2019 (4) TMI 434 - AT - Central Excise

CENVAT Credit - denial on the ground that inputs have not been received in the factory of the appellant - Held that - Apart from the statement of transporter, no corroborative evidence has been produced by the Revenue. The said statement has not been examined in chief, therefore, the statement of the transporter cannot be relied without examination in chief of the same by the appellants - further it is noticed that the investigation and the matter was started in the year 1999 and thereafter the show cause was notice issued in 2002. After lapse of 17 years, if the matter is remanded to the adjudicating authority that will not serve the purpose - the credit cannot be denied to the appellant. Clandestine removal - it was alleged that there was receipt of the inputs without cover of the invoices and non-accountal of the goods in the statutory records and the same were used in manufacturing of final goods which were cleared clandestinely - Held that - No evidence has been produced by the Revenue to allege clandestine manufacture/removal of the goods how the goods were manufactured or from where the other raw materials were procured and how clandestine manufacture goods were transported and how the payment on the said goods have been received. In the absence of any corroborative evidence, except the statement of the transporter whose cross examination has not been granted, therefore, denial of cross examination is in the gross violation of the principles of natural justice, the allegation of clandestine removal of the goods is not sustainable - the demand on account of clandestine removal of the goods is not sustainable. This was a majority decision and in view of majority decision, it is held that the credit cannot be denied to the appellant and no demand can be confirmed against the appellant on account of clandestine removal of the goods. Appeal allowed - decided in favor of appellant.

Issues Involved:
1. Denial of credit on inputs received from Chemplast Sanmar.
2. Denial of credit on inputs imported and received from the head office.
3. Denial of credit on inputs transported in own vehicles.
4. Demand of duty on the ground of alleged clandestine removal of final products.

Detailed Analysis:

Issue 1: Denial of Credit on Inputs Received from Chemplast Sanmar
The appellants contested the denial of credit amounting to ?10,29,387 on PVC resin purchased from Chemplast Sanmar. The adjudicating authority held that the transporters’ lorry receipts were fictitious, suggesting the inputs were not received. The appellants argued that the goods were physically received and entered in their records, supported by gate registers, freight bills, and RG 23A Part I register. The transporter’s cross-examination confirmed the delivery. The appellants cited several case laws, including *Neepez Steels Ltd.* and *Pioneer Industries*, to support their contention that credit cannot be denied based on uncorroborated transporter statements. The Tribunal found that no corroborative evidence was presented by the Revenue, and the denial of cross-examination violated principles of natural justice, thus setting aside the demand.

Issue 2: Denial of Credit on Inputs Imported and Received from Head Office
The denial of credit amounting to ?9,17,570 on imported PVC resin was based on the claim that the inputs were not received by the appellant. The appellant provided documentation, including gate registers and RG 23A Part I register, to prove physical receipt. The Tribunal noted that the adjudicating authority denied the cross-examination of the relevant witness, thus violating the principles of natural justice. Consequently, the Tribunal ruled that the credit could not be denied.

Issue 3: Denial of Credit on Inputs Transported in Own Vehicles
The credit of ?1,15,212 was denied on the ground that the inputs transported in the appellant’s own vehicles were not received. The appellant argued that the inputs were indeed received and accounted for in their records. The Tribunal found that the evidence provided by the appellant, such as gate registers and payment records, was sufficient to prove receipt of the inputs. Therefore, the denial of credit was not justified.

Issue 4: Demand of Duty on Alleged Clandestine Removal of Final Products
The demand of ?33,69,797 was based on the allegation of clandestine removal of goods, supported by transporter documents. The appellant argued that the transporter’s statement was unreliable and that no corroborative evidence was provided by the Revenue. The Tribunal noted that the cross-examination of the transporter was denied, which is a gross violation of natural justice. The Tribunal found that the Revenue failed to provide evidence of clandestine manufacture or removal, such as procurement of raw materials or receipt of payment. Therefore, the demand was based on assumptions and was set aside.

Separate Judgments Delivered:
- Majority Decision: The majority held that the credit could not be denied and no demand could be confirmed on account of clandestine removal. The appeals were allowed with consequential relief.
- Dissenting Opinion: One member suggested remanding the matter back to the adjudicating authority for fresh adjudication following the provisions of Section 9D of the Central Excise Act, 1944, arguing that it would be in the interest of justice to give the adjudicating authority a chance to comply with the procedural requirements.

Final Order:
In view of the majority decision, the impugned order was set aside, and the appeals were allowed with consequential relief, if any.

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