2016 (3) TMI 997 - AT - Central Excise

Eligibility of CENVAT credit - fake invoices - whether the four invoices in question on the basis of which the appellant has availed the cenvat credit are genuine invoices or fake invoices - Held that - the investigation by the department is totally faulty and defective. The department did not bother to verify the particulars contained in the invoices submitted by the appellant by visiting the premises of M/s. Annapurna Impex Pvt. Ltd. The department has conveniently recorded the statement of one office attendant Shri Purshottam Lal, to make the basis of the entire case and further, the statement of Shri Purshottam Lal was recorded on 18.5.2005 whereas the invoices involved in this case pertain to much earlier period. It is also pertinent to note that the payment to M/s. Annapurna Impex Pvt. Ltd. was also made by cheques by the appellant. As per the Evidence Act, the onus to prove that the invoices on which the appellant has taken cenvat credit are fake and invalid, was on the department and the department failed to prove the same by bringing on record any credible and convincing evidence. So much so, the appellant was not even allowed to cross-examine the office attendant whose statement was the only basis for framing the appellant. Therefore, the respondent has failed to establish the charge against the appellant. Besides this the entire demand in this case is also time barred. The impugned show cause notice was issued on 17.10.2007 pertaining to the invoices dated 5.2.2004, 17.3.2004, 22.6.2004 and 25.3.2005, which is beyond the normal period of one year. Further, when the appellant has been filing the relevant ER-1 returns regularly and disclosing the details of these invoices on the basis of which the credit was availed, then it cannot be said that the appellant has wilfully suppressed the material fact from the department so as to invoke the extended period of limitation. Therefore, in my view, the entire demand is time barred. Further, the question of penalty does not arise when the demand is time barred. - Decided in favour of assessee

Issues Involved:
1. Validity of the invoices for availing Cenvat credit.
2. Compliance with principles of natural justice.
3. Burden of proof regarding the genuineness of invoices.
4. Time-barred nature of the demand.
5. Imposition of penalty under Section 11AC.

Issue-wise Detailed Analysis:

1. Validity of the Invoices for Availing Cenvat Credit:
The core issue in this case is whether the four invoices on which the appellant availed Cenvat credit were genuine or fake. The department alleged that these invoices were fake, asserting that M/s. Annapurna Impex Pvt. Ltd. did not have the capability to manufacture the copper wire bars as claimed. The appellant contended that the invoices contained all necessary details and that the goods were received as per these invoices. The appellant also provided corroborative evidence, including lorry receipts and payments made by cheques, to support the genuineness of the invoices.

2. Compliance with Principles of Natural Justice:
The appellant argued that the impugned order violated principles of natural justice as the respondent failed to consider the documentary evidence submitted by the appellant, including an affidavit from the Director of M/s. Annapurna Impex Pvt. Ltd. affirming the existence of manufacturing machinery. Additionally, the appellant was denied the opportunity to cross-examine the witnesses whose statements were used against them.

3. Burden of Proof Regarding the Genuineness of Invoices:
The appellant asserted that the onus to prove the invoices were fake lay with the department, which failed to discharge this burden. The department relied on the statement of an office attendant and did not conduct a thorough verification of the manufacturing capabilities of M/s. Annapurna Impex Pvt. Ltd. The appellant cited Section 101 of the Indian Evidence Act to emphasize that the burden of proof was on the department.

4. Time-barred Nature of the Demand:
The appellant contended that the demand was time-barred as the show cause notice was issued on 17.10.2007 for invoices dated as far back as 5.2.2004. The appellant had regularly filed ER-1 returns disclosing the details of the invoices, and there was no wilful suppression of facts. Hence, the extended period of limitation could not be invoked.

5. Imposition of Penalty under Section 11AC:
The appellant challenged the imposition of penalty under Section 11AC, arguing that there was no fraud, collusion, or wilful misstatement with intent to evade duty. Since the demand itself was time-barred, the question of penalty did not arise.

Judgment:
The tribunal found that the department's investigation was faulty and defective, as it did not verify the particulars contained in the invoices by visiting the premises of M/s. Annapurna Impex Pvt. Ltd. The department relied solely on the statement of an office attendant without corroborating evidence. The tribunal held that the onus to prove the invoices were fake was on the department, which it failed to discharge. Additionally, the tribunal concluded that the entire demand was time-barred as the show cause notice was issued beyond the normal period of one year, and there was no evidence of wilful suppression of facts by the appellant. Consequently, the tribunal set aside the impugned order, allowing the appeal with consequential relief.

Conclusion:
The tribunal ruled in favor of the appellant, setting aside the demand and penalty as the department failed to prove the invoices were fake and the demand was time-barred. The appeal was allowed with consequential relief.

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