2015 (6) TMI 1271 - AT - Central Excise

Levy of penalty u/r 26 of Central Excise Rules, 2002 - credit denied on the premise that M/s. Sidh Balak Enterprises has made a statement that they are issuing invoices and not supplying the goods - paper transaction - HELD THAT - In this case, statement of appellant has not been recorded but the statement of buyer of the appellant is recorded wherein he has admitted that they have received the goods against the invoices issued by M/s. Sidh Balak Enterprises. To contravene to said statement, Revenue was required to find out whether the manufacturer supplier has supplied the said goods or not. Moreover, no investigation was conducted at the end of transporter to ascertain the fact that transporter has transported the goods from manufacturer supplier to deliver the goods to the appellant. The show cause notice was not required to be issued on the presumptions and assumptions. There should be corroborative evidence to prove the allegation, as there is no corroborative evidence to prove the allegation against the appellant, therefore, demand confirmed in the impugned order are not sustainable and it cannot be alleged that there was merely a paper transaction on which the appellant has taken the Cenvat credit. The impugned order is set aside - appeal allowed.

Summary

Issues:
Appeal against penalty imposition under Rule 26 of Central Excise Rules, 2002 based on denial of Cenvat credit due to alleged paper transaction with first stage dealer.

Analysis:
The appellant, a 2nd stage dealer, appealed against a penalty of Rs. 50,000 imposed under Rule 26 of Central Excise Rules, 2002, due to the denial of Cenvat credit. The case involved the appellant procuring inputs from the first stage dealer, M/s. Sidh Balak Enterprises, availing Cenvat credit on duty paid, and selling to a manufacturer buyer against duty paid invoices. An investigation revealed that M/s. Sidh Balak Enterprises issued invoices without supplying goods, leading to a show cause notice to the appellant for denying Cenvat credit, demanding duty, interest, and imposing a penalty. Both lower authorities upheld the denial of credit, stating it was a paper transaction. The appellant contended that statements from M/s. Sidh Balak Enterprises were general, lacking specific evidence, and argued that without statements from the transporter or manufacturer supplier, credit denial was unjustified.

The appellant's counsel highlighted discrepancies in M/s. Sidh Balak Enterprises' submissions, emphasizing the lack of evidence confirming non-supply of goods. The appellant's buyer admitted receiving goods against the invoices, underscoring the need for thorough investigation before denying credit. The Revenue's argument aligned with the impugned order's findings, emphasizing the alleged paper transaction. The appellate tribunal considered the case, noting the absence of the appellant's statement but the buyer's admission of goods receipt. The tribunal stressed the necessity of verifying goods supply by the manufacturer supplier and investigating the transporter's role to substantiate claims against the appellant.

The tribunal concluded that the Revenue's case lacked corroborative evidence to support allegations of a paper transaction. Emphasizing the need for concrete proof rather than assumptions, the tribunal set aside the impugned order, allowing the appeal with potential consequential relief. The judgment highlighted the importance of thorough investigations and corroborative evidence in cases involving credit denial, ultimately ruling in favor of the appellant due to insufficient proof against them.