2022 (8) TMI 1253 - HC - Central Excise

CENVAT Credit - substantial error of law or not - mismatch between the consumed quantity of inputs between respondent s stock account of raw materials i.e. RG 23A Pt. 1 and ER-6 return - period 2012-13 to 2015-16 - gross inconsistencies in the records maintained by the respondent - availment and utilization of irregular Cenvat Credit in fraudulent manner by showing higher quantity of consumption of inputs for production of finished goods in their stock account (RG-23A Pt. 1) as compared to ER-6 returns during the said period - extended period of limitation. HELD THAT - The tribunal has pointed out that the department has not objected to the inter unit transfer of input which was the consistent case of the assessee. The tribunal also examined the sample stock account for pre-form submitted by the assessee and, in fact, a screen shot of the said stock account has been incorporated in the order passed by the tribunal. After examining the facts and figures in the said stock account, the tribunal pointed out that there is inter unit transfer from unit-3 to unit-1 which is included in the total issued quantity of unit-3; whereas the same is shown as inter unit receipt from unit-3 in unit-1 stock account and is also apart of total receipt of unit-1 and thereby the same will also be part of consumption of unit-1 in the column total issue . Further, the tribunal was satisfied with the inter unit transfer of raw material as captured by the appellant in the stock account is netted off while filing ER 6 returns as the same is for single excise registration number and all units are treated as one single assessee. Therefore, after being satisfied with the factual position, the tribunal held that the assessee shown excess consumption of inputs in its stock records cannot be sustained. Further, before the tribunal, the assessee had produced the chartered accountant s certificate showing the detailed reconciliation of each raw material type and the tribunal has found that the adjudicating authority has incorrectly understood the total matter and erroneously proceeded to confirm the demand on irrelevant ground. Furthermore, the tribunal had agreed with the submission made on behalf of the assessee that there is no allegation levelled against the assessee showing the excess procurement of inputs and there has been no investigation in this regard by the department. Further, with regard to invoking the extended period of limitation, the tribunal found there is absolutely no justification to do so and there is no explanation given by the department for the gross delay in initiating proceedings. The learned tribunal has examined the factual position and rightly noted that the show cause notice was issued by the adjudicating authority based on assumption and presumption without conducting any investigation and enquiry. The revenue has not made out any ground to interfere with the order passed by the tribunal - Appeal dismissed.

Summary

Issues:
1. Alleged mismatch in consumed quantity of inputs between stock account and returns.
2. Gross inconsistencies in records maintained by the respondent.
3. Alleged irregular availing of Cenvat Credit.

Analysis:

Issue 1: Alleged mismatch in consumed quantity of inputs
The appellant raised concerns regarding the mismatch in the consumed quantity of inputs between the respondent's stock account of raw materials and ER-6 return for the period 2012-13 to 2015-16. The show cause notice alleged excess availment of Cenvat credit based on the consumption of raw material as per the stock account, leading to the recovery of the amount along with interest and penalty. The respondent contended that the inter-unit stock transfer was netted off as it was merely an accounting entry, treating all units as one single unit for excise purposes. The adjudicating authority confirmed the proposal in the show cause notice, leading to the appeal before the tribunal.

Issue 2: Gross inconsistencies in records
The appellant also highlighted gross inconsistencies in the records maintained by the respondent, alleging fraudulent availing of Cenvat credit by showing a higher quantity of consumption of inputs in the stock account as compared to ER-6 returns. The respondent argued that the entire demand was based on an incorrect interpretation of consumption figures and that the show cause notice was barred by limitation. The tribunal noted that the allegation against the respondent lacked evidence and investigation to support the demand for reversal of Cenvat credit.

Issue 3: Alleged irregular availing of Cenvat Credit
The tribunal examined the stock accounts and found that raw materials were used in all three units of the respondent under the same excise registration. It was observed that the inter-unit transfer of raw material was netted off in the ER 6 returns since all units were treated as one single assessee. The tribunal concluded that the appellant failed to prove any ground for interference with the tribunal's order, as the show cause notice was issued based on assumption and presumption without proper investigation. The respondent was able to demonstrate the inter-unit transfers, which were admitted by the adjudicating authority, leading to the dismissal of the appeal.

In conclusion, the tribunal found no justification for the revenue to interfere with its order, and the substantial questions of law were answered against the revenue. The appeal was dismissed, and the connected application for stay was closed accordingly.