2014 (3) TMI 413 - AT - Central Excise

Clandestine clearance - cenvat credit - allegation of receiving unaccounted inputs and used in manufacturing and removal without payment of duty - Duty based upon the scrutiny of the records, maintained by the registered dealer - Revenue officers entertained a view that said registered dealer was issuing only invoices, without the corresponding supplies of the inputs and the payments were being received in cheque and subsequently cash was being returned to the said manufacturers. - Held That - Entire case of M/s. Jagriti Plastics was non-maintenance of proper accounts for which they have been penalized to the extent of ₹ 25,000/-. If that be so, the allegations and findings in the present case that they have passed on inadmissible Cenvat credit to the present appellants without actually supplying the inputs cannot be upheld. While dealing with the various evidence, the adjudicating authority has observed that Shri Surinder Agarwal, Director of M/s. Jagriti Plastics had at no stage accepted that he has made payments in cash in lieu of cheque received by him. Similarly, he has scrutinized the statement of Shri Kuntal Kumar, who had written and maintained said pidilite diary and has stated that he has no knowledge about cash transactions. There is no statement accepting that the cheque were converted into cash and there was flow back of the money. Similarly, the adjudicating authority has seen the material issue note book and entries made in the private records and the statement of driver and affidavit of the drivers and has come to a conclusion that there is not a single transaction mentioned in the records of Jagriti Plastics that the goods have not traveled from the registered dealer to the manufacturing unit without proper invoices. Accordingly, he has held that department has failed to prove that the goods have not traveled along with invoices and cash has been received in lieu of cheque - Following decision of JAGRITI PLASTICS LTD. Versus UNION OF INDIA 2003 (12) TMI 82 - HIGH COURT OF GUJARAT AT AHMEDABAD - Decided in favour of assessee.

Summary

Issues:
Denial of Cenvat credit based on records of a third party.

Analysis:
The judgment by Ms. Archana Wadhwa of the Appellate Tribunal CESTAT NEW DELHI involved the disposal of five appeals arising from the same set of facts but different orders by the Commissioner (Appeals). The appellants were engaged in manufacturing activities falling under various chapters of the Central Excise Act. They procured inputs from a registered dealer, M/s. Jagriti Plastics, who was later found to be involved in suspicious activities during a search conducted by the officers of Directorate General of Anti-Evasion. The Revenue alleged that the dealer issued invoices without corresponding supplies and received payments in cash, leading to the denial of Cenvat credit to the appellants.

Upon hearing arguments from both sides, the judge noted that the Revenue's case heavily relied on scrutinizing private records of the registered dealer, which did not mention the present appellants. The appellants maintained proper records of input receipt and utilization in their manufacturing process, supported by cheque payments for raw materials. The judge emphasized that denial of Cenvat credit based on third-party records without concrete evidence of non-receipt of inputs by the appellants was unjustified.

The judge cited legal precedents, including decisions by the Hon'ble Gujarat High Court and the Hon'ble Punjab and Haryana High Court, which emphasized that Cenvat credit should not be denied solely based on discrepancies in records without evidence of actual diversion of inputs. The judge also referred to a Tribunal case dealing with similar allegations of non-receipt of inputs, highlighting the importance of factual findings before denying credit.

Furthermore, the judge pointed out a separate penal action against Jagriti Plastics, where the Tribunal had clarified that the penalty imposed was for accounting irregularities, not for passing on inadmissible Cenvat credit. This finding supported the argument that the allegations against the present appellants lacked evidence of non-receipt of inputs, crucial for manufacturing final products cleared with duty payment.

In conclusion, the judge found no merit in the impugned orders of the Commissioners and set them aside, allowing the appeals with consequential relief to the appellants. The judgment highlighted the importance of concrete evidence and factual findings before denying Cenvat credit based on third-party records, ensuring fairness and justice in tax matters.