2008 (6) TMI 149 - AT - Central Excise

Discrepancy in Cenvat credit issuance resolved in favor of companies and directors

MANAKSIA LTD. Versus COMMISSIONER OF CENTRAL EXCISE, RAJKOT

The tribunal found that the invoice issued by ITPL for Cenvat credit claimed by M/s. Manaksia Ltd. did not correspond to goods manufactured by ITPL, ... Documents for availing credit – Revenue contend that ITPL(supplier) have not manufactured the goods covered by the invoice but only issued the invoices and the goods received by M/s Manaksia(appellant) were manufactured elsewhere - Appellant’s submission that they had placed orders with ITPL: received the duty paid goods along with the invoice; took the credit as indicated in the invoice and there was no irregularity in their taking the credit, is acceptable – credit cannot be denied Issues Involved:1. Eligibility of ITPL for area-specific exemption.2. Validity of the invoice issued by ITPL for taking Cenvat credit by M/s. Manaksia Ltd.3. Whether the goods mentioned in the invoice were manufactured by ITPL.4. Imposition of penalties on M/s. Manaksia Ltd., ITPL, and their respective directors.Issue-wise Detailed Analysis:1. Eligibility of ITPL for Area-Specific Exemption:This issue was not under consideration in the present appeals. The tribunal clarified that the eligibility of ITPL for area-specific exemption is not before them.2. Validity of the Invoice Issued by ITPL for Taking Cenvat Credit by M/s. Manaksia Ltd.:The core issue was whether the duty paid by ITPL on the goods claimed to have been supplied to M/s. Manaksia Ltd. is available as Cenvat credit to the latter. It was undisputed that ITPL issued the invoice and paid the duty as mentioned. However, the tribunal noted that ITPL cannot issue an excise invoice for goods manufactured elsewhere. The legal provisions under Rule 9 of the Cenvat Credit Rules 2004 and Rule 11 of the Central Excise Rules were examined. The tribunal found that the invoice did not correspond to the goods received, which were manufactured elsewhere, not by ITPL. The tribunal emphasized that the goods procured from the market and supplied with a manufacturer's invoice cannot be eligible for Cenvat credit, as this may lead to frauds.3. Whether the Goods Mentioned in the Invoice Were Manufactured by ITPL:The tribunal found substantial evidence indicating that the goods were not manufactured by ITPL. This included an email revealing the alternator was manufactured in Delhi and statements from ITPL's directors and managers admitting the alternators were not manufactured by ITPL. The tribunal concluded that the claim of ITPL manufacturing the goods was not acceptable, and the invoice was tainted by deception.4. Imposition of Penalties on M/s. Manaksia Ltd., ITPL, and Their Respective Directors:The tribunal upheld the disallowance and recovery of Cenvat credit of Rs. 88 lakhs, the demand of interest, and the penalty of Rs. 88 lakhs on M/s. Manaksia Ltd. However, the redemption fine on the confiscated goods was reduced from Rs. 2 crores to Rs. 20 lakhs. The penalty of Rs. 10 lakhs on ITPL was upheld, but penalties on Shri Rajib Lalwani and Shri Kiran Bhagwat were set aside.Separate Judgment by Member (Judicial):Member (Judicial) disagreed with the findings of Member (Technical), holding that as long as ITPL paid the duty and M/s. Manaksia Ltd. received the goods and paid the consideration, the credit could not be denied. The Member (Judicial) emphasized that the issue of ITPL's eligibility for area-specific exemption was not before them and that the duty paid goods having been received by M/s. Manaksia Ltd. entitled them to credit. This view was supported by previous tribunal decisions and the principle that the receiver of goods cannot be denied credit if the manufacturer has paid the duty.Resolution of Difference of Opinion by Third Member:The Third Member (Judicial) resolved the difference by agreeing with the Member (Judicial), holding that the appellant company is eligible for the benefit of Cenvat credit as long as the duty liability on the alternator has been discharged by the supplier. The Third Member emphasized that the transaction of sale and purchase was not in doubt, and the appellant company had paid for the goods purchased.Final Order:In view of the majority decision, the impugned order was set aside, and all the appeals were allowed with consequential relief to the appellants.