2016 (6) TMI 823 - AT - Central Excise

Cenvat Credit - allegation of receipt of invoice without receipt of inputs / goods - fraudulent activity - Held that - he case is seen to have been initiated against the appellants basing on the private records seized from the residence of Sh.Prabhakar KMC . In these note books certain figures/entries were mentioned against Mayur. Though in the impugned order it is stated that the investigating officer has elaborately dealt about the link of Mayur with appellants I do not find any such elaborate discussion or evidence. The only statement is that appellants SLI is known in the market as Mayur Fans There is no evidence to link the entries resumed with the appellant. One of the grounds relied by department is that the specification of thickness of sheets shown in the invoices do not match with the specification of sheet thickness required by the appellant for manufacture of fan blades. This is answered by the appellant saying that they use sheets with thickness ranging from 0.7mm to 1.22mm. The department has not adduced any evidence to show that the fan blades manufactured by appellants cannot be manufactured using sheets of thickness as stated to have been used by appellant. The main evidence relied by department is the private note book resumed from the residence of Shri Prabhakar of KMC. In his statement dated 29-06-2005 Shri Prabhakar has deposed that the sale and purchase recorded in note book no.1 were made by him in his personal level as a side business for which no permission was obtained from anyone or kMC. - The statement of Shri. Prabhakar is not corroborated by cogent evidence to establish the allegation against appellants. The payments were made by appellant through cheque. But there are no records to establish from the accounts of appellant that there was any cash flow from appellant to KMC. On an overall appreciation of facts and evidence it is seen that whole case is based upon third party private records and statement of such third party Shri Prabhakar. In the absence of independent evidence the charges leveled against the appellant is not sustainable - Demand set aside - Decided in favor of assessee.

Summary

Issues involved: Alleged fraudulent availment of Cenvat credit based on invoices without actual receipt of goods, discrepancy in description of goods, diversion of inputs, failure to verify stock position and production, lack of evidence linking appellant to alleged transactions, reliance on third-party private records, absence of independent evidence, sustainability of charges.

Analysis:

1. The case involved allegations of fraudulent availment of Cenvat credit by the appellant based on invoices without actual receipt of goods. The department alleged that the appellant availed credit on input invoices issued by certain dealers without the actual supply of materials. The investigation was initiated based on specific intelligence, and discrepancies were found in the records of the dealers. The appellant denied the allegations and submitted detailed replies to the show cause notice, emphasizing that they were not involved in the omissions and commissions of the dealers. The appellant also requested cross-examination of relevant individuals, which was not considered by the authorities.

2. Another issue raised was the discrepancy in the description of goods received by the appellant. The department pointed out instances where the description on invoices did not match the actual goods received or used by the appellant. For example, certain wire rods were neither sent for job work nor used in the factory, and the thickness of aluminum sheets received did not align with the required specifications for manufacturing final products. The appellant defended these discrepancies by explaining their manufacturing processes and the range of thicknesses they used for their products.

3. The judgment highlighted the failure of the authorities to verify the stock position and production at the appellant's establishment. Despite allegations of diversion of inputs and fraudulent practices, no concrete evidence was presented to substantiate these claims. The reliance on third-party private records seized during the investigation was a key aspect of the case, with the appellant arguing that there was no direct link between the entries in the records and their operations. The lack of independent evidence supporting the charges raised significant doubts about the sustainability of the allegations.

4. Ultimately, the tribunal found that the case against the appellant was primarily based on third-party private records and statements, without sufficient independent evidence to support the allegations. The appellant's substantial use of raw materials during the relevant period, coupled with the lack of verification by the authorities, raised questions about the validity of the charges. As a result, the tribunal set aside the impugned order, allowing the appeals with consequential reliefs, if any, emphasizing the importance of independent and corroborative evidence in such cases.