2009 (7) TMI 581 - AT - Central Excise

Cenvat Credit-Documents for availing credits- The appellant is engaged in the manufacture of excisable goods falling. They purchased capital goods from one registered dealer M/s. Nerka Chemicals Pvt. Ltd. under the cover of Central excise invoices issued by the said dealer and availed credit. The said dealer in turn had purchased the goods from the manufacturer M/s. N.H. Harsora Pvt. Ltd. As a result of investigations conducted by DGCEI it was found that the Central Excise invoices issued by M/s. N.H. Harsora Pvt. Ltd. were fake and no duty stands paid by the said manufacturer on the capital goods cleared by him. In view of the above proceedings were initiated against the present appellant for denial of Modvat credit to them. Held that- In any case it stands contended before me that the original manufacturer has subsequently paid the duty in which case the benefit of credit cannot be denied to the appellant and penalty cannot be imposed upon him set aside the impugned order and allow the appeal with consequential relief to the appellant.

Summary

Issues:
Denial of Modvat credit, Failure to follow Cenvat Credit Rules, Imposition of penalties.

Analysis:
The appellant, engaged in manufacturing excisable goods, purchased capital goods from a registered dealer who, in turn, acquired them from a manufacturer. Investigations revealed that the manufacturer's Central Excise invoices were fake, leading to proceedings against the appellant for denying Modvat credit. The appellant argued they were unaware of the manufacturer's actions and should not be penalized as they had reversed the credit with interest and were not involved in any fraud or collusion.

The lower authorities found the appellant liable for penalties for not adhering to Rule 3 and Rule 7 of the Cenvat Credit Rules, which require ensuring proper payment of Central Excise Duty on goods. Penalties were imposed, and the wrongly availed Modvat credit was confirmed along with interest.

The appellant's advocate highlighted the appellant's General Manager's statement, stating they regularly dealt with a group of companies, including the registered dealer, and believed the goods were lawful. The advocate argued that as the registered dealer's identity was known, and there was no dispute about the invoices, the appellant fulfilled Rule 7 requirements. It was also mentioned that the manufacturer later paid the duty, justifying the credit.

The appellate tribunal agreed with the appellant's contentions, noting that as the goods were supplied by a registered dealer with undisputed invoices, the appellant was not obligated to verify the manufacturer's duty payment. The tribunal emphasized that Rule 7 only requires steps to confirm the supplier's identity when goods are not directly from the manufacturer. The tribunal suggested the Revenue pursue action against the manufacturer and ruled in favor of the appellant, setting aside the penalties and allowing the appeal with relief.

In conclusion, the judgment focused on the appellant's lack of responsibility for the manufacturer's actions, emphasizing the need for the Revenue to address issues with the original manufacturer. The tribunal's decision highlighted the importance of following Cenvat Credit Rules while protecting appellants from penalties when they act in good faith based on available information.