2020 (2) TMI 181 - AT - Central Excise

CENVAT Credit - duty paying invoices - fake invoices issued by non-existing suppliers - benefit of N/N. 34/2003-C.E vis- -vis circular no. 703/19/2003-CX dt. 25-3-2003 - admissibility of appeal for hearing - monetary amount involved in the appeal - HELD THAT - For duty demand of ₹ 25,544/- appellant had gone to the Hon ble High Court as its appeal was not admitted for hearing because of operation of Section 35B that provides monetary limit to file appeal before the CESTAT. So primarily on point of law, this appeal is admitted for hearing in the CESTAT and factual aspect on which the issue of original appellant M/s. Accelerate Synthetic Pvt. Ltd. had gone for re-adjudication is un-related to this instant appeal as genuiness of the invoices received and availement of Cenvat Credit by M/s. Accelerate Synthetics Pvt. Ltd. would be determined in that re-adjudication process. Going by the text of N/N. 34/2003-C.E, under para 1 (2)(a) it has been clearly mentioned that first or second stage dealer may, at his option, remove such goods after undertaking activities such as packing, repacking etc. on payment of amount equivalent to duty of excise, which is levyable on such goods, it can avail Cenvat Credit on the same. Therefore, the appellant may also exercise his option not to remove such goods but payment of equivalent duty on such goods was a pre-condition which is under dispute because the first dealer is i.e. original supplier of appellant has been prosecuted for non-payment of duty and availement of Cenvat Credit which was subsequently passed on to the appellant by the supplier. This being the factual scenario, it is on the supplier of appellant on whom duty liability is to be determined since the credit has been passed on to the appellant by supplier after all payments had been made by the appellant. The denial of availment of Cenvat Credit on the ground that no physical movement of goods had taken place is also not in conformity to the procedure meant to be followed by the deemed textile manufactures - appeal allowed - decided in favor of appellant.

Summary

Issues involved: Denial of Cenvat Credit based on fake invoices without actual movement/supply of goods.

Analysis:
1. The appellant, a deemed manufacturer of processed polyester fabric, availed Cenvat Credit based on invoices from a supplier who fraudulently obtained credit on fake invoices. The investigation revealed non-delivery of goods by the supplier, leading to a duty demand against the appellant.

2. The appellant argued that clearance or supply of goods was not a requirement for availing Cenvat Credit as per relevant notifications and circulars. They contended that the burden of proof should not be on them to verify records maintained by the supplier. The appellant also challenged the reliability of the proprietor's confessional statement, citing legal precedents regarding retractions of statements.

3. The Department supported the denial of Cenvat Credit, relying on the proprietor's confessional statement admitting no actual movement of goods. They argued that the retraction of the statement was not communicated immediately, making it admissible as evidence. The Department sought no interference in the Commissioner's decision.

4. The Tribunal considered the case, noting that the appellant's appeal was admitted primarily on a point of law due to monetary limits for appeals. The issue of the original supplier's re-adjudication was deemed irrelevant to the current appeal. The Tribunal focused on determining the appellant's eligibility for Cenvat Credit based on the supplier's invoices and the permissibility of credit in the absence of goods movement.

5. Referring to relevant notifications, the Tribunal highlighted that the first dealer's duty liability is crucial, as the credit was passed on to the appellant after payment. Imposing duty on both the supplier and the appellant would lead to double taxation, which is not permissible. The Tribunal concluded that the denial of Cenvat Credit based on lack of goods movement was not in line with the rules for deemed textile manufacturers.

6. The Tribunal allowed the appeal, setting aside the Commissioner's order, emphasizing that the denial of Cenvat Credit and imposition of penalties were not in accordance with the applicable rules and procedures.

This detailed analysis of the judgment provides a comprehensive understanding of the issues involved and the Tribunal's decision regarding the denial of Cenvat Credit based on fake invoices and lack of goods movement.