2009 (9) TMI 540 - AT - Central Excise

Cenvat Credit- The appellant-company is a manufacturer of unprocessed man made fabrics. They were availing Cenvat credit of duty on inputs like PV and texturised yarn. The Department found that there was mis-match between the goods received and the duty paying documents. On the above mentioned grounds, the original authority demanded duty of Rs. 78,864/- along with interest; he imposed equal amount as penalty under Section 11AC on the appellant company; he also imposed a penalty of Rs. 10,000/- under Rule 13 on the appellant company. He also imposed penalty of Rs. 10,000/- on Shri Anil Baldva, Director of the appellant company. Held that- the goods have been received under kaccha challans. The goods on which credit has been taken has been admittedly received under kaccha challans. The need for issue of goods by the supplier under kaccha challans cannot be appreciated especially when credit was to be taken by the appellants. There is failure on the part of the appellant company in linking the duty paying documents to the goods received. Therefore, the denial of credit and the order for recovery of interest are justified. The appeal by the appellant company is rejected in so far as it relates to demand of duty, order of recovery of interest and imposition of penalty under Section 11AC. Penalty on the appellant company under Rule 13 is set aside. The appeal of Shri Anil Baldva is allowed with consequential relief.

Summary

Issues:
Appeal against demand of duty, order of recovery of interest, and imposition of penalties under Section 11AC and Rule 13.

Analysis:

1. Demand of Duty and Recovery of Interest:
The appellant, a manufacturer of unprocessed man-made fabrics, availed Cenvat credit on inputs like PV and texturised yarn. The Department alleged discrepancies in credit availed based on delayed invoices, mis-matched goods and duty paying documents. The original authority demanded duty, interest, and penalties. The Commissioner (Appeals) upheld this decision. The appellant argued that discrepancies were technical, goods were received under challans, and invoices were received shortly after. However, the Tribunal found that the goods moved without proper documents, no evidence linked goods to subsequent invoices, and ignorance of procedure did not absolve legal requirements. The burden of proof to show receipt of duty paid goods lay with the appellant, and failure to link duty paying documents to goods justified denial of credit, recovery of interest, and penalties under Section 11AC.

2. Penalty under Rule 13:
The Tribunal held that a separate penalty under Rule 13 on the appellant company was not warranted due to the circumstances of the case. The lack of evidence regarding the Director's personal knowledge or intention to evade duty led to the conclusion that the penalty on the appellant Director was not justified. Consequently, the appeal by the appellant company against the demand of duty, recovery of interest, and penalties under Section 11AC was rejected, but the penalty under Rule 13 was set aside. The appeal of the Director was allowed with consequential relief.

In conclusion, the Tribunal upheld the demand of duty, recovery of interest, and penalties under Section 11AC due to the appellant's failure to link duty paying documents to received goods. However, it set aside the penalty under Rule 13 as unwarranted and allowed the appeal of the Director. The judgment highlights the importance of proper documentation and compliance with legal requirements in availing Cenvat credit to avoid penalties and adverse consequences.