2018 (9) TMI 1194 - AT - Central Excise

Tribunal overturns demand & penalty, emphasizing need for thorough investigation & substantiated allegations in Cenvat credit cases.

M/s Spacechem Enterprises Versus Commissioner of Central Excise & S.T., Ghaziabad

M/s Spacechem Enterprises Versus Commissioner of Central Excise & S.T., Ghaziabad - TMI Issues:- Appeal against Order-in-Appeal No. 101-CE/GZB/2012 dated 18/05/2012- Shortage of stock leading to demand of Cenvat credit- Challenge of Order-in-Original dated 15.03.2010- Confirmation of demand and penalty under Section 11AC of the Central Excise Act, 1944Analysis:The appeal in question arose from the Order-in-Appeal No. 101-CE/GZB/2012 dated 18/05/2012 issued by the Commissioner of Customs, Central Excise & Service Tax (Appeals), Ghaziabad. The case involved the appellants, who were manufacturers of Machines and Parts thereof under Chapter 84 & 73 of the First Schedule to the Central Excise Tariff Act, 1985, and were availing the facility of Cenvat credit. The central issue revolved around a visit by Central Excise Officers to the appellant's factory premises on 18.09.2008, where a shortage of finished goods was noted, leading to suspicion regarding the Cenvat credit availed on certain raw materials such as Shape & Section, M.S. Pipe, H.R. Plate, and Sheet. This suspicion resulted in a show cause notice dated 21.08.2009, culminating in an Order-in-Original dated 15.03.2010, which was challenged before the Commissioner (Appeals) and subsequently brought before the Tribunal.During the proceedings, the appellant argued that the information collected by the revenue initially was not in the required form, leading to discrepancies in the consideration of Cenvated inputs issued for manufacturing. The appellant contended that the authorities did not adequately consider the flow of Cenvated inputs and failed to investigate the removal of inputs clandestinely, especially since Central Excise duty was paid on the final products. The Tribunal, upon reviewing the contentions and records, found that there was a lack of investigation into which inputs were used by the appellant for manufacturing in case Cenvated inputs were removed improperly. Additionally, the Tribunal noted the absence of inquiries into the clearance of the inputs and the financial transactions related to the alleged shortage. Consequently, the Tribunal concluded that the grounds on which the show cause notice was issued were insufficient to sustain charges against the appellant.In light of the above analysis, the Tribunal set aside the impugned order and allowed the appeal, thereby ruling in favor of the appellant. The decision highlighted the importance of thorough investigations and the need for sufficient evidence to support allegations in cases involving demands of Cenvat credit and shortages of stock.