2018 (5) TMI 719 - AT - Central Excise

CENVAT credit - input PVC resin - inputs have not been received in the factory of the appellant - denial on the ground that the transporters whose vehicle numbers have been entered in the invoices found non- existence or having made statement that they have not transported the goods - demand based on the transporter s statement - Held that - apart from the statement of transporter, no corroborative evidence has been produced by the Revenue. The said statement has not been examined in chief, therefore, in view of the decision of the Hon ble Punjab and Haryana High Court in the case of Ambika International, 2016 (6) TMI 919 - PUNJAB AND HARYANA HIGH COURT the statement of the transporter cannot be relied without examination in chief of the same by the appellants - credit cannot be denied. Clandestine removal - principles of natural justice - it is also alleged against the appellants that they have received the goods from M/s. Roongta Textile without cover of invoices and the same has been used in the manufacture of final products which have been cleared without payment of duty - difference of opinion - Held that - As there are difference of opinion between the Members, therefore, the matter is referred to the the Hon ble President to appoint third Member to resolve the issue - Whether the Member (Technical) is correct in holding that the matter is required to remanded back to the adjudicating by following the provisions of Section 9D and thereafter pass appropriate orders - matter referred to Third Member.

Issues Involved:
1. Denial of credit on inputs received from Chemplast Sanmar.
2. Denial of credit on inputs imported and received from the head office.
3. Denial of credit on inputs transported in own vehicles.
4. Demand on the ground of alleged clandestine removal of final products.

Detailed Analysis:

Issue 1: Denial of credit on inputs received from Chemplast Sanmar
The appellants contested the denial of credit amounting to ?10,29,387 on PVC resin purchased from Chemplast Sanmar. The adjudicating authority had held that the transporters' lorry receipts were fictitious, and thus, the inputs were not received. The appellants argued that the goods were physically received and duly entered in their records, supported by various documents like gate registers and payment records. They also cited the cross-examination of the transporter, which confirmed the physical receipt of goods. The appellants relied on precedents such as Neepez Steels Ltd. and Pioneer Industries to support their case. The tribunal found that the sole ground for denial was the transporter’s statement, without corroborative evidence, and noted the lack of cross-examination, which violated Section 9D of the Central Excise Act. Thus, the credit could not be denied.

Issue 2: Denial of credit on inputs imported and received from the head office
The appellants challenged the denial of credit amounting to ?9,17,570 on imported PVC resin. The adjudicating authority had denied the credit on the grounds that the imported PVC was not received. The appellants provided evidence of customs duty payment, proper accounting in the RG 23D register, and transportation under proper invoices. They argued that the denial of cross-examination of the owner of SR Freight Carriers was unjust. The tribunal found that the denial was based solely on the transporter’s statement without corroborative evidence and upheld the appellants' claim for credit.

Issue 3: Denial of credit on inputs transported in own vehicles
The appellants disputed the denial of credit amounting to ?1,15,212 on PVC resin transported in their own vehicles. The adjudicating authority had denied the credit on the grounds that the inputs were not received, and the vehicles were used for other purposes. The appellants provided records such as gate registers and payment documents to prove the physical receipt of goods. The tribunal found that the denial was based solely on assumptions without corroborative evidence and upheld the appellants' claim for credit.

Issue 4: Demand on the ground of alleged clandestine removal of final products
The appellants contested the demand of ?33,69,797 for alleged clandestine removal of goods based on transporter documents. The adjudicating authority had relied on the statement of a transporter and documents like loading slips and freight bills. The appellants argued that the cross-examination of the transporter was denied, violating principles of natural justice. They provided evidence of proper accounting of knitted fabric and PVC resin. The tribunal found that the allegation was based on assumptions without corroborative evidence, and the denial of cross-examination violated natural justice. Thus, the demand was not sustainable.

Conclusion:
The tribunal held that the credit could not be denied and the demand for clandestine removal was not sustainable due to the lack of corroborative evidence and the violation of natural justice principles. The impugned order was set aside, and the appeals were allowed with consequential relief.

Separate Judgments:
While the Member (Judicial) held that no purpose would be served by remanding the matter, the Member (Technical) opined that the matter should be remanded back for fresh adjudication following the provisions of Section 9D. The difference of opinion was referred to the Hon'ble President to appoint a third Member to resolve the issue.

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