2017 (12) TMI 1375 - AT - Central Excise

Tribunal overturns penalties due to lack of evidence, validates cenvat credit despite administrative errors.

Deccan Alloys Pvt. Ltd., Bhuwalka Alloys Pvt. Ltd., Shanthi Alloys Pvt. Ltd. Versus Commissioner of Central Excise, Chennai-III

Deccan Alloys Pvt. Ltd., Bhuwalka Alloys Pvt. Ltd., Shanthi Alloys Pvt. Ltd. Versus Commissioner of Central Excise, Chennai-III - TMI Issues Involved:1. Validity of cenvat credit availed by DAPL based on invoices issued by SAPL from a non-existent address.2. Alleged fraudulent intention to pass on cenvat credit without actual movement of goods.3. Time-barred nature of the demand.4. Imposition of penalties under Section 11AC and Rule 13 of CER 2002 / Rule 15 of CCR 2004.Issue-wise Detailed Analysis:1. Validity of cenvat credit availed by DAPL based on invoices issued by SAPL from a non-existent address:The department alleged that SAPL issued invoices from a non-existent depot address to enable DAPL to avail cenvat credit without actual movement of goods. However, it was established that SAPL had shifted its depot to a new address and continued issuing invoices with the old address due to an administrative oversight. The Tribunal noted that DAPL had recorded the receipt of MS ingots in their books and inventory records, and no shortage of inputs was found during the department's visit. The Tribunal emphasized that the absence of a depot address alone does not invalidate the cenvat credit if the goods were indeed received and used in manufacturing.2. Alleged fraudulent intention to pass on cenvat credit without actual movement of goods:The Tribunal observed that the department did not provide sufficient evidence to prove that the MS ingots were not transported to DAPL. The investigation did not establish any alternate source of raw materials for DAPL, nor did it find any discrepancies in DAPL's stock records. The Tribunal also noted that the clearances of MS ingots by SAPL and the finished goods by DAPL were done on payment of duty. The department's reliance on vehicle numbers and the absence of trip sheets or lorry receipts was deemed insufficient to substantiate the allegations of fraudulent transactions.3. Time-barred nature of the demand:The Tribunal agreed with the appellant's contention that the demand was time-barred. The show cause notice was issued almost three years after the department's visit to DAPL's premises and two years after the conclusion of the investigation. The Tribunal cited several case laws to support the view that the extended period for issuing a show cause notice is not invokable in the absence of specific allegations of fraud, collusion, or suppression of facts with intent to evade duty.4. Imposition of penalties under Section 11AC and Rule 13 of CER 2002 / Rule 15 of CCR 2004:The Tribunal found that the simultaneous imposition of penalties under Section 11AC and Rule 13/15 was not justified. It was noted that the show cause notice did not specify the exact sub-rule under which the penalty was proposed. The Tribunal referenced the Supreme Court's decision in UOI Vs Rajasthan Spinning & Weaving Mills, which held that mandatory penalties are not applicable in every case of non-payment or short-payment of duty unless the conditions specified in Section 11AC are met. Given that the extended period was not invokable, the penalties under Section 11AC and Rule 13/15 were deemed unsustainable.Conclusion:The Tribunal concluded that the department failed to satisfactorily establish the allegations made in the show cause notice. Consequently, the impugned order confirming the demand and imposing penalties was set aside. All appeals were allowed with consequential reliefs as per law.