2018 (5) TMI 818 - AT - Central Excise

CENVAT credit - inputs - Clandestine removal - invoices were provided without supplying the goods - case of the department is solely based on the statements of Shri Amit Gupta and other transporters, for which no cross examination was provided - Held that - In the instant case, it appears that the appellant has availed the cenvat credit on the basis of such duty paying documents and cleared the goods manufactured on payment of duty, which was accepted by the department without any objection. As per the chart mentioned in the impugned order, the departmental officers expressed doubt about the genuineness of sales of the appellant company which is about 50% of the total turn over. Therefore, when the sales are genuine, then such genuine sales is possible only with genuine purchase of standard raw material - The allegation that appellant was procuring the same from the open market on cash basis, is not sustainable for the reason that the appellant has to maintain higher standard of quality to make major supplies either for export or to the companies which are operating in atomic energy, power, defence, oil refining etc. In the instant case, no physical verification of stock was done. No shortage of physical stock was identified. Regarding the allegation that payment was made through banking channel and was received back in cash is not sustainable for the reason that no cash was seized from the appellants premises. Department has made out a case of irregular availment of cenvat credit mainly based on the statement of Shri Amit Gupta and transporters, but no cross examination of the witnesses was provided to the appellants. One of the witnesses has retracted his earlier statement. Surprisingly, in the instant case, no inquiry was made from the customers of the appellant company. Appeal allowed - decided in favor of appellant.

Issues Involved:
1. Allegation of fraudulent availing of Cenvat credit by M/s. Multi Metals Ltd.
2. Non-receipt of goods against invoices.
3. Violation of principles of natural justice.
4. Alleged fictitious transportation charges.
5. Lack of physical verification of stock.
6. Allegation of cash transactions.
7. Non-provision of cross-examination.
8. Genuineness of suppliers and transactions.

Detailed Analysis:

1. Allegation of fraudulent availing of Cenvat credit by M/s. Multi Metals Ltd.:
The department alleged that M/s. Multi Metals Ltd. availed Cenvat credit on invoices without actual receipt of goods. The company was accused of procuring only invoices from dealers operated by Shri Amit Gupta, without accompanying goods, and using these invoices to cover up unaccounted purchases of cheaper raw materials from the open market.

2. Non-receipt of goods against invoices:
The department claimed that during the period 03.02.2016 to 04.02.2016, M/s. Multi Metals Ltd. procured invoices without receiving goods, made payments through banking channels, received the payments back in cash, and did not account for these transactions in their books. It was alleged that the transportation charges shown were fictitious, with LRs from defunct transporters and vehicle numbers of unrelated vehicles.

3. Violation of principles of natural justice:
The appellants argued that the department did not provide an opportunity for cross-examination of witnesses, including Shri Amit Gupta, which violated principles of natural justice. They cited several case laws to support their argument that statements without cross-examination have no evidentiary value.

4. Alleged fictitious transportation charges:
The department alleged that transportation charges were shown for goods that were never transported, using LRs from defunct transporters and unrelated vehicle numbers. The appellants argued that they were not responsible for transportation details as per their agreements, which were on an FOR basis.

5. Lack of physical verification of stock:
The appellants contended that the department did not carry out physical verification of raw materials and finished goods during their visit, implying that the physical inventory matched the accounting and inventory records.

6. Allegation of cash transactions:
The department alleged that payments made through banking channels were received back in cash, but the appellants argued that no cash was recovered from their premises during the search, and no corroborative evidence was provided to support this allegation.

7. Non-provision of cross-examination:
The appellants emphasized that the denial of cross-examination of witnesses, particularly Shri Amit Gupta, was a violation of natural justice. They relied on several judicial precedents to argue that statements without cross-examination are not admissible as evidence.

8. Genuineness of suppliers and transactions:
The appellants argued that they purchased goods from registered dealers, maintained proper accounts, and made payments through banking channels. They contended that the department should have verified the genuineness of suppliers and conducted inquiries with their customers. The appellants also highlighted that their products required high-quality raw materials, which could not be achieved using scrap from the open market.

Conclusion:
The Tribunal found that the department's case was primarily based on the statements of Shri Amit Gupta and transporters, without providing cross-examination. The Tribunal noted that no physical verification of stock was conducted, no cash was seized, and the appellants' records showed genuine transactions. The Tribunal concluded that the department's case was not sustainable legally or factually and set aside the impugned order, allowing all the appeals.

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