2015 (1) TMI 272 - HC - Central Excise

CENVAT Credit - Non Supply of pet coke - Bogus invoices - Denial of cross examination request - Held that - entire issue is based on appreciation of evidence and the materials on record. The issues are primarily in the realm of factual findings. Even if the case of the department, as put forth before us through the Senior Counsel was that no samples were drawn on 26.4.008, it remains established that thus no chemical analysis of the materials seized from the purchasers of the goods was available on record. If, on the other hand, the presumption as drawn by the Tribunal that such samples were drawn but the test reports were not placed on record is correct, the situation would be much worse for the department. In either case, the materials at the end of the purchasers could not be established through any reliable evidence of not being pet coke. Right from the beginning the assessees had been asking for cross-examination of large number of the witnesses whose statements the department sought to rely upon. There were as many as 24 such witnesses. The assessee had also asked for the cross examination of the chemical analyzer of the laboratory carrying out the test report. After a long period of time of about two years, the Commissioner rejected such request. It may be that in a given situation, cross-examination of a witness may be declined after recording proper reasons. However, when the Commissioner mechanically declined cross-examination of the witnesses whose statements were relied upon and when the Tribunal found that this would have a material effect on the conduct of the inquiry, we see no reason to interfere with the factual findings of the Tribunal. - Decided against Revenue.

Summary

Issues:
1. Claim of cenvat credit on pet coke by cement manufacturers.
2. Personal penalties imposed on directors.
3. Cancellation of registrations of suppliers.
4. Reliability of test reports and evidence.
5. Cross-examination of witnesses and chemical analyzer.

Analysis:
1. The appeals involved a dispute regarding the claim of cenvat credit on pet coke by cement manufacturers. The Revenue contended that the purchasers had erroneously claimed cenvat credit on duty unpaid pet coke. The Commissioner had ordered recoveries with penalties and interest, which were challenged in the appeals. The Tribunal allowed the appeals, highlighting discrepancies in the evidence and lack of reliable test reports to establish the nature of the goods in question.

2. Tax appeals were filed by the directors of the companies facing personal penalties in connection with the disputed cenvat credit issue. The Tribunal noted the absence of cross-examination of witnesses and found that reliance on statements without the opportunity for cross-examination was not justified. The Tribunal's detailed re-evaluation of the evidence led to the dismissal of the penalties imposed on the directors.

3. The case also involved appeals related to the cancellation of registrations of suppliers allegedly involved in the supply of pet coke for which cenvat credit was claimed. The Tribunal scrutinized the evidence and found discrepancies in the methodology of sample collection and testing. The reliance on a private laboratory report instead of reputed Government laboratories raised doubts, leading to the dismissal of the cancellation of registrations.

4. The Tribunal extensively analyzed the reliability of test reports, evidence, and statements presented by the department. It highlighted the failure to produce crucial test reports, discrepancies in sample collection methods, and lack of credible evidence to establish the nature of the goods. The Tribunal's meticulous examination of the evidence led to the conclusion that the Commissioner had erred in confirming duty, penalty, and interest demands.

5. The issue of cross-examination of witnesses played a significant role in the Tribunal's decision. The assessees had requested cross-examination of numerous witnesses and the chemical analyzer of the laboratory conducting the test reports. The Commissioner's mechanical rejection of these requests without proper reasons was deemed unjustified by the Tribunal. The lack of cross-examination was considered to have a material effect on the inquiry, leading to the dismissal of the tax appeals based on factual findings and evidentiary considerations.