2017 (4) TMI 279 - AT - Central Excise

CENVAT credit - the case of appellant is that without bringing any positive evidence on record for diversition of the goods GP sheets and procurement of HR/CR sheets, the impugned orders, denying CENVAT credit are not sustainable - Held that - identical issue decided in the case of Silence Auto 2014 (6) TMI 306 - CESTAT NEW DELHI wherein this Tribunal has held that the adjudications are made against the appellants on the basis of surmises and conjectures without any corroborative evidence therefore, the demand is not sustainable - In view of these observations, the credit on GP sheets cannot be denied to the appellants without corroborative evidence - appeal allowed - decided in favor of appellant.

Issues Involved:
1. Denial of Modvat credit on GP sheets.
2. Allegations of fraudulent availing of Modvat credit.
3. Adjudication based on assumptions and lack of corroborative evidence.
4. Invocation of extended period of limitation.

Comprehensive, Issue-Wise Detailed Analysis:

1. Denial of Modvat Credit on GP Sheets:
The appellants, manufacturers of motor vehicles/tractor parts, were denied Modvat credit on GP sheets by the adjudicating authority. The investigation revealed that although the OE manufacturers required parts made from hot rolled/cold rolled steel, the appellants were purchasing GP sheets and claiming Modvat credit for them. The adjudicating authority confirmed the demand of duty by denying the credit on GP sheets procured by the appellants, along with interest and penalties.

2. Allegations of Fraudulent Availing of Modvat Credit:
The case involved allegations that the appellants were fraudulently availing Modvat credit on GP sheets, which were neither inputs nor used in the manufacture of OE parts. The modus operandi suggested that the GP sheets were sold clandestinely in the market, and HR/CR sheets were purchased without invoices for manufacturing OE parts. The appellants argued that the investigation conducted in a similar case (Silence Auto vs. CCE) was settled in their favor, and no positive evidence was presented to prove the diversion of GP sheets or procurement of HR/CR sheets.

3. Adjudication Based on Assumptions and Lack of Corroborative Evidence:
The Tribunal observed that the adjudicating authority's decision was based on assumptions and lacked corroborative evidence. The Revenue failed to produce evidence showing that the appellants cleared GP sheets in the market or procured HR/CR sheets from an alternate source. The Tribunal emphasized that judicial decisions should not be based on surmises and conjectures. The appellants demonstrated that GP sheets could be used in manufacturing their final product by a de-galvanization process, which the adjudicating authority dismissed without substantial evidence.

4. Invocation of Extended Period of Limitation:
The Tribunal also addressed the issue of limitation. The appellants had been availing credit on GP sheets by reflecting the same in statutory records and filing requisite returns with the Revenue. The jurisdictional Central Excise authorities regularly defaced the invoices and assessed the RT-12 returns. The Tribunal found no basis for attributing misstatement or suppression with mala fide intent to the appellants, thus ruling that the extended period of limitation was not justifiable.

Conclusion:
The Tribunal set aside the impugned orders, holding that the credit on GP sheets could not be denied without corroborative evidence. The appeals were allowed with consequential relief, if any, to the appellants. The judgment emphasized the necessity of concrete evidence in adjudicating cases involving allegations of fraudulent activities and the importance of adhering to statutory limitations.

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