2020 (1) TMI 760 - AT - Central Excise

CENVAT credit - denial on the ground that the manufacturer are non-existent - HELD THAT - No investigation have been conducted with the transporters to ascertain the fact whether the transporter has directly supplied the goods to the appellant or not - Moreover, the appellant sought cross-examination of the witnesses whose statements have been relied upon by the Revenue and no such cross-examination was granted. The case has been made out against the appellants on the basis that the manufacturers are not existent. In fact, the appellant has purchased the goods from M/s Shree Mahalaxmi Scrap Trading Co,. a dealer who has issued the proper invoice and same has been accompanying with the goods, the buying manufacturer was not required to ascertain the fact whether the manufacturer is existent or not. Admittedly, nothing adverse has been brought out on record by the Revenue. In that circumstances, Cenvat credit cannot be denied merely on the basis of the presumption that it might be a paper transaction as manufacturer of the scrap are non-existent. Credit allowed - appeal allowed - decided in favor of appellant.

Summary

Issues:
Appeal against denial of Cenvat credit due to alleged non-existence of manufacturers.

Analysis:
The case involved an appeal against impugned orders denying Cenvat credit to the appellants based on the allegation that the manufacturers were non-existent, leading to the conclusion that the goods were not received, thus disentitling the appellants from availing the credit. An investigation was initiated based on information from the Central Excise Commissionerate, Dhanbad, regarding certain entities passing inadmissible Cenvat credit on M.S. scrap invoices. Statements from involved parties, including the partner of the appellant manufacturer and an authorized person of the scrap trading company, were recorded during the investigation. The investigation revealed discrepancies in the physical receipt of goods, leading to the denial of Cenvat credit, imposition of penalties, and a demand for payment. The appellants challenged this decision before the Tribunal.

Upon perusal of the records, the Tribunal noted that the manufacturer of the scrap was deemed non-existent during the investigation, which formed the basis for denying Cenvat credit. The learned Authorized Representative argued that since the manufacturer was non-existent, the goods were not supplied, making the transactions merely paper-based and rendering the appellants ineligible for Cenvat credit. However, the Tribunal examined the impugned order and highlighted key statements made by involved parties. The Tribunal observed that the Commissioner had acknowledged the direct supply of scrap to the appellants' premises through a specific process involving different entities. The Tribunal noted the absence of substantial evidence to refute these statements and highlighted the lack of investigation into the transporters' role in the supply chain. Moreover, the Tribunal emphasized that the appellants had followed proper invoicing procedures and received the goods at their premises, fulfilling the necessary criteria for availing Cenvat credit.

In its analysis, the Tribunal found that the denial of Cenvat credit solely on the grounds of the presumed non-existence of the scrap manufacturers was not legally sustainable. The Tribunal emphasized that the appellants had met the requisite conditions for availing the credit, as evidenced by proper documentation and physical receipt of goods. The Tribunal further noted that the scrap manufacturers were registered dealers of the Revenue, reinforcing the legitimacy of the transactions. Consequently, the Tribunal set aside the impugned order, allowing the appeals with consequential relief. The decision highlighted the importance of substantiated evidence and adherence to legal requirements in determining the eligibility for Cenvat credit, ultimately ruling in favor of the appellants based on the established facts and legal principles.