2017 (11) TMI 769 - AT - Central Excise

CENVAT credit - Revenue s main case is based upon the statement of Shri S.K.Gupta, Proprietor of M/s. M.K.Steels. Admittedly, the said Shri Gupta was not presented for cross-examination or for examination in chief by the Commissioner - cross-examination - Held that - The Tribunal in the case of Commr. Vs. Kuber Tobacco India Ltd. 2016 (4) TMI 622 - CESTAT NEW DELHI held that Adjudicating Authority is first required to examine the deponent of the statement and there after cross-examination is required - In the absence of such cross-examination and examination in chief, the statement on which the Revenue seeks to rely, have to be excluded from evidence. The appellants have made payment to Shri S.K.Gupta by cheques. Apart from the statement of Shri S.K.Gupta that such cheques were subsequently encashed by him and the amounts were returned to the appellants, there is virtually no evidence to establish the said fact. Revenue has not investigated the matter with the banks and has made no efforts to establish that the cheque payments made to M/s. M.K.Steels as consideration for the bought out inputs were received back by the appellants in cash. I also note that Shri S.K.Gupta apart from making bald statement that the amounts were returned to the assessee through broker, who was given 1% commission has given no further details. There is nothing on record to establish the said transactions. Appeal allowed - decided in favor of appellant.

Issues:
1. Disallowance of cenvat credit based on forged invoices.
2. Reliability of statements recorded during investigation.
3. Lack of evidence regarding cheque payments and return.
4. Cenvat credit entitlement based on invoices from a registered dealer.
5. Compliance with Rule 9(3) of the Cenvat Credit Rules.

Analysis:
1. The judgment revolves around the disallowance of cenvat credit due to the use of forged invoices by the appellant. The Revenue's case was primarily based on the statement of the proprietor of the supplier, which was not subject to cross-examination. Citing precedents, the Tribunal emphasized the need for proper examination and cross-examination of deponents before relying on their statements in adjudication proceedings.

2. The reliability of the statements made during the investigation was questioned, especially regarding cheque payments and their subsequent return. The lack of evidence and investigation by the Revenue regarding these transactions raised doubts about the authenticity of the claims made by the supplier. The Tribunal highlighted the importance of thorough investigation and corroboration of statements to establish facts.

3. The appellant's compliance with Rule 9(3) of the Cenvat Credit Rules was a crucial aspect of the case. The Tribunal referred to various decisions where manufacturers were entitled to claim cenvat credit based on invoices from registered dealers, even in cases of fraudulent transactions. The judgments emphasized the presumption of entitlement to credit unless proven otherwise, shifting the burden of proof to the Revenue.

4. In analyzing the case, the Tribunal considered precedents where similar investigations at the supplier's end did not lead to the denial of credit to the appellant. The lack of tangible evidence to prove non-receipt of goods by the appellant, despite investigations, played a significant role in the Tribunal's decision to allow the appeals and provide relief to the appellants.

5. Ultimately, the Tribunal set aside the impugned order and allowed both appeals, following the precedents and decisions that favored the appellants' entitlement to cenvat credit based on the invoices from the registered dealer. The judgment highlighted the importance of proper investigation, corroboration of evidence, and adherence to legal provisions in determining cenvat credit eligibility.

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