2020 (9) TMI 644 - AT - Central Excise

CENVAT Credit - inputs not received - forged and fake invoices - chain of company/firm(s) created by Shri Gaurav Mungad - such cenvat credit was utilised towards payment of duty on the goods exported, and thereafter obtained undue rebate claim - proper opportunity of hearing not given - principles of natural justice - HELD THAT - The case of Revenue is mainly based on the statements of the aforementioned persons. In spite of the categorical request for cross examination of the aforementioned persons, in the adjudication proceedings and also of some other persons connected with the investigations, who had verified the cenvat credit records and the documents of the appellants as well as the officers involved in scrutiny and sanctioning of the rebate claims. But this request of the appellants have been arbitrarily refused by the ld. Commissioner observing that the allegations of the Revenue are also corroborated by other independent evidences and hence cross examination is not required. This stand of the Adjudicating Authority is a clear violation of the mandate of Section 9 D of the Central Excise Act read with Ruling of the Hon ble Punjab Haryana High Court in the case of Jindal Drugs 2016 (6) TMI 956 - PUNJAB HARYANA HIGH COURT and the requirement of cross examination reiterated by the Hon ble Supreme Court in its ruling in Andaman Timber Industries 2015 (10) TMI 442 - SUPREME COURT . Thus, there is mis-carriage of justice causing prejudice to the appellants. The contention of the appellants that they have received their raw materials under dispute, is also established by the fact that they have manufactured the finished goods, which have been mainly cleared for export. The Revenue has failed to discharge the onus as regards the source of receipt of raw materials from any other alternative source rather have made a bald allegation on the manufacturers that they have received bazaar scrap on payment in cash - there is no basis for such allegations except assumptions and presumptions. The cross examination in the facts and circumstances of the present case, was required also for the following reasons - (i) The appellant-manufacturers had cleared the goods for export under bond (ARE-I) and thereafter, they have filed the export promotion copy containing the evidences of the Port Officer, certifying the factum of export. (ii) The goods exported from ICD, Pithampur or Mandideep have been examined either in the factory at the time of stuffing by the officers or at the port by the customs officers. Further, samples were also drawn. In the course of investigation, no inquiry has been made from such officers, who were involved in the supervision and sealing of the containers for export. (iii) The manufacturers appellants have made payments for the raw materials /inputs through regular banking channels and no irregularity has been found on this aspect. In the facts of the present case, the examination of the raw materials suppliers, transporters and the proprietors of the Prerna Enterprises and Ocean Impex was essentially required as their statements are the main evidence relied upon by the Revenue. As the examination and cross examination have not been done in the course of the adjudication proceedings, in spite of this being the second round of litigation, it is held that none of the aforementioned statements can be relied upon for proving the allegations against the appellants. After discarding the statements, as aforementioned, we find that other than the bald allegations, there is no other cogent and corroborative evidences on record in support of the allegation of the Revenue. The appellants have satisfied the requirement of receipt of inputs along with cenvatable invoices and accordingly, the cenvat credit taken by them is in accordance with the scheme of the Act read with Cenvat Credit Rules - before sanction of the rebate claims by the jurisdictional Asstt. Commissioner, the payment of duty on the goods exported was verified by the Range Superintendent and it was found that the appellants have taken proper cenvat credit and the same was utilized. Thus, the rebate claim was sanctioned only after verification of the cenvat credit as per the procedure. The Revenue has placed strong reliance on the facts that the proprietor /directors of the appellants companies are related or relatives, but such observations in itself do not prove the case of the Revenue in view of the fact of the manufacture and clearance of the finished goods is on payment of duty. Further, there is no allegation of any flow back of money after the payment has been made through banking channels. Further, the appellant manufacturers have exported their goods and have received the export proceeds, although at some delay and have produced deficit BRCs, which have been annexed in the appeal paper books. Dispute of quantitative details of the manufacture and sales - HELD THAT - Such allegations are vague and not based on any cogent evidence or standard input out norms. The allegation of the Revenue as regards the inflation of sale price of the finished goods is also vague. The Revenue has only disputed the sale price with respect to the metal price of Aluminum on LME, which is only a bald allegation. Sale price are the result of market force including demand and supply, among others. No buyer will pay any abnormal high price to please the seller. There is no allegation of hawala transactions in the export made by the exporter, being fake or made to their related party. The allegations of the Revenue against the appellant are not substantiated - Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Availment of Cenvat credit on inputs.
2. Allegations of fraudulent Cenvat credit based on forged invoices.
3. Denial of cross-examination of witnesses by the adjudicating authority.
4. Confirmation of duty demands, penalties, and rebate claims.

Issue-wise Detailed Analysis:

1. Availment of Cenvat Credit on Inputs:
The dispute centers around the availment of Cenvat credit by Jiji Industries Ltd (JIL) and Mungad Steels & Alloys Pvt. Ltd (MSAPL) on inputs allegedly procured from various suppliers. The appellants argued that they received inputs along with duty-paying documents and made payments through banking channels. They contended that the inputs were used in the manufacture of finished goods, which were cleared on payment of duty and mainly exported.

2. Allegations of Fraudulent Cenvat Credit Based on Forged Invoices:
Revenue alleged that JIL and MSAPL availed Cenvat credit fraudulently based on forged invoices from suppliers like Ocean Impex and Prerna Enterprises. Investigations revealed discrepancies in Cenvat registers and invoices, leading to allegations of non-receipt of inputs. Statements from various suppliers and transporters were relied upon to support these allegations. However, the appellants argued that the statements were obtained under duress and were not corroborated by substantial evidence.

3. Denial of Cross-Examination of Witnesses by the Adjudicating Authority:
The appellants requested cross-examination of witnesses whose statements were relied upon by Revenue. The adjudicating authority denied this request, citing other corroborative evidence. The Tribunal found this denial to be a violation of Section 9D of the Central Excise Act and the principles of natural justice. The Tribunal emphasized the necessity of cross-examination, especially when statements form the primary basis of allegations.

4. Confirmation of Duty Demands, Penalties, and Rebate Claims:
Revenue confirmed duty demands and penalties based on the allegations of fraudulent Cenvat credit. Rebate claims were also disallowed. The Tribunal scrutinized the evidence and found that the appellants had provided adequate explanations for the discrepancies. It was noted that the appellants' manufacturing activities and export transactions were conducted under the supervision of Central Excise officers, and no alternative source of raw materials was identified by Revenue.

Conclusion:
The Tribunal held that the allegations of fraudulent Cenvat credit were not substantiated by cogent evidence. The denial of cross-examination was deemed a significant procedural lapse. Consequently, the impugned orders were set aside, and the appeals by the appellants were allowed. The cross-objections by Revenue were dismissed, and the appellants were entitled to consequential benefits in accordance with the law.