2015 (5) TMI 1000 - AT - Central Excise

Cenvat credit denial and imposition of penalty - M/s. Aar Aar Technoplast Pvt. Ltd. has availed cenvat credit on the basis of invoices without receiving the goods in the factory - First stage dealer M/s. Jagruti Resins Pvt. Ltd. has not supplied the goods to the second stage dealer M/s. Shree Sai International, Faridabad, from whom goods have been purchased by the appellant - Held that - The appellants have maintained proper records to prove that the goods have been received in their factory premises. In this regard, the records such as, material receipt register, gate entry register etc., though were produced before the authorities below, but no findings have been recorded regarding such claim of the appellant and also the authenticity of the documents have not been doubted. Further, register maintained by the appellant clearly shows that the amount indicated therein has been paid to the second stage dealer for supply of the goods and that the said payment has been routed through approved banking channel. Denial of cenvat credit on the ground of investigation conducted at the premises of the first stage dealers, cannot be the defensible ground, especially in view of the fact that no investigation has been conducted at the premises of the second stage dealer, from whom the goods have been purchased by the appellant. Since, the Department has not adduced any plausible evidence regarding non-receipt of the disputed goods by the appellant, penalty imposed on Shri Manoranjan Singh Duggal, President of the appellant company is not sustainable under the law. Denial of cenvat credit and imposition of penalties on the appellant are not justified - Decided in favour of assessee

Summary

Issues:
Appeal against duty demand and penalty confirmation based on availing cenvat credit without receiving goods in the factory.

Analysis:
The primary issue in this case revolves around the denial of cenvat credit and imposition of penalties due to the appellant allegedly availing credit without receiving goods in the factory. The investigation revealed discrepancies in the supply chain, where the first stage dealer did not supply goods to the second stage dealer, from whom the appellant made purchases. The appellant argued that the goods covered in the invoices were indeed received and used for manufacturing final products. They presented documents such as payment vouchers, material receipt reports, and gate entry registers to support their claim. However, no findings were recorded by the authorities regarding the submitted documents. The appellant contended that the investigation at the first stage dealer's premises should not be the sole basis for disallowing cenvat credit, especially since no investigation was conducted at the second stage dealer's end.

The appellant's consultant emphasized that the vehicle number on the invoices from the second stage dealer was not verified by the department to conclude that goods were not received in the factory. On the contrary, the respondent reiterated the findings of the impugned order, stating that the investigation confirmed non-usage of the vehicle for transporting goods from the first stage dealer to the second stage dealer. The respondent argued that since goods were not transferred from the first to the second stage dealer, the appellant could not have received them in their factory, rendering the cenvat credit inadmissible.

Upon review, the tribunal found that the denial of cenvat credit was solely based on the lack of supply from the first stage dealer to the second stage dealer. The tribunal noted that the appellant maintained proper records, including material receipt registers and gate entry registers, to prove the receipt of goods in their factory. Despite producing these records, no findings were made by the authorities, and the authenticity of the documents was not questioned. Additionally, the tribunal highlighted that the appellant's payment to the second stage dealer was made through approved banking channels, further supporting their claim. Critically, the tribunal emphasized that the denial of cenvat credit due to an investigation at the first stage dealer's premises was unjustified, especially since no investigation was conducted at the second stage dealer's premises.

Ultimately, the tribunal concluded that the Department failed to provide substantial evidence of non-receipt of goods by the appellant, leading to the unsustainability of the penalty imposed on the appellant's president. Consequently, the tribunal ruled in favor of the appellant, setting aside the impugned order and allowing the appeals.