2017 (10) TMI 200 - AT - Central Excise

CENVAT credit - non-receipt of goods - The case of the Revenue is that, as the manufacturers M/s. Karan & Company has not received the HDPE Granules in their factory, on the basis of ICC check post records, at the entry point and as per the records of sales tax department, the goods have never crossed the border of Himachal Pradesh - Held that - Revenue did not do any investigation with the transporters of the goods. Moreover, the manufacturer/ buyers has purchased the goods from Karan & Company against the duty paying invoices in which all the particulars, in terms of Rule 9(2) of CCR, 2004 were entered and manufacturer buyers have paid duty on such goods. In these circumstances, Cenvat credit cannot be denied. Moreover, no such allegation against the appellant that they have received inputs from illicit means under the cover of invoices and no investigation was conducted at the end of manufacturer-buyers to allege that there was shortage of inputs. In these circumstances, CENVAT credit to the manufacturer-buyers cannot be denied. Penalties - Held that - Merely on the basis of the check point barrier report it has been alleged that the goods have not been received by M/s. Karan & Company. As no full-proof investigation has been conducted by the Revenue in the matter, the allegation is without any basis that M/s. Karan & Company has not received the goods - penalties set aside. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Appeal against denial of Cenvat credit, duty demand, interest, and penalties on appellants.

Analysis:
The appellants, engaged in manufacturing HDPE Pipes and Granules, appealed against denial of Cenvat credit, duty demand, and penalties. The Revenue alleged that goods were not received by the manufacturer-buyers based on check post and sales tax records. The adjudicating authority allowed Cenvat credit, but the Commissioner (Appeals) denied it, citing lack of verification in some cases. The appellants argued that they received goods against duty-paying invoices, with payments made through cheques and duly recorded. They relied on the decision in Himalayan Pipe Industries case to support their claim. The Revenue contended that goods did not cross into Himachal Pradesh, but agreed that proper verification was lacking. The Tribunal noted that the Revenue did not investigate transporters, and the goods were received against duty-paying invoices, so Cenvat credit could not be denied. No evidence suggested the appellants received inputs illicitly, and penalties were unwarranted without thorough investigation.

Regarding penalties, the Tribunal found the allegation baseless as no conclusive evidence showed the goods were not received by the supplier. The Tribunal referenced previous decisions emphasizing that reliance solely on sales tax documents without further inquiry was not justified. The Tribunal set aside the penalties imposed on the appellants based on the lack of substantial evidence. Additionally, the Tribunal rejected the Revenue's appeal, noting the absence of documentary evidence to prove the manufacturer received reprocessed granules instead of virgin granules. Consequently, all appeals were allowed, and penalties were set aside for the appellants.

In conclusion, the Tribunal ruled in favor of the appellants, allowing their appeals and setting aside the penalties. The decision was based on the lack of conclusive evidence supporting the denial of Cenvat credit and penalties. The Tribunal emphasized the importance of thorough investigations and proper verification before imposing penalties or denying credits based on incomplete records or allegations.