2018 (9) TMI 1580 - HC - Central Excise

CENVAT credit - inputs - Whether adverse inference could have been drawn by the Appellate Tribunal against the appellant for denying Cenvat credit of ₹ 5,89,667/in respect of 12 invoices when the appellant has received duty paid inputs under 4,686 invoices during the period in question involving Cenvat credit of ₹ 27,32,17,300/for which no dispute at all been raised by the Revenue; and similar dispute raised by the Revenue for 76 invoices involving Cenvat credit of ₹ 39,76,922/has also been rejected by the Appellate Tribunal? Held that - The assessee was not able to establish the actual movement of the goods. When the RTO report strongly suggested that the vehicles in which the goods were stated to have been transported were incapable of doing so, the burden would be on the assessee to dislodge these primary findings particularly when the report of the RTO was not challenged. The assessee s stand that it had merely ordered goods on FOR value and therefore was not obliged to explain the manner of transportation is too simplistic in background of facts on record. When RTO report as it remained unexplained by the suppliers of the goods clearly establish that the goods could not have been transported in the vehicle stated to have been done, the assessee called a greater explanation. The conclusions of the Tribunal are not based on drawing presumptions or adverse inference even though the Tribunal has fleetingly so stated. The findings are based on evidence suggesting no movement of goods. Secondly, the quality cannot be claimed in negative - appeal dismissed.

Summary

Issues:
1. Denial of Cenvat credit to the appellant for specific invoices.
2. Justification of the Appellate Tribunal's decision regarding denial of Cenvat credit.
3. Legality of penalties imposed on the appellant.

Analysis:

Issue 1: Denial of Cenvat credit to the appellant for specific invoices
The appellant, a manufacturer, appealed against the Incometax Appellate Tribunal's judgment denying Cenvat credit for specific invoices. The Tribunal found discrepancies in the transportation details of goods received by the appellant from two suppliers. The RTO report indicated that the vehicles mentioned in the invoices were incapable of carrying the stated quantity of goods. Statements from suppliers' representatives failed to provide satisfactory explanations for the inconsistencies. The Tribunal concluded that the goods were not physically received by the appellant, leading to the denial of Cenvat credit. The Tribunal's decision was based on factual evidence and the appellant's inability to refute the primary findings, as highlighted in the judgment of Gyscoal Alloys Ltd. vs. CCE.

Issue 2: Justification of the Appellate Tribunal's decision regarding denial of Cenvat credit
The High Court upheld the Tribunal's decision, emphasizing that the issue was fact-based. Both the Revenue authorities and the Tribunal concurred that the transactions were non-existent, and the appellant failed to prove the actual receipt of goods. The RTO report, unchallenged by the appellant, supported the conclusion that the goods could not have been transported as claimed. The appellant's argument that it was not responsible for the transportation as goods were ordered on FOR basis was deemed insufficient in light of the evidence. The Court stressed that the burden was on the appellant to counter the primary findings, especially when the RTO report and supplier statements indicated discrepancies.

Issue 3: Legality of penalties imposed on the appellant
The appellant contended that the Tribunal's decision was based on presumptions, but the Court disagreed, stating that the findings were grounded in evidence of no goods movement. The Court clarified that it would not entertain an appeal solely based on the Tribunal's differing approach in other cases. Ultimately, the tax appeal was dismissed, affirming the Tribunal's decision to deny Cenvat credit and uphold the penalties imposed on the appellant.

In conclusion, the High Court's judgment upheld the Tribunal's decision, emphasizing the factual basis of the case and the appellant's failure to substantiate the receipt of goods, leading to the denial of Cenvat credit and imposition of penalties.