2018 (5) TMI 290 - AT - Central Excise

Time limitation - CENVAT credit - 1st stage dealer found to be non-existent - case of the department is that since M/s. Ganapati Udyog (1st stage dealer) was non-existent therefore the goods were not supplied by M/s. SGR Steels Pvt. Ltd. Consequently the said goods were also not supplied to the appellant, accordingly the cenvat credit was denied. Held that - From the facts, it is cleared that the appellant was absolutely unaware about any fraud or non-existent of M/s. Ganapati, Udyog the 1st stage dealer. Therefore the appellant have made a purchase of inputs which was found to be bonafide transaction - The supplier of the appellant was very much existent and the sale of the goods by the 2nd stage dealer to the appellant was neither disputed on the part of the appellant nor on the part of M/s. SGR Steels Pvt. Ltd. It cannot not be alleged that the appellant was indulged into fraud, collusion, willful misstatement, mis-declaration, suppression of etc. - demand is barred by limitation. The appeal is allowed on limitation without going into the aspect of issue.

Summary

Issues:
1. Denial of cenvat credit based on non-existent 1st stage dealer.
2. Appellant's contention of bonafide transaction and lack of involvement in fraud.
3. Invocation of extended period for demand.
4. Admissibility of cenvat credit based on supplier's authenticity.

Analysis:
1. The appeal challenged the rejection of cenvat credit by the Learned Commissioner (Appeals) due to the non-existence of the 1st stage dealer, M/s. Ganapati Udyog, from whom the goods were supposedly sourced indirectly through M/s. SGR Steels Pvt. Ltd. The department contended that since the 1st stage dealer did not exist, the goods were not supplied, leading to the denial of cenvat credit.

2. The appellant argued that they were unaware of any fraud or non-existence of the 1st stage dealer. They emphasized their legitimate dealings with the 2nd stage dealer, M/s. SGR Steels Pvt. Ltd., and asserted that the transaction was bona fide. The appellant maintained that they were not involved in any fraudulent activities and should not be penalized for the actions of the non-existent 1st stage dealer.

3. The appellant further contended that the extended period for demand was wrongly invoked, as there was no evidence of fraud, collusion, suppression of facts, or mis-declaration on their part. They argued that the demand was time-barred, as the show cause notice was issued after the normal period of one year for the period of credit taken in August 2010 to October 2010.

4. Upon review, the Tribunal found that while the 1st stage dealer was non-existent, the appellant's transactions with the 2nd stage dealer, M/s. SGR Steels Pvt. Ltd., were legitimate and undisputed. The Tribunal noted that the appellant had no involvement in any fraudulent activities and had conducted their purchases in good faith. The Tribunal distinguished the present case from the judgments cited by the Revenue, as in those cases, the supplier was non-existent, unlike the situation in the present case where the appellant's supplier was genuine. Consequently, the Tribunal ruled in favor of the appellant, setting aside the demand on grounds of limitation without delving into the substantive issues.

In conclusion, the Tribunal allowed the appeal, emphasizing the lack of fraudulent intent on the part of the appellant and the absence of grounds for invoking the extended period for demand, ultimately ruling in favor of the appellant based on the limitation aspect.