2019 (1) TMI 316 - AT - Central Excise

Clandestine removal - MS Scrap - absence of any evidence regarding illicit activities - Held that - No statements of either the MD or any other person were made available for us to weigh in the light of the arguments advanced by the Ld. Advocate. Nor is there any statement of dealers or office clerks. Further, on going through the Order-in-Original as well as the impugned Order-in-Appeal, we do not find any plea of the appellants herein making out a case that the uncorroborative statements have been used which should not have been done - It is not the case of the appellants that they sought for cross-examination and that the same was denied. The bona fides of the appellant have not been disproved and even the statements of the very employees of the appellant confirm that what they received was MS scrap. On a perusal of the analysis of various statements recorded in the Show Cause Notice as well as the Order-in-Original, we find that nothing is apparently put across to the deponents about the bogus invoice raised by M/s. SIT with the description as MS Wires/Coils . The Department has not been able to sufficiently prove its allegations nor there is any solid documentary evidence in support of its allegations - the allegations having not been proved satisfactorily, the demand cannot sustain - appeal allowed - decided in favor of appellant.

Summary

Issues: Alleged wrongful availing of CENVAT Credit based on fictitious documents.

Analysis:
1. The case involved allegations of the appellants availing CENVAT Credit wrongly on inputs using fictitious documents from a Second Stage Dealer (M/s. SIT).
2. The officers visited the appellants' premises and found discrepancies in the description of goods purchased and sold by M/s. SIT, indicating possible misuse of CENVAT Credit.
3. The appellants were accused of purchasing scraps but availing credit for MS Wires/Coils, leading to suspicion about the transactions' genuineness.
4. The Revenue alleged that the appellants availed significant amounts of credit based on invoices from M/s. SIT, which were thoroughly scrutinized.
5. A Show Cause Notice was issued proposing recovery of ineligible CENVAT Credit, along with penalties, based on evidence and statements gathered during the investigation.
6. The Order-in-Original ordered recovery of CENVAT Credit and penalties, which the appellants challenged through appeals.

Legal Arguments:
1. The appellants argued that they followed all rules, received raw materials, and utilized inputs without dispute, questioning the reliance on uncorroborated statements.
2. They contended that the statements lacked specific admissions, and all dealers were registered, supplying goods as per purchase orders, while the appellants regularly filed returns with all CENVAT documents.
3. The Managing Director denied the allegations, challenging the basis for imposing penalties under the Central Excise Rules.
4. The Revenue supported the lower authorities' findings, emphasizing the evidence gathered during the investigation.

Judgment:
1. The Tribunal noted the absence of statements from key individuals for evaluation, highlighting the lack of specific findings on the appellants' contentions.
2. The appellants did not request cross-examination, unlike in a referenced case where dealers retracted statements post cross-examination.
3. Statements from the Chief Chemist and Purchase Officer of the appellant indicated proper testing and receipt of scraps, contradicting the Revenue's allegations.
4. The adjudicating authority's conclusions were based on insufficient evidence, with no solid documentary support for the allegations.
5. Consequently, the Tribunal found the Department failed to prove the allegations satisfactorily, leading to setting aside the demand and the impugned Order, allowing the appeals with consequential benefits.

This comprehensive analysis outlines the issues, legal arguments, and the Tribunal's judgment regarding the alleged wrongful availing of CENVAT Credit based on fictitious documents.