2016 (11) TMI 1279 - AT - Central Excise

CENVAT credit - bogus registered dealers - Held that - the department sought to deny Cenvat Credit to the appellants on the basis of fact that the registered dealer from whom the goods have been procured by the appellants found to be non-existent. It is not the case of the Department hat appellants have not received the goods. In fact no investigation has been conducted at the end of the appellants to ascertain they have received the goods or not. Revenue has not made any investigation at the end of the manufacturer supplier of the goods. No investigation was conducted at the transporter of the goods or at the premises of the appellants to reveal the truth. No cross examination of the registered dealer was granted to the appellants to reveal the truth. In these circumstances Cenvat Credit cannot be denied to the appellants on the basis of deficient investigation - appeal allowed - decided in favor of appellant.

Summary

Issues:
Appeal against demanding duty, interest, and penalty by denying Cenvat Credit on input procurement.

Analysis:
The case involved an appeal against orders demanding duty, interest, and penalty by denying Cenvat Credit on input procurement by the appellants. The appellants had procured pig iron from a registered dealer, who in turn had procured goods from a manufacturer of pig iron. An investigation revealed that the registered dealer was allegedly bogus, leading to a show cause notice to the appellants to deny Cenvat Credit. The appellants argued that they had received the goods, used them in manufacturing their final product, and had paid for them through legitimate means. They contended that the denial of Cenvat Credit solely based on the status of the registered dealer was unjustified, especially since no investigation was conducted at their end or at the end of the manufacturer or transporter. The appellants emphasized that they had followed the necessary procedures and should not be penalized due to deficiencies in the investigation process.

The lower authorities had upheld the denial of Cenvat Credit, reiterating the allegations against the registered dealer. However, upon hearing both parties and considering their submissions, the tribunal found that the department's attempt to deny Cenvat Credit solely on the grounds of the registered dealer's status was unfounded. The tribunal noted that there was no evidence to suggest that the appellants had not received the goods, and no thorough investigation had been conducted at various crucial points to verify the procurement and usage of the goods. The tribunal highlighted the lack of cross-examination of the registered dealer as a crucial gap in revealing the truth. Consequently, the tribunal set aside the impugned orders, allowing the appeals and granting consequential relief to the appellants.

In conclusion, the judgment emphasized the importance of a comprehensive investigation and due process before denying Cenvat Credit to appellants based on the status of a third-party supplier. The tribunal's decision underscored the need for proper verification of facts and adherence to procedural fairness in such cases to ensure that legitimate credit claims are not unjustly denied.