2009 (12) TMI 278 - AT - Central Excise

Cenvat Credit- Thereafter a show cause notice was issued on 10-5-2004 wherein the credit of Rs. 1,36,936/- taken by them was held to be ineligible on the ground that they had not given any further declaration of stock lying as on 1-4-2003 or any intimation regarding, no change of stock as on 31-3-2003 and 1-4-2003. Held that- I consider that appellants have fulfilled their obligation as regards requirement to show that they had stock of yarn as on 31-3-2003. I also consider that the subsequent declarations which did not show any different quantity as stock is sufficient as an intimation of no change. In view of the above discussions, the department has not been able to make out a case to show that appellants did not have the stock as reflected in the quarterly return and in the income tax return and accordingly the cenvat credit availed by them was not correctly availed.

Issues:
1. Eligibility of passing on credit of duty paid on grey fabrics to manufacturers.
2. Requirement to file declarations of stock as per Notifications.
3. Allegation of ineligible credit due to lack of further declaration of stock.
4. Verification of stock details and invoices.
5. Adjudication process and submission of additional documents.
6. Verification of invoices' authenticity and total quantity.

Analysis:
1. The appellant, a dealer in grey fabrics, was eligible to pass on the credit of duty paid on grey fabrics to manufacturers when textiles were brought into the cenvat network in 2003. Notifications No. 35/2003-CE. (N.T.) and No. 40/2003-C.E. (N.T) mandated filing declarations of stock as on 31-3-2003 and providing intimation of any changes. Appellants made declarations on 26-5-2003 and 10-6-2003, but a show cause notice was issued on 10-5-2004 alleging ineligibility of credit due to lack of further stock declarations.

2. The appellant's advocate argued that although no specific indication of no change in stock was given in subsequent declarations, the stock details remained the same in all declarations. The advocate highlighted the unavailability of records due to the Sales tax Department's actions and the inability to fulfill promises of producing certain certificates. The advocate emphasized that no investigation was conducted on the invoices submitted by the appellants to verify their authenticity.

3. The Departmental Representative contended that the appellants failed to provide proof of stock as on 31-3-2003, and the invoices produced were deemed unreliable by the superintendent. Questions were raised regarding the sudden appearance of the invoices and their authenticity.

4. The Tribunal considered both parties' submissions and noted that the show cause notice was primarily based on the appellants' failure to specifically intimate no change in stock. The Tribunal acknowledged the production of income tax returns by the appellants, which could have been used for verification purposes.

5. During a subsequent adjudication process in March 2008, the appellants submitted copies of invoices, raising questions about their sudden emergence. The Tribunal criticized the lack of effort in verifying the invoices' authenticity and suggested forensic examination for verification. It emphasized the importance of verifying the total quantity in the invoices against the income tax return and quarterly figures.

6. Ultimately, the Tribunal found that the appellants fulfilled their obligation to demonstrate stock as of 31-3-2003 and that subsequent declarations served as sufficient intimation of no change. Due to the lack of verification or investigation into the invoices, the Tribunal ruled in favor of the appellants, allowing the appeal with consequential relief.

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