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2023 (6) TMI 1152 - AT - Central ExciseCENVAT Credit - capital goods - entire transaction between the Appellant and M/s.Saha Industries were based upon fake invoices issued by the said M/s.Saha Industries which were merely on paper with the ulterior motive of availing wrongful and irregular Cenvat credit - onus of proof - Rule 7(2) of the said Cenvat Credit Rules, 2002 / Rule 9(3) of the said Cenvat Credit Rules, 2004 - extended period of limitation - HELD THAT - The Ld. Commissioner has nowhere observed that the Appellant had actually received the said capital goods from other alternate source. Therefore, the whole case of the department that the transactions with M/s. Saha Industries were fake transactions and the Appellant took credit without receipt of the capital goods or non receipt of the goods clearly falls down. Even in the show cause notice it was alleged that the Appellant had utterly failed to verify the antecedents of the supplier-manufacturer for the purpose of availing of Cenvat credit. This would also mean that the goods were actually received by the Appellant without verifying the antecedents of the supplier manufacturer. It is well settled law that onus of proof that the Appellant received the capital goods from some other source was squarely on the department which it failed to prove. In the present case, the issue as to whether when a supplier was duly registered with the Central excise department and had paid Central excise duty on the capital goods and cleared the same from his factory and whether Cenvat credit on the same can be denied to the recipient unit - it is already taken note of the findings of the Ld. Commissioner rendered in para7.13 of his order wherein he had held that the capital goods were duly received by the Appellant. Therefore receipt of the capital goods is not in dispute as the department has not reviewed this portion of the order of the Ld. Commissioner which has attained finality. That the Ld. Commissioner has tried to justify denial of Cenvat credit to the Appellant by rendering findings that M/s. Saha Industries was not an assessee of Central Excise manufacturer of excisable goods and had no power to issue central excise invoice on which Cenvat credit could be availed - in the present case the statutory as well as financial records of M/s.Saha Industries as well as of the Appellant have not been alleged to be incorrect or false. The main reason for denying the credit to the party was that two letters were received by the department one from the Municipal Commissioner and the other from the Postal authorities according to which the said party was not in existence at the said place. This Tribunal after analyzing the entire evidence 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. Extended period of Limitation - HELD THAT - In the present case the period involved is March, 2007, May 2007, September 2007 October 2007 and the show cause notice was issued on 10-03-2010 under extended period of limitation - In this regard Hon ble Gujarat High Court in the case of Prayagraj Dyeing Printing Mills Ltd 2013 (5) TMI 705 - GUJARAT HIGH COURT has held in clear terms that where the credit was availed on the basis of invoices of a manufacturer who was duly registered with the department but could not be found subsequently it could not be said that the credit was availed on the basis of forged documents and it has been held that even if the original document was issued by the supplier of the inputs even by practicing fraud, a holder for valuable consideration unless shown to be a party to a fraud, could not be proceeded with by taking aid of a larger period of limitation as indicated in Section 11A(1) of the Act - In the present case also it is held that there is no evidence that even if the goods were not actually manufactured by M/s. Saha Industries the fact remained that the same were duly received by the Appellant and M/s. Saha Industries have duly discharged the central excise duty on the same. In such a case following the law laid down by the Hon ble Gujarat High Court extended period of limitation could not be invoked against the Appellant. The impugned Order cannot be sustained both on merits and on the point of limitation - Appeal allowed.
Issues Involved:
1. Whether the Appellant availed wrongful and irregular Cenvat credit based on fake invoices. 2. Whether the Appellant received the capital goods from M/s. Saha Industries. 3. Whether the demand for duty is barred by limitation. Summary: 1. Wrongful and Irregular Cenvat Credit: The case revolves around the Appellant, an integrated steel plant, accused of availing wrongful and irregular Cenvat credit on capital goods purchased from M/s. Saha Industries. The department alleged that M/s. Saha Industries issued fake invoices without actual delivery of goods, leading to wrongful Cenvat credit by the Appellant. The investigation revealed that M/s. Saha Industries had poor infrastructure and lacked the capacity to manufacture the sophisticated machinery shown in their invoices. The Commissioner upheld these allegations, stating that the onus to verify the supplier's genuineness lies with the recipient as per Rule 9 of the Cenvat Credit Rules, 2004. 2. Receipt of Capital Goods: The Appellant contended that they duly received and installed the machinery, supported by statutory records, bank statements, and ER-1 returns. The Commissioner, however, concluded that the goods were not manufactured by M/s. Saha Industries, but did not establish that the Appellant received the goods from an alternate source. The Tribunal found no discrepancy on the Appellant's part and emphasized that the burden of proof lies with the department, which failed to prove that the Appellant received goods from another source. The Tribunal relied on the Supreme Court judgments in Uniworth Textiles Ltd and Kishanchand Chellaram, which state that the burden of proof is on the person making the allegation. 3. Barred by Limitation: The Tribunal addressed the issue of limitation, noting that the period involved was March 2007 to October 2007, and the show cause notice was issued on 10-03-2010. The Tribunal referred to the Gujarat High Court judgment in Prayagraj Dyeing & Printing Mills Ltd, which held that extended limitation cannot be invoked if the credit was availed on invoices from a duly registered manufacturer, even if the supplier was later found to be non-existent. The Tribunal concluded that there was no evidence of fraud by the Appellant and thus, the demand for duty was barred by limitation. Conclusion: The Tribunal set aside the impugned order on both merits and limitation grounds, allowing the appeal with consequential relief. The Tribunal emphasized that the department failed to prove any discrepancy on the Appellant's part and that the burden of proof lies with the department. The Tribunal also highlighted that the extended period of limitation could not be invoked in this case.
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