2015 (2) TMI 556 - AT - Central Excise

CENVAT Credit - Discrepancy in the description of the goods - The price at which the scrap was sold by M/s Bajaj Auto Ltd. Pune/Aurangabad and M/s Telco, Pimpri to the 1st stage dealers was excessively higher than the price at which dealer sold such goods to the respondent - Held that - On perusal of the statements of the dealers as well as manufacturer of the scrap it clearly reveals that the scrap manufacturer sells the scrap at a certain price and the said scrap is segregated wherein the scrap which can be used for manufacturing of components directly is sold at higher price and the scrap which either cannot be used or sold for use of melting under the cover of invoices at a lower price. Therefore, the appeal filed by the Revenue on two grounds i.e. description of goods does not tally and the price at which the manufacturer sold the scrap much higher price at which the main respondent procured the scrap, are not sustainable. During the course of investigation it was also found that there are incidence of substitution of scrap with respect to supply of MS Off cuts by M/s Steelcom against invoice of M/s Shaima Traders which was in the process of being offloaded in the premises of the main respondent but the said goods were not accepted by the main respondent. The CENVAT Credit to the respondent was also denied by the learned Commissioner in the impugned order. However, an option was given to redeem the same to M/s Steelcom and there is no allegation that the main respondent had any idea or inclination whatsoever of substitution of the scrap by M/s Steelcom. No other incident of the said type has been noticed by the Revenue during the course of investigation. - although there is an admission by Shri Naim Choudhary they used to purchase scrap from the open market and supply the same along with modvatable invoices but the Revenue has not produced any evidence on record that any scrap sold by M/s Shaima Iron & Scrap Traders is procured from the open market and the same has been covered under the modvatable invoices to the main respondent. In these circumstances, the allegation, in the absence of such a correlation being established, the fact of substitution of scrap is not sustainable. During the period 1996-97, M/s Bajaj Auto Ltd. was clearing the MS scrap by reversing the CENVAT credit availed on MS Sheets (inputs). In that case, the Revenue cannot dispute reversal of credit by Bajaj Auto Ltd., at the end of the recipients of the said goods as credit is taken on the duty paid by Bajaj Auto Ltd., on the said goods. The issue has been settled by the judgement of the Hon ble Supreme Court in the case of MDS Switchgear Pvt. Ltd. 2008 (8) TMI 37 - SUPREME COURT wherein it was held that credit cannot be denied at the end of the recipients of the said goods on the premise that higher duty has been paid by the manufacturer. In these circumstances, after examining the impugned order, I do not find any infirmity with the impugned order. Therefore, the impugned order is upheld. - Decided against Revenue.

Summary

Issues:
1. Denial of MODVAT credit
2. Confiscation of goods and imposition of penalties
3. Discrepancy in goods description and pricing leading to denial of CENVAT credit
4. Allegations of substitution of scrap and denial of CENVAT credit

Issue 1: Denial of MODVAT credit
The Revenue appealed against the order dropping the demand of MODVAT credit amounting to Rs. 49,89,412. The Tribunal upheld the decision to drop the demand.

Issue 2: Confiscation of goods and imposition of penalties
The Tribunal ordered the confiscation of goods valued at Rs. 34,651 under erstwhile Rule 173Q of Central Excise Rules, 1944. A penalty of Rs. 50,000 was imposed on one of the parties, while penalties were refrained from being imposed on several other entities.

Issue 3: Discrepancy in goods description and pricing
The dispute centered around the denial of CENVAT credit due to discrepancies in the description of goods mentioned in the invoices and the actual goods received. The Revenue contended that the goods supplied did not match the invoices, leading to duty demand, interest, and penalties on co-respondents. However, the respondents argued that the goods procured were correctly described as MS Offcuts, which were segregated and sold accordingly.

Issue 4: Allegations of substitution of scrap and denial of CENVAT credit
The Revenue alleged substitution of scrap by a third party, leading to the denial of CENVAT credit. However, the Tribunal found no substantial evidence to support the claim of substitution. Statements from involved parties indicated that the scrap was appropriately sourced and sold, with no indication of deliberate substitution.

In the detailed analysis, the Tribunal examined statements from relevant parties, including manufacturers and dealers, to establish the consistency in the description and pricing of the procured goods. The Tribunal found no infirmity in the impugned order and upheld the decision to dismiss the Revenue's appeals and dispose of cross-objections accordingly.