2019 (12) TMI 523 - AT - Central Excise

CENVAT Credit - duty paying invoices - fake invoices - it was alleged that M/s. Star Delta Exim P. Ltd. was issuing invoices without supply of goods - denial of cross-examination - HELD THAT - The foremost argument put forward by the ld. counsel is that though the investigation is initiated from M/s. Star Delta Exim P. Ltd., the supplier of the goods, he has not been made a party to the present proceedings. The evidence gathered by the department in the investigation done at the end of M/s. Star Delta Exim P. Ltd. has been used to issue a Show Cause Notice to the appellant herein. The appellant cannot have any knowledge of the accounts or the activity of the supplier and would not be in a position to challenge the allegations if the said supplier is not a party to the proceedings initiated against the appellant. The department does not have a case that during the said dates the appellant did not manufacture finished goods. In the statement of Shri Pawan Kumar, director of M/s. Star Delta Exim P. Ltd. relied by the department, it is clearly stated that he was issuing fictitious invoices on commission basis to Chandra Proteco Ltd. - The Show Cause Notice has even then been issued merely relying upon the statement of the proprietor of Happy Transport. When the department has relied strongly on the statement of the proprietor of Happy Transport as well as that of Pawan Kumar, Director of M/s. Star Delta Exim P. Ltd., they ought to have given an opportunity for cross-examination of these witnesses. There are no plausible explanation put forward by the adjudicating authority for denying the cross-examination. The Hon'ble High Court of Punjab Haryana in the case of G-Tech Industries Vs. Union of India 2016 (6) TMI 957 - PUNJAB HARYANA HIGH COURT has emphasized the need for cross-examination of the witnesses when the statements are relied by the department. The credit availed by the appellant is in order. There is no evidence put forward by the department to establish that appellant has availed credit on fictitious invoice. The department has failed to prove the allegations alleged in the Show Cause Notice - Appeal allowed - decided in favor of appellant.

Summary

Issues: Alleged irregular CENVAT credit availed by the appellant based on invoices from a supplier involved in fraudulent activities.

Analysis:
1. The appellant, engaged in manufacturing copper and brass products, faced a Show Cause Notice alleging irregular CENVAT credit availed based on invoices from M/s. Star Delta Exim P. Ltd., a supplier under investigation for issuing fictitious invoices. The original authority and Commissioner (Appeals) upheld the demand, interest, and penalty imposed on the appellant.

2. The appellant's counsel argued that the disallowance of credit was solely based on two invoices from M/s. Star Delta Exim P. Ltd. without evidence of non-receipt of goods. The department's investigation targeted the supplier, not the appellant, and the appellant was not involved in the proceedings against the supplier or transporter.

3. The appellant claimed to have received and used goods from M/s. Star Delta Exim P. Ltd. as per the disputed invoices, supported by raw material registers. The department's reliance on statements and lack of evidence were challenged, emphasizing the denial of cross-examination and delay in proceedings.

4. The department contended that M/s. Star Delta Exim P. Ltd. did not engage in manufacturing activities, and statements indicated invoices were issued without actual supply of goods, with payments returned through non-banking channels after deducting commissions.

5. The Tribunal considered both arguments, highlighting the lack of involvement of the supplier in the proceedings against the appellant, discrepancies in statements, and the importance of cross-examination for evidence reliability.

6. Relying on precedents emphasizing the necessity of cross-examination for witness statements, the Tribunal found the denial of cross-examination a violation of natural justice. Upon reviewing documents and registers, the Tribunal concluded that the appellant's credit availed was legitimate, with no evidence supporting the department's allegations.

7. Consequently, the Tribunal set aside the impugned order, allowing the appeal with any consequential relief, if applicable, due to the lack of evidence proving the irregular CENVAT credit availed by the appellant based on the disputed invoices.

Conclusion:
The Tribunal's decision favored the appellant, emphasizing the importance of procedural fairness, evidence substantiation, and the lack of proof supporting the alleged irregular CENVAT credit availed by the appellant.