2018 (12) TMI 429 - AT - Central Excise

CENVAT Credit - fake invoices - only invoices issued without receipt of goods - Demand alongwith interest and penalties - extended period of limitation - principles of natural justice - Held that - The investigation did not take place at the end of the transporters, no statement was recorded of any individual from Padmashri Road Lines, and it is seen from the impugned orders that the adjudicating authority as well as the first appellate authority are not disputing the existence of such consignment note nor it is alleged that this consignment note is a fake - In the absence of anything to discredit consignment note of Padmashri Road Lines which carried the material from Vadodara to Hyderabad, it is difficult to accept the revenue s view point that the main appellant had availed CENVAT credit only on documents. This view is fortified by the decision of the Tribunal in the case of Dhakad Metal Corporation 2015 (8) TMI 146 - CESTAT AHMEDABAD . Demand set aside on merits itself - appeal allowed - decided in favor of appellant.

Summary

Issues:
Appeal against Orders-in-Appeal regarding availing of CENVAT credit without material receipt, imposition of penalties, and limitation period.

Analysis:
The main issue in these appeals was the availing of CENVAT credit without the receipt of material, leading to penalties and interest being imposed on the main appellant and individuals involved. The appellant, a manufacturer of fine chemicals, utilized CENVAT credit for duty payment on finished goods cleared. The investigation revealed that a dealer had passed on ineligible CENVAT credit to the main appellant without supplying materials. The show cause notice alleged availing CENVAT credit without material receipt in May 2013, prompting demands for reversal, interest, and penalties. The appellant contested the notice on merits and limitation, providing evidence of material receipt, production, and clearance of goods. The lower authorities confirmed the demands and penalties, upheld by the first appellate authority.

The appellant's counsel argued that the revenue's case relied on statements denying material receipt, countered by documents showing material receipt and utilization. They contended that informing the department about material receipt and subsequent actions proved receipt and usage. In contrast, the department representative cited a DGCEI enquiry revealing discrepancies in material processing by the dealer. Statements from involved individuals admitting non-receipt of material were emphasized.

The Tribunal, after evaluating submissions, found merit in the appellant's case. Detailed examination of invoices, consignment notes, stock records, and monthly returns indicated material receipt and usage by the main appellant. Notably, the consignment note from the transporter, Padmashri Road Lines, was crucial evidence. The absence of investigation at the transporter's end and the authenticity of the consignment note were key considerations. Rulings from previous cases, such as Dhakad Metal Corporation, GS Alloy Castings Ltd, and Chaudhary Steel Traders, supported the appellant's position. The Tribunal concluded that demands against the main appellant were unsustainable, leading to the setting aside of penalties and interest liabilities.

Ultimately, the Tribunal allowed the appeals, setting aside the impugned orders and penalties. The judgment highlighted the importance of thorough investigation, documentary evidence, and adherence to legal principles in determining CENVAT credit eligibility and liability.