2015 (8) TMI 146 - AT - Central Excise

Disallowance of CENVAT Credit - non-receipt of material - allegation that supplier has no manufacturing facility - principle of natural justice - cross examination not allowed - extended period of limitation - levy of penalty - Held that - It is beyond comprehension that a man will get invoices without inputs and separately acquire inputs clandestinely from other sources to manufacture his goods. There is no whisper about M/s. Dhakad Metal Corporation to be indulging in clandestine removal of finished goods in these proceedings. It is now well settled legal position that a case can not be established on the basis of few confessional statements without other corroborative evidences like shortage of raw materials, cash transactions, alternative procurement of raw materials. Appellant requested for cross-examination of the persons whose statements are relied upon but the same was not extended. It is now well settled law that cross-examination of the persons whose witness are relied upon by the Revenue should be extended to the appellant and in the absence of such cross-examination extended, the statements of such persons can not be relied upon as evidence. - appellant M/s. Dhakad Metal Corporation can not be held to have any malafide intention to take wrong credit and extended period of demand cannot be invoked in the present case against them. In this case, the demand is for the period 2005-06 whereas the show cause notice was issued on 20.02.2009. As the extended period is not invokable, therefore, the demand is also time barred in addition to credit being admissible on merits. Penalties under Rule 15 of Cenvat Credit Rules, 2004 are required to be imposed upon the persons who has taken or utilised CENVAT credit in respect of inputs or capital goods wrongly in contravention of any of the provisions of Cenvat Credit Rules. Appellant M/s. Bhavna Metal Company has not been shown to have taken any credit wrongly. Further from the case records it is observed that it is not brought out by the Revenue that at the time of issuing cenvatable invoices registered dealer did not receive inputs alongwith duty paying documents. The fact of duty being paid by M/s. Prasun Ferro Alloys & Metal Casting Pvt. Limited has not been denied by the Revenue. Though later investigations done by the department does raise a strong suspicion of not receiving the inputs but the same is not corroborated by any independent evidence, except few statements. - In the absence of cross-examination of relied upon witness given the evidentiary value of the relied upon statements is lost - Decided in favour of assessee.

Summary

Issues:
1. Disallowance of CENVAT credit under Rule 14 of Cenvat Credit Rules, 2004 and imposition of penalty on M/s. Dhakad Metal Corporation.
2. Penalty imposed on M/s. Bhavna Metal Company under Rule 15 of Cenvat Credit Rules, 2004.

Analysis:
1. The appeals were filed against the Order-in-Original confirming the demand by disallowing CENVAT credit and imposing penalties. The first appellate authority upheld the order. The appellant argued that they were not aware of the original manufacturer's lack of facility for manufacturing the goods. The appellant contended that extended period cannot be invoked as they believed the inputs received were covered by documents issued by the registered dealer. The advocate relied on case laws to support the argument. The appellant requested cross-examination of witnesses, which was not extended. The tribunal observed a lack of evidence showing that the appellant had knowledge of the manufacturer's incapacity. The demand was for 2005-06, but the show cause notice was issued in 2009, making the demand time-barred. The tribunal held that the appellant was eligible for credit, and the appeal was allowed.

2. The penalty on M/s. Bhavna Metal Company was imposed under Rule 15 of Cenvat Credit Rules, 2004. The rule pertains to confiscation and penalties for wrongful utilization of CENVAT credit. The tribunal noted that there was no evidence to show that the company had taken credit wrongly. The Revenue's contentions lacked corroboration and independent evidence. The tribunal emphasized the importance of cross-examination of witnesses for evidentiary value. As the statements relied upon lacked cross-examination, the penalties imposed were not justified. The appeals filed by the appellants were allowed, granting them consequential relief.

In conclusion, the tribunal allowed the appeals filed by both M/s. Dhakad Metal Corporation and M/s. Bhavna Metal Company, as the penalties imposed were not substantiated with sufficient evidence and lacked the required cross-examination of witnesses for evidentiary value.