2016 (6) TMI 545 - AT - Central Excise

Tribunal emphasizes clarity and verification in Cenvat credit cases, overturns order.

M/s Electronic Components & Tuners Versus CCE, Delhi - II

The Tribunal set aside the impugned order denying Cenvat credit on nylon granules sent for job work due to lack of clarity and proper records. The lower ... Cenvat Credit - sending inputs for job work - availing Cenvat credit on nylon granules which are inputs for manufacture of bobbins - whether the goods sent to the job worker had been returned after process. The same could have been cross verified for a finding on fact with production records etc. Held that:- Appellant in the first round of litigation itself, submitted the full production details of bobbins and their further use in their manufacture. Originally, the recovery of Cenvat credit was mainly sought to be made on the ground of not following proper procedure for sending the goods for process by job workers. This issue has already been discussed and requires no further reiteration that there is no general rule about the point whether procedural lapse, if any, could contribute to denial of a substantial benefit. In the present case when the matter was remanded for a third time adjudication, it is expected on the part of the Original Authority to conduct a cross verification of other material evidence like usage of bobbins by the appellant, documents, if any, available at the job workers side to corroborate the job work and return of goods etc. A one line finding to the effect that party failed to produce record hence he is denying Cenvat credit is not legally sustainable. All the records available in the factory premises have been resumed by the visiting officers. Further, it is the Department which is making allegation of non-receipt of job worked goods back to the appellant, necessarily certain more verification is required to support such assertion. As the lower Authorities did not adhere to the remand direction by the Tribunal to the full extent which is basically to find out the correct facts of the case. Any further remand will not serve any purpose. As such the original order as upheld by the impugned order is not sustainable. Therefore, the impugned order is set aside. - Decided in favour of appellant Issues:- Denial of Cenvat credit on nylon granules sent for job work- Failure to maintain proper records- Imposition of penaltyAnalysis:1. Denial of Cenvat credit on nylon granules sent for job work:The case involved the appellant, engaged in manufacturing SMPS Transformers, availing Cenvat credit on nylon granules sent for job work to make bobbins. The Department alleged non-receipt of the granules back and lack of proper records, leading to proceedings and imposition of penalties. The Tribunal's latest remand directed the Original Authority to clarify if the granules were accounted for and received back after job work. The Tribunal noted the lack of clarity in lower authorities' orders regarding these crucial points.2. Failure to maintain proper records:The appellant maintained RG-23 Part-I and Part-II accounts but faced allegations of not following proper procedures for sending granules to job workers. The lower authorities failed to address whether the granules were sent under job work challans and received back by the appellant. The Tribunal emphasized the need for cross-verification of records to ascertain the return of processed goods. The Original Authority's repeated failure to follow remand directions and lack of thorough verification were highlighted.3. Imposition of penalty:Despite multiple rounds of litigation and remands, the lower authorities did not provide a clear finding on whether the granules were returned after job work. The Tribunal emphasized the need for a case-specific examination based on available evidence. The lack of substantial evidence supporting the Department's claim of non-receipt of processed goods back to the appellant raised doubts about the imposition of penalties. The Tribunal concluded that the impugned order was unsustainable due to inadequate analysis and set it aside, allowing the appeal.In conclusion, the judgment highlighted the importance of thorough verification, adherence to remand directions, and case-specific assessments in matters of Cenvat credit denial and penalty imposition. The failure to provide clear findings and lack of substantial evidence led to the setting aside of the impugned order and the allowance of the appeal.