2008 (6) TMI 153 - AT - Central Excise

Tribunal overturns penalties and duty demands, finding appellant received and used 'Ketonic Resin' in factory.

The Tribunal concluded that the appellant had received and used 'Ketonic Resin' in their factory for manufacturing dispersion dyes. The findings of ... Non-use of inputs – reversal of credit - appellants have clearly established that they were receiving input “Ketonic Resin UK 100” in the factory premises and were consuming the same for the manufacture of ‘disperse dyes’ – stock inventory is clear evidence of receipt and use of “Resin” - order-in-original confirming the reversal of the modvat credit for non-receipt of the input “Ketonic Resin UK 100” is liable to be set aside - consequent penalties are also liable to be set aside Issues Involved:1. Whether the input 'Ketonic Resin' can be used in the manufacture of dispersion dyes.2. Whether the appellant availed credit on the 'Ketonic Resin' consignments which were not actually received in the factory.Issue-Wise Detailed Analysis:1. Use of 'Ketonic Resin' in the Manufacture of Dispersion Dyes:The Commissioner (Appeals) concluded that 'Ketonic Resin' can indeed be used by the appellant in the factory for the manufacture of dispersion dyes. This finding was not challenged by the Revenue, thereby attaining finality. The Tribunal confirmed that the appellants could use 'Ketonic Resin' in the manufacturing of dispersion dyes.2. Availment of Credit on Non-Received Consignments of 'Ketonic Resin':The adjudicating authority and the Commissioner (Appeals) found that the appellant had availed credit on consignments of 'Ketonic Resin' which were not received in the factory. The Tribunal was directed to look into the affidavits of various individuals and provide a fresh finding.The Commissioner (Appeals) noted discrepancies such as vehicle numbers on invoices differing from those in the gate register, and an instance where an invoice was found in the factory but the material was not in stock. The affidavit from the supplier did not confirm the actual receipt of the material in the appellant's factory, and the affidavits from other individuals only made general statements about the use of 'Ketonic Resin' without addressing specific discrepancies.The Tribunal reviewed the records and found that the quantity of 'Ketonic Resin' covered under the disputed invoice was indeed received by the appellant company and recorded in the RG 23 Part I & II. The statements and affidavits from the store in charge and the driver of the vehicle corroborated this. The affidavit from the supplier, M/s. Arihant Chemicals, detailed invoice-wise supplies and payments received, supporting the appellant's claim of receiving the input.The Tribunal also considered the Kardex records, which were seized by the authorities and indicated the receipt and use of 'Ketonic Resin' for manufacturing final products. The statutory auditors' inventory records further supported the appellant's claim of having physical stock of 'Ketonic Resin.'The Tribunal concluded that the appellant company had received the input 'Ketonic Resin' in their factory and used it for manufacturing dispersion dyes. Consequently, the demand for duty/reversal of credit and the penalties were set aside.Conclusion:The Tribunal found that the appellant had established the receipt and use of 'Ketonic Resin' in their factory, making the findings of the Commissioner (Appeals) regarding non-receipt and consequent penalties unsustainable. The appeals were allowed, and the demand for duty/reversal of credit and penalties were set aside.