2008 (2) TMI 124 - AT - Central Excise

Revenue alleged availment of credit fraudulently on strength of invoices issued by supplier without actually receiving the goods order of adj. authority of vacating demand is based upon examination of records & reports from the sales tax authorities of the state government, hence it is not contrary to law - payments to the supplier by A/c payee cheques/drafts which were encashed & money was credited into their accounts shows bonafide of the transaction credit can t be disallowed

Summary

Issues:
1. Alleged fraudulent availment of modvat/cenvat credit based on invoices.
2. Burden of proof on the Department regarding entry of goods in the State.
3. Verification of consignments crossing the sales tax barrier.
4. Documentary evidence supporting the respondent's case.
5. Reliance on statutory records for proving clandestine transactions.

Analysis:
1. The case involved the alleged fraudulent availment of modvat/cenvat credit by the respondents based on invoices issued by a supplier without actual receipt of goods. The Revenue contended that the absence of evidence regarding the entry of goods in the State indicated fraud, shifting the burden of proof onto the respondents to prove receipt of goods.

2. The main issue was whether the consignments had entered the State of Himachal Pradesh through the sales tax barrier. The adjudicating authority considered the evidence provided by the Sales Tax Department, matching details with forms submitted by the supplier, and concluded that most entries were genuine, except in two cases.

3. The Commissioner, as the appellate authority, found that the respondent had made payments to the supplier through account payee cheques/drafts, which were encashed, proving the supply of goods. This documentary evidence, along with statutory records, supported the respondent's case.

4. In cases of clandestine transactions, direct evidence may be lacking, and inferences can be drawn from surrounding circumstances. The Department relied on records from the Excise and Taxation Department of Himachal Pradesh. The adjudicating authority's decision, based on thorough examination of records and reports, was deemed reasonable.

5. The Tribunal affirmed the lower authorities' findings, emphasizing the respondent's compliance with the burden of proof, except in two instances. The reliance on statutory records for establishing the genuineness of transactions was upheld, with no grounds for interference in the appeals. The judgment was pronounced on 21.2.08, dismissing the appeals.