2024 (9) TMI 833 - AT - Central Excise

Availment of inadmissible CENVAT credit and utilization of same for payment of central excise duty - inputs sourced in the context of the entire manufacturing operations through various job workers - contravention of provisions of Central Excise Rules, 2002 - HELD THAT - M/s AIPL, Ludhiana had disputed the allegation raised by the department that they had no facility for manufacture of copper ingots inside the factory premises etc., at the initial stage of DGCEI investigation, by filing a civil suit against the local Commissioner of Central Excise and Customs before the Civil Judge (Senior Division) Ludhiana. In disposal of such application filed by M/s AIPL, under Order 26 Rule 9 CPC this case had culminated into passing of an order dated 04.10.2006, wherein the said Civil Judge had appointed a Local Commissioner who shall visit the spot and report about the actual and factual position of machinery lying installed in the factory of the plaintiff M/s AIPL. The conclusion arrived in the impugned order that the CENVAT credit taken on the basis of invoice issued by M/s AIPL, Ludhiana is without a prescription of material is contrary to the factual position, as indicated above. Further, during cross examination of the manager Shri Jaswantbhai Shah, he had clearly stated that he had received the invoice along with the material from M/s AIPL, Ludhiana. Therefore, there are no basis or any other evidence for coming to a conclusion that the receipt of copper ingots etc., by the appellants from M/s AIPL, Ludhiana, is improper. The Tribunal in case involving similar facts and for the same disputed supplier M/s AIPL, Ludhiana, in the case of M/S. STI INDUSTRIES VERSUS COMMISSIONER OF CENTRAL EXCISE S.T., VAPI 2015 (7) TMI 224 - CESTAT AHMEDABAD have held that the CENVAT credit cannot be denied, as the documents produced show that M/s AIPL was in existence and supplied the material with invoices. Thus, the appellants have duly availed the CENVAT credit, there are no merits in the impugned order to the extent of it had denied CENVAT credit facility and in confirmation of the adjudged demands on the appellants - appeal allowed.

Summary

Issues Involved:
1. Admissibility of CENVAT credit taken by the appellants.
2. Compliance with the principles of natural justice.
3. Evaluation of evidence and cross-examination of witnesses.
4. Existence and functioning of the manufacturing facilities of M/s Annapurna Impex Pvt. Ltd. (AIPL).

Detailed Analysis:

1. Admissibility of CENVAT Credit:
The core issue was whether the CENVAT credit of Rs. 14,67,774/- availed by the appellants on inputs sourced from M/s Annapurna Impex Pvt. Ltd. (AIPL), Ludhiana, was admissible. The DGCEI alleged that the appellants had availed inadmissible CENVAT credit based on invoices without physically receiving the goods. The Tribunal found that the denial of CENVAT credit was primarily based on statements from third parties who were not directly related to the appellants. The Tribunal emphasized that the appellants had received inputs under cover of the invoices and had taken credit accordingly.

2. Compliance with the Principles of Natural Justice:
The Tribunal noted that the adjudicating authority failed to comply with the principles of natural justice by not allowing the cross-examination of witnesses whose statements were relied upon. The Tribunal had previously remanded the matter for cross-examination, which was only partially fulfilled. The Tribunal reiterated that under Section 9(d) of the Central Excise Act, 1944, it is obligatory to conduct cross-examinations when statements from third parties are used against a person.

3. Evaluation of Evidence and Cross-Examination of Witnesses:
During the de novo adjudication, only two out of seven witnesses were cross-examined. One witness confirmed receiving the invoice and material from AIPL, while the other did not retract his earlier statement. The Tribunal found that the original authority's conclusion that AIPL did not supply the materials was based on insufficient evidence. The Tribunal held that the statements and panchnamas alone were not enough to deny the CENVAT credit.

4. Existence and Functioning of Manufacturing Facilities:
The Tribunal considered the evidence provided by a Local Commissioner appointed by the Civil Judge (Senior Division), Ludhiana, which confirmed the existence of manufacturing facilities at AIPL's premises. This independent verification contradicted the DGCEI's claim that AIPL did not have manufacturing facilities. The Tribunal concluded that the appellants had legitimately availed the CENVAT credit based on the invoices from AIPL.

Conclusion:
The Tribunal set aside the impugned order dated 19.06.2020, passed by the Commissioner (Appeals), Mumbai, and allowed the appeal in favor of the appellants. The Tribunal found that the denial of CENVAT credit was not justified based on the available evidence and the principles of natural justice. The appellants were granted consequential relief.

(Order pronounced in the open court on 09.09.2024)