2018 (1) TMI 467 - AT - Central Excise

CENVAT credit - duty paying documents - fake invoices - Section 9D of the Central Excise Act - absence of cross-examination - non-appraisal of evidence - burning loss - principles of natural justice - difference of opinion - Held that - as there are difference of opinion on the various issues, the matter is being referred to Third Member for decision - matter referred to Third Member.

Summary

Issues Involved:
1. Alleged diversion of copper cathodes by JVIPL and GRPL to JMWIPL.
2. Denial of Cenvat credit on copper cathodes.
3. Alleged fraudulent availing of Cenvat credit by JVIPL and GRPL.
4. Alleged non-receipt of copper scrap by JMWIPL.
5. Jurisdiction of the Commissioner of Central Excise, Delhi-II regarding JMWIPL.
6. Reliability of statements given by key witnesses.
7. Admissibility of evidence and compliance with Section 9D of the Central Excise Act.
8. Discrepancies in burning loss between JVIPL and JMWIPL.
9. Validity of the refund claims under Notification No. 56/2002-CE.
10. Invocation of extended period of limitation.

Detailed Analysis:

1. Alleged Diversion of Copper Cathodes:
The appellants, JVIPL and GRPL, were accused of diverting copper cathodes to JMWIPL, Jammu, instead of using them in manufacturing. The Anti-Evasion Officers alleged that JVIPL and GRPL used copper scrap instead of copper cathodes and diverted the cathodes to JMWIPL, Jammu. The statement of Mr. Shivji Gupta, Production Manager, was pivotal in this allegation. However, during cross-examination, Mr. Gupta retracted his earlier statement, claiming it was obtained under coercion. The Tribunal found the retraction credible, noting the lack of corroborative evidence for the initial statement.

2. Denial of Cenvat Credit on Copper Cathodes:
The denial of Cenvat credit was based on the alleged diversion of copper cathodes. The Tribunal found that JVIPL and GRPL had the necessary infrastructure to use copper cathodes, supported by a Chartered Engineer's certificate and the lack of contrary evidence from the Revenue. The Tribunal held that the denial of Cenvat credit was unjustified.

3. Alleged Fraudulent Availing of Cenvat Credit:
The Tribunal noted that the payments for copper cathodes were made through banking channels, and there was no evidence of cash flow back to JVIPL or GRPL. The Tribunal found no credible evidence of fraudulent availing of Cenvat credit.

4. Alleged Non-Receipt of Copper Scrap by JMWIPL:
The Tribunal found that JMWIPL had received copper scrap, supported by transport documents and statements from transporters. The Tribunal held that the allegation of non-receipt of copper scrap was unsubstantiated.

5. Jurisdiction of the Commissioner of Central Excise, Delhi-II:
The Tribunal noted that the Commissioner of Central Excise, Delhi-II, had no jurisdiction over JMWIPL, Jammu, and the allegations against JMWIPL were based on inquiries made without jurisdiction.

6. Reliability of Statements Given by Key Witnesses:
The Tribunal found the statement of Mr. Shivji Gupta dated 26.03.2008 unreliable due to coercion and upheld his subsequent statement dated 30.08.2010. The Tribunal emphasized the importance of cross-examination and compliance with Section 9D of the Central Excise Act.

7. Admissibility of Evidence and Compliance with Section 9D of the Central Excise Act:
The Tribunal held that the statement of Mr. V.K. Mittal was inadmissible as evidence since he was not produced for cross-examination, violating Section 9D of the Act and principles of natural justice.

8. Discrepancies in Burning Loss Between JVIPL and JMWIPL:
The Tribunal found that the difference in burning loss was due to the type of furnace used (open furnace at JVIPL and closed furnace at JMWIPL). The Tribunal held that the allegation of diversion based on burning loss was untenable.

9. Validity of the Refund Claims Under Notification No. 56/2002-CE:
The Tribunal held that JMWIPL was entitled to the refund claims as they had used copper scrap, for which no Cenvat credit was available. The Tribunal found that the refund claims were valid and the denial of the benefit under Notification No. 56/2002-CE was unjustified.

10. Invocation of Extended Period of Limitation:
The Tribunal did not address the issue of limitation since the appeals were allowed on merits.

Conclusion:
The Tribunal set aside the impugned orders, allowing the appeals of JVIPL, GRPL, and JMWIPL with consequential benefits. The Tribunal left the issue of limitation open. The dissenting opinion by the Member (Technical) proposed remanding the matter for re-adjudication, but the majority opinion prevailed, resulting in the appeals being allowed.