2014 (8) TMI 539 - AT - Central Excise

CENVAT Credit - issue of invoice without supply of material - procurement of goods from second stage dealer - genuineness of dealer - Penalty - Held that - The statement of the authorized representative of Khemka reveals that with the loss of business in the year 2002, they entered into an arrangement with the first stage dealer for issuing invoices without the supply of goods so as to reflect some sale purchase books on accounts - Rule 7(2) of Cenvat credit rule requires the recipient of the inputs to know the identity of the supplier of the goods, was second stage dealer, the rule stand satisfied by the manufacturer with proprietor of second stage dealer having deposed that they had in fact supplied to the manufacturer, payment for which were made by them in cheque - Recipient of the inputs is expected to know his immediate supplier and there is no further requirement to find out as to from where his supplier has procured the inputs - Penalties set aside - Following decision of M/s SUPER TRADING COMPANY & OTHERS Versus COMMISSIONER OF CENTRAL EXCISE, DELHI-IV 2013 (10) TMI 491 - CESTAT NEW DELHI - Decided in favour of assessee.

Summary

Issues:
Denial of Cenvat credit to M/s. JCBL Ltd. and imposition of penalties on them and M/s. Swastik Steel Corporation.

Analysis:
The judgment revolves around the denial of Cenvat credit to M/s. JCBL Ltd. and the imposition of penalties, which arose from the same impugned order passed by the Commissioner (Appeals). The appellant availed credit based on cenvatable invoices from the second stage dealer, M/s. Swastik Steel Corporation, who, in turn, purchased goods from the first stage dealer, M/s. Steel Mongers (India) P. Ltd., procured from the manufacturer, Khemka Ispat Ltd. Investigations revealed discrepancies at Khemka Ispat, leading to proceedings against the appellants. However, the Tribunal's decision in a similar case highlighted the importance of the recipient knowing the supplier of the goods, which was satisfied in this case by evidence provided by M/s. Swastik Steel Corporation. The Tribunal emphasized that without evidence of inputs being procured from an alternative source, the revenue's claim that no inputs were received could not be upheld. The recipient is expected to know the immediate supplier, not the entire chain. Therefore, the confirmation of demand and penalties were set aside in the previous case, and these findings were deemed applicable to the present case.

The Tribunal found that M/s. Swastik Steel Corporation had produced sufficient evidence, including transportation evidence and sale tax barrier receipts, to prove that the inputs were indeed received by M/s. JCBL Ltd. Consequently, the benefit of credit was not to be denied to M/s. JCBL Ltd., and penalties on both appellants were unwarranted. Therefore, the impugned orders were set aside, and the appeals were allowed with consequential relief.