Receipt of SS waste and scrap supplied through dealers, which are defective and availment of Cenvat Credit: CESTAT quashes Excise Duty Demand [Read Order]

The Ahmedabad Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) quashed excise duty demand as there was receipt of SS waste and scrap supplied through dealers, which are defective and subsequent availment of cenvat credit.

The issue involved in the first lot of appeal Nos. E/10523/2016, E/10520/2016, E/10593/2016, E/10917/2016 is that whether M/s. Panchmahal Steel Ltd. has correctly availed the Cenvat Credit on the inputs viz waste/seconds of SS Patta/Patti, SS Circle, SS Flat, SS sheet etc., which were allegedly not received by the Appellant in their factory.

The prime reason to deny credit is on the basis that the Appellant melts its inputs and produces SS Billets/Wires/rods/bars etc. and there is no proof that the Appellant uses SS Patta/Patti, SS Circle, SS Flat, SS Sheet (assuming it to be virgin material) whereas the claim of the Appellant all along before lower authority was that what they had received was off cuts pieces/defective/seconds/waste SS articles, and very much used by them in manufacturing process.

Saurabh Dixit, Counsel who appeared on behalf of M/s. Panchmahal Steel Ltd. submitted that insofar as first lot of appeals are concerned, the demand of Cenvat Credit of Rs.2,90,19,567/- is confirmed towards Credit availed on invoices raised by manufacturers, who had supplied off cuts pieces/defective/seconds/waste SS articles to the Appellant as a consignee, while the sale was made to dealers viz. M/s. Jankilal and Nandlal and M/s. Keyur Impex (co-Appellants), who had in turn sold the goods to the Appellant.

The transporters merely stated that they did not transport SS prime grade items, whereas the truck owners are not competent to understand the difference between second grade/off cuts/rejects of SS Patta/Patti etc. compared to prime grade goods anyway and nothing turns on their statements as such.

The present investigation has not identified a single supplier of SS scrap to the Appellant so as to make up for the quantity of goods as replacement. There is no evidence regarding flow back of funds by the Appellant/dealer to the suppliers or flow of fund between the utensil manufacturers to the suppliers for the clandestine nature of transaction alleged.

A Two-Member Bench comprising Ramesh Nair, Judicial Member and Raju, Technical Member observed that “In light of the above, in the facts and circumstances of the present case, it must be held that the Appellant had in fact received SS waste and scrap supplied to them through dealers, on documents, which otherwise show that it was seconds/defective etc. and had correctly availed Cenvat Credit thereon, in absence of any cogent evidence regarding either diversion of such goods by suppliers or replacement thereof by the Appellant from any other local source.”

To Read the full text of the Order CLICK HERE

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