2015 (7) TMI 669 - AT - Central Excise

Eligibility to CENVAT Credit - whether main Appellant is eligible to CENVAT Credit on the basis of proper CENVAT taking documents when the First Appellate Authority has held that only documents were obtained by the main Appellant and no inputs were accompanied by these documents - Held that - Entire emphasis is on the statements of third parties to establish the case. Appellant was requesting the Adjudicating authority for cross-examination of all these persons whose statements are relied upon. Three of five ship breaking units denied to have followed the practice suggested by investigation. When statements were the only establishing factors then cross-examination was the only way to assist the Revenue and the arguments of the Appellant also could have been made blunt. - a diary recovered from the broker and few statements alone cannot be made the basis for denying CENVAT Credit to the Appellant in the absence of any cross-examination of the third party witnesses given. Further, there is no evidence of alternative purchase of raw material by the Appellant for manufacture of goods cleared on payment of duty during the relevant period - case cannot be made only on the basis of note books maintained by the workers unless supported by corroborative evidence with regard to purchase of material, seizure of goods, money flow back etc. No cash has been seized any where when huge cash transactions are alleged to have been made. - Decided in favour of assessee.

Issues Involved:
1. Eligibility of the main Appellant to CENVAT Credit based on proper CENVAT taking documents.
2. Reliability of the evidence, including statements and diary entries, used by the Revenue.
3. Denial of cross-examination of witnesses by the Adjudicating authority.
4. Lack of corroborative evidence of alternative raw material procurement by the Appellant.
5. Legal precedents regarding the use of statements and diary entries without cross-examination.

Detailed Analysis:

1. Eligibility to CENVAT Credit:
The main issue in these proceedings is whether the main Appellant is eligible for CENVAT Credit based on proper CENVAT taking documents. The First Appellate Authority held that only documents were obtained by the main Appellant and no inputs accompanied these documents. The Revenue recorded statements from various parties, including suppliers, ship breakers, brokers, transporters, and angadias, suggesting that only documents were sold to the Appellant while M.S. Scrap was sold in cash to certain re-rollers.

2. Reliability of Evidence:
The Appellant argued that the inputs received were M.S. Scrap as per the invoices, whereas the broker's records indicated M.S. Plates supplied to re-rolling mills. The private diary maintained by the broker did not mention the invoice numbers under which the main Appellant received M.S. Scrap. Three out of five ship breakers denied the investigation's claim that M.S. Scrap was not supplied to the Appellant. The statements of the rolling mills, which were alleged to have received M.S. Plates, were not recorded to confirm their receipt of the materials.

3. Denial of Cross-Examination:
The Appellant requested cross-examination of all third-party witnesses whose statements were relied upon by the Revenue. However, this request was denied by the Adjudicating authority. The First Appellate Authority relied on the case law of Ahmednagar Rolling Mills to justify the denial of cross-examination. The Appellant cited several case laws, including Basudev Garg Vs Commissioner of Customs, which emphasize the necessity of cross-examination when statements are used against an assessee.

4. Lack of Corroborative Evidence:
The investigation did not show any alternative raw material procurement by the Appellant for manufacturing the goods cleared on payment of duty. No shortage or excess of raw materials was detected during the investigation. The Appellant argued that it is difficult to perceive how they could manufacture finished goods without the necessary inputs.

5. Legal Precedents:
The judgment referenced several legal precedents to support the Appellant's arguments. In Basudev Garg Vs Commissioner of Customs, the Delhi High Court held that the right to cross-examine witnesses is a valuable right in quasi-judicial proceedings. The Supreme Court in CBI Vs V.C. Shukla emphasized that entries in books of account alone cannot fix liability without independent evidence of their trustworthiness. The Punjab & Haryana High Court in CCE Chandigarh Vs Shakti Roll Cold Strips Pvt. Ltd. allowed credit in the absence of evidence of alternative raw material procurement. The CESTAT Chennai in T.G.L. Poshak Corporation Vs CCE Hyderabad held that a case cannot be made solely on the basis of notebooks maintained by workers without corroborative evidence.

Conclusion:
The Tribunal concluded that the diary recovered from the broker and a few statements alone could not be the basis for denying CENVAT Credit to the Appellant without the cross-examination of third-party witnesses. Additionally, there was no evidence of alternative raw material procurement by the Appellant. Therefore, the appeals filed by the Appellants were allowed with consequential relief, if any.

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