2019 (4) TMI 431 - AT - Central Excise

CENVAT Credit - area based exemption under N/N. 56/2002-CE dated 14.11.2002 - 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 - the appellants were not the manufacturer and issued cenvatable invoices enabling to their buyers to avail inadmissible cenvat credit - 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 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 continue their activity by procuring inputs from UP based supplier and selling goods manufacturing to their buyers. During the course of investigation, itself shows that the allegation is only on the basis of the assumption and presumption, therefore, it cannot be held that the appellants were not manufactured the goods during the impugned period. Similar issue on identical facts came up before this Tribunal in the case of Nanda Mint and Pine Chemicals Ltd. 2018 (10) TMI 877 - CESTAT CHANDIGARH , where it was held that Without bringing any concrete evidence against the appellant on record, the proceedings against the appellant are not sustainable. The appellant were manufacturing unit in the state of Jammu & Kashmir is entitled for benefit of the exemption Notification No. 56/2002- CE dated 14.11.2002 and claimed the refund of duty paid through PLA. The appellant was manufacturer during the impugned period and paid the duty on the goods manufactured by them, therefore, duty 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 by the appellant.
2. Investigation conducted by the Commissioner of Central Excise, Meerut-II.
3. Evidence of transportation and manufacturing.
4. Procedural adherence under Section 9-D of the Central Excise Act.
5. Extended period of limitation for issuing the show cause notice.
6. Reference to similar cases and previous judgments.

Issue-wise Detailed Analysis:

1. Allegation of Non-Manufacture by the Appellant:
The primary allegation against the appellant was that they were not manufacturers and had issued cenvatable invoices to enable their buyers to avail inadmissible cenvat credit. The investigation by the Meerut Commissionerate concluded that the raw materials were not purchased and thus no manufacturing occurred. Consequently, it was alleged that the appellant did not manufacture or sell the goods, leading to a demand for duty repayment.

2. Investigation Conducted by the Commissioner of Central Excise, Meerut-II:
The investigation was initiated by the Commissioner of Central Excise, Meerut-II, against units purchasing Menthol Solution and De-mentholised Oil from Jammu & Kashmir. The investigation found discrepancies in the records maintained by commission agents and alleged that the farmers from whom raw materials were purchased were non-existent. This led to the conclusion that the J&K units did not manufacture the goods.

3. Evidence of Transportation and Manufacturing:
The appellant argued that no investigation was conducted at their end to ascertain whether they were manufacturers. They provided evidence of transportation, including toll receipts and entries of trucks at excise toll posts, proving the movement of raw materials and finished goods. The appellant also submitted various certificates and documents from different authorities, including the Commercial Tax Officer, General Manager of the District Industries Centre, and Pollution Control Board, which supported their claim of manufacturing activities.

4. Procedural Adherence under Section 9-D of the Central Excise Act:
The appellant contended that the procedure under Section 9-D of the Central Excise Act was not followed. According to the case of CCE, Delhi-I vs. Kuber Tobacco Industries, if the adjudicating authority relies on certain statements, the witnesses must be called for examination in chief, and the appellant should be offered the opportunity for cross-examination. This procedure was not followed, rendering the demand of duty unsustainable.

5. Extended Period of Limitation for Issuing the Show Cause Notice:
The appellant argued that the show cause notice was issued by invoking the extended period of limitation, which was not sustainable. The department's failure to consider the report from the Jurisdictional Commissioner to the Chief Commissioner dated 21.05.2010 was also highlighted.

6. Reference to Similar Cases and Previous Judgments:
The Tribunal referred to a similar case involving Nanda Mint and Pine Chemicals Ltd., where a similar show cause notice was issued, and the demand for duty was set aside. The Tribunal observed that the investigation conducted by the Commissioner of Central Excise, Meerut-II, was not sufficient to allege non-manufacture by the appellant. The Tribunal also noted that various other departments had verified the manufacturing activities of the appellant, and no discrepancies were found.

Conclusion:
The Tribunal concluded that the investigation conducted by the Commissioner of Central Excise, Meerut-II, was based on assumptions and presumptions without concrete evidence against the appellant. The evidence provided by the appellant, including transportation records and certificates from various authorities, supported their claim of manufacturing activities. The procedural requirements under Section 9-D of the Central Excise Act were not followed, and the extended period of limitation for issuing the show cause notice was not justified. Consequently, the Tribunal set aside the impugned order and allowed the appeal with consequential relief.

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