2017 (5) TMI 1285 - AT - Central Excise

CENVAT credit - fake transaction - denial of credit on the ground that such dealers on enquiry, was found had not purchased any duty paid goods for trading and then in their statement to the Revenue, have admitted the fact - Held that - it is not the case of the Revenue that the appellant have not complied with the provisions of Rule 9(3) of CCR or have been negligent on their part - the alert circulars were issued much after the transaction had taken place - the appellant have discharged their onus under the scheme of the Act and the Rules and have taken credit on receipt of inputs along with duty paying documents. Once, it is demonstrated that reasonable steps had been taken, which is a question of fact in each case, it would be contrary to the rules to cast an impossible or impractical burden on the assessee - credit allowed - appeal allowed - decided in favor of appellant.

Summary

Issues:
Denial of Cenvat Credit on inputs purchased from dealers due to alleged fake invoices.

Analysis:
The appellant, a manufacturer of Bars and Rods of Iron and Steel, appealed against the denial of Cenvat Credit on inputs purchased from dealers who were found to have not purchased any duty paid goods for trading. The jurisdictional Commissioner received alert circulars regarding fake invoices issued by certain dealers, including those used by the appellant. The appellant provided evidence of receiving raw materials with proper documentation and transportation permits. The Additional Commissioner held the appellant liable for taking Cenvat credit on fake invoices, leading to a demand confirmation and imposition of penalties. The appellant's appeal before the Commissioner (Appeals) was rejected, upholding the demand and penalties.

The appellant argued that they had received goods with proper transport documents endorsed by tax authorities, making payments via account payee cheques, thus establishing the genuineness of the transactions. They cited a ruling by the Allahabad High Court in a similar case supporting their position on taking reasonable steps to ensure the legitimacy of transactions. The High Court's ruling emphasized the importance of the assessee's diligence in dealing with first stage dealers and the impracticality of requiring them to verify beyond the records maintained by such dealers.

The Tribunal found that the appellant had complied with Rule 9(3) of the Cenvat Credit Rules and had taken reasonable steps to verify the inputs received with duty paying documents. It noted that the alert circulars were issued after the transactions had occurred and that there was no evidence of the appellant using raw materials from other sources for manufacturing excisable goods. Relying on the findings of the Allahabad High Court and the Tribunal's previous rulings, the Tribunal allowed the appeal, setting aside the impugned order and granting the appellant consequential benefits.

In conclusion, the Tribunal held that the appellant had fulfilled their obligations under the Act and Rules by demonstrating the receipt of inputs along with proper duty paying documents. The decision emphasized the importance of assessing each case based on the facts presented and not imposing impractical burdens on the assessee. The appeal was allowed, overturning the demand and penalties imposed on the appellant.