2016 (2) TMI 785 - AT - Central Excise

Denial of cenvat credit - denial based on the investigations conducted at seller s site - Held that - In the absence of clear evidence to the effect that the appellant is one of the persons listed and as confirmed in the statement, the main basis of the case stands un-substantiated. Regarding the investigation conducted by the Department with certain transporters, it is seen that the appellants have submitted invoice-wise receipts along with transport s details to substantiate their claim of actual receipt of goods. These are not examined and categorically refuted with contra evidence by the Revenue. We find that the main basis and the starting point of investigation is the statement dated 26.05.2006 of Shri Naresh Gularia, Director of KPIL. As already noted, he was shown a list of buyers to whom he was to have sold the PVC compounds. The said list was not made available to the appellant to ascertain whether his name is figuring as one of the buyers. This was not examined for a definitive finding by the lower authorities. No verification has been made in the appellants premises regarding the due accounting or receipt of goods. In the face of these serious lacunae, we find that the denial of credit, as upheld in the impugned order, is not sustainable. Accordingly, we allow the appeal.

Summary

Issues:
Denial of cenvat credit based on investigations at seller's site. Lack of clear evidence linking the appellant to fraudulent credit availment. Reliance on statements of Director of KPIL and transporters. Failure to cross-verify defense evidence submitted by the appellant.

Analysis:
The case involved an appeal against an order by the Commissioner (Appeals)-I, Jaipur, denying cenvat credit of Rs. 13,48,560 to the appellants engaged in the manufacture of PVC coated wire & cables. The investigations were initiated based on alleged fraudulent credit availment by M/s. Kashish Proudcts Impex Pvt. Ltd. (KPIL), a supplier of PVC compound to the appellants. The Revenue contended that KPIL issued invoices without actual production or supply of PVC compound. The appellant's defense centered on lack of clarity regarding their inclusion in the list of buyers presented to the Director of KPIL. The appellant provided evidence of goods receipt, transport details, and payment records to support their claim. The investigation relied on statements by the Director of KPIL and transporters, alleging non-use of vehicles for transporting goods. However, the appellate tribunal noted serious shortcomings in the investigation and adjudication process. The tribunal highlighted the failure to cross-verify the appellant's defense evidence and the denial of an opportunity for fresh adjudication. The tribunal emphasized the lack of definitive findings regarding the appellant's inclusion in the list of buyers and the absence of verification at the appellant's premises. Ultimately, the tribunal found the denial of credit unsustainable due to significant lacunae in the investigation and upheld the appeal.

This judgment underscores the importance of thorough investigation and verification in cases of alleged fraudulent credit availment. It highlights the need for authorities to consider all evidence presented by the appellant and conduct comprehensive cross-verification before denying cenvat credit. The tribunal's decision emphasizes the principle of natural justice and the right to a fair adjudication process, particularly in cases where serious allegations impact a party's financial liabilities. The judgment serves as a reminder of the burden of proof on the investigating authorities and the necessity of establishing a clear link between allegations and the party accused of wrongdoing. It also showcases the significance of due diligence in examining all aspects of a case before reaching a decision that affects the rights and obligations of the parties involved.