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2023 (6) TMI 1155 - AT - Central ExciseCENVAT Credit - Input or not - Sponge Iron - Charging Report does not reflect the quantity of Sponge Iron charged in the Blast Furnace - officers were of the view that Sponge Iron was not required for manufacture of Pig Iron and the Appellant has wrongly taken the credit on the Sponge Iron as their input without using the same in the manufacture of Pig Iron - Penalty. HELD THAT - The allegations of the department are only on presumption basis and not supported by any evidence, in view of the explanations submitted by the Appellant against each of the allegations. Allegation that RG-23 Register shows the availment of credit, but the Charge Report did not indicate the issue of Sponge Iron for the manufacture of Pig Iron - HELD THAT - The officer visited the factory had taken possession of some documents but did not take the sample of Sponge Iron, which was stored at the store of the company for manufacturing of pig iron. It is observed that just because there was no issue of Sponge Iron on the day of visit of the officers, it cannot be concluded that the Appellant has not used it at all in the manufacturing of Pig Iron. It is a fact that Sponge Iron is not must for manufacturing Pig Iron. The Appellant stated that they have used it as a trial basis only to reduce the usage of Coke - the statement of Usha Martin (another Conversant Agent of TISCO) also agrees that the usage of Sponge Iron reduces the use of Coke. Since it is not an essential major input in the manufacturing of Pig Iron, we agree with the submission of the Appellant that on the basis of one day verification by the officers, it cannot be concluded that the Appellant has never used Sponge Iron in the manufacture of Pig Iron. The officers found from the Costing Sheet, the cost of Sponge Iron was not taken into consideration - HELD THAT - Appellant contended that the costing has no relevance to conclude whether Sponge Iron is an input or not and to decide the eligibility of availment of Cenvat credit- the Contention of the Appellant agreed upon, that on the basis of costing it cannot be decided whether the Appellant is eligible for Cenvat credit or not, since it was not their finished goods. They manufacture it for TISCO only for job charges. The investigation has relied upon the literature Making Shaping and Treating of Steel published by Association and Iron Steel Engineers of United State Steel, to support of their allegation that Sponge Iron was not viable for use in the manufacture of Pig Iron - HELD THAT - The Appellant stated that the Literature Making Shaping and Treating of Steel published by Association and Iron Steel Engineers of United State Steel, relied upon by the investigation in support of their allegation that Sponge Iron was not viable for use in the manufacture of Pig Iron, does not represent the correct picture. The theoretical application of the said book cannot be made in the present case, to deny Cenvat credit. It is observed that the Appellant was also using the Sponge Iron only on trial basis with a view to reduce the cost by using less Coke. Hence, the contention of the Appellant is agreed upon that the Literature cannot be relied upon to deny the credit otherwise eligible to them. In the Central Excise Registration, the Appellant has not mentioned Sponge Iron as one of their major inputs - HELD THAT - The receipt of the input Sponge Iron into the factory was not in dispute. The RG-23 Register maintained by the appellant ,the Gate Register and the Stores Register containing all the details about the transport details of the Sponge Iron and issue of the same for manufacture of Pig Iron. The duty paid nature of the Sponge Iron was also not in dispute. Since receipt, utilization and duty paid nature of the input Sponge Iron was not in dispute, the Appellant are eligible for the Cenvat credit of the input Sponge Iron, as the same has been utilized in the manufacturing of finished goods Pig Iron. Penalty - HELD THAT - There was no violation committed by the Director Shri Uday Singh. Thus, no penalty is imposable on the Director under Rule 15(1) of Cenvat Credit Rules, 2004. Appeal allowed.
Issues involved:
The issues involved in this case are whether the Appellant utilized Sponge Iron as an input in the manufacture of Pig Iron, the validity of availing Cenvat credit on Sponge Iron, and the imposition of penalty on the Director under Rule 15(1) of the Cenvat Credit Rules, 2004. Utilization of Sponge Iron as an input: The Appellant, engaged in the manufacture of Pig Iron, claimed to have used Sponge Iron as an input in the manufacturing process to reduce Coke consumption. Despite officers' doubts regarding the necessity of Sponge Iron, statements from industry experts and other Conversant Agents supported the Appellant's claim of using Sponge Iron to achieve desired coke rates. The investigation did not conclusively establish whether Sponge Iron was essential for Pig Iron production. Validity of availing Cenvat credit: The department alleged that the Appellant irregularly availed Cenvat credit on Sponge Iron not used in Pig Iron manufacture. The Adjudicating authority upheld the allegations and imposed penalties. However, the Appellant contended that they procured Sponge Iron as an input, maintained proper records, and used it to control costs, disputing the department's presumption-based claims. The Appellant's records, including RG-23 Register, Gate Register, and Stores Register, indicated the receipt, utilization, and duty payment of Sponge Iron for Pig Iron production. Imposition of penalty: The Adjudicating authority imposed penalties on the Director under Rule 15(1) of the Cenvat Credit Rules, 2004, based on the alleged irregularities in availing Cenvat credit. However, the Appellant's explanations, supported by their records and industry practices, demonstrated the legitimate use of Sponge Iron in the manufacturing process. Consequently, the Tribunal found no violation warranting penalties and set aside the impugned order. Conclusion: After considering the evidence and submissions, the Tribunal allowed the appeals filed by the Appellant, holding that they were eligible for Cenvat credit on Sponge Iron used in Pig Iron production. The Tribunal also determined that no penalty should be imposed on the Director, as there was no violation observed. The impugned order was set aside, and the appeals were allowed in favor of the Appellant.
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