2023 (9) TMI 409 - AT - Central Excise

Manufacturer wins Cenvat Credit case against Indian Railways before Appellate Tribunal

M/s. Techma Engineering Enterprise Versus Commissioner of Central Excise, Haldia

M/s. Techma Engineering Enterprise Versus Commissioner of Central Excise, Haldia - TMI ISSUES PRESENTED AND CONSIDERED 1. Whether the steel items (MS plates, MS bars, etc.) used in manufacturing finished goods qualify as inputs for the purpose of Cenvat credit. 2. Whether the adjudicating authority erred in rejecting or ignoring the appellant's documentary evidence (including a Chartered Engineer's certificate and flow chart) and thereby rendered a non-speaking order. 3. Whether the show cause notice and confirmed demand for Cenvat credit, issued more than three years after credit was taken, is barred by limitation or defeated by absence of suppression with intent to evade duty. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Qualification of steel items as inputs for Cenvat credit Legal framework: Cenvat credit is admissible where goods are used as inputs in the manufacture of dutiable finished goods; the recording and accounting of receipt and use of such goods are relevant to entitlement. Precedent Treatment: The judgment relies upon a High Court pronouncement (as quoted in the record) that a professional certificate (from an authorised accountant/engineer) establishes prima facie use, and that revenue must request further material if in doubt. Interpretation and reasoning: The Tribunal found admitted facts that the goods were received, accounted for in books, and paid for through banking channels. The appellant produced a Chartered Engineer's certificate with a manufacturing flow chart demonstrating points of incorporation of the steel items into the finished products. The department did not dispute actual receipt or accountal nor produce evidence showing the goods could not be used as inputs. Given these uncontroverted facts and the professional certificate explaining usage, the materials qualify as inputs for Cenvat credit unless convincingly rebutted. Ratio vs. Obiter: Ratio - where receipt, accounting, and professional certification demonstrate use of materials in manufacture, the entitlement to Cenvat credit cannot be denied without credible rebuttal or further investigation. Obiter - none significant on this point beyond the application to the facts. Conclusion: The steel items were properly inputs for manufacture and eligible for Cenvat credit; the demand on merits is not sustainable. Issue 2 - Adequacy of adjudicating authority's consideration of documentary evidence Legal framework: Administrative orders must be speaking, address relevant evidence, and, when a claimant produces a certificate from a qualified professional, the authority must either accept it or rebut it with specific findings or require further proof. Precedent Treatment: The Tribunal applies the principle from the High Court authority quoted in the record that certificates from qualified professionals ordinarily suffice unless revenue raises specific doubts and seeks further documents or verification. Interpretation and reasoning: The adjudicating authority did not undertake any verification (such as a factory inspection), did not specify reasons for rejecting the Chartered Engineer's certificate or the flow chart, and failed to articulate why the documentary proofs did not establish use as inputs. The authority's failure to confront or rebut the evidence or to seek further verification renders the order non-speaking and legally inadequate. Ratio vs. Obiter: Ratio - an authority must either accept a professional certificate or provide reasoned rebuttal/seek further verification; failing to do so makes the order non-speaking and unsustainable. Obiter - emphasis that production of invoices, accounting entries and flow charts collectively strengthen prima facie case. Conclusion: The adjudicating authority erred in not considering or rebutting the documentary evidence; its order is non-speaking and cannot sustain the confirmed demand. Issue 3 - Limitation and absence of suppression with intent to evade duty Legal framework: Limitation bars recovery where statutory time limits are not met; prosecution of Cenvat denial on the basis of suppression requires evidence of concealment or intent to evade duty. Regular disclosure in statutory returns and maintenance of records militates against an allegation of suppression. Precedent Treatment: The Tribunal applies the principle that where Cenvat credit details are regularly disclosed in returns (ER-1) and there is no allegation of non-filing or concealment, revenue must justify delay or suppression; mere passage of time without explanation can render proceedings time-barred. Interpretation and reasoning: The appellant had regularly filed ER-1 returns showing Cenvat taken; there was no allegation or evidence of failure to file returns or of concealment of credits. The show cause notice was issued more than three years after the Cenvat credit was taken. In the absence of any claim of suppression with intent to evade duty or of failure to disclose in statutory returns, the Tribunal concluded the demand could not be sustained on limitation grounds. Ratio vs. Obiter: Ratio - where credits are regularly disclosed in statutory returns and there is no allegation/evidence of suppression, revenue cannot rely on delayed proceedings to sustain a demand; such demands are liable to be set aside on limitation grounds. Obiter - none material beyond application to these facts. Conclusion: The demand is time-barred and unsustainable in light of regular ER-1 disclosure and absence of suppression; appeal allowed on limitation grounds as well. Cross-references and Overall Disposition 1. Issues 1 and 2 are interrelated: the entitlement to credit (Issue 1) depended on acceptance or proper rebuttal of the Chartered Engineer's certificate and accompanying documentary evidence (Issue 2); the Tribunal found both entitlement and failure of the authority to properly consider evidence. 2. Issue 3 provides an independent ground for allowing the appeal: regardless of the merits, regular disclosure in ER-1 returns and absence of suppression rendered the proceedings time-barred. Final Conclusion: The Tribunal allowed the appeal on merits for lack of proper rebuttal of documentary evidence and on the separate ground of limitation/absence of suppression, setting aside the confirmed demand. (Operative part pronounced in open Court.)