2014 (6) TMI 306 - AT - Central Excise

Denial of Cenvat credit - Bar of limitation - Revenue entertained a view that the appellant has taken credit on the GP sheets, which were not capable of being used in the manufacture of their final product. As such, the Revenue further entertained a view that the appellant has sold the said procured GP sheets and has used the other procured HR/CR sheets in the manufacture of their final product. - Held that - Impugned orders stands passed by the lower authorities in terms of the remand proceedings by the Hon ble High Court vide their order dated 21.8.2008. Ongoing through the said order of the Hon ble High Court, I find that the appeal does not stand disposed of by the Hon ble High Court on the merits of the case, as is clear from the re-produced part of the order, it stand remitted to the lower authorities, preliminary on the ground that the entire material collected by the Revenue was not supplied to the assessee. There is virtually no evidence produced by the Revenue inasmuch as no buyer of the GP sheets stands identified nor is there any documentary evidence to establish that the procured GP sheets were cleared by the appellant in the market. Further, the Revenue has also miserably failed to show as to from where the appellants have procured the HR/CR sheets. Admittedly, without the use of the raw materials, may it be GP sheets or HR/CR sheets, their final product cannot be manufactured. In the absence of any evidence produced by the Revenue, the burden of countering and rebutting the evidence does not get shifted to the assessee. The number of search conducted on the google is not indicative of a process being commercially viable or not. On one hand the adjudicating authority has observed that de-galvanisation exists and on the other hand he is rejecting the appellant s stand that there is no technical literature to show that de-galvanisation actually exists. He has also observed that the Show Cause Notice has referred to and relied upon circumstantial evidences to show that it is not possible to use GP sheets in the manufacture of tractor component. The Revenue establishing a fact that in the normal course GP sheets are not used for manufacture of OE parts, cannot lead to inevitable conclusion that the appellants have not used the said GP sheets in the manufacture of their final product. This is specifically so as the Revenue has failed to produce any evidence on record to establish that the said GP sheets stand cleared by the appellant in the open market and also to establish that the appellants have procured the HR/CR sheets from any other source. Extended period of limitation - Held that - Admittedly the credit on the GP sheets was being availed by the appellant by reflecting the same in the statutory records. The requisite returns were being filed with the Revenue along with invoices, which indicated the description of the material as GP sheets. The said invoices were being regularly defaced by appellant s jurisdictional Central Excise authorities, who never objected to the use of the GP sheets in the manufacture of OE parts. The RT-12 returns filed by the appellants were also being finally assessed. In such a scenario, I really fail to understand as to how any mis-statement or suppression etc. with an intent of mala fide can be attributed to the assessee so as to justifiably invoke the longer period of limitation - Bar of limitation - Decided in favour of assessee.

Summary

Issues Involved:
1. Denial of Cenvat credit.
2. Alleged use of GP sheets instead of HR/CR sheets.
3. Alleged clandestine disposal of GP sheets.
4. Limitation period for raising the demand.

Issue-wise Detailed Analysis:

1. Denial of Cenvat Credit:
The appeals arose from an order denying Cenvat credit of Rs. 7,42,649/- against the manufacturer along with penalties. The appellant procured raw materials from registered dealers and availed Cenvat credit on duty paid, which was used for discharging duty on final products. The Revenue's investigation revealed that the appellant received GP sheets, which were allegedly not used in manufacturing the final products.

2. Alleged Use of GP Sheets Instead of HR/CR Sheets:
Investigations indicated that the appellant's customers (motor vehicle manufacturers) typically required parts made from CR/HR sheets, not GP sheets. The Revenue's stance was that the appellant used HR/CR sheets for manufacturing and sold the GP sheets clandestinely. However, the appellant argued that GP sheets could be used after de-galvanization, converting them to HR/CR sheets. The lower authorities did not accept this explanation, deeming it economically unviable.

3. Alleged Clandestine Disposal of GP Sheets:
The Revenue failed to provide evidence of the clandestine disposal of GP sheets or the procurement of HR/CR sheets from alternate sources. The Assistant Commissioner cited the burden of proof shifting principle but did not present initial evidence of clandestine clearance. The appellant's explanation of de-galvanization was dismissed as speculative and not commercially viable. The adjudicating authority's reliance on internet searches and assumptions was criticized as insufficient and contradictory.

4. Limitation Period for Raising the Demand:
The Commissioner (Appeals) and the Tribunal previously set aside the demand on merits and limitation, noting that the appellant reflected the credit in statutory returns, which were regularly assessed without objections. The extended period of limitation was deemed inapplicable as there was no suppression or misstatement by the appellant. The High Court remanded the matter for fresh consideration, emphasizing that the appellant did not have the opportunity to confront the material collected by the Revenue.

Final Judgment:
The Tribunal found no evidence of clandestine disposal of GP sheets or procurement of HR/CR sheets from alternate sources. The appellant's explanation of using GP sheets after de-galvanization was plausible. The Revenue's case was based on assumptions without concrete evidence. The demand was also barred by limitation as the appellant duly reflected the credit in statutory records and filed requisite returns. Consequently, the confirmation of demand and imposition of penalties were set aside, and the appeals were allowed with consequential relief.

Conclusion:
The Tribunal allowed the appeals, setting aside the demand and penalties, emphasizing the lack of evidence for clandestine disposal and the inapplicability of the extended limitation period.