2019 (3) TMI 1491 - AT - Central Excise

Recovery of erroneous refunds - demand made on the grounds that the farmers are non existence ensuring non supply of raw material by commission agents to J&K based units and absence of evidence of power by the appellant - Held that - The appellant had shown from the records that there was periodical checks conducted by the jurisdictional Central Excise officers, who found that the appellants are manufacturers of the goods and we also take note of the fact that the appellant has obtained necessary permission from the Directorate of Industries to manufacture the goods and necessary permission from the Pollution Control Board and moreover during the period, the appellant is selling the goods and it was found that there was movement of goods inward/outward. 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 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. Thus, the demand against the appellants on account of erroneous refund cannot be demanded on the allegation that the appellants were not manufacturer - appeal allowed - decided in favor of appellant.

Issues Involved:
1. Allegation of non-existence of farmers and commission agents.
2. Investigation conducted by Commissioner of Central Excise, Merrut-II.
3. Denial of Cenvat credit to UP-based manufacturers.
4. Demand of duty refunded to J&K based manufacturers availing area-based exemption.
5. Allegation of non-manufacture of goods by J&K based units.
6. Periodical checks and permissions obtained by the appellant.
7. Evidence of inward/outward movement of goods.

Detailed Analysis:

1. Allegation of Non-Existence of Farmers and Commission Agents:
The investigation initiated by the Commissioner of Central Excise, Merrut-II, revealed that commission agents were not maintaining proper records of raw material sales and purchases. It was alleged that the farmers, who were supposed to supply raw materials, were non-existent. This led to the conclusion that J&K based units were not purchasing raw materials, thereby questioning the manufacture of finished goods.

2. Investigation Conducted by Commissioner of Central Excise, Merrut-II:
The investigation conducted by the Merrut Commissionerate was pivotal in forming the basis of the allegations. However, it was noted that the investigation was not conducted at the end of the appellants. The Tribunal observed that without a direct investigation of the appellants, it could not be conclusively held that the appellants were not manufacturing the goods. The investigation relied heavily on assumptions and presumptions rather than concrete evidence.

3. Denial of Cenvat Credit to UP-Based Manufacturers:
Based on the findings of the Merrut Commissionerate, show cause notices were issued to UP-based manufacturers to deny Cenvat credit availed on goods purchased from J&K based suppliers. The Tribunal noted that similar issues had been addressed in previous cases, where it was held that the allegations were based on investigations conducted by the Commissioner of Central Excise, Merrut, without substantial evidence against the appellants.

4. Demand of Duty Refunded to J&K Based Manufacturers Availing Area-Based Exemption:
The jurisdictional Commissionerate issued show cause notices to various J&K based manufacturers, raising demands for duty refunded under Notification No. 56/2002-CE dated 14.11.2002. The adjudicating authority confirmed the demand, asserting that the non-existence of farmers ensured no supply of raw materials, leading to the conclusion that the appellants were not manufacturing goods.

5. Allegation of Non-Manufacture of Goods by J&K Based Units:
The Tribunal noted that the sole allegation against the appellants was based on the investigation by the Merrut Commissionerate, which alleged that the farmers were non-existent, and therefore, the commission agents never supplied inputs to the appellants. Consequently, it was alleged that the appellants did not manufacture the goods. However, the Tribunal found that the investigation did not conclusively prove that the appellants were not manufacturing goods.

6. Periodical Checks and Permissions Obtained by the Appellant:
The Tribunal took note of the fact that periodical checks were conducted by jurisdictional Central Excise officers, who found that the appellants were manufacturers of the goods. The appellants had obtained necessary permissions from the Directorate of Industries and the Pollution Control Board. During the period, the appellants were selling goods, and there was evidence of the movement of goods inward and outward.

7. Evidence of Inward/Outward Movement of Goods:
The Tribunal observed that entries of vehicles at toll barriers certified the movement of raw materials and finished goods. The report from the Jurisdictional Commissioner to the Chief Commissioner indicated that the officers of the Merrut-II Commissionerate had generalized the non-existence of raw material purchases without concrete evidence. The Tribunal noted that the appellants continued their manufacturing activities during the investigation period, procuring inputs and selling manufactured goods.

Judgment:
The Tribunal concluded that without concrete evidence against the appellants, the proceedings were not sustainable. It held that the appellants were entitled to the benefit of the exemption under Notification No. 56/2002-CE dated 14.11.2002 and the refund of duty paid through PLA. The impugned orders were set aside, and the appeals filed by the appellants were allowed with consequential relief.

← Previous Next →