2020 (9) TMI 302 - AT - Central Excise

CENVAT Credit - fake purchases - It was alleged that M/s.Abhay Chemicals, Jammu had not purchased raw materials from their stated suppliers and therefore they could not have manufactured any finished goods in the absence of procurement of raw materials, with the sole intent to facilitate undue cenvat credit to their buyers - HELD THAT - The allegations in the show cause notice of taking irregular cenvat credit is based on a communication dated 30.02.2012 received from the Additional Commissioner, Customs Central Excise, J K, Jammu, stating that the several units in their jurisdiction located in Jammu Kashmir appear to be not actually engaged in the manufacturing activities - Further, it is found that the appellants have led evidence that they have received the inputs along with duty paying documents. Further, the appellants have made payments for receipt of inputs by cheque. Further, the appellants have manufactured finished products from the inputs and cleared the same on payment of duty, which is an admitted fact. Further, Revenue has not identified any alternate source of receipt of raw materials clandestinely. The allegation of Revenue are vague and are proved wrong - Adjudicating Authority is directed to grant the refund of disputed cenvat credit in cash along with interest as per Transitory Provisions under CGST Act - Appeal allowed - decided in favor of appellant.

Summary

Issues:
- Alleged fraudulent availing of Cenvat credit
- Proper receipt of goods under proper documents
- Evidence of manufacturing and clearance of finished goods
- Lack of evidence of alternate source of raw materials
- Rulings of the Division Bench of the Tribunal
- Dismissal of the appeal by the Commissioner (Appeals)

Analysis:

The appellant company and its Director appealed against the order-in-appeal directing them to pay wrongly availed cenvat credit of ?11,67,818 along with interest and penalty. The case involved allegations that the appellants fraudulently availed Cenvat credit based on invoices from an input supplier, M/s. Abhay Chemicals, Jammu. The appellant contended that they properly received goods, manufactured finished products, and cleared them after paying duty. The appellant argued that no evidence of procurement from other sources was found, and relied on various case laws to support their contentions.

The appellant highlighted the ruling of the Division Bench regarding Abhay Chemicals, emphasizing various documents and evidence of manufacturing activities by Abhay Chemicals. The Tribunal noted that Abhay Chemicals was engaged in production as evidenced by certificates, permissions, financial statements, and plant-based checks. The jurisdictional Commissioner's report also confirmed the operation of Abhay Chemicals and other similar units. The appellant sought the allowance of their appeals based on this information.

The respondent/Department reiterated the findings of the Commissioner (Appeals) and requested the dismissal of the appeal. However, after considering the contentions from both sides, the Tribunal found that the allegations of irregular Cenvat credit were based on vague communication and lacked concrete evidence. The Tribunal observed that the appellants had received inputs with duty-paying documents, made payments by cheque, manufactured finished products, and cleared them after paying duty. The Tribunal also noted that no alternate source of raw materials was identified clandestinely. Referring to the ruling on Abhay Chemicals and other units, the Tribunal concluded that the Revenue's allegations were unfounded, allowing the appeals and setting aside the impugned order.

The Tribunal directed the Adjudicating Authority to grant the refund of disputed Cenvat credit in cash along with interest as per Transitory Provisions under the CGST Act. The judgment was pronounced on 01.09.2020 by the Member (Judicial) of the Appellate Tribunal CESTAT New Delhi.