2015 (5) TMI 135 - AT - Central Excise

Denial of MODVAT Credit - Bogus invoices - MODVAT Credit was denied on the basis of evidence to the extent of the report of RTO that the vehicle numbers mentioned in the invoices are incapable to carry of such huge quantities of the material - Held that - There is no dispute in the Central Excise invoices are genuine and the goods were cleared from the supplier of inputs accompanied with Central Excise invoices. It is evident from the statements of the supplier of inputs that the goods were transported through the broker/transporter. The statements of the transporters were heavily relied upon, but they did not turn up for cross-examination and therefore, such evidence cannot be relied upon. The applicability of RTO report in respect of all the consignments is doubtful. It is not clear from the RTO report that it would be applicable in respect of 66 consignments. There is no evidence that the goods were diverted by the Appellant. It is important to note that the supplier of input categorically stated that the goods were transported through the agents/broker of the transporter and the vehicle numbers were mentioned in the invoices at their instance. In such situation, MODVAT Credit cannot be denied merely on the basis of report of RTO. - denial of MODVAT Credit alongwith interest and imposition of penalties cannot be sustained on merit, without going into the submission on limitation of the Appellants. Accordingly, the impugned order is set aside - Decided in favour of assessee.

Issues Involved:
1. Wrongful availment of MODVAT Credit.
2. Denial of cross-examination.
3. Reliance on statements and RTO report.
4. Retraction of statements.
5. Evidence of actual receipt of goods.
6. Imposition of penalties.

Detailed Analysis:

1. Wrongful Availment of MODVAT Credit:
The primary issue was whether M/s SM Energy Teknik & Electronics Ltd wrongfully availed MODVAT Credit amounting to Rs. 44,25,049.00 based on invoices without physically receiving the raw materials. The Adjudicating authority confirmed the demand along with interest and imposed a penalty of equal amount. The Commissioner (Appeals) upheld this decision.

2. Denial of Cross-Examination:
The Appellant argued that the denial of cross-examination of relevant persons, whose statements were relied upon by the department, was against natural justice. The Commissioner (Appeals) had earlier remanded the matter for cross-examination, which was not allowed in the de-novo adjudication. The Tribunal found that the denial of cross-examination was unjustified and essential for finding the truth.

3. Reliance on Statements and RTO Report:
The department relied heavily on statements from dealers and transporters, and a report from the RTO indicating that the vehicle numbers on the invoices were incapable of carrying such quantities. The Tribunal noted that these statements were uncorroborated and the transporters did not appear for cross-examination, thus their statements could not be relied upon. The RTO report was also found insufficient as it only covered 11 out of 66 consignments and did not provide a clear picture applicable to all consignments.

4. Retraction of Statements:
The statements of the Executive Director and transporters were retracted shortly after being recorded. The Tribunal emphasized that retracted statements, especially when not corroborated by other evidence, hold little evidentiary value. The Commissioner (Appeals) had not considered the retracted statements properly, which was a significant oversight.

5. Evidence of Actual Receipt of Goods:
The Appellant provided evidence that all materials received were recorded in the factory's statutory records, audited by Central Excise Officers. The Tribunal found no evidence of goods being diverted or any discrepancy in the statutory records. The suppliers confirmed the delivery of goods, and payments were made through cheques, further supporting the Appellant's claim.

6. Imposition of Penalties:
Given the lack of substantial evidence against the Appellant and the procedural lapses, the Tribunal found no justification for the penalties imposed. The reliance on uncorroborated statements and an incomplete RTO report was insufficient to sustain the penalties.

Conclusion:
The Tribunal set aside the impugned order, finding that the denial of MODVAT Credit along with interest and the imposition of penalties could not be sustained on merit. The appeals filed by the Appellants were allowed with consequential relief. The judgment emphasized the necessity of cross-examination and corroborated evidence in quasi-judicial proceedings.

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