2019 (8) TMI 870 - AT - Central Excise

Clandestine manufacture ad removal - suppression of production of clandestine removal of goods without issue of any invoice - shortage of stock - allegation based on differences between stock statement submitted with the bank and statutory record - no corroborative evidences - opportunity of cross-examination not granted - HELD THAT - In the case of BEEKAYLON SYNTHETICS VERSUS COMMISSIONER OF C. EX., SURAT/MUMBAI 2003 (8) TMI 108 - CESTAT, NEW DELHI , time and again the Tribunal observed that bank statement by itself cannot be the basis for holding that there was undervaluation for clandestine removal - thus, on the basis of differences between the stock statement furnished to the bank and statutory record cannot be the reason to allege the clandestine removal of goods in the absence of any corroborative evidence - Further, no opportunity of cross-examination was granted to the appellant to adduce evidence - demand of duty not sustainable. CENVAT Credit - denial on the ground of non payment for procurement of the input - Rule 3 of Cenvat Credit Rules, 2004 - HELD THAT - In terms of Rule 3 of Cenvat Credit Rules, 2004 an assessee is entitled to avail cenvat credit on receipt of the inputs. It is immaterial where assessee paid the amount to supplier of the inputs or not - Merely, the appellant did not pay amount towards supply of inputs to the appellant and in the absence of any contrary evidence, the cenvat credit cannot be denied to the appellant. The penalties imposed on all the appellants are also set aside. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Allegation of clandestine removal of goods and denial of cenvat credit.
2. Discrepancy in stock statement submitted to the bank and statutory records.
3. Non-payment for procurement of inputs as a reason to deny cenvat credit.

Issue (a):
The appellant contested the show cause notice alleging that discrepancies between the stock statement submitted to the bank and statutory records were due to seeking higher financial limits and not clandestine removal of goods. Citing relevant case laws, the appellant argued that the Revenue failed to establish a link between the alleged discrepancies and clandestine activities. The Tribunal emphasized the need for proper investigation and evidence to support allegations of clandestine activities. It was held that differences in stock statements alone cannot be the basis for alleging clandestine removal without corroborative evidence. Lack of opportunity for cross-examination further weakened the Revenue's case, leading to the conclusion that the demand of duty was not sustainable.

Issue (b):
Regarding the denial of cenvat credit due to non-payment for procurement of inputs, the Tribunal referred to Rule 3 of Cenvat Credit Rules, 2004, which entitles an assessee to avail cenvat credit upon receipt of inputs, irrespective of payment to the supplier. The Tribunal emphasized that the absence of payment for inputs does not automatically warrant denial of cenvat credit unless contrary evidence is presented. As no such evidence was provided, the Tribunal ruled in favor of the appellant, holding that the denial of cenvat credit was unjustified. Consequently, the impugned order was set aside, and the appeals were allowed with consequential relief. Penalties imposed on the appellants were also revoked.

This judgment highlights the importance of substantiating allegations with concrete evidence and ensuring procedural fairness in tax disputes. It underscores the significance of following statutory rules and providing a fair opportunity for parties to present their case and evidence. The ruling serves as a reminder of the principles of natural justice and the burden of proof in tax matters, emphasizing the need for a strong evidentiary basis to support allegations of non-compliance or wrongdoing.