2018 (7) TMI 1364 - AT - Central Excise

CENVAT Credit - fake invoices - it was alleged that Cenvat Credit availed on the strength of invoices issued by various raw material suppliers as they have fraudulently passed on the Cenvat Credit by issuing invoice only without actual supply of material. Held that - In the entire investigation the evidences which were brought on records are RTO reports according to which the vehicle number shown in invoices are not capable of transporting the heavy goods like inputs and the two transporters admission that the goods were not supplied to the appellant - Contrary to this evidences the fact that the appellant have recorded the receipt of the goods in their cenvat account i.e. RG-23A the purchase of the goods under the invoices in question were booked in books of accounts. The payment against the said invoices were made through cheque even the payment of transportation was also made by cheque. The Revenue could not bring any evidence that the goods covered under the invoices were diverted to any other place. It is also not the case of the department that the appellant have procured some unaccounted inputs to cover up the quantity of input shown in the invoices. The statement of managing director of the appellant company is exculpatory - The appellant have recorded the receipt of the goods in RG-23 part I register and payment of the same was made through cheque. The finished goods were cleared on payment of Central Excise duty. Transportation charges were also paid by account payee cheque and such payment was accounted for in the books of accounts. The clearances of all the goods from the suppliers premises was never disputed. The payment of transportation was made after deduction of TDS. All the suppliers affirmed the sale of goods and receipt of payments for such sale. There is no evidence that the inputs shown in the invoices received by the appellant were not used in the manufacture of final product. Department has not disputed the correctness of quantity manufactured by the appellant recorded in their daily stock account. The service tax payment in respect of transportation of goods also establish the transportation of goods - merely on the basis of the RTO reports it cannot be concluded that the inputs were not received by the appellant. The facts are established that the appellant have received the inputs in their factory used in the manufacture of final product and same was cleared on payment of duty - credit cannot be disallowed - appeal allowed - decided in favor of appellant.

Issues Involved:
1. Allegation of fraudulent availing of Cenvat Credit.
2. Validity of evidence based on RTO reports and transporter statements.
3. Discrepancy in vehicle numbers mentioned in invoices.
4. Evidence supporting actual receipt and use of inputs.
5. Applicability of previous judgments in similar cases.

Detailed Analysis:

1. Allegation of Fraudulent Availing of Cenvat Credit:
The appellant, M/s Grace Castings Ltd., was accused of availing Cenvat Credit fraudulently by using invoices from raw material suppliers without actual receipt of goods. The investigation revealed that vehicles mentioned in the invoices were incapable of transporting the goods, leading to the allegation that the credit was availed without actual receipt of inputs.

2. Validity of Evidence Based on RTO Reports and Transporter Statements:
The department's case relied heavily on RTO reports and statements from two transporters, M/s Jai Ambe Transport Co. and M/s Gurukrupa Roadways, who allegedly admitted that the goods were not transported. The appellant argued that the majority of evidence, including statements from other transporters and suppliers, was in their favor and that the department's reliance on limited evidence was insufficient for confirming the demand.

3. Discrepancy in Vehicle Numbers Mentioned in Invoices:
The investigation found that the vehicles listed in the invoices were not capable of carrying the goods. The appellant contended that discrepancies in vehicle numbers were possible in a small portion of transactions (less than 2% of total procurement) and that such minor errors should not lead to the conclusion that goods were not received.

4. Evidence Supporting Actual Receipt and Use of Inputs:
The appellant provided evidence that the goods were recorded in statutory records, payments were made through proper banking channels, and the inputs were used in manufacturing final products which were cleared on payment of duty. There was no evidence from the department to prove that the goods were not physically received or that unaccounted materials were used instead.

5. Applicability of Previous Judgments in Similar Cases:
The appellant cited several judgments where courts had ruled in favor of the assessees under similar circumstances. The department, however, relied on judgments like Gyscoal Alloys Ltd., where the High Court upheld the denial of credit based on RTO reports. The appellant argued that the facts in the present case were different, as there was no inculpatory statement from the director, no shortage of stock, and no evidence of financial flow-back.

Conclusion:
The Tribunal found that the appellant had recorded the receipt of goods in their cenvat account, made payments through cheques, and used the inputs in manufacturing final products. The department failed to provide substantial evidence to prove that the goods were not received. The Tribunal distinguished the present case from Gyscoal Alloys Ltd. by noting the absence of inculpatory statements and stock shortages. Consequently, the Tribunal set aside the impugned order and allowed the appeals, concluding that the appellant had indeed received the inputs and used them in their manufacturing process.

Pronouncement: The judgment was pronounced in the open court on 16.07.2018.

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