2019 (8) TMI 314 - AT - Central Excise

Rebate claim - CENVAT Credit of excise duty/CVD paid on such inputs and were utilising the same for payment of duty on finished goods cleared to respective principal manufacturers - Cenvat registers of the appellant were called for scrutiny while their application for sanction of rebate claim was being examined - credit has been availed on the documents of SIL/SCPPL - HELD THAT - It has been pointed out by the appellant that each page of register also contains ECC Code of appellant. Appellant have explained that two separate registers maintained by them in respect of inputs received from two different clients and thus there is no error in mentioning the names of their clients in the Cenvat registers. There is no prescribed format for making such registers and there is no law which debars the appellants from maintaining separate registers for two different clients. In these circumstances the allegation in the notice and in the impugned order that the Cenvat credit taken and utilized from the said two registers does not belong to the appellant is misplaced - if the Revenue believed that the said registers did not belong to the appellant and in fact belonged to SIL and SCPPL, then the same could have been essentially verified from the other financial record of the appellant. There is no scrutiny of other financial records done and therefore, the allegation remains unsubstantiated - demand on this count is set-aside. No investigation or verification of records has been done to ascertain if the goods were received in the factory and utilized for the purpose of manufacture of final product or not. The only requirement under the law to avail credit of duty paid on inputs is that the said goods should have suffered duty liability and should have been used in the production of finished goods which are liable to duty - In the instant case, no investigation whatever has been done to ascertain that the goods were received and utilized in the manufacture of goods. Whatever be the address in the invoice documents on the strength of which the credit has been availed, the credit cannot be denied if the goods are in fact received in the factory and utilized for the manufacture of finished goods. The demand set aside and the matter remanded to original adjudicating authority. The appellant may produce all the necessary record of receipt and use of goods in the manufacture, in terms of Rule 9 of Cenvat Credit Rules, 2004 - The matter may be decided after examining the evidence. Denial of credit also on the ground that inputs on which credit is availed are not owned by the appellant - HELD THAT - There is no such requirement in the law that only inputs which are owned by the assessee, the credit in relation to such inputs which are owned by the assessee can be availed. The only requirement is that the credit of inputs used in relation of manufacture of finished goods can be availed. Availment of CENVAT Credit in excess - HELD THAT - While the SCN cites Rule 3(7) of Cenvat Credit Rules, 2004, it does not disclose exact manner as to how this calculation has been made and the impugned has also not dealt with the issue. Thus, the order of the Commissioner is not a speaking order consequently, this demand is also set-aside. The Commissioner is directed to disclose the exact manner the demand has been calculated and the details of formula applicable to the facts of the case. Penalty on SIL, SCPPL and Shri R.L. Shetty, (employee of SIL) - penalty imposed alleging that they have aided and abetted M/s. Agro Pack Limited to projected themselves as manufacturer at Ankleshwar and took credit in the Cenvat account registers and allowed the same to be utilized illegally by M/s. Agro Pack Limited. - HELD THAT - The said allegation has not been upheld in the order passed and consequently, penalty on SIL and SCPPL and Shri R.L. Shetty is set-aside - As regards penalties on Shri Tushar Patel, Shri Bipin Patel and Shri Harish M. Patel, employees of M/s. Agro Pack Limited, the matter is remanded for determination of penalty, after examining the facts in respect of wrong availment of credit, if any. Appeal allowed in part.

Issues Involved:
1. Validity of Cenvat credit availed by the appellants.
2. Eligibility of Cenvat credit on inputs received under Bills of Entry in the name of SIL/SCPPL.
3. Eligibility of Cenvat credit on locally procured inputs belonging to SIL/SCPPL.
4. Excess availment of Cenvat credit from 100% EOU.
5. Double availing of Cenvat credit.
6. Imposition of penalties on various appellants and their employees.

Detailed Analysis:

1. Validity of Cenvat Credit Availed by the Appellants:
The appellants, Agro Pack Limited (APL), engaged in the manufacture of pesticides on a job work basis for principal manufacturers like SIL and SCPPL, maintained separate Cenvat registers for these principal manufacturers. The dispute arose when it was found that the appellants had overwritten the names of SIL and SCPPL with their own name in the Cenvat registers. The demand of ?25,39,18,209/- was confirmed on the ground that the duty was paid by utilizing Cenvat Credit which did not belong to the appellants. The Tribunal found merit in the appellants' argument that the registers were maintained separately for accounting purposes and the goods were received and used in the manufacture of final products. The demand on this count was set aside.

2. Eligibility of Cenvat Credit on Inputs Received under Bills of Entry in the Name of SIL/SCPPL:
The demand of ?7,60,14,689/- was confirmed on the ground that the credit was availed on Bills of Entry in the name of SIL/SCPPL. The Tribunal found that no investigation was done to ascertain if the goods were received in the factory and utilized for the manufacture of final products. The Tribunal set aside the demand and remanded the matter to the original adjudicating authority for verification of records of receipt and use of goods in terms of Rule 9 of the Cenvat Credit Rules, 2004.

3. Eligibility of Cenvat Credit on Locally Procured Inputs Belonging to SIL/SCPPL:
The demand of ?1,18,55,284/- was confirmed on the ground that the credit was availed on inputs procured locally belonging to SIL/SCPPL. The Tribunal found that the same argument as in the previous issue applies and set aside the demand, remanding the matter for verification of facts.

4. Excess Availment of Cenvat Credit from 100% EOU:
The demand of ?36,20,302/- was confirmed on the ground that the credit was availed in excess of the formula prescribed under Rule 3(7) of the Cenvat Credit Rules, 2004. The Tribunal found that the show cause notice did not mention the formula and the quantification of demand was not correct. The demand was set aside and the Commissioner was directed to disclose the exact manner the demand was calculated.

5. Double Availing of Cenvat Credit:
The demand of ?4,75,860/- was confirmed on the ground that the Cenvat Credit was availed twice. The Tribunal did not specifically address this issue separately but included it in the general remand for verification of facts.

6. Imposition of Penalties on Various Appellants and Their Employees:
Penalties were imposed on SIL, SCPPL, and Shri R.L. Shetty for aiding and abetting APL in projecting themselves as manufacturers and utilizing Cenvat credit illegally. The Tribunal found that the allegation was not upheld and set aside the penalties on SIL, SCPPL, and Shri R.L. Shetty. Penalties on Shri Tushar Patel, Shri Bipin Patel, and Shri Harish M. Patel, employees of APL, were remanded for determination after examining the facts of wrong availment of credit, if any.

Conclusion:
The appeals were partly allowed, with demands and penalties set aside or remanded for further verification and examination of facts. The Tribunal emphasized the need for proper investigation and verification of records to ascertain the receipt and use of goods in the manufacture of final products.

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