2010 (11) TMI 819 - AT - Central Excise

Tribunal allows appeal, recognizes good faith in claiming credit, emphasizes supplier responsibility.

The tribunal allowed the appeal, setting aside the lower authorities' decision to deny Cenvat credit on inputs, interest, and penalty. Despite the ... Cenvat credit denied - appellants has not received the inputs against the duty paying document - inputs which were received by the appellant are not those inputs which are mentioned in the invoice - Demand, interest and penalty - Held that:- Allegation can be verified only by inspection of the input in the factory of the appellants only, which could not be done in this case as the inputs have already gone in the process of manufacturing. Being a prudent buyer the appellant has taken the credit on a duty paying document which is not in dispute and same has been cleared after processing by paying duty on the same at the time of clearance. In that situation, if there is an allegation that the appellant has taken the credit at bona fide belief same is to be dealt with in accordance with the C.B.E. & C. Circular No. 766/82/2003-CX., dated 15-12-2003 wherein it has been clarified that if any action is to be taken; that is to be taken against the supplier of the goods. On the identical facts, this Tribunal has already held that demand is not sustainable in the appellant’s own case vide order dt. 11-10-2007, which has been accepted by the department, appellant has taken the credit on the duty paid invoice in accordance with the law. In the facts and circumstances of the case, the demand, interest and penalty are not sustainable. Accordingly impugned order is set aside and the appeal is allowed. Issues:Denial of Cenvat credit on inputs along with interest and penalty.Analysis:The appellant filed an appeal against the denial of Cenvat credit on inputs, interest, and penalty. The case involved a show cause notice alleging fraudulent availment of Cenvat Credit on Hot Rolled Trimming (HRT) without physically receiving and using them for final products, leading to evasion of Central Excise Duty. The lower authorities confirmed the demand along with interest and penalty, prompting the appeal.The appellant's advocate argued that the inputs were procured against duty paid invoices from a second-stage dealer, cleared after processing, and there was no evidence of non-receipt of goods at the factory. The advocate emphasized that quality tests were conducted before processing, and previous tribunal decisions supported the appellant's position. Referring to relevant case law and CBEC Circulars, the advocate contended that the demand was baseless and unsustainable.On the contrary, the Departmental Representative (DR) asserted that the appellant had availed credit without receiving the goods, as confirmed by the chain of supply from the manufacturer to the second-stage dealer to the appellant. The DR argued that since the appellant did not physically receive the specified inputs, the demand was justified and sustainable.Upon examination, the tribunal found that while it was undisputed that the appellant did not receive the specified inputs physically, the appellant acted in good faith by taking credit against duty paying documents, which were cleared after processing by paying duty. Citing judicial precedents and CBEC Circulars, the tribunal concluded that any action should be taken against the supplier in such cases, and the demand, interest, and penalty were not sustainable. Consequently, the impugned order was set aside, and the appeal was allowed.In conclusion, the tribunal's decision favored the appellant, emphasizing the importance of bona fide transactions and adherence to legal provisions in availing Cenvat credit on inputs. The judgment highlighted the need for proper verification and legal recourse against suppliers in cases of disputed credit availment, ultimately leading to the allowance of the appeal.