2018 (12) TMI 1165 - AT - Central Excise

Recovery of cash refund (erroneous refund) - area based exemption under N/N. 56/2002-CE dated 14.11.2002 availed - Held that - Similar issue has been dealt by this Tribunal in the case of S.B. Aromatics vs. CCE & ST, Jammu & Kashmir 2018 (11) TMI 830 - CESTAT CHANDIGARH , where it was held that 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. Legitimacy of the investigation by the Commissioner of Central Excise, Meerut-II.
2. Allegations of non-existence of farmers and commission agents.
3. Denial of CENVAT credit to UP-based manufacturers.
4. Demand of duty refund from J&K based manufacturers.
5. Evidence of manufacturing activities by J&K based units.
6. Validity of the show cause notices issued.

Detailed Analysis:

1. Legitimacy of the investigation by the Commissioner of Central Excise, Meerut-II:
The Tribunal noted that the investigation conducted by the Commissioner of Central Excise, Meerut-II was the sole basis for the allegations against the appellant. The investigation concluded that the farmers from whom the inputs were purchased were non-existent, leading to the assumption that the commission agents never supplied inputs to the appellant, and consequently, the appellant did not manufacture the goods. However, the Tribunal highlighted that the investigation was not conducted at the appellant’s end and was based on assumptions and presumptions.

2. Allegations of non-existence of farmers and commission agents:
The investigation revealed that the commission agents issued Kissan Kharid Patra to non-existent farmers, suggesting that the raw materials were not supplied to J&K based units. The Tribunal, however, emphasized that the investigation did not provide concrete evidence against the appellant and relied on generalized assumptions.

3. Denial of CENVAT credit to UP-based manufacturers:
The Meerut Commissionerate issued show cause notices to UP-based manufacturers to deny CENVAT credit availed on goods purchased from J&K based suppliers. The Tribunal referred to previous rulings, including the case of S.B. Aromatics vs. CCE & ST, Jammu & Kashmir, which established that without concrete evidence, it cannot be held that the appellants were not manufacturers of the finished goods.

4. Demand of duty refund from J&K based manufacturers:
The jurisdictional Commissionerate issued show cause notices to various J&K based manufacturers, raising demands for duty refunds availed under Notification No. 56/2002-CE dated 14.11.2002. The Tribunal found that the demand was based on the assumption that the appellant was not a manufacturer, without conducting a thorough investigation at the appellant's end.

5. Evidence of manufacturing activities by J&K based units:
The Tribunal noted that the appellant had shown evidence of periodical checks conducted by jurisdictional Central Excise officers, who confirmed that the appellants were manufacturers of the goods. Additionally, the appellant had obtained necessary permissions from the Directorate of Industries and the Pollution Control Board. The Tribunal also referred to the case of Nanda Mint and Pine Chemicals Ltd., where similar allegations were dismissed due to lack of concrete evidence.

6. Validity of the show cause notices issued:
The Tribunal held that the show cause notices issued to the appellant were based on assumptions and presumptions without concrete evidence. The Tribunal reiterated that the appellant was entitled to the benefit of exemption Notification No. 56/2002-CE dated 14.11.2002 and the refund of duty paid through PLA.

Conclusion:
The Tribunal concluded that the demand against the appellant on account of erroneous refund could not be sustained on the allegation that the appellant was not a manufacturer. The impugned order was set aside, and the appeal was allowed with consequential relief, if any. The Tribunal emphasized the importance of concrete evidence and dismissed the allegations based on assumptions and presumptions.

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