2020 (11) TMI 725 - AT - Central Excise

CENVAT Credit - LAM ( Low Ash Metallurgical) COKE - fake invoices without supply of goods - time limitation - main basis of denying the Cenvat credit to the appellants are the two letters received by the department, one from the Municipal Commissioner and the other from the Postal authorities - HELD THAT - The best evidence would have been for departmental officers to physically visit the place and draw a panchnama after making enquiries from the locality. No such documentary evidence is there on record - The department has not denied that the dealer, M/s Dankuni Steel Ltd was registered with the jurisdictional Central Excise formation. As per extant departmental instructions the premises were required to be physically inspected within 5 days of granting registration. It has to be presumed that these instructions were duly followed. In that case it has to be assumed that during the relevant period the dealer was operating from the registered premises. The dealer has clarified that their head office was at Bentinck Street and this was duly indicated in all the disputed invoices. The department has not denied the existence of the dealer at the Bentinck Street address - Hence, the material available on record can at most arouse suspicion, but suspicion, however strong, cannot replace proof/evidence. The department has made no enquiries to ascertain whether the disputed quantity of LAM Coke had been received in the appellants factory or not. A proper stock-taking would have revealed the true picture. But no such evidence is there. Hence, it has to be accepted that the disputed quantity of LAM Coke was actually received in the factory - The department did not also make any enquiry to determine whether the quantity of finished goods manufactured by the appellants was consistent with the consumption of the disputed quantity of inputs. The appellants had provided the Railway Receipts (RR s) under cover of which the inputs had come. The disputed invoices have crossreferences of the corresponding RR s. The department made no efforts to verify the genuineness of the RR s - Hence, it cannot be said that the invoices received in the appellants factory were not accompanied by duty paid goods. It is also established law now that duty paid goods can be consigned directly to a buyer by the manufacturer/supplier without the goods first going to the dealer s premises - Once it is held that the disputed quantity of goods have been duly received in the appellants factory, the cenvat credit on input service of transportation cannot also be denied. The department has not been able to make out a case for denial of Cenvat Credit - Appeal allowed - decided in favor of appellant.

Issues Involved:

1. Alleged availing of Cenvat Credit on fake invoices.
2. Denial of input service tax credit on transportation charges.
3. Validity of evidence provided by the department.
4. Right to cross-examination.
5. Time-barred demand.
6. Existence and operations of the registered dealer.

Detailed Analysis:

1. Alleged Availing of Cenvat Credit on Fake Invoices:

The appellants were accused of availing Cenvat Credit of ?1,28,39,142/- for the years 2011-12 and 2012-13 based on five fake invoices issued by M/s Dankuni Steel Ltd. without the actual supply of goods. The department's investigation revealed that no premises existed at the declared address of M/s Dankuni Steel Ltd. However, the appellants contended that the LAM Coke was received by rail and transported by trucks to their factory, supported by Railway Receipts (RRs) and duty-paying documents. The department did not physically verify the premises or the stock, and the existence of the dealer at their head office was not denied. The Tribunal found that the evidence provided by the department was insufficient to deny the credit, emphasizing that suspicion cannot replace proof.

2. Denial of Input Service Tax Credit on Transportation Charges:

The department also alleged that the appellants availed input service tax credit of ?1,30,534/- on transportation charges without actual transportation. The appellants provided documents such as invoices, road challans, waybills, and RRs to prove the transportation and receipt of goods. The Tribunal held that the credit on input services could not be denied as the goods were received and used in the manufacturing process.

3. Validity of Evidence Provided by the Department:

The department relied on letters from the Municipal Commissioner and Postal authorities to claim that the dealer's premises did not exist. The Tribunal noted that the Municipal Commissioner's letter was based on outdated records from 2003-04, and the Postal authorities' letter was issued one and a half years after the disputed period. The Tribunal emphasized that the best evidence would have been a physical verification, which was not conducted. The Tribunal also noted that the dealer was registered with the Central Excise department, which required physical inspection of premises within five days of registration.

4. Right to Cross-Examination:

The appellants' request for cross-examination of key witnesses was denied by the adjudicating authority on the grounds of delay. The Tribunal cited several judgments affirming the right to cross-examination as a valuable right and stated that statements could not be relied upon without cross-examination. The denial of cross-examination weakened the department's case.

5. Time-Barred Demand:

The appellants argued that the demand was time-barred as the invoices were dated March to July 2012, and the show cause notice was issued on 07.04.2017. The Tribunal found no evidence of fraud, collusion, willful misstatement, or suppression of facts by the appellants to justify the extended period for issuing the notice.

6. Existence and Operations of the Registered Dealer:

The Tribunal noted that the department did not deny the existence of the dealer at their head office and that the dealer continued to issue invoices till 2015-16. The Tribunal also observed that the department did not conduct any stock-taking or analysis of the finished goods to verify the receipt and use of the disputed quantity of LAM Coke. The Tribunal held that the mere non-existence of a dealer at the registered premises does not disentitle the recipient from availing Cenvat Credit, citing relevant case laws.

Conclusion:

The Tribunal concluded that the department failed to make out a case for denial of Cenvat Credit and input service tax credit. The appeals were allowed, and the demand was set aside. The Tribunal emphasized the need for concrete evidence and proper verification by the department before denying credit.

← Previous Next →