Commissioner, Central Excise vs Pee Jay International Limited

Ashutosh Mohunta, J.—The present Appeal is filed by Revenue challenging the Order dated 01.03.2005 (Annexure A-2) passed by Customs, Excise and Service Tax Appellate Tribunal, New Delhi (hereinafter referred to as �the Tribunal�) whereby the Tribunal has allowed Appeal of the respondent-assessee. The Revenue has raised following questions of Law:

a) Whether the findings of the CESTAT by negation of the confessional statement tendered before a Central Excise Officer u/s 14 of the Central Excise Act, 1944 by relying only on the unstated version, cannot be considered as perverse because the allegation to the extent of wrong availment of Modvat credit of Rs. 44,09,220/- out of the alleged wrong availment of Rs.4,08,71,796/- has been upheld in the Order-in-Original on the basis of proper and legal appreciation of the fact on record and on the stated version of said confessional statements not given under duress/coercion and never retracted?

b) Whether credit on inputs is admissible to a manufacturer when the supplier of inputs admitted that the inputs consigned to the manufacturer were not delivered at the factory premises of the said manufacturer but delivered to various dealers and the said dealers failed to prove that the said inputs were ultimately delivered to the said manufacturer?

The Respondent is engaged in the manufacture of Woolen Yarn, Acrylic Yarn and Woolen Blended Yarn falling under Chapter Heading 51 of the Central Excise Tariff Act as well as man-made Yarn falling under Chapter Heading 55 of the Central Excise Tariff Act. The assessee manufactured blended Woolen Yarn by using Polyester, Polyester Filament Yarn as input and it was purchased from different manufacturers and dealers.

The Revenue issued a Show Cause Notice alleging that during January� 1997 to March� 2000, the Respondent did not actually receive and utilize Polyester Filament Yarn whereas credit was availed. The Adjudicating Authority, i.e. the Commissioner of Central Excise, Ludhiana disallowed credit of Rs. 44,09,228/- and imposed equal amount of penalty under Rule 57(i) read with Rule 173Q of the Rules.

The Commissioner denied the Modvat credit on the ground that buyers to whom, blended yarn was supplied have denied receipt of the blended yarn.

The a Assessee preferred an Appeal before the Tribunal impugning the Order passed by Adjudicating Authority. The Tribunal allowed Appeal of the assessee holding that the documentary evidences as well as other evidences prove receipt of the material. So demand cannot be confirmed on the basis of statements of certain buyers. The Revenue has preferred present Appeal against this Order.

We have heard learned Counsels for the parties. The Counsel for the Appellant contended that as per statement of General Manager of the Respondent, they have manufactured wool and acrylic blended yarn only. The Counsel also contended that as per test reports, polyester was not found and only wool/acrylic was found. The learned Counsel further contended that buyers in their statements had confirmed that they received yarn not containing polyester.

Per Contra, the Counsel for the respondent-assessee contends that the Order passed by Adjudicating Authority was not passed on any tangible, cogent or documentary evidences and demand cannot be confirmed on the basis of assumption and surmises. He further contended that by allowing substantial amount of Cenvat, the learned Commissioner had admitted the contention of the assessee.

A perusal of the order passed by the Commissioner as well as the Tribunal shows that the respondents had adduced sufficient documentary evidence to prove that they had used Polyester Filament Yarn (PFY) in the manufacture of final product, i.e. wool polyester blended yarn and had availed the credit of duty paid on the PFY. The record of the respondents was checked and verified by the officers of the Department from time to time when they visited the factory premises of the respondents. Requisite entries regarding receipt of the yarn was made in RG 23-A Part 1 Register and the respondents had also filed declaration wherein the final produce was also mentioned. The Department was also informed about the receipt of PFY from the suppliers/agents and the same was used in the manufacture of the final product. The respondents also filed copies of Blend Register alongwith RG 23 Part I Register, which depicted the receipt of PFY and its utilization for the manufacture of the final product. Similarly, declaration under Rule 173-B was also filed showing the use of polyester filament yarn in the manufacture of the final product.

Thus, it is clear that polyester filament yarn was used by the respondents in manufacture of the final product and therefore modvat credit was rightly availed on the same by the assessee. The allegations of the Department that respondents did not use the PFY in their final product and hence are not entitled to the modvat credit is completely falsified from the record. Apart from the above, samples were also drawn of the yarn from the factory premises of the respondents and the test reports are also in their favour and the same have also been accepted by the Commissioner. The Commissioner has admitted that test report No. 9/20 dated 1.2.2000 revealed the presence of PFY. In fact the Commissioner in para 3.2 of the impugned order has observed as under:

That none of the dealers/supplies had specifically admitted tht the PFY of the appellants was diverted in the open market. The investigating officers have searched premises of the various dealers/transporters. No records were recovered indicating diversion of the PFY to the persons, other than the appellants.

In the light of the aforementioned facts, the respondents could not be disallowed modvat credit.

We do not find that any question much less substantial question of law is involved in the present appeal. The dispute raised by Revenue is purely of fact and no substantial question of law is involved. As per Revenue, the assessee has availed credit without actually receiving and utilizing the inputs for final product whereas as per assessee, they had actually received the material and utilized the same in the manufacture of their finished goods. The Revenue is relying upon various statements and samples drawn during the course of search. On analysis of evidence on record, the Tribunal has categorically found that samples and statements of buyers do not prove beyond doubt that material has not been received, rather observations of the learned Commissioner and documentary evidence prove that material was actually utilized by the assessee for manufacturing of final product.

Thus, we find that the findings of fact returned by the Tribunal are neither unreasonable nor perverse, rather the same have been rendered on the basis of documentary evidence. Therefore, we are of the considered opinion that no substantial question of law is involved and appeal is bereft of merits.

Appeal is dismissed