2013 (10) TMI 943 - AT - Central Excise

Confirmation of Demand Self Assessment Held that - The show-cause notice itself accepts the fact that the material under dispute was scrap in the eyes of BHEL and was leftover material in the eyes of assessee - no investigation was conducted as to what was the real nature of the material and whether it could have been used by the appellant or not especially in view of the fact that show-cause notice was issued on the ground that these were not inputs - The whole system of collection of indirect taxes is based on the trust placed on the assessee and the assessee has to do the self-assessment and considering whether a particular item is input or not, whether credit is admissible or not, and same can be used or not is a part of assessment process. The adjudicating authority when accepted the reply to the show-cause notice by the assessee since he had no reason to disbelieve the assessee - What can be said is that at the time of issue of show-cause notice and subsequently at the time of adjudication, officers exercised their discretion and believed the assessee in what they have claimed - the Commissioner (A) has confirmed the demand only on the ground that such investigation/verification was not taken up by the lower authorities - This means that the Commissioner, without any basis but the disbelief on the assessee claim and on a totally new ground, allowed the appeal - the confirmation of demand and allowing the Revenues appeal on this ground is against the spirit or letter of law and would not be proper. Notification No.214/1986 - Return of Goods Held that - Goods should have been returned when the assessee purchases the leftover materials from BHEL, the obligation under Notification No.214/1986 in respect of the assessee as well as BHEL can be said to have been fulfilled order set aside Decided in favour of assessee.

Summary

Issues: Delay in filing appeal due to illness of Managing Director, CENVAT credit on M.S. scrap, Job work arrangement with principal manufacturer, Show-cause notice, Original adjudicating authority's decision, Commissioner (A)'s decision, Requirement of pre-deposit, Nature of material purchased from principal manufacturer, Interpretation of Notification No.214/1986.

The judgment addresses multiple issues arising from a case involving the delay in filing an appeal due to the illness of the Managing Director, the eligibility of CENVAT credit on M.S. scrap, a job work arrangement with a principal manufacturer, the show-cause notice, decisions made by the original adjudicating authority and the Commissioner (A), the requirement of pre-deposit, the nature of the material purchased from the principal manufacturer, and the interpretation of Notification No.214/1986.

The delay in filing the appeal was condoned due to a satisfactory explanation regarding the illness of the Managing Director. The case involved an assessee, a Small Scale Industry (SSI) unit, claiming CENVAT credit on M.S. scrap purchased from a principal manufacturer, Bharat Heavy Electricals Ltd. (BHEL). The issue arose when it was found that the scrap was not an input for the manufacture of the final product, dish ends. The job work arrangement between the assessee and BHEL involved the purchase of leftover materials treated as scrap by BHEL, which was deducted from the job work charges paid to the assessee. The show-cause notice was issued based on discrepancies in the CENVAT credit claimed, leading to proceedings and subsequent decisions by the original adjudicating authority and the Commissioner (A).

The original adjudicating authority accepted the assessee's claim that the purchased material was leftover and could be used in manufacturing dish ends, dropping the proceedings. However, the Commissioner (A) disagreed, citing a violation of Notification No.214/1986 and confirmed the demand for CENVAT credit availed by the assessee. The judgment highlighted the importance of trust in the self-assessment process by the assessee and criticized the Commissioner (A)'s decision to disbelieve the assessee's claim without conducting necessary investigations.

The judgment concluded that the Commissioner (A)'s decision was not based on proper grounds and did not align with the spirit of the law. It also addressed the interpretation of Notification No.214/1986, stating that the obligation under the notification was fulfilled when the assessee purchased leftover materials from BHEL. The impugned order was deemed unsustainable, leading to the allowance of the appeal. The judgment emphasized the need for proper verification and investigation before disbelieving the assessee's claims and highlighted the importance of trust in the assessment process.