2019 (4) TMI 1644 - AT - Central Excise

CENVAT credit - fake invoices - supply of cenvatable invoice to the appellant without actual supply of the goods - HELD THAT - The appellant has also asked for cross examination of Shri Amit Gupta and Shri Maggu which was denied by the adjudicating authority, which is in contravention of the provisions of Section 9(D) of the Excise Act as has held in the various case laws as mentioned in para 4 of above. We, therefore, find that the impugned order is not sustainable in the eyes of law. Further, the department has not taken any step to link the transaction with the supply of other raw materials required for the manufacture of the final product. Investigations also could not identify the finished goods by the appellant. The investigation has not been conducted in a manner so as prove the availment of ineligible Cenvat credit on the basis of invoices only, without receipt of the goods. We also find that as the manufacturer of the goods appellant has taken a due care and has received the good at the strength of invoice and payment of duty. Also, Driver of the truck was transported the goods has not been examined by the adjudicating authority and subjected to cross examination by the appellant. This also is against the provisions of Section 9(D)(i) of the Central Excise Act. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Availment of Cenvat credit without receipt of goods
2. Allegations of circular trading and ineligible credit
3. Denial of cross-examination and admissibility of evidence
4. Time-barred demand and lack of evidence for purchases
5. Compliance with Rule 9(3) of Cenvat Credit Rules

Issue 1: Availment of Cenvat credit without receipt of goods
The appellant, a manufacturer of iron/steel articles, faced allegations of wrongly availing Cenvat credit without receiving goods, contravening various rules. The investigation revealed circular trading by a dealer, leading to ineligible credit availment. The appellant argued that reliance on statements without cross-examination was improper, citing legal precedents. The Tribunal found the investigation lacking, emphasizing the appellant's due diligence in payment and record-keeping, following Rule 9(3) of Cenvat Rules. The order disallowing credit was deemed unsustainable.

Issue 2: Allegations of circular trading and ineligible credit
The case involved allegations of circular trading to avail ineligible Cenvat credit based on invoices without actual goods receipt. The appellant's reliance on banking channels for payments was highlighted, questioning the department's failure to link transactions with raw material supplies. The Tribunal noted the absence of evidence linking goods purchase, production, and sale, deeming the investigation insufficient to prove ineligible credit availment solely based on invoices.

Issue 3: Denial of cross-examination and admissibility of evidence
The appellant contested the denial of cross-examination of involved individuals, challenging the admissibility of their statements as evidence. Citing legal decisions, the appellant argued for the inadmissibility of unverified statements. The Tribunal agreed, emphasizing the importance of cross-examination and due diligence in assessing evidence, ultimately deeming the impugned order legally flawed.

Issue 4: Time-barred demand and lack of evidence for purchases
The appellant raised concerns about the time-barred demand and lack of evidence for purchases, arguing that statutory records were timely filed and scrutinized. The Tribunal noted the absence of evidence regarding cash transactions and other necessary inputs for production, questioning the department's failure to identify buyers or sellers. The demand for the period in question was deemed time-barred due to delayed issuance of the show cause notice.

Issue 5: Compliance with Rule 9(3) of Cenvat Credit Rules
The Tribunal emphasized compliance with Rule 9(3) of Cenvat Credit Rules, highlighting the appellant's diligence in payment, record-keeping, and reliance on legitimate transactions. Citing legal precedents, the Tribunal stressed the impracticality of burdening the appellant beyond reasonable diligence in dealing with suppliers. The impugned order was overturned based on the appellant's adherence to due diligence requirements and legal standards.