2017 (9) TMI 497 - AT - Central Excise

CENVAT credit - 4 Cranes along with parts of handling equipments installed in 1996, which were released by IDBI bank - time limitation - Section 11A of Central Excise Act, 1944 - the demand has been raised by the Department after four and half years after receiving the intimation under Rule 57 T - fraudulent invoices - suppression of facts - Held that - it is settled law that for availing Modvat credit, there are two prerequisites. The first, being acquisition of capital assets on payment of duty along with proper duty paying document and secondly the receipt of the particular capital goods in the factory of production - at the time of inspection, revenue found the presence of the 4 EOT cranes in the factory of respondents M/s ATV and also found the relevant invoices issued by the supplier namely M/s VEL. Further, the cranes were inspected and finalised by IDBI Bank Ltd. and in such case of bank finance as per the facts on record, the cranes were inspected by the authorized representative of the bank, prior to purchase and also after purchase and the receipt in the factory of the respondent M/s ATV and only on such conformation the bank could release the amount of finance to the supplier. The entire allegation of revenue is based on flow back of money to ATV. The said allegation is misconceived in as much as admittedly the 4 cranes in questions were leased by IDBI Bank and the ownership of the same vests with IDBI bank only. There is no finding that the bank have been involved in fraud in collusion with the company M/s ATV and its Directors/Managers. Further, the allegations are vague in absence of enquiry made against M/s VEL and no collusion with intent to defraud, established by the revenue. The whole allegation of the revenue is presumptive and hypothetical. M/s IDBI Bank has collected rental, interest, compensatory finance charges, costs and differences and other dues from respondent M/s ATV under the Lease Agreement, which has not been disbelieved by the Department. The Order-in-Original is bad and rightly set aside by the learned Commissioner (Appeals) on the finding that denial of cross examination, including examination of the persons, whose statements are relied upon by revenue in the course of adjudication proceedings, is violation of the provisions of Section 9D of the Act and as such the findings in the Order-in-Original are vitiated - there being no fraud established, the invocation of extended period of limitation is also untenable and the show cause notice is unsustainable. Appeal dismissed - decided against Revenue.

Summary

Issues Involved:
1. Entitlement to Cenvat credit on EOT cranes.
2. Allegation of fraudulent availing of Modvat credit.
3. Denial of cross-examination and principles of natural justice.
4. Validity of extended period of limitation for raising demand.

Detailed Analysis:

1. Entitlement to Cenvat Credit on EOT Cranes:
The primary issue revolves around whether the appellant is entitled to Cenvat credit of ?42,39,514/- on EOT cranes acquired during the Financial Year 1995-96. The Commissioner of Central Excise, Service Tax & Customs (Appeals), Lucknow, in Order-in-Appeal No. 26-28-CE/LKO/2006, held that the appellant was rightly entitled to this credit. The cranes were financed by IDBI and the payment was made directly to the supplier, M/s Vidiyani Engineers Ltd. (VEL).

2. Allegation of Fraudulent Availing of Modvat Credit:
The Revenue alleged that M/s ATV Projects India Ltd. fraudulently availed Modvat credit by showing receipt of cranes from VEL, which were actually manufactured by M/s ACME Manufacturing Company, Mumbai. During inspections, discrepancies were found in the documents, and it was alleged that the cranes were already installed in 1992 but shown to have been received in 1996 to claim Modvat credit. Statements from various individuals, including transport company partners and company officials, suggested that the documents were forged.

3. Denial of Cross-Examination and Principles of Natural Justice:
The Commissioner (Appeals) allowed the respondent's appeal on the grounds that the adjudicating authority denied the opportunity for cross-examination of individuals whose statements were relied upon. This denial was deemed a breach of natural justice. The Commissioner (Appeals) cited the Apex Court's decision in Arya Abhushan Bhandar Vs. UOI, which emphasized the importance of cross-examination for upholding natural justice. The denial of cross-examination rendered the inculpatory evidence suspect and unreliable.

4. Validity of Extended Period of Limitation for Raising Demand:
The Commissioner (Appeals) also found the demand time-barred under Section 11A of the Central Excise Act, 1944, as the Department raised objections four and a half years after receiving the intimation under Rule 57T. The intimation under Rule 57T(2) was properly given and acknowledged by the Department, indicating that the goods were received and the Department was aware of the receipt.

Conclusion:
The Tribunal upheld the Commissioner (Appeals)'s decision, dismissing the Revenue's appeal. The Tribunal confirmed that the respondent was entitled to the Cenvat credit as the cranes were found in the factory, and the relevant invoices were present. The Tribunal also emphasized the importance of cross-examination in ensuring natural justice, and the denial of the same vitiated the Order-in-Original. Additionally, the invocation of the extended period of limitation was found untenable, making the show cause notice unsustainable. The respondents-assessee were entitled to consequential benefits in accordance with the law.