2017 (2) TMI 144 - AT - Central Excise

CENVAT credit - non-existent supplier - forged invoices - Held that - The scheme of Cenvat Credit is that buyer of inputs/capital goods receives the excisable items along with invoices evidencing payment of duty and immediately thereafter is allowed to take Cenvat Credit of the excise duty so paid. It is not expected that the buyer will carry out verification of the Accounts of the supplier to find out whether the Central Excise duty has actually been paid on the inputs / capital goods. Cenvat Credit has been availed on the basis of invoices issued by the supplier. No evidence found on record establishing that excise duty has not been paid by the supplier on the capital goods. There is nothing on record to show that the goods have not been received in the factory of the appellant - denial of credit not justified. Whether the allegation against the supplier that no goods were manufactured at their factory is correct? - Held that - reliance placed in the decision of the case of CCE Vs. Juhi Alloys Ltd. 2014 (1) TMI 1475 - ALLAHABAD HIGH COURT , where The goods were demonstrated to have travelled to the premises of the assessee under the cover of Form 31 issued by the Trade Tax Department, and the ledger account as well as the statutory records establish the receipt of the goods. In such a situation, it would be impractical to require the assessee to go behind the records maintained by the first stage dealer. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Denial of Cenvat Credit to the appellant on the basis of alleged non-existent supply from the supplier.
2. Allegations of fraud and collusion in availing Cenvat Credit.
3. Disallowance of Cenvat Credit due to lack of manufacturing activities by the supplier.
4. Time limitation for issuing show cause notice in case of alleged fraud.

Analysis:
1. The appellant, engaged in manufacturing excisable items, purchased capital goods from a supplier against proper invoices and payment of excise duty. However, an investigation revealed discrepancies in the supplier's manufacturing capacity, leading to a show cause notice against both parties. The appellant contested the demand, arguing that as a bona fide purchaser, they were not involved in any fraud or collusion with the supplier. The appellant's claim for Cenvat Credit was denied by the adjudicating authority and Commissioner (A).

2. The appellant's counsel contended that the denial of demand against them was unjust as they had purchased goods in good faith with proper documentation. They argued that the demand was time-barred and lacked evidence of fraud on their part. On the contrary, the Revenue argued that the Cenvat Credit was availed based on fake invoices and fraud, justifying the extended period for investigation under the Central Excise Act.

3. Detailed investigations revealed that the supplier had not undertaken manufacturing activities, leading to the disallowance of Cenvat Credit to the appellant. However, the appellant presented transport documents, purchase orders, and payment evidence to prove the receipt of goods and legitimate purchase transactions. The Tribunal found no justification to deny the Cenvat Credit to the appellant based on the evidence presented.

4. The Revenue alleged fraud on the part of the supplier, but the Tribunal emphasized that the appellant, as a buyer, cannot be expected to verify the supplier's excise duty payments independently. Citing relevant case laws, the Tribunal highlighted that the appellant acted diligently in their transactions and was entitled to assume the duty payment by the supplier. The Tribunal set aside the impugned order and allowed the appeal, rejecting the plea to keep the appeal pending based on the supplier's proceedings.