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2020 (12) TMI 908 - AT - Central ExciseCENVAT Credit - few transactions of which consignments were either fake or fictitious - 8 vehicles with respect to 24 invoices were found non-existent in the database - owners of 9 vehicles denied transportation by written communications - CENVAT Credit - HELD THAT - During the course of search at the factory premises of the appellant neither incriminating documents were recovered nor any shortage/excess of raw materials/finished goods were found by the officers of the anti-evasion. The employees of the appellant in their statements have clearly stated that they have physically received the goods and utilized in the manufacture of their final products. The adjudicating authority is required to first conduct examination-in-chief of the witnesses whose statement is relied upon by the department and then to form an opinion whether the statements of the witness is admissible in evidence with respect to the facts and circumstances of the case and then only the witness shall be offered for cross-examination - in the present case, since no examinationin-chief has been conducted by the learned adjudicating authority, therefore the statements of witnesses are inadmissible in evidence and are eschewed from evidence. Also, the department has not confronted various evidences to the appellant, which further creates doubt about the said half-baked investigation conducted by the department - it is found that the investigation conducted at the end of transporter is not reliable piece of evidence and cannot be used against the appellant. The appellant has taken all reasonable steps as mentioned in Rule 9 of the Cenvat Credit Rules. The appellant has produced duty paid invoices under cover of which goods were received in the factory, showing names of manufacturer and supplier thereon and produced weighment slips evidencing receipt of goods. The payments have been made through the banking channels and the goods received have been duly entered into the RG-23 register - there is no evidence adduced by the department to show any flow back of money in the show cause notice. The department is not disputing the fact that these dealers raised invoices giving all particulars required to be given under the provisions of Cenvat Credit Rules in respect of materials supplied to the appellant. There is no evidence in the show cause notice that goods are not duty paid. The investigation conducted by the department at the end of the transporter by searching the vehicles from the site www.vahan.nic.in is an evidence which cannot be relied upon inasmuch as by the said evidence, the department is fastening the liability against the appellant, especially when the department could have investigated from the concerned State RTO in order to get the details of the truck owners. This exercise has not been done in the present case, thus, the said evidence cannot be relied upon in order to deny the lawful credit availed by the appellant. The department is alleging the non-existence of premises of manufacturer/dealers, relying solely upon the alert circulars issued by the different Commissionerates. In the present case, the department has neither relied upon nor stated in the SCN about the Panchnama drawn at the concerned premises. If the said evidences have not been relied upon, then there is no material for the appellant to controvert the same, which is in clear violation of the principle of natural justice. It is well settled law that, merely on the basis of alert circulars, it cannot be said that particular premises are non-existent. The appellant has taken all reasonable steps as mentioned in Rule 9 of the Cenvat Credit Rules, therefore, the denial of Cenvat credit is wrong and liable to be set aside - Appeal allowed - decided in favor of appellant.
Issues Involved:
1. Wrong availment of Cenvat Credit. 2. Reliance on statements recorded under Section 14 of the Central Excise Act. 3. Investigation and evidence from the VAHAN database and transporters. 4. Non-existence of premises of manufacturers/dealers. 5. Reasonable steps taken by the appellant under Rule 9 of the Cenvat Credit Rules. 6. Imposition of penalty on the Director of the appellant company. Detailed Analysis: 1. Wrong Availment of Cenvat Credit: The department alleged that the appellant availed illegal Cenvat Credit on 14,992 MT of raw materials without receiving any goods, based on discrepancies found in the VAHAN database and statements from certain individuals. The appellant countered that it was impossible to manufacture 22,401 MT of finished goods from only 9,782 MT of raw materials, and no evidence was provided by the department to show alternate sources of raw materials. 2. Reliance on Statements Recorded under Section 14 of the Central Excise Act: The Tribunal held that statements recorded under Section 14 cannot be relied upon as evidence unless the provisions of Section 9D are followed. The adjudicating authority did not conduct the required examination-in-chief or allow cross-examination, making the statements inadmissible. This view was supported by judgments from the High Court of Chhattisgarh and the High Court of Punjab and Haryana. 3. Investigation and Evidence from the VAHAN Database and Transporters: The department's investigation relied on the VAHAN database, which showed discrepancies in vehicle details. However, the Tribunal found that the letters from vehicle owners were stereotyped and similarly worded, casting doubt on their authenticity. The department failed to conduct thorough investigations from the concerned RTOs and did not allow cross-examination of the truck owners, making the evidence unreliable. 4. Non-existence of Premises of Manufacturers/Dealers: The department alleged non-existence based on alert circulars without providing Panchnama or other concrete evidence. The Tribunal held that merely relying on alert circulars without proper investigation violates the principle of natural justice. The manufacturers had issued invoices and paid Central Excise duty, causing no loss to the exchequer, thus the credit was rightly availed. 5. Reasonable Steps Taken by the Appellant under Rule 9 of the Cenvat Credit Rules: The appellant produced duty-paid invoices, weighment slips, and made payments through banking channels, fulfilling the requirements under Rule 9. The appellant also paid Service Tax under Reverse Charge Mechanism and filed ST-3 returns. There was no evidence of money flow back, indicating compliance with the Cenvat Credit Rules. 6. Imposition of Penalty on the Director of the Appellant Company: Since the appeal was allowed on merits, the penalty on the Director, Sh. Shankar Lal Agarwal, was also set aside. The Tribunal found no grounds to sustain the penalty when the main appeal was decided in favor of the appellant. Conclusion: The Tribunal set aside the impugned order and allowed the appeal with consequential relief. The investigation conducted by the department was found to be flawed, and the evidence relied upon was deemed inadmissible. The appellant had taken all reasonable precautions as required by the Cenvat Credit Rules, and there was no loss to the exchequer. The penalty on the Director was also set aside.
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