2018 (11) TMI 830 - AT - Central Excise

Recovery of erroneous refund - it was alleged that appellants had not the manufactured the goods and issued cenvatable invoices enabling to their buyers to avail inadmissible cenvat credit - the sole allegation against the appellant is based on the investigation conducted by Commissioner of Central Excise, Merrut, and as per the investigation, it is alleged that farmers from whom the inputs were purchased were non-existence. Held that - The investigation was not conducted at the end of the appellants and whole case has been based on the investigation conducted at Commissioner Central Excise, Merrut-II. Without investigation, it cannot be held that the appellants were not manufacturer of the finished goods during the impugned period. Moreover, the entries of vehicles at the toll barriers also certified that the movements of raw material and finished goods. during the period of investigation itself, the appellants were allowed to continue their activity by procuring inputs from UP based supplier and selling goods manufacturing to their buyers - the allegation is only on the basis of the assumption and presumption, therefore, it cannot be held that the appellants had not manufactured the goods during the impugned period. The appellant (M/s S.B Aromatics) was manufacturer during the impugned period and paid the duty on the goods manufactured by them, therefore, duty on account of erroneous refund cannot be demanded on the allegation that the appellant was not a manufacturer - appeal allowed - decided in favor of appellant.

Issues Involved:
1. Allegation of non-manufacture of goods and issuance of cenvatable invoices.
2. Investigation conducted by the Commissioner of Central Excise, Merrut-II.
3. Evidence of transportation and receipt of raw materials.
4. Verification by various departments and officials.
5. Previous tribunal decisions on similar issues.
6. Assumption and presumption in the investigation.

Issue-wise Detailed Analysis:

1. Allegation of Non-Manufacture of Goods and Issuance of Cenvatable Invoices:
The appellants, including M/s S.B Aromatics, were accused of not manufacturing goods and issuing cenvatable invoices to enable buyers to avail inadmissible cenvat credit. The impugned order demanded duty along with interest and imposed penalties based on this allegation.

2. Investigation Conducted by the Commissioner of Central Excise, Merrut-II:
The investigation revealed that commission agents did not maintain proper records and the farmers from whom raw materials were allegedly purchased were non-existent. Consequently, it was concluded that the J&K based units did not manufacture the goods, leading to the denial of cenvat credit to UP based manufacturers and the demand for duty refunds from J&K based manufacturers availing area-based exemption under Notification No. 56/2002-CE dated 14.11.2002.

3. Evidence of Transportation and Receipt of Raw Materials:
The appellants argued that the existence of trucks used for transportation, reports from Deputy Commissioner Excise, Toll Post, Lakhanpur, and the Excise and Taxation Commissioner confirmed the movement of consignments. Additionally, reports from the Commissioner of Central Excise, Jammu, and preventive staff indicated regular verification of purchase consignments and no adverse findings during factory visits.

4. Verification by Various Departments and Officials:
The appellants provided evidence of regular visits and inspections by various departments, including the District Industry Centre, Pollution Control Department, and Electrical Department, which confirmed the functioning of the manufacturing units. These verifications supported the appellants' claim of manufacturing activities.

5. Previous Tribunal Decisions on Similar Issues:
The tribunal referred to a similar case, Nanda Mint and Pine Chemicals Ltd., where it was observed that the sole allegation was based on the investigation by Commissioner of Central Excise, Merrut, without corroborative evidence. The tribunal noted the movement of trucks carrying inputs and finished goods, and the regular verification by departmental officers, which supported the manufacturing activities of the appellants.

6. Assumption and Presumption in the Investigation:
The tribunal criticized the investigation for being based on assumptions and presumptions without concrete evidence. It highlighted that the investigation did not include verification at the appellants' end, and the evidence provided by the appellants was not disputed by the Revenue. The tribunal emphasized that the allegations were not sustainable without corroborative evidence.

Conclusion:
The tribunal concluded that the appellants were manufacturing units during the impugned period and paid duty on the goods manufactured. Therefore, the demand for duty on account of erroneous refund was not justified. The show cause notice was based on assumptions and lacked concrete evidence. The tribunal set aside the impugned order and allowed the appeals with consequential relief.

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