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2023 (12) TMI 603 - AT - Central ExciseCENVATCredit - rolled products/ rounds and HR coil/ sheets - denial on the ground that they are not inputs but were final products in themselves - procuring only Cenvatable invoices from their suppliers, like M/s Kailash Steel and Alloys without commensurate movement of goods - penalties - HELD THAT - The learned Commissioner failed to appreciate that HR Coils can be used as inputs in the manufacture of ingots/ billets in an induction furnace. The Revenue s allegation that the appellant did not have equipment to cut the coils and manufactured formers for captive consumption is not based on any evidence like Panchnama. The appellant s claim that they have borrowed the equipment from other manufacturers cannot be ignored. Obtaining only the invoices from his suppliers, without receiving the material - HELD THAT - Revenue has not undertaken any investigation into the aspect of actual transportation and the receipt of the material; no statement of transporter/ driver was recorded; no enquiries with the banks was made to ascertain whether the transactions were genuine and are not just temporary adjustments with flow back of money. Under such circumstances, the Department has not made out any case against the appellants. Mere allegation without any evidence to substantiate cannot hold. Penalties - HELD THAT - The appellants are eligible for the disputed CENVAT credit. When the credit is held to be admissible, penalties impose on both the appellants do not survive. Appeal allowed.
Issues involved:
The issues involved in the judgment are the confirmation of Central Excise duty, admissibility of credit on certain items, imposition of penalty under Rule 26 of the Central Excise Rules, 2002, and the validity of the findings of the Adjudicating Authority. Confirmation of Central Excise Duty: The appeal was against the order confirming Central Excise duty of Rs.89,28,473/- along with interest and equal penalty imposed on M/s Kailash Steel and Alloys. The appellant, M/s Allied Recycling Limited, was engaged in the manufacture of alloy and non-alloy steel ingots/billets. The case revolved around the admissibility of credit availed on rolled products/rounds and HR coil/sheets, with the Department alleging that these were not inputs but final products. The appellant argued that the quantity of final products manufactured could not be possible without the procurement of raw material. The Department's case was based on invoices exchanged without physical receipt of goods, but lacked evidence such as transporter statements or financial transaction verification. Admissibility of Credit: The appellant contended that the cost of the disputed raw material was more than the final products cleared, but the Adjudicating Authority failed to consider the proportion in which the raw material was used. The appellant highlighted the discrepancy in pricing and argued that the impugned raw material was used in a small proportion. The appellant also referred to Circulars and case laws to support their claim that penalty cannot be imposed without proof of intent to evade duty. The appellant's compliance history and lack of discrepancies in audits were also emphasized. Imposition of Penalty under Rule 26: The Counsel for appellant No.2 argued against the imposition of penalty, stating that they supplied goods, arranged transportation, and received payments through banking channels. It was contended that penalty cannot be imposed on a non-physical entity that dealt in goods. The Department reiterated the findings of the impugned order, leading to a discussion on the legality of the penalties imposed. Validity of Adjudicating Authority's Findings: Upon hearing both sides and examining the records, it was found that the Department's case lacked substantial evidence. The Department's argument that the appellants availed credit on final products as inputs was refuted based on the small proportion of disputed raw material used. The claim that HR coil/sheets were used to make "formers" for the induction furnace was supported by Circulars, and the lack of evidence to discount the appellant's claims was noted. The Department's failure to investigate actual transportation and receipt of goods, along with the absence of evidence to substantiate allegations, led to the conclusion that the Department had not made a strong case against the appellants. The decision of a previous case involving similar facts was cited to support the admissibility of CENVAT credit, leading to the allowance of the appeals and the removal of penalties.
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