Tribunal rejects cenvat credit demand on grey fabrics, emphasizes no double levy, penalty dismissed due to lack of evidence.

The tribunal set aside the demand for deemed cenvat credit on grey fabrics not supplied by merchant manufacturers, emphasizing the prohibition against double levy of excise duty on the same goods. Additionally, the imposition of a penalty for availing cenvat credit without receiving goods was rejected due to insufficient evidence, leading to the allowance of the appeal.

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Issues:
1. Recovery of deemed cenvat credit on grey fabrics not supplied by merchant manufacturers.
2. Imposition of penalty for availing cenvat credit without receiving goods.

Analysis:

Issue 1 - Recovery of deemed cenvat credit:
The case involved a demand for duty of Rs. 2,54,189/- and an imposed penalty equal to the duty amount due to the appellants availing deemed cenvat credit on grey fabrics not supplied by merchant manufacturers. The appellant argued that recovery of the same amount from them would result in double levy of excise duty on the same goods, as the full amount had already been recovered from M/s. Anchal Synthetics. The tribunal agreed that excise duty cannot be recovered twice on the same goods, emphasizing that denial of cenvat credit must consider all aspects. The appellant had reversed the deemed credit and paid half from PLA, which was deemed credit sanctioned as rebate and recovered from M/s. Anchal. The tribunal highlighted that the credit availed was on a deemed basis without the requirement of payment of duty by the supplier, making the recovery from the appellant unjustifiable. It was concluded that the demand for cenvat credit could not be sustained and was set aside.

Issue 2 - Imposition of penalty for availing cenvat credit without receiving goods:
The Revenue argued for the imposition of a penalty, stating that the appellant violated Central Excise law by availing cenvat credit without receiving goods, based on statements of suppliers. The case revolved around incomplete supplier addresses and non-existence of some suppliers, with the Revenue relying on merchant manufacturer statements. However, the appellant maintained records of payments received from merchant manufacturers and filed returns with the department. The Commissioner (Appeals) noted the absence of specific production records but clarified that these were not legally required. The penalty was proposed under Rule 13 of Central Excise Rules, invoking an extended period. Since the duty demand was set aside due to insufficient evidence, the tribunal ruled that the penalty could not be sustained, ultimately allowing the appeal.

In summary, the tribunal set aside the demand for deemed cenvat credit on grey fabrics not supplied by merchant manufacturers, emphasizing the prohibition against double levy of excise duty on the same goods. Additionally, the imposition of a penalty for availing cenvat credit without receiving goods was rejected due to insufficient evidence, leading to the allowance of the appeal.

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