2023 (7) TMI 765 - HC - Central Excise

CENVAT Credit - inputs - plastic granules other than polycarbonate - credit availed by showing that these inputs were used and consumed in relation to manufacturing of energy meters, electric wires, cables, electronic parts and batteries - reliability of testing report/opinion - cross-examination of the persons whose statements are relied upon - HELD THAT - It was neither the case of the appellant nor any material has come on record to show that it was not possible for the appellant revenue to procure the attendance of some of these witnesses without undue delay or expense or due to any other reason such person could not be produced for cross-examination. Since the revenue had chosen to heavily rely upon the statements of such persons, therefore, it was for the revenue to make such persons available for cross-examination for their evidence or statements to be considered and as it was not done so, therefore, in our considered opinion, the learned Tribunal had rightly ignored the statements of such persons for arriving at a conclusion that the order passed by the adjudicating authority was liable to be set aside. The adjudicating authority had also placed reliance upon the testing report/opinion given by one Dr. K. Prakalathan, Manager (Testing), CIPET, Chennai regarding the inputs used for manufacturing of the energy meters, the samples of which were sent to him for the purpose of testing. The adjudicating authority had observed that it was revealed from the report of the CIPET Chennai that the samples of energy meters were manufactured with polycarbonate only. It is relevant to mention here that the report of the Manager (Testing) as such has not been produced on record but it is revealed from the order passed by the adjudicating authority that the expert had opined that the mixing of polycarbonate with non polar plastic granules like granules of polymers of ethylene (PE), granules of polymers of propylene (PP) or granules of polymers of styrene (PS) was difficult. The Tribunal had observed that this report could not be considered to be conclusive on the point that the body part of energy meter could not be manufactured by mixing polycarbonate with plastic granules of the type which were of the inputs in dispute in this case - On perusal of the record, there are no reason to differ with the observations as made by the Tribunal on this point as the report of the testing officer cannot be stated to be conclusive on the point that energy meter could not be manufactured by mixing of the inputs in dispute i.e. plastic granules of polymers of ethylene (PE), granules of polymers of propylene (PP) or granules of polymers of styrene (PS) and especially when all these inputs in question undisputedly qualified as engineering materials. Therefore, the observations made by the Tribunal on this point also deserve to be affirmed. The adjudicating authority had also observed that the invoices showing purchase of goods/inputs in dispute from various suppliers were paper transactions and this observation was made by relying upon statements of the suppliers. As also observed, such statement could not be considered to be relevant and admissible and hence had rightly not been relied upon by the Tribunal. The revenue failed to produce any material on record to show that either the goods qua which invoices were issued by the suppliers had been diverted to some third party or there was any instance of the money being received back in cash by the assessee as shown to be paid on account of purchase of the disputed inputs. The appellant-revenue had also failed to ascertain as to how much quantity of the inputs was required for manufacturing finished goods which were found at the time of the search - It is well settled that in an appeal under Section 35 G of the Act, 1944, this Court cannot re-appreciate the evidence and conclude that the finding of fact is incorrect so the appeal can only be maintained on the substantial question of law. Since the findings recorded by the Tribunal are essentially the findings of fact recorded on appreciation of material brought on record the same cannot be gone into by this Court under Section 35 G of the Act, 1944. There are no merit in the appeal filed by the revenue against the main assessee M/s Avon Meters Private Limited. Accordingly, the same is dismissed.

Summary

Issues Involved:
1. Wrongful Availment of CENVAT Credit: Whether the assessee wrongfully availed CENVAT credit on inputs not actually received and used in the manufacturing process.
2. Admissibility of Statements: Whether the statements recorded during the investigation, without cross-examination, can be relied upon.
3. Testing Report Validity: Whether the testing report from CIPET Chennai conclusively proved the misuse of inputs.
4. Substantial Question of Law: Whether the appeal involves any substantial question of law.

Summary of Judgment:

Issue 1: Wrongful Availment of CENVAT Credit
The revenue argued that the assessee wrongfully availed CENVAT credit on inputs by showing paper transactions without actual receipt of goods. The Tribunal found that the revenue failed to prove the non-receipt and non-use of inputs by the assessee. The Tribunal noted that entries showed the goods passing through the Information Collection Centres (ICC) of Punjab, indicating receipt at the assessee's factory. The Tribunal concluded that the inputs were used in manufacturing, dismissing the revenue's claims.

Issue 2: Admissibility of Statements
The Tribunal held that the statements of suppliers, transporters, and buyers recorded during the investigation could not be relied upon as the assessee was not given an opportunity to cross-examine these witnesses, violating principles of natural justice. The Tribunal referred to Section 9-D of the Central Excise Act, 1944, which requires cross-examination for statements to be admissible.

Issue 3: Testing Report Validity
The revenue relied on a testing report from CIPET Chennai, which suggested that energy meters were manufactured using only polycarbonate, not the disputed inputs. The Tribunal found this report inconclusive, noting that the expert admitted the possibility of mixing polycarbonate with other plastic granules using an additive compatibilizer. Therefore, the Tribunal rejected the report as definitive proof against the assessee.

Issue 4: Substantial Question of Law
The Tribunal's findings were based on factual appreciation, and no substantial question of law was involved. The High Court affirmed that it could not re-appreciate evidence under Section 35 G of the Central Excise Act, 1944, and upheld the Tribunal's decision.

Conclusion:
The High Court dismissed the revenue's appeals against both the main assessee and the supplier, M/s Dipika Polymers Private Limited, affirming the Tribunal's findings. The appeals lacked merit as they did not involve any substantial question of law. All miscellaneous applications were also disposed of.