2017 (11) TMI 756 - AT - Central Excise

Duty Drawback - All Industry Rate - M/s FIL claimed the AIR at higher rate by claiming that the export goods were made without claiming such credit - Held that - Revenue has not brought any other evidence to establish that the export goods were procured through other invoices on which credit was availed. Moreover the AIR was sanctioned and paid by Customs authority at the port of export. If Revenue is of the view that excess drawback has been paid, action for recovery has to be initiated by the jurisdictional Customs authority. The Central Excise authority has no jurisdiction to initiate such recovery - demand rightly dropped. CENVAT credit - bogus invoices - Held that - the case of the Revenue has been built up almost entirely on third party evidence which also stands denied in cross examination. There is no admission by the appellants about the receipt of only invoices without accompanying goods. These facts are also not corroborated by any evidence recovered from the appellants. There is also no evidence found in the appellant s documents which show their involvement in the matter - It is well settled position of law that demand cannot be made only on the basis of third party documents - credit remains allowed. Appeal allowed - decided in favor of assessee.

Issues: Alleged procurement of bogus invoices, fraudulent availing of Cenvat credit, demand for excess drawback, third-party evidence, cross-examination denial, legal precedents from similar cases.

Alleged procurement of bogus invoices:
The case involved M/s. Flexituff International Ltd. being accused of procuring bogus invoices from certain suppliers. Evidence collected indicated that no goods were received by M/s. Flexituff International Ltd. from the suppliers mentioned, and the invoices were used without actual receipt of goods. The company was found to have availed credit on some bogus invoices and used others to create a separate account for the manufacture of export goods. Additionally, the company appeared to have issued bogus invoices to account for a shortage of physical stock due to the procurement of bogus invoices and unaccounted sale of inputs.

Fraudulent availing of Cenvat credit:
M/s. Flexituff International Ltd. was alleged to have fraudulently availed Cenvat credit on the basis of the bogus invoices procured. The Central Excise authority issued a show cause notice for the recovery of the wrongfully availed Cenvat credit and excess drawback. The Tribunal analyzed the evidence presented by the Revenue, including documents and statements, but found that the case was primarily built on third-party evidence, which was denied during cross-examination. The Tribunal highlighted that demand cannot be solely based on third-party documents, citing legal precedents to support this position.

Demand for excess drawback:
The Revenue appealed against the dropping of the demand for the recovery of excess drawback claimed by M/s. Flexituff International Ltd. The company had claimed a higher rate of All Industry Rate (AIR) for drawback by stating that no credit was availed on the invoices used for procuring raw materials. The Tribunal upheld the dropping of the demand for recovery of excess drawback, emphasizing that the Customs authority at the port of export sanctioned and paid the AIR, and if excess drawback was paid, recovery action should be initiated by the jurisdictional Customs authority.

Third-party evidence and legal precedents:
The Tribunal considered the denial of third-party evidence during cross-examination and noted that the Revenue's case lacked corroboration from the appellants or their documents. The Tribunal referenced legal precedents to support the position that demand cannot be solely based on third-party documents. Furthermore, the Tribunal reviewed similar cases arising from the same investigation against M/s. SOL and concluded that the present case deserved a similar view based on the evidence presented.

In conclusion, the Tribunal set aside the impugned order regarding the demand for the recovery of Cenvat credit. The assessee's appeals were allowed, and the Revenue's appeal was rejected, with the order pronounced in the open court on 06.10.2017.

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