2013 (9) TMI 90 - AT - Central Excise

CENVAT Credit - Revenue was of the view that in some cases supplying just invoices without any goods to some of its customers to enable them to take fraudulent Cenvat credit - Held that - The case was made out based on inadequate investigation and unacceptable principle followed during adjudication - The only matter that could have survived was the transportation of 6 consignments weighing more than 500Kgs in each case, and one such case being that of a consignment weighing 705 Kgs transported by an auto-rickshaw. During the adjudication proceedings the Appellants requested for opportunity to cross-examine - Such opportunity was denied to them - the main ground on which the adjudication order and first appellate orders were contested was denial of natural justice by denying cross-examination of persons whose statements were relied upon - during investigation stage the Appellants were not confronted with the evidences appearing against them - A statement was recorded without showing any evidence against them - During the statement the authorized signatory had confirmed that all the goods were received in the factory and payments to the suppliers were made by cheques. The reason for not allowing the cross-examination was not acceptable at all - An argument that at the time of recording the statement he was trustworthy but he cannot be trusted during cross-examination was inherently contradictory - Shalimar Rubber Industries and Ors v. CCE, Cochin 2002 (11) TMI 91 - SUPREME COURT OF INDIA denying cross-examination would strike at the root of the evidence given by the concerned persons - More than nine years have passed by - The investigation itself was half-hearted with reluctance to examine the detailed data and reluctance to confront the accused with the data to get their explanation Decided in favour of Assesses.

Summary

Issues: Alleged fraudulent Cenvat credit availed by the Appellant based on invoices from a supplier without actual goods, denial of natural justice by not allowing cross-examination of witnesses, distorted version of statements in the show cause notice, reliance on incriminating statements without proper verification, transportation of goods by vehicles not suitable for carrying the specified weight, lack of thorough investigation, and the decision to set aside the orders-in-original and order-in-appeal.

Fraudulent Cenvat Credit Allegation:
The case involved M/s. Bird Audio Electronics purchasing raw materials from a supplier, M/s. Satvik Industries (SI), for which Cenvat credit was availed. It was discovered that SI provided invoices without actual goods to enable fraudulent credit claims. The Appellants faced demands, interest, and penalties following an investigation leading to adverse consequences.

Denial of Natural Justice:
The Appellants contested the denial of the opportunity for cross-examination of witnesses, including Shri Rajesh Jain and drivers, whose statements were pivotal in the case. The adjudicating authority's reasoning for not allowing cross-examination was challenged, asserting a violation of natural justice principles.

Distorted Statements and Lack of Verification:
The show cause notice contained distorted translations of statements, misrepresenting facts crucial to the case. The Appellants argued that they were not confronted with evidence during the investigation stage, and the reliance on unverified statements without proper scrutiny was highlighted as a procedural flaw.

Transportation by Unsuitable Vehicles:
The case relied on the transportation of goods by vehicles like auto-rickshaws and scooters, deemed unsuitable for carrying specified weights. The Appellants questioned the feasibility of such transportation methods, emphasizing discrepancies in the allegations regarding the capacity of the vehicles to transport the goods.

Inadequate Investigation and Decision to Set Aside Orders:
The Tribunal observed shortcomings in the investigation process, including a lack of thoroughness and reluctance to confront the accused with relevant data. The distorted version of statements in the show cause notice and the reliance on untested evidence led to the decision to set aside the orders-in-original and order-in-appeal, highlighting the need for a more comprehensive and fair adjudication process.

Conclusion:
Ultimately, the Tribunal allowed the appeal, setting aside the previous orders due to procedural irregularities, lack of thorough investigation, and the failure to adhere to principles of natural justice. The decision emphasized the importance of fair proceedings, proper verification of evidence, and the need for a transparent and comprehensive adjudication process to ensure justice.