2016 (4) TMI 491 - AT - Central Excise

Denial of Cenvat credit and demand of duty - Clandestine removal of goods - Shortage of raw materials - Procurement of Bazar s scrap without cover of invoices - Excess production of finished goods as per private records maintained - Held that - Revenue cannot deny the CENVAT Credit and simultaneously confirm duty liability on the finished goods. The shortage of raw materials on which CENVAT Credit is proposed to be denied has to be considered as used in the manufacture of finished goods along with Bazar s scrap illicitly procured by the Respondent for the manufacture of finished goods which have been cleared clandestinely and on which duty demand was correctly confirmed by the Adjudicating Authority. The evidences available on record are sufficient to confirm duty with respect to clandestinely removed goods and is required to be upheld by setting aside Order-in-Appeal. Appeal filed by the Revenue is allowed to that extent. However, it is observed from the case records that 25% option of reduced penalty under Section 11AC has not been extended to the appellant with respect to penalty. The same is extended to the appellant if the entire duty amount along with interest and reduced 25% penalty is paid within one month from the date of receipt of this order. Hence, so far as denial of credit is concerned, the demand is set aside and accordingly equivalent penalty imposed is also set aside. - Decided partly in favour of revenue

Issues:
1. Appeal against Order-in-Appeal confirming demand for clandestine removal of goods and CENVAT Credit.
2. Argument by Revenue regarding irregular procurement of scrap and clandestine manufacture.
3. Non-appearance of Respondent during multiple hearings.
4. Observations on excess production, shortage of raw materials, and CENVAT Credit recovery.
5. Decision on duty liability confirmation and penalty extension.
6. Denial of credit and penalty imposition set aside.

Analysis:

1. The appeal was filed by the Revenue against the Order-in-Appeal confirming a demand for clandestine removal of goods and CENVAT Credit. The Order-in-Appeal dated 20.02.2007 set aside the Order-in-Original dated 27.09.2006, where a demand of ?10,13,102/- for clandestine removal of goods and a CENVAT Credit of ?1,03,104/- for short inputs were confirmed against the Respondent.

2. The Revenue argued that during a visit, raw materials were found short, and evidence indicated clandestine manufacture of finished goods involving Central Excise duty. The Respondent did not contest the stock-taking report, and the Order-in-Appeal was deemed incorrect and required to be set aside.

3. Despite being fixed for hearings on multiple occasions, the Respondent did not appear to counter the grounds of the Appeal filed by the Department.

4. Upon review of the case records, it was noted that the Respondent procured scrap without proper documentation, leading to excess production of finished goods. The shortage of raw materials, for which CENVAT Credit was proposed to be recovered, was acknowledged. The Bench concluded that the duty liability on clandestinely removed goods was correctly confirmed by the Adjudicating Authority.

5. The duty demand of ?10,13,102/- was upheld, and the reduced penalty under Section 11AC was extended to the Appellant if the duty amount, along with interest and reduced penalty, was paid within one month from the order receipt. However, the denial of credit of ?1,03,104/- was set aside, along with the equivalent penalty.

6. Consequently, the Revenue's appeal was allowed to the extent indicated, with the duty liability confirmed and the denial of credit and penalty imposition set aside.

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