2018 (5) TMI 380 - AT - Central Excise

CENVAT credit - receipt of goods from first state dealer who obtained the goods from a person not having manufacturing facility - Whether in the facts and circumstance of the case and evidences placed on record, Member (Judicial) is correct in holding that the appellant namely M/s. JSL Stainless Limited has correctly taken Cenvat credit on the invoices issued by M/s. National Udyog and therefore, proceedings against the appellant are not sustainable? - Difference of opinion - majority order. Held that - the show cause notice is silent on the investigation in respect of the documents on the basis of which the appellant have availed Cenvat credit which was sought to be denied by Revenue, and that Revenue have not carried out any investigation regarding the goods which were transported from M/s National Udyog Limited to the appellant. The show cause notice is silent on the name of the manufacturer who supplied the said goods to the first stage dealer which were intern received by the appellant - The said show cause notice only discussed about the transaction between M/s. AIP Industries Limited and M/s. National Udyog. M/s. National Udyog is first stage dealer and any first stage dealer is not required to receive the goods only from one manufacturer. Had there been any investigation establishing that the inputs on which Cenvat credit was availed, as entered in the invoices issued by the first stage dealer, were the same goods which were involved in the investigation about the transaction between M/s AIP Industries and M/s National Udyog, then only this show cause notice could have sustained. In the present case, the assessee is found to have duly acted with all reasonable diligence in its dealings with the first stage dealer - the ruling in the case of CCE vs. Juhi Alloys Limited 2014 (1) TMI 1475 - ALLAHABAD HIGH COURT squarely applies to the present case, where it was held that Admittedly, in the present case, the assessee was a bona fide purchaser of the goods for a price which included the duty element and payment was made by cheque. The assessee had received the inputs which were entered in the statutory records maintained by the assessee, credit remains allowed. In view of the majority decision the appeals are allowed.

Summary

Issues Involved:
1. Entitlement of M/s. JSL Stainless Ltd. to avail Cenvat Credit on goods supplied by M/s. National Udyog and M/s. Ridhi Sidhi Alloys Pvt. Ltd.
2. Validity of penalties imposed on M/s. National Udyog, M/s. Ridhi Sidhi Alloys Pvt. Ltd., and individuals associated with these entities.

Issue-Wise Detailed Analysis:

1. Entitlement of M/s. JSL Stainless Ltd. to avail Cenvat Credit:

Goods Supplied by M/s. Ridhi Sidhi Alloys Pvt. Ltd.:
The Tribunal found that M/s. Ridhi Sidhi Alloys Pvt. Ltd. is a manufacturer of copper nickel alloys ingots, which were received by M/s. JSL Stainless Ltd. The duty on these goods was paid by M/s. Ridhi Sidhi Alloys Pvt. Ltd., and this fact was not disputed by the Revenue. The Tribunal concluded that M/s. JSL Stainless Ltd. is entitled to avail Cenvat Credit on these goods as the goods were received with duty-paying documents.

Goods Supplied by M/s. National Udyog:
The Tribunal examined whether M/s. JSL Stainless Ltd. could avail Cenvat Credit on goods supplied by M/s. National Udyog. The Revenue argued that M/s. AIP Industries, the original supplier, did not have the manufacturing capacity to produce the goods in question, and the goods were not transported as claimed. However, M/s. JSL Stainless Ltd. provided evidence of receipt of goods, payment through account payee cheques, and entry of goods in their records.

The Tribunal referred to previous judgments, including CCE Vs. Juhi Alloys Ltd. and CCE Vs. Ridhi Sidhi Alloys Pvt. Ltd., which established that as long as the recipient of the goods has taken reasonable steps to verify the duty-paid nature of the goods, Cenvat Credit should not be denied. The Tribunal found that M/s. JSL Stainless Ltd. acted with due diligence and received the goods with proper documentation, thus entitling them to avail Cenvat Credit.

2. Validity of Penalties:

Penalties on M/s. National Udyog and Individuals:
The Tribunal examined the penalties imposed on M/s. National Udyog, Shri Ram Kishan Gupta (Vice-President of M/s. JSL Stainless Ltd.), and Shri Jagdish Jindal (Partner of M/s. National Udyog). The Tribunal found that the evidence against M/s. National Udyog was based on the non-existence of manufacturing facilities at M/s. AIP Industries and the lack of transportation records. However, the Tribunal noted that the investigation did not conclusively prove that the goods were not received by M/s. JSL Stainless Ltd.

The Tribunal also referred to the judgment in Mini Steel Traders, which held that penalties under Rule 26 (2) of the Cenvat Credit Rules, 2002, could not be imposed for actions prior to the amendment on 01.03.2007. Therefore, the penalties imposed on M/s. National Udyog, Shri Ram Kishan Gupta, and Shri Jagdish Jindal for the period before 01.03.2007 were not sustainable. However, for the period after 01.03.2007, the Tribunal upheld the penalties under Rule 26 (2) for their role in facilitating the fraudulent availment of Cenvat Credit.

Majority Decision:
The majority decision, including the opinion of the third member, concluded that M/s. JSL Stainless Ltd. had correctly taken Cenvat Credit on the invoices issued by M/s. National Udyog and M/s. Ridhi Sidhi Alloys Pvt. Ltd. The appeals were allowed, and the penalties imposed were set aside for the period before 01.03.2007 but upheld for the period after 01.03.2007.

Conclusion:
The Tribunal allowed the appeals filed by the appellants, holding that M/s. JSL Stainless Ltd. was entitled to avail Cenvat Credit on the goods supplied by M/s. National Udyog and M/s. Ridhi Sidhi Alloys Pvt. Ltd. The penalties imposed on M/s. National Udyog and individuals associated with it were partially set aside, with penalties upheld only for the period after 01.03.2007.