2024 (8) TMI 1275 - AT - Central Excise

Passing on fraudulent Cenvat Credit, for the period from April 2016 to June 2017 - fake invoices without actual supply of goods was investigated - evidence to indicate non supply of goods produced or not - HELD THAT - The whole chain of evidence as mentioned by the department indicates that the goods did not move from various parties to M/s. Ridhi Sidhi as per testimonial evidence nor were supplied to M/s. Ridhi Sidhi and documents on the record on the Books of Accounts of M/s. Ridhi Sidhi were not genuine. However, the second link in the chain of evidence, which had to indicate that the goods in turn were not supplied to appellants by M/s. Ridhi Sidhi is missing in investigation of the department. As against this, the appellants have produced various documentary evidences including transport receipts, proof of payments, proof of receipt of such goods in their premises and their output indicating that the goods were actually received as per accounts. The department has not brought on record any worthwhile evidence to indicate non supply of goods from M/s. Ridhi Sidhi to the present appellants despite appellant s having brought on record various evidence by name of transporters, their receipts, invoice and the receipt of goods as well as payments made to M/s. Ridhi Sidhi. The documentary evidence given by them therefore has not been rebutted by any credible evidence. The stance of the department in upholding the second link in the chain of evidence is therefore purely based on presumptions and assumptions. Therefore, there is no reason to doubt the documentary evidence indicating receipt of finished material from M/s. Ridhi Sidhi. The same has also been left incomplete due to non-recording of statements of proprietor/director/authorised person of M/s. Ridhi Sidhi and also because of refusal of the adjudicating authority below to allow cross examination to afford opportunity to the present appellant who desired the same for their defence. Cumulatively department has failed to establish a case against the appellants making them eligible for relief. The impugned order is set aside - appeal allowed.

Issues Involved:
1. Fraudulent passing of Cenvat Credit based on fake invoices.
2. Investigation lapses by the department.
3. Relevance of statements from suppliers.
4. Demand hit by limitation.
5. Penalty on the director.

Issue-wise Detailed Analysis:

1. Fraudulent Passing of Cenvat Credit Based on Fake Invoices:
The case involved M/s Ridhi Sidhi Enterprises, Jaipur, accused of availing Cenvat credit on fake invoices without actual supply of goods. The Anti Evasion Branch, CGST, Jaipur, investigated the matter and found that M/s Ridhi Sidhi Enterprises had availed Cenvat credit based on invoices from various dealers/manufacturers. The investigation concluded that M/s Ridhi Sidhi Enterprises did not receive any goods from its suppliers, leading to a Show Cause Notice (SCN) for recovery of Cenvat credit of Rs. 2,19,82,733/- along with interest and penalties.

2. Investigation Lapses by the Department:
The appellants pointed out several lapses in the department's investigation:
- No investigation at the end of transporters or their drivers.
- No investigation into how the appellant manufactured goods without receiving the alleged quantity of scrap.
- No shortage of raw material was found, nor was there an allegation of procuring raw material from the open market without invoices.
- Statements of various persons were not corroborated by any documentary evidence.
- The appellant provided documentary evidence, including invoices, transport documents, weighment slips, goods receipt notes, and payment records, to support their claim of receiving the goods.

3. Relevance of Statements from Suppliers:
The appellants argued that statements from suppliers who claimed no dealings with M/s Ridhi Sidhi were irrelevant since only two suppliers (M/s Renu Raj Enterprises and M/s Sidhi Vinayyak Metal & Salt Co. P. Ltd.) actually supplied scrap to M/s Ridhi Sidhi. The department's reliance on statements from other suppliers was not justified. Furthermore, the appellants emphasized that the department did not investigate the origin of the scrap from manufacturers like Tata Steel Ltd., which constituted 85.58% of the total scrap.

4. Demand Hit by Limitation:
The appellants contended that the demand was barred by limitation. The SCN was issued on 26.08.2021 for the period from April 2016 to June 2017, which was beyond the prescribed period of limitation. The appellants cited various case laws to support their argument that the recovery of Cenvat credit could not be made due to the time-barred nature of the demand.

5. Penalty on the Director:
The appellants argued that penalties could only be imposed on the entity that availed the Cenvat credit, not on the director. They cited the case of Ashok Kumar H Fulwadhya Vs. UOI to support their claim that the director could not be penalized under the relevant rules.

Judgment Analysis:
The tribunal found that the department failed to conclusively prove that M/s Ridhi Sidhi Enterprises did not receive the raw material or supply the finished goods to the appellants. The appellants provided substantial documentary evidence, including transport receipts, proof of payments, and proof of receipt of goods, which the department could not rebut. The denial of cross-examination of the suppliers and transporters further weakened the department's case. The tribunal relied on the case of Nidhi Auto Pvt. Ltd. Vs. Commissioner of Central Excise, Noida-I, which had similar facts, to conclude that the department's findings were based on presumptions and assumptions.

Conclusion:
The tribunal set aside the impugned order and allowed the appeals with consequential benefits, stating that the department failed to establish a case against the appellants. The judgment emphasized the importance of credible evidence and proper investigation in cases involving allegations of fraudulent Cenvat credit. The appeal was allowed, providing relief to the appellants.

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