2017 (9) TMI 1061 - AT - Central Excise

CENVAT credit - Duty paying invoices - fake invoices - M/s.HSAL had only supplied invoices to various parties without supplying the goods - Held that - the fictitious nature of transfer taken of inputs recorded by the Ld. Commissioner (Appeals) is completely contradictory to his conclusion at the end of order that the inputs were actually received by the appellant and the department did not prove that inputs were not received in the factory categorically. The provisions of Section 9D of the Central Excise Act 1944 have not been followed by the adjudicating authority which were required to be followed as per law at that time. It is well settled principle that the adjudicating authority cannot straightaway rely on the statement recoded during investigation unless the conditions set out in Section 9D are fulfilled. The matter requires to be adjudicated afresh by the adjudicating authority after following the procedure laid down under Section 9D of the Act and by following the principles of nature justice - appeal allowed by way of remand.

Summary

Issues:
- Availment of Cenvat credit based on invoices from M/s. HSAL
- Allegations of non-supply of goods by M/s. HSAL
- Penalties imposed on the respondent and partner
- Appeal against dropped demand and penalties by the Commissioner (Appeals)
- Compliance with Section 9D of the Central Excise Act, 1944

Analysis:

Availment of Cenvat credit based on invoices from M/s. HSAL:
The respondent availed Cenvat credit using invoices from M/s. HSAL, who was found to have issued invoices without supplying goods. The investigation revealed discrepancies in the transportation of goods mentioned in the invoices, leading to a demand of ?19,40,840 confirmed by the adjudicating authority. However, the Commissioner (Appeals) dropped the demand and penalties, prompting the Revenue to file appeals.

Allegations of non-supply of goods by M/s. HSAL:
Evidence presented by the Revenue included statements from transporters denying the transportation of goods to the respondent as per the invoices. The investigation highlighted discrepancies in the goods' transportation, supported by statements and transport documents indicating the transportation of goods to different locations than stated in the invoices.

Penalties imposed on the respondent and partner:
Apart from the demand, penalties were imposed on the respondent and the partner of the firm. The Commissioner (Appeals) set aside these penalties, leading to the Revenue's appeal. The argument was made that if the firm is penalized, a separate penalty on the partner is not justifiable, citing legal precedents.

Appeal against dropped demand and penalties by the Commissioner (Appeals):
The Revenue challenged the dropping of the demand and penalties by the Commissioner (Appeals) based on the contradictory findings regarding the receipt of inputs by the appellant. The order was deemed perverse, leading to the decision to set it aside and remand the matter back to the adjudicating authority for fresh adjudication.

Compliance with Section 9D of the Central Excise Act, 1944:
The Tribunal found that the adjudicating authority did not follow the provisions of Section 9D of the Central Excise Act, 1944, which necessitates adherence to specific procedures for statements recorded during investigations. Citing legal precedents, it was established that failure to comply with Section 9D renders reliance on such statements irrelevant, leading to the need for re-adjudication following the prescribed procedure.

In conclusion, the Tribunal set aside the impugned order and remanded the matter back to the adjudicating authority for fresh adjudication in compliance with Section 9D, ensuring a fair opportunity for the appellants to defend their case.