2020 (9) TMI 695 - AT - Central Excise

Irregular availment of CENVAT Credit - contravention to Rule 15(2) of the Cenvat Credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944 - demand based on various statements - reliability on Chartered Engineer s Certificate - discrepancies pointed out by the department with regard to the Transportation of Goods from the factory of M/s.Industrial Associates to the factory of the appellant - Failure to Produce Documents - non-appearance against summons - HELD THAT - The inputs received by the appellants were duly entered in their RG-23A Part-I for the period from August, 2008 to January, 2009 and such records were subject to scrutiny by their jurisdictional Central Excise Officers and the credits were being availed with the knowledge of the Revenue and by reflecting the inputs in the records. In such a scenario, it is a difficult proposition to come to a finding that all the inputs received by the appellants, which have been utilized in the manufacture of their final product, were not actually received by the appellants. The appellants received the goods in their factory under cover of the Central Excise invoices issued by M/s.Industrial Associates. The concerned staff at the factory gate puts the receipt seal under his initial and affected a consolidated entry in Form-IV Register for the receipt of said inputs along with other inputs of analogous character. The credit availed by them were duly reflected in their monthly ER-I returns. They also received tax-invoice-cum-challan along with original for buyer copy of the excise invoices for inputs received from the said manufacturer. The amounts were paid by them by account payee cheques/RTGS. VAT were also reflected in the invoices raised by the said company. The transportation costs were paid by them to the vehicle drivers/owners under the cash vouchers. The appellants have admittedly manufactured their final product by using the said inputs and the final products stands cleared by them on payment of duty. The final product cannot be manufactured out of nothing and obviously requires inputs. There is no iota of evidence produced by the Revenue to reflect upon the fact as to from where the appellants have procured such a huge quantity of inputs used by them in the manufacture of their final product. As such, there is a lacuna in the Revenue s investigations to that extent also. The Tribunal had come to a finding that the assessee in fact had received the goods covered under the disputed invoices inasmuch as the Revenue has not brought any tangible evidence to prove nonreceipt of the goods by the respondent - it is undisputed fact that all the purchases were duly recorded in the statutory books of the appellant and the goods were also found to be entered in statutory records of the appellant. None of the consignors of the goods have denied the clearance of the goods to the appellant. There is no evidence which can show that the records maintained by the appellant are not correct. The order for disallowance of credit to the appellant is not sustainable - in the absence of any cogent evidence, the demands are not sustainable, as a consequence, the penalties imposed on both the appellants are also not sustainable and are accordingly set aside - appeal allowed - decided in favor of appellant.

Issues Involved:

1. Legitimacy of Cenvat Credit availed by the appellant.
2. Evidentiary value of statements from various individuals.
3. Compliance with Rule 9(3) of the Cenvat Credit Rules, 2004.
4. Validity of penalties imposed on the appellants.

Issue-wise Detailed Analysis:

1. Legitimacy of Cenvat Credit availed by the appellant:

The appellant, engaged in manufacturing TMT bars and M.S. Billet, had availed Cenvat Credit amounting to ?19,81,396/- based on 43 invoices from M/s. Industrial Associates. The Department contended that this availment was in contravention of Rule 15(2) of the Cenvat Credit Rules, 2004, read with Section 11AC of the Central Excise Act, 1944. The adjudicating authority confirmed the demand, which was upheld by the Commissioner (Appeals). The Tribunal, however, found that the inputs received were duly entered in the appellant's RG-23A Part-I records, which were scrutinized by jurisdictional Central Excise Officers. The Tribunal concluded that it was difficult to assert that the inputs were not received, especially since the final products were manufactured and cleared on payment of duty, indicating the use of inputs.

2. Evidentiary value of statements from various individuals:

The Department relied on statements from individuals like Shri Subhas Biswas, Shri Subhas Dhandhania, and Shri Raj Kumar Kedia. The Tribunal found these statements to lack evidentiary value as they were not subjected to cross-examination per Section 9D of the Central Excise Act, 1944. The Tribunal emphasized that uncorroborated, uncross-examined statements cannot be relied upon, referencing cases like Emmtex Synthetics v. CCE and CCE, Ludhiana v. Pee Jay International Ltd. Additionally, the Chartered Engineer’s report was deemed vague and not specific enough to hold evidentiary value.

3. Compliance with Rule 9(3) of the Cenvat Credit Rules, 2004:

The Tribunal noted that the appellant fulfilled the requirements of Rule 9(3) by referring to the address and registration number of the inputs supplier, thereby knowing their dealer. The Tribunal cited precedents like Tata Motors Ltd. and Rinox Engg., which held that buyers are entitled to claim Cenvat credit on inputs when payments are made, and it is unreasonable to expect buyers to verify if the dealer paid the Central Excise duty.

4. Validity of penalties imposed on the appellants:

Given the findings that the inputs were received and used in manufacturing, and the lack of tangible evidence from the Revenue to prove otherwise, the Tribunal held that the disallowance of credit and the penalties imposed were not sustainable. The Tribunal set aside the demands and penalties, allowing the appeals with consequential relief.

Conclusion:

The Tribunal concluded that the appellant had legitimately availed the Cenvat Credit, and the statements relied upon by the Department lacked evidentiary value. The appellant complied with Rule 9(3) of the Cenvat Credit Rules, 2004, and the penalties imposed were not justified. The appeals were allowed, and the demands were set aside.

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