2019 (3) TMI 1493 - 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 appellant on account of erroneous refund cannot be demanded on the allegation that the appellant was not manufacturer - appeal allowed - decided in favor of appellant.

Issues Involved:
1. Allegation of non-existence of farmers and non-supply of raw materials.
2. Allegation that J&K based units did not manufacture the goods.
3. Denial of Cenvat credit to UP based manufacturers.
4. Demand of duty refunded to J&K based manufacturers availing area-based exemption.
5. Validity of the investigation conducted by the Commissioner of Central Excise, Meerut-II.

Issue-wise Detailed Analysis:

1. Allegation of Non-Existence of Farmers and Non-Supply of Raw Materials:
The investigation by the Commissioner of Central Excise, Meerut-II, alleged that the farmers from whom the inputs were purchased were non-existent. Consequently, it was claimed that commission agents never supplied inputs to the appellant. However, the Tribunal noted that the investigation was not conducted at the end of the appellants, and the entire case was based on the investigation conducted by the Meerut Commissionerate. The Tribunal emphasized that without a proper investigation at the appellant's end, it could not be conclusively held that the appellants did not receive the raw materials.

2. Allegation that J&K Based Units Did Not Manufacture the Goods:
The Meerut Commissionerate concluded that J&K based units were not manufacturing the goods as alleged. However, the Tribunal found that there were periodical checks conducted by jurisdictional Central Excise officers, which confirmed that the appellant was manufacturing the goods. The Tribunal also noted that necessary permissions from the Directorate of Industries and the Pollution Control Board were obtained by the appellant. Moreover, the movement of goods inward and outward was documented, contradicting the allegations.

3. Denial of Cenvat Credit to UP Based Manufacturers:
Show cause notices were issued to UP based manufacturers to deny Cenvat credit availed on goods purchased from J&K based suppliers. The Tribunal referred to previous cases, such as S.B. Aromatics and Nanda Mint and Pine Chemicals Ltd., where similar allegations were made. It was observed that the movement of trucks carrying inputs and finished goods was recorded at toll barriers, and there was evidence of manufacturing activities. Therefore, the denial of Cenvat credit was not justified.

4. Demand of Duty Refunded to J&K Based Manufacturers Availing Area-Based Exemption:
The adjudicating authority confirmed the demand on the grounds that the farmers were non-existent, ensuring non-supply of raw materials by commission agents to J&K based units. The Tribunal, however, noted that the investigation did not conclusively prove that the appellants were not manufacturing the goods. Reports from various departments, including the District Industry Centre and Pollution Control Department, confirmed the functioning of the manufacturing units. Thus, the demand for duty refunded was not sustainable.

5. Validity of the Investigation Conducted by the Commissioner of Central Excise, Meerut-II:
The Tribunal highlighted that the investigation by the Meerut Commissionerate was based on assumptions and presumptions without concrete evidence. It was noted that the investigation did not align with the findings of the jurisdictional Commissioner, who reported regular checks and no adverse findings against the units. The Tribunal emphasized that the investigation should have been thorough and corroborative evidence should have been presented to substantiate the allegations.

Conclusion:
The Tribunal held that the demand against the appellant on account of erroneous refund could not be sustained based on the allegations that the appellant was not a manufacturer. The show cause notice issued was based on assumptions and lacked concrete evidence. Consequently, the impugned order was set aside, and the appeal filed by the appellant was allowed with consequential relief, if any.

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