2022 (8) TMI 1252 - AT - Central Excise

CENVAT Credit - allegation of availing the cenvat credit of the duty paid on inputs/ raw materials without physically receiving and using the said goods in their factory and to compensate the same they were showing excess generation of As - invoices issued by first state / second stage dealers - HELD THAT - To avail Cenvat credit, the inputs or capital goods should have suffered the appropriate duty by the producer/manufacturer of such goods and the goods should be received by the manufacturer availing credit in his factory and the inputs or capital goods so received should be utilised in or in relation to the manufacture of final products. In respect of inputs received from a first or second stage dealer, an additional condition is stipulated to the effect that the inputs or capital goods were supplied from the stock on which duty was paid by the producer of such goods and only an amount of such duty on pro rata basis has been indicated in the invoices issued by him. CENVAT Credit - alleged non receipt and use of Aluminium wire Rod, Aluminium Ingot, Aluminium Scrap, Copper Ingot and Scrap, Nickel and Zinc Ingot and Scrap etc. - HELD THAT - The department in the present case itself admitted that the Appellant shown the receipts and use of the goods in their factory, therefore we do not find any reason for disallowance of cenvat credit in this matter specifically when the supplier of the goods/ raw material, nowhere admitted that, they have not supplied the goods to appellant and any evidences in relation to diversion of disputed raw materials. When the inputs are used in the manufacture of dutiable final products, the benefit of cenvat credit in respect of such input cannot be denied. There is no provision in the Central Excise Law and Cenvat Credit Rules for determination of Cenvat amount on the basis of SION norms - There was specific provision in the Act and the Rules for determination of capacity of production on the basis of capacity of furnace and rolling mill. Since there was no similar provision in the law for determination of cenvat amount on the basis of SION norms, the entire proceeding in the impugned matter is void. Apart from the input-output ratio, which has been made the basis, there is no other evidences on record to show that the appellant either did not receive the raw materials, on which they have taken the credit or after receiving the same and availing the credit, the same stand removed by them in the open market. Further in the entire case there is no admission in the statements of Appellant s directors or employees to the effect that the raw materials were not actually received by them and they were showing excess consumption of the raw materials to accommodate such non-receipted raw materials. There is also no admission in the said statements to the effect that raw materials stand diverted in the open market - credit cannot be denied to Appellant merely by relying the SION norms and transporters statements. All these factors lead to show that the findings, arrived at by the adjudicating authority are on the basis of assumptions and presumptions and in the absence of any independent evidence, cannot be upheld. CENVAT Credit - non -receipts of raw materials from M/s Metal Plast Exim (India) Pvt. Ltd. and M/s Nico Extrusions Pvt. Ltd, Kalyan by relying the records of transporters and statements of transporters - HELD THAT - M/s Metal Plast Exim (India) Pvt. Ltd. was a 100% EOU unit and M/s Nico Extrusions Pvt. Ltd. Kalyan was registered warehouse of Appellant. The goods were duly found to have recorded in the Appellant s factory and were consumed in the production. The payment was made through banking channels to supplier and transporters which is not denied. Both the suppliers nowhere stated that they have not supplied the alleged goods to the Appellant. In such case we do not find any reason to disallow the credit to the Appellant - it is well settled law that no cenvat demand is sustainable on the basis of third party documents and their statements. In the present matter the goods were found to be duly shown as received and entered in the factory of the Appellant. The statutory records of the Appellant concern show the receipt and consumption of the goods. Pertinently it is noted that there is no statement of the supplier that the goods were not supplied to the appellant. There are no reason to disallow credit to the Appellant. CENVAT Credit - credit denied on the ground that Appellant in collusion with the transporters and suppliers, High Sea Seller, have wrongly availed the credit on inputs without actual receipts of the goods in factory and without actually using the said goods in the manufacture of their finished goods on the strength of Bill of Entries issued by ICD - HELD THAT - Department in the present matter nowhere produced any corroborative evidences related to the diversion of imported raw materials/ substitute of imported raw material in factory/ any buyer of imported raw material who admitted that the Appellant had delivered the said imported goods to them. Moreover in the said matter Transporters did not turne up for cross-examination, hence their statement cannot be relied upon. During the investigation the transporter admitted the payment from the appellant towards transportation, high seas sale supplier had also confirmed the sale to the appellant. The bills of entry filed by the Appellant and clearances of the goods from customs substantiate the purchase of goods by the Appellant and appellant also account for the said goods in their books of account - the case on merit is not sustainable due to lack of evidence to establish the allegations. CENVAT Credit - case of the Revenue is that the Appellant has availed the Cenvat Credit on inputs mainly copper/Nickle, supplied by M/s Metec Asia Pvt. Ltd. without actual receipts of the said goods in their factory and without using the said goods in manufacture of their finished goods - HELD THAT - The facts are established that the appellant have received the inputs in their factory used in the manufacture of final product and same was cleared on payment of duty. Therefore, there are no substantial evidence which result the disallowance of credit. The evidences placed by department before us are not cogent to establish that appellant is guilty of fraudulent availment of Cenvat credit. Mere suspicion or assumptions and presumptions cannot be the basis for such serious allegation of fraudulent availment of credit - the impugned demand alleging fraudulent availment of credit is not sustainable. CENVAT Credit - demand of Rs. 81,76,443/- in respect of invoices issued by Supplier M/s Meal Links Alloys Ltd., M/s N.D. Metal Ind. Ltd., M/s Merchandiser Pvt. Ltd. and M/s Kothari Metals - HELD THAT - The contention of the Ld. Commissioner is that investigation shown that the supplier of the material has not actually supplied the material as the transporter denied the transportation of the material not sustainable in the absence of any corroborative evidences. In this case the appellant's submission is that they had received the material in question from the suppliers, the suppliers in his statement admitted that supply of the material and payments made through banking channel the material was duly entered in the statutory records and issued for manufacture of finished goods - as the material in question is received by the appellant under the cover of duty paying invoices and payments were made through banking channel, there is merit in the contention of the appellant - the impugned orders are not sustainable in the eyes of law. It is well settled law that statements recorded by the Central Excise officers during the course of investigation cannot be relied upon, unless procedure prescribed under Section 9D of the said Act is scrupulously followed. Such statement would have no evidentiary value if the person making it is not subjected to examination-in-chief before the adjudicating authority and also not produced for cross- examination as stipulated under Section 9D(1)(b) of Central Excise Act, 1944 - Since the Revenue failed to prove alternative source of receipt of raw materials and also money flow back from manufacturer/supplier to the assessee, it can not be said that they had not received the inputs especially when statements relied upon by the Revenue are contrary to the documentary evidence on record produced by the Appellant - this contention cannot be accepted. The reliance of third party i.e transporters documents /statements was placed while confirming demand against present appellant is also observed to be unjustified and unreasonable - the demands of whatever nature cannot be confirmed solely on the basis of third party s evidence/record. The appellant have satisfied the requirement of receipt of inputs along with cenvatable invoices and use of such inputs in the manufacture of final product, accordingly, the Cenvat credit taken by them is in accordance with the scheme of the Act read with Cenvat Credit Rules - Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:

