2014 (2) TMI 63 - AT - Central Excise

Availment of CENVAT Credit - Credit availed without delivery of goods - Goods were charged octroi whereas the factory is situated outside the octroi limit - Held that - demand is on the basis of statement consignor of goods that he has received only invoices from M/s Vasmin Corporation, Bhavnagar without physical receipt of M.S. Scrap and on the strength of such bogus invoices, he has passid on the CENVAT credit to the Appellant unit - M/s Star Associates being registered dealer under central excise issued invoices to the Appellant who has duly recorded the receipt of such goods in their records and made payment through banking channels. There is no such evidence that the said amount towards purchase was received back by the Appellant and in support of contention that the goods were transported, reliance was placed on Form 40 of the Sales Tax and purchase tax was paid by the supplier as seen from the ledger annexed with the appeal. Demand cannot be fastened upon the Appellant on the basis of his statement. I find that only on the sole basis of statement of proprietor of M/s Star Associate is to the effect that that they have received only invoices from M/s Vasmin Corporation cannot be made a ground to deny credit to the Appellant Unit. I also find that it is a fact that M/s Star Associates were regularly supplying goods to the Appellant unit in the past also and on no occasion it was found that they have issued invoices without actual supply. Demand is based upon the findings that the octroi receipt shows the delivery of the goods within the municipal limits of the city whereas the factory is situated outside municipal limits. Reliance is also placed upon the statement of the administrator of trucks who denied the transportation to M/s Bajrang and partner of two units who actually alleged to have received the goods without invoices. However I find that only the statement of administrator of truck and octroi receipt the receipt of goods cannot be disputed. I find that the goods were consigned by the ship breakers and no investigation was conducted at their end to ascertain the fact of delivery of goods. Hence no demand can be made against the Appellant. All the purchases were duly recorded in the statutory books of the Appellant and the goods were also found to be entered in statutory records of the Appellant. No investigation has been made at unit of M/s Bajrang which could have supported the findings of the adjudicating authority. None of the consignor of the goods has denied the clearance of goods to M/s Bajrang. There is no evidence which can show that the records maintained by the Appellant are not correct. Only on the basis of statement of some of the transporters, the huge credit is sought to be disallowed whereas the statements are in isolation with no corroboration. I therefore hold that the impugned order for disallowance of credit to the Appellant is not sustainable - Decided in favour of assessee.

Issues Involved:

1. Disallowance of CENVAT credit on invoices without actual delivery of goods.
2. Imposition of penalties on various parties related to the alleged fraudulent transactions.
3. Validity of demands based on statements of transporters and other third parties.
4. Evidentiary value of statements without cross-examination.
5. Legitimacy of records and transactions maintained by the appellant.

Issue-wise Detailed Analysis:

1. Disallowance of CENVAT Credit:

The Commissioner disallowed credit of Rs. 47,08,339/- to M/s Bajrang Castings under Rule 12 of CENVAT Credit Rules, 2001/2002 read with Section 11A(1) on the grounds of availing credit on invoices without actual delivery of goods. The Tribunal found that the credit could not be disallowed solely based on the statements of the consignor and some transporters without corroborative evidence. The appellant had duly recorded the receipt of goods in their records and made payments through banking channels. The Tribunal noted discrepancies in the statements of the consignor and emphasized the lack of cross-examination, thereby ruling in favor of the appellant.

2. Imposition of Penalties:

Penalties were imposed on M/s Bajrang Castings and its director, supervisor, and associated firms under Rule 13 of CENVAT Credit Rules, 2001/2002 and Rule 209A of the erstwhile Rules, 1944. The Tribunal set aside these penalties, stating that the demands were not sustainable due to the absence of cogent evidence and corroboration. The Tribunal emphasized that penalties could not be imposed based on uncorroborated statements of third parties.

3. Validity of Demands Based on Statements:

Demands were confirmed based on statements from transporters and administrators of trucks, who denied the transportation of goods to the appellant. The Tribunal found these statements insufficient to confirm demands, as they were not corroborated by evidence. The Tribunal highlighted that no investigation was conducted at the alleged places of delivery or at the consignor's end, making the statements unreliable for confirming demands.

4. Evidentiary Value of Statements Without Cross-examination:

The Tribunal noted that the statements of key witnesses, such as Shri Arjandas and transporters, lacked evidentiary value as they were not cross-examined despite being summoned. The Tribunal relied on precedents which held that statements without cross-examination could not be used to confirm demands. The Tribunal also considered the retraction of statements by the appellant's director and the consignor, further weakening the case against the appellant.

5. Legitimacy of Records and Transactions:

The Tribunal observed that all purchases were duly recorded in the appellant's statutory books, and the goods were found to be entered in the statutory records. Payments were made through regular banking channels, and no discrepancies were found in the appellant's unit. The Tribunal ruled that the records maintained by the appellant were legitimate and could not be disputed based on uncorroborated third-party statements. The Tribunal cited previous judgments supporting the appellant's case, emphasizing that credit could not be denied when statutory records did not disclose the absence of receipt of inputs in the factory.

Conclusion:

The Tribunal set aside the impugned order, disallowing the credit and penalties imposed on M/s Bajrang Castings and other appellants due to the lack of corroborative evidence and the unreliability of third-party statements. The appeals were allowed with consequential relief.

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