2017 (5) TMI 643 - AT - Central Excise

CENVAT credit availed fraudulently on the basis of bills of entry - it was alleged on the basis of statements that Bills of Entry were diverted to purchasers who did not avail CENVAT facility. These bills of Entry were given to appellant and others to facilitate the availment of credit without receipt of goods - Held that - the appellants have produced the lorry receipt and weighment slips to show receipt of goods in the factory besides entries in RG-23 register to show that such goods have been received in the factory - Apart from, such statements which have been retracted or contradicted there is no iot of evidence to establish that the appellants indulged in fraudulent availment of CENVAT credit - reliance was placed in the case of M/s Akshay LPG Valves, V.K. Janaki Ram, M/s Jagadamba Engineering (P) Ltd., V.K. Janaki Ram Versus The Commissioner C & C.E, Hyderabad 2016 (6) TMI 762 - CESTAT HYDERABAD - appeal allowed - decided in favor of appellant.

Summary

Issues: Alleged irregular CENVAT credit availed without receipt of goods, retraction of statements, lack of corroborative evidence, proper maintenance of statutory records, burden of proof on Revenue.

Issue 1: Alleged irregular CENVAT credit availed without receipt of goods
The case revolved around the appellants, manufacturers of LPG Valves, who were accused of irregularly availing CENVAT credit without actual receipt of goods into their factory. The investigation by DGCEI led to a show cause notice alleging a contravention of CENVAT Credit Rules. The original authority confirmed the demand and penalties, which were partially upheld by the Commissioner (Appeals). The main evidence relied upon was statements by the Managing Partner of the appellant firm, which were later retracted, alleging physical coercion during their recording. The Department contended that goods were diverted, and the appellants did not receive the imported raw materials, while the appellants presented lorry receipts, weighment slips, and RG-23 records to prove receipt of goods.

Issue 2: Retraction of statements and lack of corroborative evidence
The statements crucial to the case, including those of the Managing Partner and the alleged mastermind, were retracted during cross-examination. The Department's case heavily relied on these statements, which lacked corroboration through other evidence. The Tribunal had previously analyzed similar evidence in related appeals and emphasized the importance of corroborative evidence over retracted confessional statements. The appellants highlighted the absence of corroborative evidence, emphasizing the necessity of proper documentation and statutory records to counter allegations based on retracted statements.

Issue 3: Proper maintenance of statutory records and burden of proof on Revenue
The Tribunal noted the appellants' production of statutory records, weighment slips, and other documentation to support the receipt of goods in their factory. The appellants argued that in the absence of corroborative evidence, credit denial based solely on confessional statements was unjustified. They pointed out the lack of inquiry into the transportation of goods and the absence of statements from truck drivers. The burden of proof was deemed to rest heavily on the Revenue, especially when statutory records were in order, final products were manufactured and cleared with duty payment. The Tribunal ultimately found the Revenue had failed to substantiate the allegations in the show cause notice, leading to the allowance of the appeals.

In conclusion, the judgment centered on the failure of the Department to establish the alleged irregularities in availing CENVAT credit by the appellants. The retraction of crucial statements, lack of corroborative evidence, proper maintenance of statutory records, and the burden of proof on the Revenue were pivotal in the Tribunal's decision to allow the appeals and provide consequential reliefs.