2009 (9) TMI 400 - AT - Central Excise

Cenvat Credit- A show cause notice was issued to the respondents and the original authority held that the credit taken on the basis of invoices received from M/s. Ambica Steel Industries through their own premises as registered dealer in Mandi Gobindgarh was irregular and accordingly confirmed the demand of duty along with interest and imposed penalty as mentioned above. On appeal filed by the party, the Commissioner (Appeals) allowed the appeal. Held that- As they have played dual roles, first as registered dealer and then as a recipient-manufacturer, they were required to prove the receipt of duty paid materials in their dealer s premises and the premises of the manufacturing unit. They have not adduced any evidence regarding the actual receipt of the material by their Mandi Gobindgarh office or for transport of the same to Parwanoo factory and on the duty paid nature of the scrap received by them. Under the circumstances, the order of the original authority in confirming the demand along with interest and imposition of penalty should not have been interfered with by the Commissioner (Appeals). In view of the above, we set aside the order of the Commissioner (Appeals) and allow the appeal of the department by restoring the order of the original authority.

Summary

Issues:
Appeal against Commissioner (Appeals) order confirming demand under Rule 57-I, irregular credit availed by the respondent, dual role of the respondent as registered dealer and recipient-manufacturer.

Analysis:
The appeal before the Appellate Tribunal CESTAT, New Delhi involved a dispute regarding the irregular credit availed by a Private Limited company acting as a dealer of excisable goods. The company had registered itself with the Excise authorities for passing on Cenvat credit, showing receipt of duty paid goods from a supplier, M/s. Ambica Steel Industries. However, investigations revealed that M/s. Ambica Steel Industries lacked manufacturing facilities and engaged in suspicious transactions, leading to proceedings against them for irregular credit. The original authority confirmed the demand of duty along with interest and penalty, which was later set aside by the Commissioner (Appeals).

The Department contended that since the supplier had no manufacturing facilities, the credit availed by the respondent was irregular. On the other hand, the respondent argued that the lack of manufacturing facilities should not invalidate the credit taken, emphasizing that they had received materials from the registered dealer and correctly availed the credit based on invoices. The respondent's advocate sought to uphold the Commissioner (Appeals) order.

Upon careful consideration of the submissions, the Tribunal noted that the registered dealer acting as an intermediary between the supplier and the respondent was, in fact, the respondent itself. The Tribunal found the claim that M/s. Ambica Steel Industries supplied scrap without manufacturing facilities to be unacceptable. The respondent's reliance on invoices issued by their own office was viewed with caution. As the respondent played dual roles, they were required to prove the receipt of duty paid materials at both their dealer's premises and the manufacturing unit, which they failed to do. Consequently, the Tribunal set aside the Commissioner (Appeals) order and reinstated the original authority's decision confirming the demand, interest, and penalty.

In conclusion, the Tribunal allowed the Department's appeal, emphasizing the necessity for proper evidence of the receipt of duty paid materials and highlighting the respondent's failure to substantiate their claims, ultimately leading to the restoration of the original authority's order.