2010 (1) TMI 377 - AT - Central Excise

Cenvat- The respondents received materials from M/s. Metal Trading Company, a registered dealer, who claims to have purchased the goods from M/s. Gautam Steel Traders, another registered dealer. The respondents have taken credit of duty on the basis of invoices issued by M/s. Metal Trading Company. The dispute relates to whether M/s. Metal Trading Company can be treated as the second stage dealer or not. The Original Authority held that the goods manufactured by M/s. Swastika Pipes Ltd., Rohtak has been sold to M/s. Rameshwar Das Devidayal (P) Ltd. and they are the first stage dealers and M/s. Gautam Steel Traders, at the most, can be considered as second stage dealer and, they in turn sold the goods to M/s. Metal Trading Company. Held that- order of original authority denying credit justified.

Summary

Issues:
1. Dispute regarding the eligibility of credit based on invoices from a registered dealer.
2. Determination of the status of dealers involved in the transaction.
3. Applicability of Cenvat Credit Rules, 2004 in the case.
4. Assessment of penalty on the parties involved.

Analysis:
1. The dispute in this case revolves around the eligibility of credit claimed by the respondent based on invoices from M/s. Metal Trading Company, a registered dealer. The Original Authority disallowed the credit and ordered recovery, along with penalties, on the grounds that the invoices were not valid for credit purposes.

2. The status of the dealers involved in the transaction is crucial for determining the validity of the credit claimed. The Commissioner (Appeals) differentiated between the roles of M/s. Gautam Steel Traders and M/s. Metal Trading Company, ultimately sustaining the penalty on the former but setting aside the demand and penalty on the respondent, M/s. S.D.L. Auto Pvt. Ltd., due to lack of knowledge regarding the validity of the invoices.

3. The application of the Cenvat Credit Rules, 2004 is significant in this case. The argument presented by the Department emphasized that M/s. Gautam Steel Traders could not be considered a first stage dealer, therefore rendering the invoices invalid for credit purposes. This interpretation influenced the decision to set aside the Commissioner (Appeals) order and restore that of the Original Authority.

4. The assessment of penalties on the parties involved was a key aspect of the judgment. While the Original Authority's decision to deny credit and order recovery was upheld, the penalty on M/s. S.D.L. Auto Pvt. Ltd. was deemed unjustified due to lack of evidence showing their knowledge of the irregular credit passing between dealers.

In conclusion, the judgment focused on the intricacies of dealer statuses, validity of invoices, and adherence to Cenvat Credit Rules, ultimately leading to the restoration of the Original Authority's order regarding credit eligibility and penalties.