2023 (10) TMI 1159 - AT - Central Excise

CENVAT Credit - allegation of contravention of rule 3(5) of Cenvat Credit Rules - clearance of pure lead ingot on which CENVAT Credit was availed, but were sold as such in the home market on payment of an amount as duty which was less than the amount of Cenvat Credit availed by them at the time of it s procurement. HELD THAT - The department has not adduced any evidence to substantiate the allegation that the Appellant has availed excess credit on the inputs and paid less duty at the time of clearance of the inputs as such . In the grounds of appeal, the department stated that the Appellant themselves are manufacturers of pure lead ingot of a quantity more than required for its captive consumption. Hence, there was no necessity for importing the pure lead ingot and then re-selling the same in the market - the allegation is very strange. In business, there is nothing wrong in manufacturing one product and importing the same to meet the market requirement. If there is any malafide intention in it, the department should have brought it out clearly with evidence. Mere allegation without any evidence is not sufficient to demand the differential duty. There is no material evidence available on record to substantiate the allegation of the department regarding excess availment of Cenvat credit on the imported pure lead ingot. Hence the allegation of excess availment of credit by the department is not sustainable - Further, the department has not adduced any evidence for diversion of Cenvat credit availed inputs as such . All the allegations of the department were only on presumption basis, without any evidence. One such allegation of the department is that during the period Sept 2010 to March 2011, the Appellant procured 1,11,808 Kgs of pure lead ingot and availed Cenvat credit. During this period they have also manufactured 13,77,957 Kgs of the same pure lead ingot and cleared the same to domestic market. Thus, allegation of the department is that there is no need to procure 1,11,808 Kgs of pure lead ingot when they themselves manufactured 13,77,957.10 Kgs of pure lead ingot during the same period - it is found that there is nothing wrong in procuring pure lead ingot from outside sources when there was a shortage. Just because they manufacture huge quantity of pure lead ingot, it does mean that they should not import the same goods to meet their requirement. Thus, the allegations are only on presumption basis without any evidence. Appeal of assessee allowed.

Summary

Issues involved:
The issues involved in the judgment are the demand of Central Excise duty, interest, and penalty on the clearance of 'pure lead ingot' by the Appellant, the allegation of excess availment of Cenvat credit, and the imposition of penalty.

Central Excise Duty Demand:
The Appellant was issued a Show Cause Notice demanding Central Excise duty for the removal of 'pure lead ingot' during a specific period. The Notice was adjudicated, and demands were initially dropped but later reviewed and appealed. The Appellant contended that they manufactured 'pure lead ingot' as a major finished product, used for downstream products, and maintained records of inputs. They denied the allegation of contravention of Cenvat Credit Rules and argued that the demand was based on hypothetical grounds without substantial evidence. The Tribunal observed that the department failed to provide evidence of excess credit availment or diversion of inputs 'as such,' and held the demand not sustainable.

Interest and Penalty Imposition:
Regarding the demand of interest, the Appellant cited a Supreme Court decision and argued that if no tax is payable, no interest is due. They also contested the imposition of penalty, stating that without a sustainable duty demand, there is no basis for penalty. The Appellant referred to various case laws to support their argument that penalty cannot be imposed without mens rea and mala fide intention. The Tribunal considered the arguments from both sides and found in favor of the Appellant, allowing their appeal and rejecting the department's appeal.

Conclusion:
The Tribunal found that the department's allegations were based on presumption without substantial evidence. The Appellant's practice of procuring 'pure lead ingot' from outside sources when needed was deemed normal trade practice. The Tribunal noted the lack of material evidence to support the department's claims of excess credit availment or rule contravention. Ultimately, the appeal filed by the Appellant was allowed, and the appeal filed by the department was rejected.