Commr. of C. Ex. and Cus. vs Panchmukhi Processors P. Ltd.

N.V. Anjaria, J.—The present appeal u/s 35-G of the Central Excise Act, 1944, preferred by the Department is directed against judgment and order dated 11-6-2010 passed by the Customs Excise and Service Tax Appellate Tribunal, West Zonal Bench at Ahmedabad in Central Excise Appeal No. E/1310 of 2009 2010 (258) ELT 152 .

1.1 At the time of admitting the appeal following question of law was formulated for consideration of the court:

Whether in the facts and circumstances of the case the Tribunal has committed substantial error in setting aside penalty imposed upon the respondent under Rule 13 of the Cenvat Credit Rules?

We heard learned senior counsel Mr. R.J. Oza, assisted by Ms. Rujuta Qza, learned advocate for the Department. None appeared for the respondent though as per the office record, the respondent was served with notice of admission on 13-9-2011.

The respondent was engaged in processing of grey fabrics on job charges supplied by different parties-merchants. At the relevant time in April 2002 under the scheme of deemed credit benefit, the respondent availed deemed credit to the tune of Rs. 2,54,189/-. It was on the basis of receipt of grey fabrics purportedly supplied by one M/s. Aanchal Synthetics. The amount of deemed credit was utilized to pay duty on the final goods stated to have been manufactured and exported on behalf of said M/s. Aanchal Synthetics. M/s. Aanchal Synthetics claimed and obtained rebate on eight consignments. Subsequently, it was found that the said merchant had obtained the rebate on the basis of false export documents and as per the investigation, M/s. Aanchal Synthetics had never supplied any grey fabrics and the transactions between the respondent and the said merchant were merely paper transactions without any movement of goods.

2.1 A show cause notice dated 24-4-2007 was issued to the respondent for wrongly availing the cenvat credit as to why the benefit taken should not be disallowed and recovery should not be made under Rule 12 of the Cenvat Credit Rules, 2007 read with the proviso to Section 11A of the Central Excise Act, with interest. The said show cause notice culminated into order of the Assistant Commissioner, Central Excise passed on 28-12-2007 confirming the demand made in the show cause notice.

2.2 The aggrieved assessee preferred an appeal before the Commissioner (Appeals). The Appellate commissioner by order dated 15-2-2009 dismissed the appeal. The contention of the assessee was that the demand was time-barred. One of the issue considered by the Appellate Commissioner was whether the penalty was liable to be imposed. For dismissing the appeal of the assessee, the Appellate Commissioner was of the view that the penalty under Rule 13 of the Cenvat Credit Rules read with 11AC of the Act was illegal inasmuch as the case was of one of fraudulent transactions.

The Tribunal while allowing the appeal of the assessee recorded the following findings:

The whole case of the Revenue is based on the statements of suppliers. Further, in show cause notice it has been staled that summons were issued to five firms which issued Challans and it was found that address found incomplete or addressee not found or in some cases suppliers address was not known. In these circumstances the case of the Revenue is based on non existence of suppliers and the statement of merchant manufacturer. Unlike subsequent period when credit taken was of duty paid, in this case the credit taken was deemed credit and only weaver''s challan was required and goods were cleared without payment of duty. Manufacturer was required to deposit 1/3 of the duty from PLA compulsorily and 2/3rd was deemed credit. The credit was deemed and not linked to payment. Further, it is also to be noted that summons were issued after 3-4 years and from the address it can be seen that some of the trading firms may have left the place. On the other hand it is the appellant''s claim that they have maintained lot register and there was ledger entry and record of payments received from merchant manufacturers by account payee cheques and they have filed returns with the department. The commissioner (Appeals) has observed that the appellant did not maintain production record such as job card etc. but these are not legally required to be maintained. Further, the penalty has been proposed to be imposed under Rule 13 of Central Excise Rules and proposed to be imposed by invoking extended period. Since duty demand itself is set aside in this case and because of insufficient evidence, the penalty cannot be sustained.

It was observed inter alia by the Tribunal that merely because the addresses of the firms which received the challans were incomplete or not found, the inference on the part of the Revenue authorities that they were not in existence was not justified. It was observed that the assessee was maintaining a lot register and the entries were on record indicating the payments received from the merchant-manufacturers.

4.1 Those entries were acceptable and not required to be doubted as the payment was by account payee cheques. Those merchants were found to have filed return of income also. The Commissioner (Appeals) could not have held against the assessee citing a ground only that the assessee had not maintained production record in particular form.

4.2 Whether the challans were of non-existent firms or not was a question which was to be determined on the basis of material in that regard. The Tribunal has on consideration of relevant material and by drawing conclusions therefrom held against the Revenue. They are the findings based on appreciation of facts and material. We are in agreement with the findings recorded by the Tribunal.

In the aforesaid view, the findings being factual and the Tribunal being a final fact finding authority, no substantial questions of law arises for consideration and the order is not liable to be interfered with. The appeal is devoid of merit. Accordingly, the Appeal is dismissed.