CENVAT credit demand set aside due to natural justice violation and time-barred proceedings on aluminum ingots

CESTAT Ahmedabad allowed the appeal, setting aside the demand for CENVAT credit denial on aluminum ingots. The tribunal held that allegations based solely on transporter statements without cross-examination violated natural justice principles under Section 9D of Central Excise Act, 1944. The Settlement Commission had previously accepted the entire transaction chain from procurement to delivery using the same evidence. The demand was time-barred as the department took five years to issue show cause notice despite having information since October 2008. Redemption fine was unsustainable as no clandestine removal was established and goods were unavailable for confiscation per established precedent.

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Issues Involved:
1. Denial of Cenvat credit on aluminium ingots.
2. Allegation of clandestine removal of inputs.
3. Bar of limitation on demand.
4. Imposition of redemption fine.

Summary:

1. Denial of Cenvat credit on aluminium ingots:
The appellants were denied Cenvat credit on aluminium ingots initially sold by NALCO to Hiren Aluminium and then to the appellants. The department's case was based on statements from transporters, but these transporters were not cross-examined as required u/s 9D of the Central Excise Act, 1944. The Settlement Commission had previously found that the aluminium ingots were procured from NALCO, converted into wire rods, and then into standard wire, which was used to manufacture aluminium conductors cleared on payment of duty. This established the chain of transactions and negated the department's allegations.

2. Allegation of clandestine removal of inputs:
The department alleged that the appellants removed aluminium ingots without payment of duty and without using them in manufacturing. This was based on transporter statements, which were not cross-examined. The Settlement Commission had already concluded that the ingots were used in the manufacturing process, thus the charge of clandestine removal did not hold.

3. Bar of limitation on demand:
The demand pertained to the period February 2008 to March 2008, with the investigation completed by October 2008. However, the show cause notice was issued on 06.03.2013, almost five years later. Given that all relevant information was available to the department in 2008, the delay rendered the demand time-barred.

4. Imposition of redemption fine:
The Tribunal held that since the appellants did not clandestinely remove aluminium ingots, no confiscation could be made, and consequently, no redemption fine could be imposed. Additionally, the goods were not available for confiscation, aligning with the legal position that redemption fine cannot be imposed if goods are unavailable.

Conclusion:
The impugned order was set aside, and the appeals were allowed with consequential relief in accordance with the law.

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