2015 (2) TMI 649 - AT - Central Excise

Denial of CENVAT Credit - Parallel and bogus invoices - Issue of invoices without supply of goods - Invocation of extended period of limitation - Held that - it is evident that out of 129 invoices relating to JCPL for the purchases in question, 66 invoices bearing same serial no. (parallel Nos.) had been issued by the supplier SSMPL. Further, summons were issued to all transporters whose vehicle nos. Were appearing in the invoices, but only one appeared and denied having transported the scrap, whereas two other transporters informed by letters that on the said date, their vehicle had been engaged for some other work. Other transporters either did not respond or were not served the summons. Respondents had nothing to do with the transportation of scrap from Bhavnagar etc. to the dealer s premises and further to their premises there from. In view of the ground that the transportation of scrap from the supplying dealers premises/godown to their factory was arranged for and paid by the supplying dealers, have not been controverted by the adjudicating authority in the Order-in-Original. Further, there are 146 invoices in question in case of Jay Iron-respondent and only on account of denial of the facts of transportation by 5-6 vehicle owners/drivers, adverse inference has been drawn by the Adjudicating authority. Similarly, in the case of respondent JCPL wherein 129 invoices are in question and only one vehicle owner/driver appeared and denied and two vehicle owners respondent by mail, who were examined in the adjudication proceedings and never produced for cross-examination and it is not clear as to on what grounds the statements or communications of a few can be made applicable to all the supplies received against the remaining majority of the invoices. Further, the statements have been found to be recorded after prolonged time (more than two years) from the date of transaction and the statements were given on the basis of memory without reference of any record. Investigating officers did not obtain any confirmation from the record of the supplying dealers that these were the same vehicle(s) to whom the payment was shown to have been made by them for transportation. It is further observed that in case of large no. of invoices, possibility of clerical error in a few, cannot be completely ruled out and it could have been the case of mistaken identity. Further, the adjudicating authority have failed in exercising the jurisdiction vested in him as he has not tried to ensure appearance and collection of evidence from the majority almost 97% of the vehicle owners, who did not appear on receipt of summons and/or summons could not be served. It is settled law that substantial benefit granted by the Cenvat Credit Rules cannot be denied on technical/clerical mistake occurred in few invoices after incomplete investigation. Further, one of the reason for disallowance in the adjudication order of Jay Iron, the adjudicating authority relied upon statement of Mr. Kishan Daga, Purchase Officer, who has stated that neither the order was placed for purchase of ship-breaking scrap nor the material was received. The conclusion is incorrect and it is further observed that in reply to question no. 4 and 5, Mr. Daga stated that they have been purchasing scrap from M/s SSMPL for last two years, and they specify the quality of scrap ordered as not above 3 feet in size and not rusted material . In view of this background the purport of reply given to question no. 16 and 17 was that they had not ordered scrap as ship-breaking scrap or had not ordered specifically for ship braking scarp and the same was not received as ship breaking scrap. RG-23D numbers given in the invoices received by the assessee are not tallying with the figures in the RG-23D register of the said dealer, the show-cause notice only indicated that the RG-23D (page no.) appearing on the invoices issued to the respondent and the parallel invoices issued to other parties/buyers were different. Thus, it is found that the adjudicating authority have travelled further beyond the allegation in the show-cause notice without any tangible evidence on record. It was further noted that there is no similarity between the two set of invoices. The quantity, value and duty appearing on the two parallel invoices is completely different. The allegation also contradicts the other allegation that in the first place, the dealers themselves had not brought any material and secondly had not dispatched any material (scrap) to other parties including the respondents. It is further found that the investigation have not come to any definite conclusion. Merely raising doubt and that too are self contradictory in nature, demolishes the case of Revenue. Benefit of CENVAT Credit, being substantial benefit granted by law, it cannot be denied on flimsy ground like, suspicion or presumption, as the same cannot take the place of proof. It is further seen that the adjudicating authority have drawn erroneous conclusion in concluding that the respondent have not received the inputs in their factory, in question, and have therefore taken wrong credit. It is further found that the respondents on receipt of the inputs in question, under the normal course of business, had prepared goods received note and made entries in the statutory records maintained by them. Further, the stock of scrap/physically present in the factory of respondents could have been easily verified with the records which was not done and receipt of the inputs is erroneously being disputed on the basis of the investigation against the supplying dealers, which is found to be wrong and untenable. Further, the investigation is silent as to how the respondent-manufactures, manufactured finished material without receiving the inputs. The law is settled that as long as duty payment is accepted on outputs, the benefit of credit available in law cannot be denied. Respondent had made full payment of duty indicated in the invoices by cheque, which have been rejected on the ground that it is not established that the payments made to the supplying dealers pertain to the purchase transaction in the question. It is further noted that the respondent - Jay Iron has made payment of more than ₹ 2 crores (approx) over nearly three years to the supplying dealers and the respondent JCPL had also made payment of more than ₹ 2 crores over nearly 6 months period. Further, the transaction and payments etc. are properly recorded in the Books of Account. Ledger etc. Thus it is established that the payments were made against supply of scrap. It is further noted that it is not the case of Revenue that part of the payment was returned to the respondent as a notice or reward for connivance, and accordingly, it is held upholding the finding by the appellate authority that the extended period is not attracted in absence of any fraud, collusion or connivance on part of the respondents. Both the suppliers being registered dealers with the Department were carrying on the business from their registered premises for a number of years and the identity and address of the suppliers/dealers were never in doubt and the finding of the lower authority that the respondent did not take reasonable step is contrary to the records and accordingly held unsustainable. - Decided against Revenue.

