2016 (10) TMI 611 - AT - Central Excise

Denial of CENVAT credit - demand of duty with interest - imposition of penalties - dealer found to be non-existent at the time of investigation - Held that - the cenvat credit cannot be denied to the assessee merely, on the ground that at the time of investigation, the dealer was non-existent. In fact when the goods were procured by the assessee, the dealer was registered with the department. CENVAT credit on the basis of investigation conducted at the third party cannot be denied to the appellants - appeal allowed - decided in favor of appellant.

Summary

Issues:
Appeal against denial of cenvat credit on inputs received from a dealer; Allegation of engaging in paper transactions without receiving goods; Confirmation of duty demand and interest; Imposition of penalties.

Analysis:
The appellants, engaged in manufacturing Iron & Steel Products, appealed against impugned orders denying cenvat credit on inputs received from a dealer, M/s Sidh Balak Enterprises. An investigation revealed the dealer was non-existent and lacked storage capacity. Show cause notices alleged paper transactions without goods receipt. Adjudication resulted in cenvat credit denial, duty demand, interest, and penalties. The appellant contended no investigation or documents supported the denial, citing precedents where cenvat credit denial was rejected due to lack of investigation at the manufacturer's end. The AR upheld the impugned orders.

Upon hearing submissions, the tribunal referred to a similar case involving M/s Accurate Auto Product Ltd. where cenvat credit was denied due to a non-existent dealer. However, the tribunal differentiated the present case as the appellants had storage capacity, unlike the precedent. Citing relevant case laws, the tribunal held that without investigation at the manufacturer's end, cenvat credit cannot be denied. As the dealer was registered when goods were procured, the denial lacked merit. Consequently, the tribunal dismissed the revenue's appeal and allowed the appellant's appeal, setting aside the impugned orders and granting consequential relief.

In conclusion, the tribunal ruled that cenvat credit based on third-party investigations cannot be denied to the appellants. Therefore, the impugned orders were set aside, and the appeals were allowed with any consequential relief.