Tribunal When Already Decided In Applicant Favour, Denial Of Cenvat Credit & Imposition Of Penalty Cannot Sustain

These two appeals have been filed assailing the order-in-original dated 26.09.2013 passed by the Commissioner of Central Excise, Delhi – II1. The operative part of the impugned order is as follows :-

“1. I disallow the Cenvat credit amounting to Rs. 57,48,536/- (Rupees Fifty Seven Lacs Forty Eight Thousand Five Hundred and Thirty Six only) availed and utilized by M/s KEI Industries Limited during the period April, 2005 to March, 2006 and order for the recovery of the said amount from M/s KEI Industries Ltd. under Rule 14 of the Cenvat Credit Rules, 2004 readwith proviso to Section 11A (1) of the Central Excise Act, 1994 ;

2. I order to recover the interest from M/s KEI Industries Limited under Rule 14 of the Cenvat Credit Rules, 204 readwith Section 11AB and Section 11AA of the Act ibid;

3. I impose penalty amounting to Rs. 57,48,536/- (Rupees Fifty Seven Lacs Forty Eight Thousand Five Hundred and Thirty Six only) under Rule 15 (2) of the Cenvat Credit Rules, 2004 readwith Section 11AC of the Act and order to recover the same from M/s KEI Industries Limited ;

4. I impose personal penalty of Rs. 5,00,000/- (Rupees Five Lakhs only) on Shri Anil Gupta, Chairman-cum-Managing Director of M/s KEI Industries Ltd.”

2. Appeal No. E/50149 of 2014 is filed by M/s KEI Industries, while Appeal No. 50150 of 2014 is filed by Shri Anil Gupta, the Director of M/s KEI Industries2.

3. The facts of the case, in brief, are that the assessee is engaged in manufacture of electric wires and cables and winding wires of copper falling under Chapter 8544 of Central Excise Tariff Act, 1985 and is registered with the Central Excise Department. It avails the benefit of Cenvat credit under Cenvat Credit Rules, 2004. The assessee purchased copper ingots during the period 2005-2006 from M/s V.K. Metal Works3, Jammu and sent them directly to its job workers for converting them into copper wire rods. It received and used the wire rods to manufacture electric wires and cables. The assessee availed Cenvat credit on the invoices issued by VKM after following the proper procedures.

4. The officers of Directorate General of Central Excise Intelligence4 visited the factory of VKM on 29.11.2006, collected information, investigated and came to the conclusion that VKM had issued invoices without receiving any raw material and without manufacturing and supplying copper ingots. Based on this investigation, a show cause notice dated 05.01.2010 was issued to VKM demanding central excise duty of Rs. 42,37,24,491/-. Show cause notices were also issued to various buyers of VKM including the assessee herein seeking to deny Cenvat credit on the strength of the invoices issued by VKM on the ground that since VKM had not manufactured any ingots, it could not have supplied them to its buyers and only invoices were issued without supplying any ingots. The orders passed by the Commissioner deciding many such show cause notices were appealed against and disposed of by this Tribunal by Final order No. A/51982-51997 of 2018 – EX (DB) dated 23.05.2018. It was held that the allegation that VKM had not manufactured and supplied copper ingots and only issued invoices was not correct. Consequently, the demand against VKM was set aside as also the orders seeking to deny Cenvat credit to the buyers of VKM. Paragraph 6 of this order is as follows :-

“6. We have considered the submissions of all the appellants who are recipients of copper ingots from VKM. While deciding the first batch of appeals which relate to VKM and others, we have already held that VKM had duly manufactured copper ingots from copper scrap and cleared the same from their unit on appropriate payment of Central Excise duty. There is ample evidence on record that all the recipients of copper ingots had duly received the same in their respective units and utilized the same in the manufacture of finished goods which these units cleared on payment of appropriate Central Excise duty. There is neither any allegation nor findings that the manufacturers in question had procured the copper ingots which they utilized as raw material from any other alternative source. We therefore hold that all the appellants had correctly availed utilized Cenvat credit on copper ingots which they had received from VKM. Consequently, neither the Cenvat credit can be disallowed or denied nor any penalty can be imposed on the appellants”.

5. The basis of the allegations in the show cause notice in this case and denial of Cenvat credit by the impugned order and imposition of penalties is also on the ground that M/s VKM had not manufactured any copper ingots and had only issued invoices to the appellant. This Tribunal had already decided, by a detailed order dated 23.05.2018, that this allegation is not true and VKM had manufactured copper ingots. Therefore, no basis remains for denial of Cenvat credit to the appellant/assessee herein. Consequently, the imposition of penalty upon the assessee and Shri Anil Gupta, Director of the assessee also cannot sustain.

6. In view of the above, we find that the impugned order dated 26.09.2013 cannot be sustained. The impugned order is, accordingly set aside and both appeals are allowed with consequential relief to the appellants, if any.

(Order pronounced in open court on 22/04/2022.)

Notes :-

1 impugned order

2 assessee

3 VKM

4 DGCEI