2019 (7) TMI 197 - AT - Central Excise

CENVAT Credit - inputs - CR sheets dies, etc - alleged wrongful description of raw material - Revenue entertained a view that as per description of goods in the invoices, the goods cannot be used in the furnace installed by the appellant for further manufacturing of ingots - penalty - HELD THAT - The credit sought to be denied to the appellant on the ground that CR coils of small length cannot be the inputs for the appellant to be used in their final products. The only allegation on the basis that the said HR/CR coils can be used by cycle manufacture to manufacture their final products - The said allegation has been made on the basis of assumptions and presumptions. During the course of investigation, both suppliers as well as manufacturer-buyer have stated in their statements that they have supplied the goods, in question to the appellant, who received the goods. There is no evidence placed on record by the Revenue that the goods in question have not been received by the appellant-manufacturer. Merely adding the word rejected scrap in the invoice cannot be the reason to say that the goods were not received by the appellant and there is no such evidence placed on record by the Revenue. The said goods used by the appellant in the manufacture of final products. The Revenue has to prove if the said goods have been diverted or not used by the appellant in the manufacture of their final products then from where the inputs have been procured by the appellant to manufacture final products. There is no statement of transporter to that extent has been brought on record. The Revenue has failed to produce any evidence to show that the inputs in question have not been used by the appellant in the manufacture of their final products. Therefore, the demand is on the basis assumptions and presumptions, hence, cannot be confirmed by denying the credit to the appellants - the benefit of doubt goes in favor of the appellants - Credit allowed - penalty also not imposable. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Appeal against confirmed duty demand, denial of credit, and imposition of penalties on appellants supplying raw materials to main appellant.

Analysis:
The main issue in this case was the denial of cenvat credit to the main appellant, who was engaged in manufacturing ingots, based on the allegation that certain raw materials received were not suitable for further manufacturing. The Revenue contended that the goods were diverted and not used for final products, leading to the denial of credit and imposition of penalties on all appellants. The appellants argued that rejected/defective items, even if classified under a different category, could still be considered inputs for manufacturing final goods. They provided statements and evidence supporting the use of these materials in the manufacturing process, emphasizing that the Revenue failed to provide concrete evidence of diversion or non-usage.

Another key issue highlighted was the alteration of goods description in invoices by the appellants, which the Revenue used as evidence of malafide intent to deny credit. However, the Tribunal found that merely changing the description in invoices was not sufficient evidence to prove non-receipt or diversion of goods. The Tribunal emphasized the importance of substantial evidence to support allegations of non-usage or diversion of materials, which the Revenue failed to provide in this case.

The Tribunal referred to a similar case involving Tharaj, where credit denial was based on assumptions without concrete evidence. In that case, the Tribunal ruled in favor of the appellant due to the lack of substantial evidence supporting the Revenue's claims. Similarly, in the present case, the Tribunal found that the Revenue failed to produce evidence showing non-usage of materials in the manufacturing process, leading to the benefit of doubt being given to the appellants. Consequently, the Tribunal set aside the impugned order, allowed the appeals, and stated that no penalties were imposable on the appellants.

In conclusion, the Tribunal ruled in favor of the appellants, emphasizing the importance of concrete evidence to support allegations of non-usage or diversion of materials in cases involving denial of cenvat credit. The lack of substantial evidence provided by the Revenue led to the benefit of doubt being given to the appellants, resulting in the appeals being allowed with consequential relief.