In a significant judgement, the Bangalore bench of the Customs, Excise & Service Tax Appellate Tribunal ( CESTAT ) has held that the allegation of availing irregular CENVAT Credit is not valid since no discrepancy regarding the stock of raw material.
Sahney Commutators Pvt Ltd, the appellant is manufacturing Commutators and Bare Copper Strip/wire of various sizes is the major input for the manufacture of final products. It was alleged that appellant irregularly availed CENVAT credit of Rs.57,636/-, and present proceedings were initiated.
It was submitted that during the course of the transaction, they received 1028.8 Kgs of Bare Copper Strip. While manufacturing final products, these strips were cut into the required length and only during the manufacturing process, they found that the raw material supplied by the suppliers M/s Copprrod Industries Pvt. Ltd. is generating excess waste and rejected the same.
They have informed the supplier regarding the defects in the material and also raised a Debit Note for accounting and for avoiding automatic payments against such defective supply of material. It was further submitted that the said material was returned and the supplier charged Rs.46,656/- towards Job charges.
It was evident that the inputs were carried out within 180 days of being sent to the Job work and they complied with the conditions stipulated under Rule 4(5)(a) of CENVAT Credit Rules 2004. The respondent issued SCN as to why CENVAT credit of Rs.57,630/- irregularly availed on the rejected inputs should not be demanded and recovered with interest and penalty should not be imposed under Rule 15(2) of CENVAT Credit Rules, 2004.
A Coram comprising of Shri P A Augustian, Member (Judicial) observed that there was a slight discrepancy in the description of invoices. During the investigation, there is no discrepancy pointed out regarding the stock of raw material maintained by the appellant and the return submitted for the relevant period shows proper transaction of said material as claimed by the appellant.
The Tribunal found no reason to allege that the appellant had availed ineligible CENVAT credit and allowed the appeal.
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