2016 (9) TMI 1051 - AT - Central Excise

Invokation of extended period of limitation - Cenvat credit - appellant purchased input-Scrap i.e. SS Scraps from a first stage dealer namely, Khmeshwar Enterprises who was involved in passing fraudulent credit by trading in excisable goods namely Metal Scrap - seeking cross examination of witness of the Revenue - appellant contended that they are not aware, if Khameshwar Enterprises have supplied them some other scrap or non-duty paid scrap and passed on illegitimate credit - suo motu, reversal of duty with interest by the appellant. Held that - it is found that the appellant has admittedly paid the duty on the inputs in question by cheque. Further, no case of collusion is made out against the appellant. I further take notice of the fact that the case of Revenue is based on the statements of the said Rakesh Agarwal of Khameshwar Enterprise & others, and Revenue have failed to offer its witness for cross-examination in spite of prayer having been made by the appellant. This has resulted into miscarriage of justice for not giving any reasonable opportunity of hearing. Further, in view of the findings of the Ld. Commissioner (Appeals), we find that the appellant seems to have received some scrap along with the duty paying document, also establishes the absence of collusion and or mala fide on the part of the appellant. I also take a notice of the fact that the appellant have, suo motu, reversed the Cenvat credit under dispute along with the interest prior to the enquiry initiated against them by the Revenue and issuing the show cause notice. Therefore, I hold that no case of contumacious conduct or fraud, is made out against the appellant. Hence, the penalty imposed under Rule 15 of CCR read with Section 11 AC of the Act is set aside. Also, the appellant will not be entitled to take re-credit of the amount reversed by them, suo motu. - Decided partly in favour of appellant

Summary

Issues Involved:
1. Denial of Cenvat Credit.
2. Opportunity for cross-examination.
3. Allegations of fraudulent transactions.
4. Imposition of penalty under Rule 15 of CCR read with Section 11 AC of the Act.

Detailed Analysis:

1. Denial of Cenvat Credit:
The appellant, a manufacturer of Ingots, challenged the denial of Cenvat Credit amounting to ?1,71,887/- along with interest and an equal amount of penalty. The Revenue's case was based on intelligence reports and statements suggesting that the supplier, Khmeshwar Enterprises, was involved in fraudulent transactions by issuing invoices without actual physical transactions of goods. The appellant argued that they had received the scrap and used it to manufacture dutiable finished products, maintaining proper records.

2. Opportunity for Cross-Examination:
The appellant contended that the Revenue's case was primarily based on statements from individuals associated with Khmeshwar Enterprises. They requested the opportunity to cross-examine these individuals, which was denied by the adjudicating authority. The Tribunal noted that the failure to allow cross-examination resulted in a miscarriage of justice, as it deprived the appellant of a reasonable opportunity to challenge the evidence against them.

3. Allegations of Fraudulent Transactions:
The Revenue alleged that Khmeshwar Enterprises issued invoices for Cenvat credit without actual physical transactions of goods. Statements from various individuals, including the proprietor of Khmeshwar Enterprises, indicated that the transactions were on paper only, and no actual goods were transported. The appellant maintained that they were unaware of any fraudulent activities by Khmeshwar Enterprises and that they had acted in good faith, utilizing the scrap received and paying duty on the finished products.

4. Imposition of Penalty:
The adjudicating authority imposed a penalty of ?1,71,887/- under Rule 15 of CCR read with Section 11 AC of the Act. The appellant argued that the reversal of Cenvat credit and payment of interest was a voluntary action to avoid litigation and did not imply any admission of guilt. The Tribunal found no evidence of collusion or malafide intent on the appellant's part. It also noted that the appellant had reversed the credit and paid interest before the Revenue initiated an inquiry.

Judgment:
The Tribunal concluded that the denial of cross-examination resulted in a miscarriage of justice. It held that the appellant had acted with reasonable diligence and there was no evidence of collusion or fraudulent intent. Consequently, the penalty imposed under Rule 15 of CCR read with Section 11 AC of the Act was set aside. However, the appellant was not entitled to re-credit the amount reversed. The appeal was allowed in part, providing relief from the penalty while upholding the reversal of Cenvat credit.