2019 (10) TMI 582 - AT - Central Excise

CENVAT Credit - manufacture of vaccines which is nil rated for central excise duty - allegation that appellant is not maintaining separate statutory record for Cenvat credit which have been availed on manufactured and exempted goods - HELD THAT - Its matter of record that manufacturing and clearance of vaccine has been shown by the appellant in their own statutory records for the relevant period including in VAT records. As the appellant is professionally managed manufacturing plant and it is beyond our comprehension that the goods manufactured by some other plant which is a separate legal entity will find a place in the records of the appellant s statutory books or stock records - These evidences cannot be rejected lightly and the Department has rightly raised the issue of mis-utilization of the Cenvat credit. The appellant have failed to adduce any evidence to prove that M/s Panheber/Panera Biotec Pvt. Ltd. had any independent manufacturing facility within the appellant s own premises - there are no fault in the Department s conclusion that it is the appellant who had manufactured the vaccine in the name of M/s Panheber/Panera Biotec Pvt. Ltd. - appeal dismissed - decided against appellant.

Summary

Issues Involved:
1. Determination of the true manufacturer of the vaccine.
2. Compliance with Rule 6 (3) of the Cenvat Credit Rules, 2004.
3. Examination of statutory records and financial transactions.
4. Verification of legal entity status and independent manufacturing facilities.
5. Reversal of Cenvat credit and associated penalties.

Issue-wise Detailed Analysis:

1. Determination of the True Manufacturer of the Vaccine:
The central issue was whether the appellant or M/s Panheber Biotec Pvt. Ltd. (later Panera Biotec Pvt. Ltd.) was the actual manufacturer of the vaccine. The Department contended that the appellant was manufacturing the vaccines, which attracted nil duty, without maintaining separate statutory records for Cenvat credit. The appellant claimed that Panheber Biotec was an independent entity manufacturing the vaccine. However, the Tribunal found that the appellant's statutory records, including RG-1 and VAT returns, indicated that the appellant was the manufacturer. The Assistant Commissioner’s report confirmed that Panheber/Panera Biotec was not a separate legal entity during the relevant period, as they only applied for Central Excise Registration in 2011, well after the period in question.

2. Compliance with Rule 6 (3) of the Cenvat Credit Rules, 2004:
The Department issued a show cause notice demanding the reversal of Cenvat credit equivalent to 10% of the total turnover of the exempted goods (vaccine) cleared by the appellant, invoking Rule 6 (3) of the Cenvat Credit Rules, 2004. The appellant argued that they did not manufacture the vaccine and thus were not required to reverse the Cenvat credit. However, the Tribunal upheld the Department's view that the appellant failed to maintain separate records for dutiable and exempted goods, thereby necessitating the reversal of Cenvat credit.

3. Examination of Statutory Records and Financial Transactions:
The Tribunal noted that the appellant's statutory records (RG-1 and ER-1 registers) and VAT returns showed the production and clearance of the vaccine. The Assistant Commissioner’s report indicated that the payments for raw materials used in vaccine manufacturing were made by the appellant, further supporting the Department's case. The appellant's failure to provide convincing evidence to counter these findings led the Tribunal to conclude that the appellant was indeed the manufacturer.

4. Verification of Legal Entity Status and Independent Manufacturing Facilities:
The Tribunal examined whether Panheber/Panera Biotec had independent manufacturing facilities. The Assistant Commissioner’s report highlighted the absence of independent power connections or sub-meters for electricity supply to Panheber/Panera Biotec. Additionally, the financial statements of Panheber Biotec did not show any significant transactions or assets that would support independent manufacturing operations. The Tribunal concluded that Panheber/Panera Biotec existed only on paper and that the appellant was the actual manufacturer.

5. Reversal of Cenvat Credit and Associated Penalties:
The Tribunal upheld the Adjudicating Authority's order for the reversal of Cenvat credit amounting to ?1,65,92,802, along with interest and penalties under Rule 15 read with Section 11AC of the Central Excise Act, 1944. The appellant's failure to provide substantial evidence to refute the Department's claims and the clear indications from statutory records led to the dismissal of the appeal.

Conclusion:
The Tribunal found no legal infirmity in the impugned order-in-original and upheld the reversal of Cenvat credit along with interest and penalties. The appeal was dismissed, reinforcing the Department's stance that the appellant was the manufacturer of the vaccine and had failed to comply with the requisite statutory requirements.