2015 (11) TMI 1096 - AT - Central Excise

Denial of CENVAT Credit - Bogus invoices - Issue of invoices without actual receipt of goods - Held that - entire case of the Revenue is based upon the investigations conducted at the end of the manufacturing unit of M/s. Aggarwal Steel Rolling Mills & Metal Industries. Admittedly the said manufacturer was also clearing the scrap or the defective goods etc. to some extent. There is nothing on record to show that the goods were not actually received by the present appellant which stands duly reflected by them in their RG-23 Part A register and stand utilised by them in the manufacture of their final product. Further as seen from the impugned order of the Commissioner (Appeals) he has observed that there is circumstantial evidence available on record to indicate that the defective rounds produced by the manufacturer were not scrap. Such circumstantial evidence referred by the Commissioner (Appeals) is the fact that the original manufacturing unit has shown more clearance of defective rounds than the prime quality rounds. There is otherwise no evidence to show that such excess cleared defective rounds were received by the present appellant. They may have received defective goods/scrap which was admittedly defective and was capable of melting in the furnace. In the absence of any evidence to the contrary. I find that the denial of Cenvat credit on the basis of the investigations conducted at the third party end cannot be adopted as the sole basis for denial of credit. - Decided in favour of assessee.

Summary

Issues Involved:
Denial of Cenvat credit based on investigations at the manufacturer's end.

Analysis:
The judgment revolves around the denial of Cenvat credit amounting to Rs. 1,28,148/- to the appellant due to alleged discrepancies in the receipt of inputs. The lower authorities based their decision on investigations conducted at the manufacturing unit of M/s. Aggarwal Steel Rolling Mills & Metal Industries, where it was found that defective CTD bars were being cleared as scrap, leading to the denial of credit. The Revenue contended that prime quality bars were disguised as defective, with corresponding melting scrap cleared under such invoices.

The appellate tribunal scrutinized the case, emphasizing that the Revenue's argument relied solely on investigations at the manufacturer's end. Despite the manufacturer clearing some scrap or defective goods, there was no evidence to suggest that the appellant did not receive the goods reflected in their records. The Commissioner (Appeals) noted circumstantial evidence indicating discrepancies in the clearance of defective rounds, but there was no proof that the excess cleared defective rounds were received by the appellant. The tribunal highlighted that denial of Cenvat credit based solely on third-party investigations was unjustified, especially when the appellant had utilized the goods in their final product manufacturing process.

In conclusion, the tribunal overturned the impugned order, ruling in favor of the appellant and granting them the appeal with consequential relief. The judgment underscores the importance of concrete evidence and direct linkage between the alleged discrepancies at the manufacturer's end and the denial of credit to the appellant. The decision serves as a reminder that denial of credit should be substantiated by clear evidence directly implicating the party seeking the credit, rather than relying on investigations conducted at a third party's premises.