2016 (8) TMI 754 - HC - Central Excise

Cenvat credit - wrongly availed in contravention of Rule 3(4) of the Central Credit Rules, 2004 - assessee is said to have purchased Copper Wire in the invoices, manufacturer is shown as M/s Navneet Yarn Pvt. Ltd. and the description of the goods is shown as Copper Wire which is 99% of purity and admittedly it has been found during investigation that M/s Navneet Yarn Pvt. Ltd. is not at all a manufacturer of Copper Wire rather has been found to be a manufacturer of entirely different product namely; texturing of Polyster Yarn. Held that - When M/s Navneet Yarn Pvt. Ltd. from whom M/s. V.K. Enterprises purchased the goods and in turn sold to the assessee has been admittedly found to be a manufacturer of Polyster Yarn, an entirely different product and which has been proved on record by the Revenue on the basis of the investigations carried out and confronted the same to the appellant, in our view, all these are finding of fact based on the material on record found by all the three authorities who in unison have come to the conclusion that the Cenvat Credit was wrongly taken. Even if the seller is a registered dealer under Central Excise and an assessee under Sales Tax Laws, Income Tax Laws and other statutory laws and payment is by cheque, in our view, will not make any difference as long as on investigation it revealed that the goods purchased were not proved to the hilt and Revenue has made out a clear cut case of irregular availment of Cenvat Credit. Therefore, we find no infirmity or perversity in the order of the Tribunal so as to call for interference. - Decided against the appellant

Summary

Issues:
1. Wrongful availment of Cenvat Credit by the assessee.
2. Validity of the claim made by the appellant regarding the purchase of goods.
3. Perversity of the Tribunal's order and substantial questions of law arising from it.

Issue 1: Wrongful availment of Cenvat Credit
The case revolved around the appellant-assessee, a manufacturer of copper products, who was alleged to have wrongly availed Cenvat Credit amounting to a specific sum. The dispute arose from the purchase of goods from a registered dealer, M/s V.K. Enterprises, who claimed to have received the material from M/s Navneet Yarn Pvt. Ltd., a supposed manufacturer of copper wire. However, investigations revealed that M/s Navneet Yarn Pvt. Ltd. was actually a manufacturer of Polyster Yarn and not copper wire. The authorities contended that the appellant had irregularly availed the credit by relying on invoices from a non-existent source, leading to a show cause notice and subsequent rejection of the appellant's contentions.

Issue 2: Validity of the Appellant's Claim
The appellant argued that they were bona fide purchasers of the goods, as evidenced by proper documentation and transportation of the goods received from M/s V.K. Enterprises. The appellant maintained that they were not obligated to verify the original source of the goods beyond the registered dealer from whom they made the purchase. The appellant emphasized that all transactions were conducted through legitimate channels, including payments via account payee cheques. However, the authorities, including the AO, Commissioner, and Tribunal, upheld the irregular availment of Cenvat Credit due to the discrepancy in the actual nature of the goods received compared to the invoices.

Issue 3: Perversity of Tribunal's Order and Substantial Questions of Law
The appellant contended that the Tribunal's order was perverse, emphasizing that they had received and treated the goods as copper wire scrap, which was consistent with their manufacturing process. However, the High Court, after reviewing the statements and evidence, found that the Tribunal's decision was based on factual findings and material on record. The Court concluded that there was no legal error or substantial question of law to warrant interference, ultimately dismissing the appeal for lack of merit.

In conclusion, the High Court upheld the Tribunal's decision, highlighting the importance of verifying the actual nature of goods received for claiming Cenvat Credit and emphasizing the significance of factual findings in such cases.