2019 (6) TMI 899 - AT - Central Excise

CENVAT Credit - fake invoices - It appeared to revenue that M/s Nidhi Auto availed inadmissible Cenvat credit of around ₹ 4.66 crores during the period from April, 2011 to January, 2015 without receipt of inputs on the basis of invoices issued by M/s Ruby Steels - HELD THAT - In the present case, the author of the diary recovered at the residence of the partner of M/s Ruby Steels was not identified and his statement was not recorded and therefore, the diary recovered was not admissible evidence. Further, it was also alleged that M/s Nidhi Auto was maintaining parallel ledgers whereas we find that M/s Nidhi Auto was maintaining two ledgers which was in the regular course of business and that the goods entered were tallying with the total quantity received by them in both the ledgers put together. Further, revenue could not exhibit any discrepancy of total inputs reflected in two ledgers put together with entries of inputs in RG-23 records. Further, the revenue has not investigated as to if 9112.500 MT of quantity of inputs shown in the books of account of M/s Ruby Steels were not delivered to M/s Nidhi Auto and only invoices were given then where did such huge quantity of inputs gone and to whom and who was the transporter. Further, revenue also did not investigate as to if 9112.500 MT of inputs were not received by M/s Nidhi Auto then from where M/s Nidhi Auto has procured inputs for manufacture of goods which were cleared on payment of duty. Impugned order not sustainable - Appeal allowed - decided in favor of appellant.

Issues Involved:
1. Validity of reliance on the diary seized from the residence of the partner of Ruby Steels.
2. Admissibility of statements and evidence without cross-examination.
3. Alleged fraudulent availment of Cenvat credit by M/s Nidhi Auto Pvt. Ltd.
4. Maintenance and accuracy of ledger accounts by M/s Nidhi Auto.
5. Investigation of the receipt and usage of inputs by M/s Nidhi Auto.

Issue-wise Detailed Analysis:

1. Validity of Reliance on the Diary Seized:
The appellants argued that reliance on the diary seized from the residence of the partner of Ruby Steels was contrary to the provisions of law since the author of the said diary was not identified, and his statement was not recorded. The diary, maintained only for 11 months, was used to raise a demand for 5 years, rendering the evidence insufficient and unreliable. The Tribunal observed that it is settled law that if the author of a diary is not identified and his statement is not recorded, such a diary is not admissible evidence. Therefore, the diary recovered was not admissible evidence.

2. Admissibility of Statements and Evidence Without Cross-Examination:
The appellants contended that cross-examination of the evidences was not allowed, which is contrary to the ruling by the Hon’ble Allahabad High Court in the case of Commissioner of Central Excise Vs Parmarth Iron Pvt. Ltd. The Tribunal noted that the Hon’ble Allahabad High Court held that if revenue does not allow cross-examination of any prosecution witness, then revenue cannot rely on the statement given by such prosecution witness for confirmation of demand. In this case, cross-examination of none of the prosecution witnesses was allowed, making the statements inadmissible evidence.

3. Alleged Fraudulent Availment of Cenvat Credit:
The revenue alleged that M/s Nidhi Auto was engaged in fraudulent availment of Cenvat credit without receipt of goods, based on invoices issued by M/s Ruby Steels and entered into ledger account at Sl. No.70. The Tribunal found that the Original Adjudicating Authority relied on few statements, two ledgers maintained by M/s Nidhi Auto, a diary recovered from the residence of a partner of M/s Ruby Steels, and transport details for five months. However, the Tribunal noted that the evidence was not sufficient to confirm the demand, as the statements were inadmissible, and the diary was not a reliable piece of evidence.

4. Maintenance and Accuracy of Ledger Accounts:
The appellants maintained that all goods entered in ledger accounts at Sl. No.69 and Sl. No.70 were actually received, and payments were made through RTGS and Cheques. The Tribunal observed that M/s Nidhi Auto was maintaining two ledgers in the regular course of business, and the goods entered were tallying with the total quantity received by them in both ledgers put together. The revenue could not exhibit any discrepancy in the total inputs reflected in the two ledgers put together with entries of inputs in RG-23 records.

5. Investigation of the Receipt and Usage of Inputs:
The appellants argued that the revenue failed to investigate the total inputs received by M/s Nidhi Auto and the source of inputs for manufacturing finished products if the alleged quantity of 9112.500 MT was not received. The Tribunal noted that the revenue did not investigate where the alleged quantity of inputs went if not delivered to M/s Nidhi Auto, who the transporters were, and who the purchasers were. Additionally, the revenue did not investigate the source of inputs used by M/s Nidhi Auto for manufacturing goods cleared on payment of duty. Therefore, the Tribunal found the impugned order unsustainable.

Conclusion:
The Tribunal set aside the entire impugned order and allowed all the appeals, granting consequential relief to the appellants as per law. The judgment emphasized the importance of admissible evidence, proper investigation, and the necessity of cross-examination in confirming demands and penalties.

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