2018 (12) TMI 153 - AT - Central Excise

CENVAT Credit - denial on the ground that the units in Jammu & Kashmir did not manufacture Menthol Flakes and DMO - the grounds raised were not considered properly - Held that - Similar issue decided in the case of M/S ARORA AROMATICS 2017 (12) TMI 1430 - CESTAT ALLAHABAD , where it was held that The Original Authority was pre-determined to adjudicate the matter in the manner in which he has decided the issue and he was not just and fair and did not discharge his duty as an independent adjudicator - credit remains allowed - appeal allowed - decided in favor of appellant.

Summary

Issues: Alleged ineligibility for Cenvat Credit on inputs; Reduction of personal penalty

Issue 1: Alleged ineligibility for Cenvat Credit on inputs
The case involved two appeals arising from a common impugned Order-in-Appeal dated 30.08.2011, where the appellants, manufacturers of Menthol and Pepper Mint Oil, were issued a show cause notice proposing to recover Cenvat Credit amounting to ?32,51,336/- availed on inputs from units in Jammu & Kashmir. The show cause notice alleged that the units in Jammu & Kashmir did not manufacture the inputs, making the appellants ineligible for Cenvat Credit. The Original Authority confirmed the demand with interest and equal penalty, imposing a penalty of ?5 lakhs on one appellant. The Commissioner (Appeals) upheld the denial of Cenvat Credit but reduced the penalty to ?2 lakhs for the other appellant. The appellants appealed to the Tribunal challenging the Order-in-Appeal.

Issue 2: Reduction of personal penalty
During the hearing, the counsel for the appellant was absent, and the Revenue presented a Final Order passed by the Tribunal on a similar issue. The Tribunal noted that in a similar matter, it had set aside the Order-in-Original due to lack of proper assessment and adjudication. The Tribunal emphasized that the assessment in Central Excise is record-based, and evidence submitted by the appellant should be considered. The Tribunal criticized the Original Authority for not accepting evidence of manufacturing processes and inputs verification. Referring to a report by the Commissioner of Central Excise, Jammu, the Tribunal accepted the evidence of goods being manufactured in Jammu. Consequently, the Tribunal set aside the impugned order and allowed both appeals, granting the appellants consequential relief and nullifying all demands and penalties imposed.

This judgment highlights the importance of proper assessment based on evidence in tax matters and the need for fair adjudication by the authorities. The Tribunal's decision to accept evidence of manufacturing processes and inputs verification underscores the significance of factual evidence in tax disputes.