CESTAT allows Cenvat Credit of Excise Duty Paid for Mild Steel Scrap on Strength of Invoices issued by Registered Dealers [Read Order]

The Delhi bench of the Customs, Excise and Service Tax Appellate Tribunal ( CESTAT ) has ruled in favor of M/s Raghuveer Concast Pvt. Ltd. and its Directors, Mr. Chand Singhal and Mr. Inder Mohan Singhal, allowing them to claim Cenvat credit for excise duty paid for mild steel scrap on strength of invoices issued by registered dealers

M/s Raghuveer Concast Pvt. Ltd. (assessee) along with its Directors, Shri Chand Singhal and Shri Inder Mohan Singhal, have contested the order-in-appeal dated 26.09.2018 issued by the Commissioner (Appeals), Customs, Central Excise & Service Tax, Raipur. The Commissioner (Appeals) had partially accepted the appeals of the directors by reducing the personal penalties imposed on them to Rs. 3 lakhs each but upheld the remaining portions of the order-in-original dated 29.03.2018, issued by the Additional Commissioner.

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The assessee engages in the manufacture of MS Ingots from Sponge Iron, MS Scrap, Pig Iron, and Ferro Alloys. The dispute revolves around the eligibility of Cenvat credit claimed by the assessee based on invoices for MS scrap from two first-stage dealers: M/s Jetking Trading and Agencies Pvt. Ltd. and M/s S.R. Metalics.

Intelligence gathered by the Directorate General of Central Excise Intelligence ( DGCEI ) indicated that during the fiscal years 2013-2014 and 2014-2015, the assessee claimed ineligible Cenvat credit amounting to Rs. 95,90,687/- through fake invoices from M/s Jetking Trading and M/s S.R. Metalics. These invoices purportedly listed non-existent manufacturers from Dhanbad. The department identified 122 invoices 89 from M/s Jetking Trading and 33 from M/s S.R. Metalics as being fraudulent.

A show cause notice dated 05.12.2016 was issued to the assessee and others, including Inder Mohan and Chand, proposing the denial of Cenvat credit amounting to Rs. 95,90,687/- and imposing penalties. The Additional Commissioner confirmed these proposals in the order-in-original dated 29.03.2018. On appeal, the Commissioner (Appeals) upheld the Additional Commissioner’s decision but reduced the penalties for Inder Mohan and Chand from Rs. 5 lakhs to Rs. 3 lakhs each.

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The department's case hinges on the premise that the first-stage dealers were fictitious and did not exist at their business locations. The department also asserted that the purported manufacturers listed on the invoices were non-existent. Despite the fact that the dealers were registered with the central excise department and had filed returns, the department claimed their premises were non-existent during inspections.

The tribunal, consisting of Justice Dilip Gupta ( President ) and P.V. Subba Rao ( Technical Member ), observed contradictions in the department’s stance. While accepting the existence of the dealers and manufacturers for purposes such as registration and notices, the department denied their existence when it came to Cenvat credit claims.

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The tribunal concluded that the impugned order was unsustainable due to these inconsistencies. Consequently, the tribunal set aside the impugned order and allowed the appeal, granting consequential relief to the appellant.

To Read the full text of the Order CLICK HERE

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