ORDER
M.V. Ravindran, Member (J)
1. This stay application is directed against the confirmation of demand of Rs. 80,28,546/- and equivalent amount of penalty. Since the issue involved in this case is in a narrow compass, the application for waiver of pre-deposit of the amount is allowed and we take up the appeal itself for disposal.
2. The issue involved in this case is regarding the denial of Cenvat Credit to the appellants. The Cenvat Credit is sought to be denied to the appellant on the ground that the appellant had availed Cenvat Credit on the invoices issued by one M/s. J & J Precision Industries have cleared the final products on payment of duty, by availing irregular and illegible Cenvat Credit on the inputs received by them. The current appellant is one of the purchasers of the final product is cleared by M/s. J.&J Precision Industries.
3. Considered the submissions made by both sides and perused the records. The contention of the appellant is that they had taken reasonable care to verify that the credit availed by them is in accordance with the provisions of Rule 9 of the Cenvat Credit Rules. It is also submitted that they have paid for the entire quantity of the inputs purchased by them from the supplier. On the other hand the Ld. JDR submits that if the duty is paid availing/ Cenvat credit, fraudulently and willfully by supplier, then the appellant cannot be allowed to take credit.
4. It is undisputed that the appellant had paid the amount of invoices under which the inputs were cleared to them by the supplier and there is no contrary evidence to indicate that there was a flow back of any amount to the supplier. As regards the recovery of dues and in case if there is any default by the manufacturer, the CBEC Circular No. 766/82//2003-CX dt. 15.12.2003 clarified as under:
Therefore, after the completion of one month paid from the due date, the amount of duty outstanding and the interest payable thereon should be treated as “recoverable arrears of revenue” and all permissible action under the law including the action under Section 11 of the Central Excise Act, 1944 for recovery of the duty assessed under Rule 6 and interest payable thereon.
On the issue of availment of credit by the user-manufacturer, it is clarified that action against the consignee to reverse/recover the CENVAT Credit availed of in such cases need not be resorted to as long as the bona fide nature of consignee’s transaction is not in dispute.
In case the manufacturer-supplier has received payment from the buyer (including the amount shown as duty of excise) i.e. the person taking CENVAT Credit has made payment of the invoice amount, action should also be taken against the manufacturer-supplier under Section 11D and 11DD of the Central Excise Act, 1944.
On the plain reading of the above reproduced Circular of the CBEC, it is very dear that reversal/recovery of the Cenvat Credit availed by the consignee need not be resorted as long as the nature of the transaction is bona-fide. In the present case before us, it is on record that the purchasers made by the current appellant were of bonafide nature, the payment has been made for these purchases to the suppliers.
5. On an identical issue in the case of R.S. Industries v. Commissioner of Central Excise, New Delhi-I as reported at the Tribunal has held as under:
We have considered the submissions of both the sides. The Revenue has not challenged the findings contained in the impugned order to the effect that the allegation of non-receipt of goods by the Appellants has not been established beyond doubt in view of the fact that Prema Metal Inds. had bought material from Delhi Aluminium Corporation which was substantial in nature. Once the Revenue is not disputing the receipt of goods under the cover of invoices by the appellants which contained duty paying particulars the Modvat Credit cannot be denied to the appellants. As far as the appellants are concerned they have purchased the goods which are dutiable on the strength of the invoices carrying duty payment particulars. Moreover the Revenue has confirmed the demand of duty against Prerna Metal Inds. in respect of goods removed by them by utilizing wrongly availed Modvat Credit. We also observe that Rule 57I of the Central Excise Rules, 194 at the time when the show cause notice was issued, provided for the recovery of Credit taken on account of error, omission or misconstruction on the part of officer or manufacturer or an assessee. As far as the appellants are concerned there was neither any error nor any misconstruction on their part. We also do not find any substance in the submission of the learned SDR that larger period of limitation will be invokable irrespective of the fact that fraud has not been committed by the appellants. It is evident from the impugned Order that the appellants have not committed any fraud, suppression, or willful misstatement as the Commissioner has given specific finding that no evidence has been brought on record to suggest active involvement of the appellants. Rule 57I(ii) clearly provides that where a manufacturer has taken a creditory reason of fraud, willful mis-statement, collusion or suppression of fact or contravention of any of the provisions of the Act or the Rules with intent to evade payment of duty extended period of 5 years will be available for issuing show cause notice. It is apparent from the wording of Clause (ii) that fraud etc. has to be committed by the person against whom the show cause notice is being issued and not by the person at large. We, therefore, set aside the disallowance of the Modvat credit and recovery of the said amount from the appellants. All the appeals are thus allowed.
It can be noted that the ratio of the decision of the Tribunal squarely covers the issue in favour of the appellant.
6. Accordingly, the impugned order denying the Cenvat credit to the appellant and upholding the imposition of penalty is liable to be set aside and we do so The appeal allowed with consequential relief if any.
(Dictated in court)