters.