2017 (3) TMI 1094 - AT - Central Excise

CENVAT credit - denial on the ground that the assessee sold the raw material on which they had taken Cenvat credit - Held that - there has been no defence with the appellants in case of 6,70,000 Kgs of raw material of Polyethylene granules for which invoices were issued by M/s GAIL to M/s Resham Polymers ltd., but the said goods were never physically received in the factory of appellant and the appellant, therefore, wrongly took the Cenvat credit of ₹ 41,40,880/- on this account. The appellant assessee has not given sufficient evidence that this material quantifying 6,70,000 Kgs of raw material, polyethylene granules was received by them and used for manufacture in their factory - this demand of cenvat credit of ₹ 41,40,880/- on account of non-receipt of the above raw material(6,70,000 Kgs) in their factory (out of total demand of Cenvat credit of ₹ 1,05,66,429/-) along with interest and imposition of corresponding equivalent penalty is hereby sustained. In case of remaining demand of ₹ 61,79,502/-, assessee claims that the repetition of invoices has led to duplication of demands - Held that - the matter deserves to be remanded to the Original adjudicating authority, who shall examine the same - matter on remand. Appeal allowed by way of remand.

Summary

Issues:
- Demand of Cenvat credit confirmed against the appellant assessee.
- Imposition of penalties on the Managing Director and Partner of the appellant company.
- Allegations of clandestine removal based on hand written documents.
- Denial of Cenvat credit based on overlapping quantities and invoices.
- Non-receipt of raw material and incorrect Cenvat credit claimed.
- Repetition of invoices leading to duplication of demands.
- Need for independent evidence in the form of raw material delivery.
- Requirement for verification of transactions related to sale of raw material.
- Lack of explanation for alleged clandestine receipt of raw material.
- Application of case laws requiring corroborated evidence.

Analysis:
The judgment by the Appellate Tribunal CESTAT NEW DELHI involved multiple issues stemming from the confirmation of demand of Cenvat credit against the appellant assessee. The Order-in-Original dated 21.08.2008 confirmed the demand amounting to a significant sum along with penalties imposed on the Managing Director and Partner of the appellant company. The allegations of clandestine removal were primarily based on hand written documents found during a search, leading to the denial of Cenvat credit due to overlapping quantities and invoices.

The tribunal noted discrepancies regarding the non-receipt of raw material by the appellant, resulting in the incorrect claim of Cenvat credit. Specifically, the demand related to the non-receipt of a substantial quantity of raw material was sustained, while issues of duplication of demands due to repeated invoices were raised. The tribunal found errors in the confirmation of the remaining demand and remanded the matter for fresh adjudication to address the repetition of invoices and corresponding penalties.

Moreover, the judgment highlighted the necessity for independent evidence, such as proof of raw material delivery, and emphasized the importance of verifying transactions related to the sale of raw material. The appellant's argument regarding the lack of explanation for clandestine receipt of raw material was considered, along with the reliance on case laws requiring corroborated evidence in similar matters. Ultimately, the impugned order was modified, the penalties were set aside for reevaluation, and the appeals were partly allowed by remanding the matters for adjudication afresh.