2017 (3) TMI 929 - AT - Central Excise

CENVAT credit - fake invoices - denial on the premise that the dealer M/s S.K. Garg & Sons who has supplied the goods to the respondent is non existence and he has merely issued invoice not the goods - Held that - no investigation conducted at the end of manufacturer/supplier or the transporter to reveal the truth whether manufacturer/supplier has supplied the goods in question to M/s S.K. Garg & Sons or the transporter has transported the goods to the premises of the respondents which is vital evidence to reveal the truth - it cannot be alleged against the respondents that they have received the invoices and not the goods merely on the ground that there was not storage facility specifically when the landlord made a statement that the godown was let out to the dealer - in the absence of any investigation at the end of manufacturer/supplier or the transporter, the cenvat credit cannot be denied to the respondents - appeal dismissed - decided against Revenue.

Summary

Issues:
Cenvat credit denial based on non-existence of supplier M/s S.K. Garg & Sons.

Analysis:
The appeal was filed by the Revenue against an order allowing cenvat credit on inputs to the respondent, based on the premise that the supplier, M/s S.K. Garg & Sons, did not exist and had only issued invoices without supplying goods. The investigation revealed that the premises of M/s S.K. Garg & Sons were locked and non-existent, leading to the cancellation of their registration. The respondent had procured goods from M/s S.K. Garg & Sons and availed cenvat credit. A show cause notice was issued, denying the credit and proposing duty, interest, and penalty. The Commissioner (Appeals) allowed the credit, stating that the documents showed all required particulars and were co-relatable with duty-paying documents. The Revenue contended that as M/s S.K. Garg & Sons did not have storage capacity, the credit should not be allowed.

The AR argued that M/s S.K. Garg & Sons was engaged in issuing fake invoices for cenvat credit, as confirmed by Preventive Officers' visit and lack of storage facilities. The absence of investigation at the supplier's end was highlighted, where goods were allegedly not received by the appellant on the same day as invoicing. The respondent's counsel emphasized that the goods were physically received and used in manufacturing, with no incriminating statement. They also pointed out the lack of investigation with the transporter or manufacturer/supplier of the goods.

The Tribunal found that crucial investigations were missing at the supplier's and transporter's ends to ascertain the truth. M/s S.K. Garg & Sons had filed ER-1 returns accepted by the department, and the landlord confirmed the existence of the godown. Relying on precedent cases, including M/s Dhawan Steel Industries, the Tribunal upheld the impugned order, stating that without corroborative evidence, the allegation of not receiving goods based on the non-existence of the supplier was not sustainable. The appeal by the Revenue was dismissed, affirming that cenvat credit cannot be denied without thorough investigations at the supplier's and transporter's ends.