1. Cenvat demand of Rs. 7,22,30,953/- on account of alleged non-receipt and use of various raw materials.
2. Cenvat demand of Rs. 1,34,26,199/- on account of alleged non-receipt of raw materials from specific suppliers.
3. Cenvat demand of Rs. 2,99,63,292/- on account of alleged non-receipt of imported goods.
4. Cenvat demand of Rs. 4,57,79,503/- on account of alleged non-receipt of goods from a specific supplier.
5. Cenvat demand of Rs. 81,76,443/- on account of alleged non-receipt of raw materials from specific suppliers.
6. Imposition of personal penalties under Rule 26 of the Central Excise Rules 2002.

Issue-wise Detailed Analysis:

1. Cenvat demand of Rs. 7,22,30,953/-:
The department alleged that the appellant had shown receipts and consumption of raw materials without physically receiving and using them, based on discrepancies in the Standard Input Output Norms (SION). The Tribunal found that the conditions for allowing Cenvat credit are stipulated in the Cenvat Credit Rules 2004 and not on SION norms. The Tribunal noted that there is no provision in the Central Excise Law and Cenvat Credit Rules for determination of Cenvat amount on the basis of SION norms. It was established that the appellant had shown receipt and use of the goods in their factory, and there was no evidence of diversion of raw materials. The Tribunal relied on several precedents which held that theoretical input-output norms cannot be the sole basis for denying Cenvat credit without corroborative evidence.

2. Cenvat demand of Rs. 1,34,26,199/-:
The demand was based on alleged non-receipt of raw materials from M/s Metal Plast Exim (India) Pvt. Ltd. and M/s Nico Extrusions Pvt. Ltd., Kalyan. The Tribunal found that the goods were recorded in the appellant's factory and consumed in production, with payments made through banking channels. The suppliers did not deny supplying the goods. The Tribunal relied on precedents that credit is available where ample documentary evidence proves the receipt of inputs and payments made through banking channels. The Tribunal concluded that there was no reason to disallow the credit.

3. Cenvat demand of Rs. 2,99,63,292/-:
The demand was based on alleged non-receipt of imported goods, relying on transporter records and statements. The Tribunal found the basis for denial unsustainable and beyond reason, as there was no corroboration of the allegation. The Tribunal noted that there was no evidence of diversion of imported raw materials or any buyer admitting receipt of such goods. The transporters did not turn up for cross-examination, and the statements could not be relied upon. The Tribunal concluded that the case lacked merit due to a lack of evidence.

4. Cenvat demand of Rs. 4,57,79,503/-:
The demand was based on alleged non-receipt of goods from M/s Metec Asia Pvt. Ltd., relying on transporter statements and RTO reports. The Tribunal found that the revenue failed to establish beyond doubt that the goods were not physically received. The Tribunal noted that the goods were recorded in the appellant's books, payments were made through banking channels, and there was no corroborative evidence of non-receipt. The Tribunal concluded that the demand was not sustainable.

5. Cenvat demand of Rs. 81,76,443/-:
The demand was based on alleged non-receipt of raw materials from M/s Metal Links Alloys Ltd., M/s N.D. Metal Ind. Ltd., and others. The Tribunal found that the suppliers admitted supplying the goods and receiving payments through banking channels. The transporters were arranged by the suppliers, and there was no corroborative evidence of non-receipt. The Tribunal concluded that the denial of credit was not sustainable.

6. Imposition of personal penalties under Rule 26 of the Central Excise Rules 2002:
The department sought to impose personal penalties on individuals for abetting the wrong availment of Cenvat credit. Since the Tribunal set aside the demand itself, the proposal for personal penalties, being consequential, was also not sustained. The Tribunal dismissed the revenue's appeals for personal penalties.

Conclusion:
The Tribunal found that the appellant had satisfied the requirements for receipt of inputs and use in the manufacture of final products, and the Cenvat credit taken was in accordance with the law. The impugned order was set aside, and the appellant's appeal was allowed. The revenue's appeals for personal penalties were dismissed.