2022 (4) TMI 1104 - AT - Central Excise

Recovery of CENVAT Credit - purchased copper ingots and sent them directly to its job workers for converting them into copper wire rods - denial of credit on the ground that since VKM had not manufactured any ingots, it could not have supplied them to its buyers and only invoices were issued without supplying any ingots - HELD THAT - The basis of the allegations in the show cause notice in this case and denial of Cenvat credit by the impugned order and imposition of penalties is also on the ground that M/s VKM had not manufactured any copper ingots and had only issued invoices to the appellant. This Tribunal had already decided, by a detailed order in VINOD KUMAR JAIN VERSUS C.C.E. S.T. -JAMMU KASHMIR AND OTHERS 2018 (5) TMI 1512 - CESTAT NEW DELHI , that this allegation is not true and VKM had manufactured copper ingots. Therefore, no basis remains for denial of Cenvat credit to the appellant/assessee herein. Consequently, the imposition of penalty upon the assessee and Shri Anil Gupta, Director of the assessee also cannot sustain. The impugned order dated 26.09.2013 cannot be sustained - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Denial of Cenvat credit availed and utilized by the appellant
- Recovery of disallowed amount from the appellant
- Recovery of interest and penalties
- Imposition of personal penalty on the Director of the appellant
- Allegations based on VKM's manufacturing of copper ingots
- Previous Tribunal's decision on VKM's manufacturing activities

Analysis:
The judgment involves two appeals challenging an order disallowing Cenvat credit availed and utilized by the appellant, along with the recovery of the disallowed amount, interest, and penalties. The order also imposed a personal penalty on the Director of the appellant. The appellant, engaged in manufacturing electric wires and cables, purchased copper ingots from VKM and availed Cenvat credit. However, based on an investigation by DGCEI alleging VKM issued invoices without actual manufacturing, a show cause notice was issued to VKM and various buyers, including the appellant.

The Tribunal had previously decided on VKM's manufacturing activities, concluding that VKM had indeed manufactured and supplied copper ingots, thereby allowing recipients to avail Cenvat credit. The current judgment emphasizes that since VKM's manufacturing was established, there was no basis for denying Cenvat credit to the appellant. Consequently, the penalties imposed on the appellant and its Director were deemed unsustainable.

In light of the previous Tribunal's decision and the lack of evidence supporting the denial of Cenvat credit, the impugned order dated 26.09.2013 was set aside. Both appeals were allowed, providing consequential relief to the appellants. The judgment highlights the importance of factual findings and evidence in determining the validity of Cenvat credit denial and penalties, ultimately leading to the reversal of the impugned order.

The detailed analysis of VKM's manufacturing activities and the subsequent impact on Cenvat credit denial underscores the significance of thorough investigations and factual accuracy in tax matters. The judgment serves as a reminder of the legal principles governing the availment of credits and the necessity of substantiated allegations in imposing penalties.