2020 (3) TMI 16 - AT - Central Excise

CENVAT credit - duty paying invoices - Credit in respect of input on 10 Bill of Entries which were disputed by the Audit party - proper verification not carried out - principles of natural justice - Penalty imposed on Shri Hari Nair - HELD THAT - The appellant for each and every objections whereby the Cenvat Credit was disallowed, given detailed explanation in a chart along with relevant documents submitted - the appellant have given proper justification for the discrepancies alleged by the revenue. They have also co-related the Bill of Entry with other documents. With this co-relation it has been established that against the Bill of Entry the appellant have received the input in their factory and the same have been used. Therefore, the Cenvat Credit should not have been disallowed only for the procedural/clerical lapse. It is the submission of the appellant that the co-relation and the supporting documents submitted by the appellant have not been verified by the adjudicating authority - it is found that even though some procedural lapse has occurred but since the receipt of inputs under the cover of Bill of Entry and use of input in the manufacture of final product was neither alleged nor established by the revenue, the Cenvat credit cannot be denied. Penalty imposed on Shri Hari Nair - HELD THAT - It is evident from the record that the act of alleged wrong availment of credit has happened in the year 2008-09 whereas Shri Hari Nair has joined the appellant company only in 2011. Therefore, it cannot be said that he has abated in the act of alleged wrong availment of credit by the company. Moreover, the credit was disallowed only for some discrepancy in the documents which cannot be attributed to serious offence of evasion of duty with mala fide intention, therefore, in the facts and circumstances of the case Shri Hari Nair was wrongly imposed with penalty under Rule 26(2) of the Central Excise Rules, 2002. The adjudicating authority since not verified all the co-relation given by the appellant, the matter needs to be reconsidered by the adjudicating authority, the other issue of time bar is also kept open - Appeal allowed by way of remand.

Summary

Issues Involved:
Disallowed Cenvat Credit on input; Imposition of penalty on employee; Discrepancies in documentation; Time bar for demand; Penalty on employee for alleged wrong availment of credit.

Analysis:
The case involved the disallowance of Cenvat Credit on input by the appellant, who were engaged in the manufacture of organic chemicals. The dispute arose from the Audit party's objection to the Cenvat Credit availed on 10 Bill of Entries. A Show Cause Notice was issued, proposing the disallowance of a total credit amount and imposition of penalties, including on an employee. The adjudicating authority set aside a portion of the demand but disallowed the majority of the credit, imposed penalties, and demanded interest. The appellant appealed the decision.

Upon review, both the Commissioner (Appeals) and the Adjudicating Authority disallowed the Cenvat Credit citing various discrepancies in documentation, such as mismatches in LR, BOE, invoice numbers, weights, values, and other details. The Head Indirect Taxes of the appellant provided a detailed explanation justifying the discrepancies, arguing that they were procedural errors and did not affect the receipt and use of goods. The appellant also cited relevant judgments supporting their position.

The appellant contended that all credit entries were properly recorded, and the demand was time-barred, citing relevant case law. Additionally, regarding the penalty imposed on the employee, it was argued that he joined the company after the alleged credit availment, and the discrepancies were not indicative of intentional evasion.

After considering the submissions and evidence, the Hon'ble Member (Judicial) found that the appellant had provided adequate justification for the discrepancies and had established the receipt and use of inputs. The Member noted that while procedural lapses occurred, the receipt and utilization of inputs were not disputed. The matter was remanded for further verification by the Adjudicating Authority, keeping the issue of time bar open. The penalty imposed on the employee was deemed unjust as he had not abetted any intentional wrongdoing.

Consequently, the appeal by Pidilite Industries Limited was allowed for remand, and the appeal by the employee was also allowed. The judgment highlighted the importance of verifying documentation and establishing intentional wrongdoing before disallowing credits or imposing penalties.

(Judgment by Hon'ble Member (Judicial), Mr. Ramesh Nair, pronounced on 28.02.2020)