2019 (2) TMI 1172 - AT - Central Excise

CENVAT Credit - fake invoices - no physical delivery of goods - demand based on third party evidence - appellant s specific submission that due to the purchase being made on FOR basis that no freight was paid by the appellant and no GR was generated as such the said document is not available with them - Held that - The Commissioner(Appeals) is still of the opinion that the requisite document as that of the purchase of the raw material by the appellant from M/s UAPL has not been produced on record. Rather perusal of the order makes it clear that the Department has acknowledged about appellant making payment to M/s UAPL against the aforesaid invoices. The documents on record shows that the inputs as received by appellant were first purchased by M/s UAPL from M/s Moral Alloys based at Bhiwadi and the GR in that respect were also produced on record. The Order under challenge has ignored those GRs. There is nothing apparent in the Order about the vehicle nos. mentioned on the said GRs - There is no other evidence on record to support the finding that the vehicle nos. as mentioned in the invoices issued by Shri Amit Gupta were LPG tankers, JCP Machines, auto richshaw rather perusal of the invoices issued by Shri Amit Gupta shows that no vehicle No. is mentioned on those invoices. The findings are based upon the third party evidence without even giving the opportunity to the appellant to confront the evidence recovered from a third party, but against the appellant. The opportunity of cross examination is given under the law as a means of fair trial because it is cross examination only vide which the party gets the opportunity to confront the evidence produced against it. In absence of such opportunity specifically the denial thereof is sufficient to hold that opportunity of fair trial has been denied to the appellant - finding of Commissioner(Appeals) holding that there are clinching evidences to prove the alleged fault of the appellant and that there is no evidence of the appellant in support of defence are actually the findings based on mere presumptions and surmises. Invocation of sub rule 4 of Rule 7 of Cenvat Credit Rules, 2002 - Held that - The appellant has submitted enough document to discharge the liability as fixed under the above said Rule. As already observed that the findings of Commissioner(Appeals) are in ignorance of the documentary evidence, there arises no reason for invoking the said Rule especially when the demand against the appellant has been confirmed merely on the basis of the oral statement of a third party which received no corroboration from any document as received by the Department from appellant premises. Appeal allowed - decided in favor of appellant.

Summary

Issues: Allegations of wrong availment of cenvat credit, denial of opportunity to confront third party evidence, limitation period for SCN, reliance on third party evidence, onus of proving cenvat credit admissibility, evasion of duty, malafide intent, applicability of proviso to Section 73(3) of Central Excise Act, 1944.

Allegations of Wrong Availment of Cenvat Credit:
The case involved the appellant, engaged in manufacturing High Crome Grinding Media Balls and Alloy Steel Castings, facing allegations of wrong availment of cenvat credit based on specific intelligence from officers of DGCEI. The Department alleged that the appellant received non-ferrous alloy from a supplier without physical delivery of goods, leading to a proposed recovery of wrongly availed cenvat credit. The initial order confirmed this proposal, which was upheld by the Commissioner(Appeals) in the subsequent order-in-appeal.

Denial of Opportunity to Confront Third Party Evidence:
The appellant argued that the allegations were based on third-party evidence, and they were not provided with an opportunity to confront or cross-examine the witnesses supporting the recovery proposed against them. They submitted documentary evidence, such as RG-3 register, ledger accounts, and bank statements, to prove the purchase of raw materials from the supplier. The appellant contended that the findings against them were erroneous, relying on third-party evidence without considering the documents they provided. They also claimed that the show-cause notice (SCN) was time-barred.

Reliance on Third Party Evidence and Onus of Proving Cenvat Credit Admissibility:
The Department emphasized that the investigation revealed invoices issued without actual delivery of goods, indicating a discrepancy in the transportation details. The Commissioner(Appeals) held that the appellant failed to produce essential documents regarding the purchase of raw materials, despite acknowledging payments made to the supplier. The appellant's explanation of not having certain documents due to the nature of the purchase was not considered. The findings were based on third-party evidence without granting the appellant an opportunity to confront it, raising concerns about fair trial procedures.

Evasion of Duty, Malafide Intent, and Applicability of Proviso to Section 73(3) of Central Excise Act, 1944:
The Tribunal observed that the appellant had cleared final products using the purchased raw materials after paying excise duty, indicating no evasion of duty or malafide intent. The Department's invocation of the proviso to Section 73(3) of the Central Excise Act, 1944, was deemed inappropriate, as the SCN proposing a demand for a specific period was held to be time-barred. Consequently, the Order confirming the demand, interest, and penalty was set aside, and the Appeal was allowed.

This comprehensive analysis of the judgment highlights the legal intricacies, procedural irregularities, and substantive findings that led to the Tribunal's decision in favor of the appellant, addressing each issue raised in the case.