2015 (11) TMI 1037 - AT - Central Excise

Denial of CENVAT Credit - Bogus invoices - Non receipt of physical goods - whether the appellant-manufacturer have availed CENVAT credit on inputs without actually receiving the inputs - Held that - Demands have arisen as a result of investigation carried out by the officers at residential premises of Shri Kirti Kala and other employees, director of M/s SOL Shri Mukesh Sangla, office and godown of M/s SOL and its associate concerns. The hand written slips and lap top seized from the residence of Shri Kala, contained details of purported cash transactions by M/s SOL. Shri Kirti Kala and Shri Mukesh Sangla stated that the entries pertains to cash received on account of sale of polymers without issue of invoices and cash payments which included the payments made in lieu of cheques to the parties who purchased bogus invoices without delivery of goods. Reliance has also been placed upon the statement of Ravindra Pingle the godown Incharge at Indore and Paras Patidar, Marketing Manager of M/s SOL. The officers also investigated one of the transporter Shree Ganesh Transport who had transported goods from Mumbai godown of M/s SOL to M/s TEL but the same was found to be non existing. Neither the statement of Shri Ravindra Pingle, the godown Incharge nor the statement of Shri Paras Patidar points out any modus operandi in respect of M/s TEL having been issued duty paid invoices by M/s SOL, without actual delivery of goods. M/s TEL had produced the documents towards deposit of cash showing the receipt of the same from buyers/dealers of finished goods. These documents remained undisputed, as not found untrue, by the adjudicating authority, which shows that the contention made by M/s TEL is correct. No investigation has been conducted at Mumbai godown nor the records of said premises has been relied upon to show that the goods were not dispatched from the Mumbai Godown of M/s SOL and if dispatched having been diverted elsewhere. In case of goods received from M/s DCW, there is no investigation as to whether the goods were diverted elsewhere and not received by M/s TEL. The investigation is silent upon all these issues. Further it is not appearing on record that if the goods were not received by the Units of M/s TEL in that case what was the alternate source from where M/s TEL procured the goods. When the goods (inputs) were found to have been entered in records of M/s TEL and were shown to have been consumed in the production, which remains undisputed, I hold that looking to all these aspects the demand is not sustainable. - case of Revenue does not stand. The impugned Order-in-Appeals are set aside. The demand and penalty against M/s TEL Unit No.1 and Unit No.2 are not sustainable and therefore are set aside. - Decided in favour of assessee.

Summary

Issues Involved:
1. Whether the appellant-manufacturer availed CENVAT credit on inputs without actually receiving the inputs.

Detailed Analysis:

Background and Facts:
The appellants, M/s Tulsi Extrusions Ltd. - Unit No. 1 and Unit No. 2 (TEL), engaged in the manufacture of PVC Pipes and fittings, were availing CENVAT credit on inputs used in their finished goods. The case arose from a common investigation by the officers of DGCEI, Indore, which led to the issuance of show-cause notices alleging that the appellants availed CENVAT credit without actually receiving the inputs.

Investigation Findings:
During searches at the premises of M/s Signet Overseas Ltd. (SOL) and its associates, various documents, unaccounted currency, and electronic data were seized. Statements from employees of SOL and associated persons indicated cash transactions not recorded in official books. It was alleged that SOL issued invoices without actual supply of goods, enabling buyers to avail CENVAT credit fraudulently.

Show-Cause Notice and Adjudication:
The show-cause notices alleged that TEL availed credit based on invoices from SOL without actual receipt of goods. The adjudicating authority confirmed the demand with penalties and interest, rejecting the appellants' request for cross-examination of SOL's employees and other related persons.

Appeal and Tribunal Findings:
The appellants contested the show-cause notices, arguing that the seized documents and statements lacked evidentiary value and that cross-examination was unjustly denied. They provided records of receipt, consumption, and production, supported by a cost accountant's certificate, to prove the receipt and use of inputs.

The Tribunal found several key points:
1. Lack of Direct Evidence: The statements of SOL's employees did not specifically implicate TEL in receiving bogus invoices without goods. The ledger entries in the laptop of SOL's employee were not maintained in the ordinary course of business.
2. Denial of Cross-Examination: The refusal to allow cross-examination of key witnesses was deemed improper. Cross-examination was necessary to test the veracity of the statements and documents relied upon by the Revenue.
3. Absence of Investigation at Mumbai Godown: The investigation did not verify records at SOL's Mumbai godown, from where the disputed invoices were issued. No evidence showed that goods were not dispatched or were diverted elsewhere.
4. Existence of Transporter: The non-existence of the transporter (Shree Ganesh Transport) at the given address was not sufficient to conclude that no goods were transported. The vehicle registration numbers and freight payment records were not disputed.
5. Proper Records and Consumption: TEL maintained proper records of receipt and consumption of inputs, and there was no evidence of diversion or non-receipt of goods. The statutory records were not found to be incorrect or untrue.

Legal Precedents and Judgments:
The Tribunal relied on several judgments, including Basudev Garg Vs. CCU and Charminar Bottling Co. Pvt. Ltd. Vs. CCE, which emphasized the necessity of cross-examination and the insufficiency of third-party records as sole evidence. Similar cases highlighted the importance of corroborative evidence to support allegations of fraudulent credit availing.

Conclusion:
The Tribunal concluded that the Revenue's case lacked substantial evidence to prove that TEL availed CENVAT credit without receiving inputs. The denial of cross-examination and reliance on unverified third-party records were significant procedural lapses. Consequently, the demands and penalties against TEL and associated individuals were set aside, and the appeals were allowed with consequential reliefs.

Pronouncement:
The judgment was pronounced in court on 30.07.2015, setting aside the impugned orders and allowing the appeals in favor of the appellants.