2019 (2) TMI 668 - AT - Central Excise

CENVAT Credit - denial on the ground that description of the goods in the invoices of dealer did not match with the description given by the manufacturers of the goods - Held that - If it is the case of the Revenue that the appellant has not received the goods then the Revenue failed to prove from where the appellant received the goods. Moreover, the Revenue has investigated the manufacturer of the goods who have explained the description in the invoices. Merely on the basis of statement, the case has been made out which is not admissible evidence to deny credit to the appellant - receipt of input is not disputed - credit allowed. Denial also on the ground that there is difference in figures of certain inputs from their balance sheet and the RG-23A Part-1 register as they have shown higher figures in the quantity of purchases and utilization thereof by the appellant - Held that - The appellant has not explained certain inputs received by them were cleared as such and on payment of duty. This fact has been recorded by the Commissioner (Appeals) but inputs have been cleared as such are not the inputs received by the appellant then from where the inputs received by the appellant which have been cleared on payment of duty. This has not been explained by the Revenue - the explanation given by the appellant is acceptable - credit cannot be denied. Rejection of credit on inputs also on the ground that they were shown as purchases by the appellant but did not reflect in the records how they were consumed and how they were disposed of - Held that - It is fact on record that the appellant has manufactured dies from inputs received by them. If these dies are not manufactured by the appellant from the inputs in question then the Revenue has failed to explain from where the appellant got inputs to manufacture to dies - the benefit of doubt goes in favour of the appellant and moreover non recording of manufacturing of dies in RG-23A Part-1 register and ER-1 returns is only procedural lapse for which the appellant can be penalized but the credit cannot be denied to the appellant - credit allowed. Penalty - Held that - For procedural lapse, a penalty of ₹ 5,000/- is imposed on the appellant M/s. Hariom Forgings Pvt. Ltd. and no penalty is imposable on Shri H.M. Dagar, Director. Appeal allowed in part.

Summary

Issues:
1. Denial of credit due to mismatch in goods description on invoices.
2. Denial of credit based on discrepancies in figures between RG-23A Part-1 register and balance sheet.
3. Denial of credit for fabrication of dies used in final products.

Analysis:

(a) Denial of credit due to mismatch in goods description on invoices:
The appellant's credit was denied because the description of goods on invoices did not match with the manufacturer's description. However, it was found that the appellant had received the goods and used them in manufacturing without any dispute on the receipt of inputs. The Revenue's case lacked evidence to prove otherwise, as the manufacturer's explanation was not sufficient to deny credit. Hence, the appellant was held entitled to avail credit in this regard.

(b) Denial of credit based on discrepancies in figures between RG-23A Part-1 register and balance sheet:
The appellant explained the discrepancies in figures in response to the show cause notice, which was not duly considered by the authorities. The Commissioner's findings were vague, and the Revenue failed to explain the clearance of certain inputs that were received by the appellant. As the appellant's explanations were acceptable, and the Revenue did not counter them, the credit could not be denied based on these discrepancies.

(c) Denial of credit for fabrication of dies used in final products:
The appellant clarified that the inputs were used in fabricating dies, which were then used in manufacturing final products. Despite the lack of recording of the manufacturing of dies in the register and returns, it was evident that the dies were made from the inputs received. The Revenue's failure to explain the source of these inputs led to the benefit of doubt favoring the appellant. While procedural lapses could attract penalties, the credit could not be denied. Consequently, the appellant was deemed entitled to avail credit in this scenario.

In conclusion, the tribunal ruled in favor of the appellant, allowing them to avail credit. The demand for duty was set aside, with no interest payable. A penalty of ?5,000 was imposed on the appellant for procedural lapses, while no penalty was imposed on the director. The appeals were disposed of accordingly.