Summary

Issues Involved:
1. CENVAT Credit disallowance based on alleged non-receipt of inputs.
2. Validity of invoices and transportation of goods.
3. Onus of proof regarding receipt of goods.
4. Statements of transporters and vehicle owners.
5. Alleged clerical errors in invoices and their impact.
6. Allegations of parallel invoices and their implications.
7. Time-barred demand and extended period applicability.
8. Reasonable steps taken by the assessee to verify the suppliers.

Issue-wise Detailed Analysis:

1. CENVAT Credit Disallowance Based on Alleged Non-Receipt of Inputs:
The Revenue appealed against the Order-in-Appeal, which allowed the respondent companies to avail CENVAT Credit on inputs. The Revenue's contention was based on investigations that allegedly proved non-receipt of inputs. The respondents, Jay Iron & Steel Industries Ltd. (Jay Iron) and Jayashree Concast Pvt. Ltd. (JCPL), had availed CENVAT Credit on inputs purchased from dealers, which the Revenue claimed were not actually received.

2. Validity of Invoices and Transportation of Goods:
The respondents argued that the invoices were genuine, and the goods were received at their factory gates. They maintained Goods Receipt Notes (GRNs) and other records to substantiate the receipt of goods. The Revenue, however, argued that the vehicles used for transportation were not suitable for carrying goods and that some transporters denied transporting the goods.

3. Onus of Proof Regarding Receipt of Goods:
The Revenue contended that the onus was on the respondents to prove receipt of goods, citing cases like Lloyds Metal Engineering and Saina Industries. The respondents countered that they had taken all reasonable steps to verify the suppliers and provided evidence of payments made through account payee cheques.

4. Statements of Transporters and Vehicle Owners:
The Revenue relied on statements from a few transporters and vehicle owners who denied transporting the goods. The respondents argued that these statements were not corroborated by other evidence and were given after a significant time lapse, making them unreliable.

5. Alleged Clerical Errors in Invoices and Their Impact:
The respondents acknowledged minor clerical errors in some invoices but argued that these did not justify the denial of CENVAT Credit. The Commissioner (Appeals) agreed, noting that minor discrepancies should not lead to adverse inferences.

6. Allegations of Parallel Invoices and Their Implications:
The Revenue alleged that some invoices bore parallel serial numbers, suggesting fraudulent activities. The respondents argued that they had no control over the dealers' records and had verified the invoices they received. The Commissioner (Appeals) found that the allegations were not substantiated by tangible evidence.

7. Time-Barred Demand and Extended Period Applicability:
The respondents contended that the demands were time-barred, as the investigations started in 2001, but show-cause notices were issued only in 2005 and 2006. The Commissioner (Appeals) upheld this argument, noting the absence of fraud, collusion, or connivance on the respondents' part.

8. Reasonable Steps Taken by the Assessee to Verify the Suppliers:
The respondents argued that they had taken all reasonable steps to verify the suppliers, as required under the CENVAT Credit Rules. The Commissioner (Appeals) found that the respondents had indeed taken reasonable steps and that the identity and address of the suppliers were never in doubt.

Conclusion:
The Tribunal upheld the Commissioner (Appeals)'s decision, dismissing the Revenue's appeals. The Tribunal found that the respondents had rightly availed CENVAT Credit, and there was no contumacious conduct or connivance with the suppliers. The Tribunal emphasized that substantial benefits granted by the CENVAT Credit Rules could not be denied based on technical or clerical mistakes, and the Revenue's case was not substantiated by sufficient evidence.