2024 (11) TMI 989 - AT - Central Excise

CENVAT Credit on the invoices issued by M/s. Rashmi Metaliks Ltd. and M/s. Neo Metaliks Ltd. - Evasion of Central Excise duty by way of willful suppression of material facts and intentional misuse of CENVAT Credit facility by adopting the modus operandi of non-receipt of their primary raw materials, namely Pig Iron in their factory and non- use of the same in the manufacture of final products - Levy of penalty - HELD THAT - The whole of the case has been made out on the basis of the statement of appellant No.1 who stated that he is dealing with excise and VAT paid goods and not registered with the central excise department and clearing goods on their challans and no cenvat credit has been availed by the receiver of the goods as no excise paid challan or invoice has been issued by appellant No.1. During the course of investigation, statement of the Authorized Representative of the appellant No.3 was recorded and nowhere he has admitted that they are having any relation or have ever transacted with appellant No.1 and the goods which have been received by them have been used in manufacturing of their final product, which ultimately suffered duty. These facts are not in dispute. In the absence of all the evidences it cannot be said that appellant No.3 has not received the goods. Moreover, the case against the appellant No.2 and 3 has been made on the basis of statement of appellant No.1. Demand cannot be raised on the basis of third party statement without any corroborative evidence thereon. The cenvat credit in this case cannot be denied to the appellant No.3, therefore, no penalty can be imposed on the appellant No.2. Consequent to that, penalty on the appellant No.1 also cannot be imposed. The impugned order is set aside - appeal allowed.

Summary

Issues Involved:

1. Entitlement of appellant No.3 to CENVAT credit based on invoices from M/s. Rashmi Metaliks Ltd. and M/s. Neo Metaliks Ltd.
2. Legitimacy of penalties imposed on appellant No.1, 2, and 3 under relevant Central Excise and CENVAT Credit Rules.

Issue-wise Detailed Analysis:

1. Entitlement to CENVAT Credit:

The central issue in this case was whether appellant No.3 was entitled to avail CENVAT credit on the invoices issued by M/s. Rashmi Metaliks Ltd. and M/s. Neo Metaliks Ltd. The Revenue's case was based on the recovery of notebooks from appellant No.1, which allegedly showed that goods were received by appellant No.1 on behalf of appellant No.2 and 3 and were diverted using other transporters. The appellants argued that appellant No.3 received and used the goods in manufacturing their final products, which were duly taxed. The Revenue failed to provide evidence that the goods were not present in appellant No.3's stock or used in manufacturing. The adjudicating authority concluded that without corroborative evidence, CENVAT credit could not be denied to appellant No.3.

2. Legitimacy of Penalties:

The penalties imposed on the appellants were based on the alleged wrongful availment of CENVAT credit. For appellant No.1, the penalty was proposed under Rule 26 of the Central Excise Rules, 2002, read with Rule 15 of the CENVAT Credit Rules, 2004, for his role in the alleged diversion of goods. Appellant No.2 faced penalties under the same rules for purportedly being aware of and consenting to the wrongful practices. The appellants contended that the penalties were unjustified as the goods were not liable for confiscation, and there was no evidence of dealing with non-receipt goods. The adjudicating authority found that the penalties could not be sustained in the absence of evidence proving non-receipt of goods or fraudulent transactions.

Conclusion:

The adjudicating authority set aside the impugned order, allowing all appeals with consequential relief. The decision emphasized the lack of corroborative evidence from the Revenue to support the allegations of non-receipt of goods and wrongful availment of CENVAT credit. Consequently, the penalties imposed on the appellants were also deemed unsustainable.