2012 (11) TMI 1015 - AT - Central Excise

CENVAT Credit - benefit of the Notification No. 214/86-CE dated 25.3.1986 - Manufacturers of the Panel Boards supplied to the appellant were within the SSI exemption limit of clearances - Held that - appellant could have definitely availed the cenvat credit on the inputs if appellant had followed the correct procedure and really purchased the inputs supplied to SSI manufacturers who could have in turn added the value of the raw material and sold it back to him. In fact instead of manipulating and seeking the manufacturers to include his name in the invoices received by them all he had to do was he could make the payment and the manufacturers only need to add the value of other costs and supply the goods to him. Under these circumstances the submission that there was no loss to the Government and in fact it was loss to the party would show that extended period could not have been invoked in this case and therefore the entire demand may have to be set-aside. In the absence of any Panelty proposed under other rules/ sections Panelty under Section 11AC also may have to be struck down. However learned advocate on behalf of the appellant has referred to a detailed examination of all the evidences and facts of the case to reach a correct conclusion regarding invocation of extended time by submitting that appellant has no objection to appropriate the duty and interest paid and is seeking only waiver of Panelty. Under the circumstances I find that this is a very reasonable proposition and therefore I uphold the demand for cenvat credit and interest thereon as not contested. In the facts and circumstances of the case the Panelty imposed under Section 11AC is set-aside - Decided in favour of assessee.

Summary

Issues:
1. Availment of cenvat credit on inputs not purchased by the appellant but used in the manufacturing process.
2. Allegations of manipulation of records and incorrect availment of cenvat credit.
3. Dispute regarding the role of panel board manufacturers as job workers.
4. Invocation of extended period for proceedings due to manipulation of documents.
5. Imposition of penalty on the appellant.

Analysis:
1. The appellant, engaged in manufacturing Electrical Control Panel board, availed cenvat credit on inputs not directly purchased but used in the manufacturing process. The issue arose as the panel board manufacturers supplying to the appellant were within the SSI exemption limit and did not avail cenvat credit on inputs like HR Sheets, HR Coils, etc. The appellant claimed these inputs were used on a job work basis, necessitating fulfillment of conditions under Notification 214/86-CE for availing cenvat credit. The department initiated proceedings against the appellant for improper availment of cenvat credit.

2. The appellant admitted to manipulating records by creating job work challans and documents to show purchase of inputs, which were actually bought by the panel board manufacturers. The appellant argued lack of awareness and wrong advice led to these actions. Despite the manipulation, it was contended that no loss to the government occurred as final products were cleared with duty payment. Citing legal precedents, the appellant sought leniency, emphasizing that no undue benefit was gained through the actions.

3. The dispute centered on whether the panel board manufacturers acted as job workers for the appellant. The appellant's advocate highlighted that there was no formal agreement appointing them as job workers, and neither party availed the benefits under Notification 214/86-CE. The lower authorities held that the panel board manufacture was undertaken by the job workers, supported by evidence of manipulation and lack of direct involvement in the supply of inputs by the appellant.

4. The invocation of the extended period for proceedings was justified due to the manipulation of documents and evidence showing the appellant's limited role in the supply chain. The appellant, acknowledging the improper availment of cenvat credit, agreed not to contest the issue and paid the duty and interest. However, leniency was sought concerning the imposition of penalty, arguing against adding insult to injury.

5. The judgment upheld the demand for cenvat credit and interest, as the appellant did not contest these aspects. Noting that the extended period might not have been appropriately invoked, the penalty under Section 11AC was set aside considering the circumstances and the appellant's willingness to rectify the situation. The decision aimed to balance the recovery of dues with fairness, acknowledging the appellant's cooperation in resolving the matter.