2019 (10) TMI 1037 - AT - Central Excise

CENVAT credit - inputs used in the manufacture of exempt goods, Animal Driven Vehicle Tyres (ADV tyres) - Allegation based on assumptions and presumptions - HELD THAT - In the premises the Cost Audit report submitted by Birla Tyres in terms of the direction of the predecessor Commissioner in the present proceedings, as well as the certificate of the Cost Auditor, submitted as per his direction in the proceedings are to be relied upon. They establish that the subject materials were never used as input materials, either directly or indirectly, in or in relation to the manufacture of ADV tyres. The charts submitted by Birla Tyres, the contents whereof are with reference to the documents on record and the correctness of which has not been disputed on behalf of the Revenue, also evidences this. The findings in the impugned order are based on, besides uncorroborated statements, derived figure of numbers, assumptions, presumptions and on unintelligible, theoretical calculations. It is a settled principle of law that in the absence of sufficient, positive and tangible evidence on record, findings based on inferences as in the impugned order are unsustainable - however, the burden of proof that assessee had availed modvat/cenvat credit is that on the Revenue. The impugned order, to the extent it confirms the duty demand of ₹ 78,57,625/-, interest thereon and the penalty imposed upon Birla Tyres, is set aside and the dropping of the demand of ₹ 24,53,668/- is confirmed, with consequential relief to Birla Tyres - appeal allowed - decided in favor of appellant.

Issues Involved:
1. Demand for excise duty on inputs used in the manufacture of exempted ADV tyres.
2. Reversal of Cenvat credit on inputs used for exempted products.
3. Validity of the Department’s reliance on stock records and statements.
4. Limitation period for raising the demand.
5. Department’s appeal against the dropping of a portion of the duty demand.

Detailed Analysis:

1. Demand for Excise Duty on Inputs Used in the Manufacture of Exempted ADV Tyres:
The Commissioner confirmed an excise duty demand of ?78,57,625/- against Birla Tyres for not reversing the Cenvat credit on inputs used in the manufacture of Animal Driven Vehicle (ADV) tyres, which were exempted from duty. The Department alleged that Birla Tyres used certain inputs in the manufacture of exempted ADV tyres but did not reverse the Modvat/Cenvat credit of the duty paid on such inputs. The demand was based on stock records and a list of direct and indirect materials provided by a company officer.

2. Reversal of Cenvat Credit on Inputs Used for Exempted Products:
Birla Tyres contended that they reversed the credit on inputs used in the manufacture of ADV tyres based on Chartered Accountant (CA) certificates. They argued that the Department ignored these CA certificates and raised the demand based on stock records, which included inputs not used for ADV tyres. The company provided Cost Auditor’s certificates and other documents to support their claim that the alleged inputs were not used in the manufacture of ADV tyres.

3. Validity of the Department’s Reliance on Stock Records and Statements:
The Tribunal found that the Department's reliance on stock records and statements was not substantiated by any positive collateral evidence. The stock records included inputs for various types of tyres, not just ADV tyres. The Tribunal held that the findings based on uncorroborated statements and derived figures were unsustainable. The Cost Auditor’s report and CA certificates submitted by Birla Tyres were found to be credible and supported their claim that the inputs in question were not used for ADV tyres.

4. Limitation Period for Raising the Demand:
Birla Tyres argued that the entire demand was barred by limitation as they had disclosed all relevant facts and materials to the Department. The Tribunal agreed, noting that the CA certificates were undisputedly submitted to the Department, and there was no material evidence to contradict the disclosures made by Birla Tyres. Therefore, the proceedings were barred by limitation.

5. Department’s Appeal Against the Dropping of a Portion of the Duty Demand:
The Department appealed against the dropping of a ?24,53,668/- duty demand. The Commissioner had dropped this portion of the demand based on the finding that less quantity of fabric was used than alleged in the show cause notice. The Tribunal upheld the Commissioner’s decision, agreeing with Birla Tyres that the demand was correctly dropped based on the stock statements relied upon by the Department.

Conclusion:
The Tribunal set aside the impugned order to the extent it confirmed the duty demand of ?78,57,625/-, interest thereon, and the penalty imposed on Birla Tyres. The Tribunal confirmed the dropping of the ?24,53,668/- demand, providing consequential relief to Birla Tyres. Thus, Birla Tyres' appeal was allowed, and the Department’s appeal was rejected.

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