2016 (9) TMI 478 - AT - Central Excise

Cenvat credit - channels, Joist, C.R. Strips, H.R. Coils, G.R. Strips, Angles etc. - Cenvat credit wrongly taken on the basis of invoices without actually receiving the inputs into the factory - respondents could produce all the witnesses whose cross-examination was sought but only the statement of witnesses were produced whom could not be produced in person - Held that - the original authority has relied upon the findings only on the basis of statements of such witnesses whose cross-examination could not be conducted, since the respondent could not produce them. The contention of Revenue is that the inputs were not received by the appellants but it is a fact that appellants manufactured their final product and paid duty on the final product and filed statutory returns for the same and such returns are not questioned by Revenue then, obviously Revenue should have investigated as to from which raw materials, the assessee i.e. appellant manufactured the goods. The failure of the Revenue to establish the source of Raw material in the absence of non-receipt of inputs on which Cenvat Credit was taken, brings us to the conclusion that the entire case of Revenue is on the basis of presumption. We have also found that there is sufficient force in the arguments put forth by the appellants and the various case laws cited by him, are squarely applicable in the present case. Therefore, the impugned Order-in-Original is not tenable in law. - Decided in favour of appellant

Summary

Issues Involved:
1. Allegation of wrongful availing of Cenvat Credit.
2. Reliance on statements of witnesses not produced for cross-examination.
3. Validity of evidence from affidavits and letters of witnesses not cross-examined.
4. Time-barred demand.
5. Procedural compliance by appellants.

Detailed Analysis:

1. Allegation of wrongful availing of Cenvat Credit:
The appellants were accused of availing Cenvat Credit on inputs without actually receiving them, based on invoices from registered dealers. The department's allegation was primarily based on statements from dealers and transporters, suggesting that the inputs were not received in the appellants' factory. The Show Cause Notice demanded the recovery of ?76,16,327/- from M/s Raj Ratan Casting Pvt. Ltd. and ?17,78,078/- from M/s Raj Ratan Industry Ltd., along with penalties on their directors.

2. Reliance on statements of witnesses not produced for cross-examination:
The appellants argued that the original authority relied on statements of witnesses who were not produced for cross-examination, violating the principle that such testimony should not be used as evidence. The appellants cited various case laws, including the ruling in Basudev Garg Vs. Commissioner of Customs, which emphasized the necessity of cross-examination when statements are used against the assessee. The Tribunal noted that only four out of eleven witnesses were produced for cross-examination, and the remaining witnesses' statements were still considered by the original authority.

3. Validity of evidence from affidavits and letters of witnesses not cross-examined:
The appellants contended that affidavits and letters from witnesses who did not appear for cross-examination should not be treated as evidence, as their authenticity could not be verified. The Tribunal agreed, referencing the judgment in Commissioner Vs. Motabhai Iron and Steel Industries, which held that demands based solely on third-party statements without corroborative evidence are untenable.

4. Time-barred demand:
The appellants argued that the demand was time-barred since they had been regularly filing statutory returns, and the department had not raised any objections during audits. The Tribunal recognized the appellants' compliance with statutory requirements and the absence of any challenge to their returns by the department, supporting the argument that the demand was indeed time-barred.

5. Procedural compliance by appellants:
The appellants demonstrated that they had procured inputs from registered dealers, made payments through banking channels, and maintained proper statutory records. The Tribunal noted that the department failed to investigate the source of raw materials used by the appellants if the alleged inputs were not received. This lack of investigation weakened the department's case, as it was based on presumptions rather than concrete evidence.

Conclusion:
The Tribunal concluded that the original authority's reliance on statements of witnesses not produced for cross-examination and the lack of substantial evidence to support the department's allegations rendered the Order-in-Original untenable. The Tribunal set aside the impugned order and allowed the appeals, emphasizing the importance of procedural fairness and the necessity of corroborative evidence in such cases.