2018 (12) TMI 1178 - AT - Central Excise

Clandestine removal - bazar scrap - the entire case of the Revenue and the Adjudicating Authority while holding against the main appellant is on statements recorded of individuals, it is also recorded that corroborative evidence documentation on which defence for availing CENVAT credit was not produced - Held that - The Adjudicating Authority has not brought on record in the findings portion, how he has come to a conclusion that there were purchases of bazar scrap and the same was unaccounted; there is nothing on record to indicate the investigation was taken up with scrap dealers - there seems to be no evidence in any form to indicate purchases of unaccounted bazar scrap. Registration number of vehicle mentioned - Held that - The document indicated was of a Bajaj pulsar motor cycle, the Lorry/Trailer Numbers are specifically mentioned does indicate so, it is not proved beyond doubt that the vehicle number of Bajaj Pulsar was mentioned intentionally on behest of main appellant. Further it can be noticed that the main appellant was taking a consistent stand before the lower authorities they had religiously recorded the receipts and consumption of imported goods in the statutory of books and cleared manufactured products on payment of appropriate duty. The details as given by main appellants in form of RG-23A part I&II, RGI etc., are not controverted by the Adjudicating Authority in the findings (which are reproduced herein above) but pleas were dismissed by recording that the main appellant had not produced evidence of receipt of materials in their factory. The main appellant s contention that they had manufactured final products and cleared the same during the period in question remains uncontroverted. As regards the RG-23 part I& II and statutory books - Held that - This position is unchallenged, it can be noted that same were maintained and produced before audit parties during scrutiny of records, on various dates for the period in question. If that be so and there being no adverse observation in the various audit report, as to there may be a case of non-receipt of inputs, entire case of the revenue is based on the statements will fall under its own weight as during cross examination the individuals have denied to have made the statements, which would mean that there is lack of cogent evidences. On this ground itself the entire demand fails. CENVAT Credit - CVD paid on the Bills of entry was availed without receipt of inputs - Held that - The individuals who were handling business activity of the main appellant i.e., Shri PR Bhandari, Shri U.M. Bhandari, Shri Virendra and Shri Surendra Bhandari, had not given any statement which is inculpatory in nature to indicate CENVAT credit was availed without receipt of any materials. In the absence of any corroborative evidences, it has to be held that the Revenue has not been able to prove that CENVAT credit of the CVD paid on the Bills of entry was availed without receipt of inputs. Demands confirmed on letter written by Concor Corporation that there was receipt of imported goods at Turbhe and transported to place other than Hyderabad - main appellant had been seeking cross examination of the officials, which was declined by the Adjudicating Authority - Held that - It is settled law that no reliance can be placed on a document which is not tested in cross examination if specifically sought. At the same time, the Adjudicating Authority should be extended an opportunity to consider the plea of cross examination of the individuals from Concor Corporation - appeal allowed by way of remand. Penalties also cannot be sustained. Appeal disposed off.

Issues Involved:
1. Fraudulent availment of ineligible CENVAT credit by the main appellant.
2. Diversion of imported copper ingots/scrap without actual receipt in the factory.
3. Imposition of penalties on the main appellant and other appellants.
4. Reliability of statements and documents used as evidence.
5. Denial of cross-examination of certain witnesses by the adjudicating authority.
6. Verification of transportation and receipt of goods.

Issue-wise Detailed Analysis:

1. Fraudulent Availment of Ineligible CENVAT Credit:
The main appellant, M/s Cubex Tubing Ltd., was charged with fraudulently availing CENVAT credit on 12 Bills of Entry without the actual receipt of copper ingots/scraps in their factory. The adjudicating authority confirmed that the main appellant availed ineligible CENVAT credit based on these Bills of Entry and utilized the same for payment of duty on their finished goods.

2. Diversion of Imported Copper Ingots/Scrap:
Investigations revealed that consignments under certain Bills of Entry were delivered to locations other than the appellant's factory, such as Bhiwandi or Tughlakabad, New Delhi. Statements from various individuals and documents from CONCOR and other transporters supported this allegation. The adjudicating authority concluded that the main appellant diverted the consignments and did not receive the materials in their factory.

3. Imposition of Penalties:
Penalties were imposed on the main appellant and other appellants for their roles in the fraudulent availment of CENVAT credit. The adjudicating authority held that the appellants played an active role in this fraudulent activity.

4. Reliability of Statements and Documents:
The adjudicating authority relied heavily on statements from individuals and documents from CONCOR, transporters, and financial records. However, during cross-examination, the individuals disowned their statements, claiming they were not voluntary. The adjudicating authority dismissed the main appellant's submissions, stating that the documentation was fake and created for the sole purpose of taking credit fraudulently.

5. Denial of Cross-Examination:
The main appellant sought cross-examination of various individuals and officials from CONCOR, which was denied by the adjudicating authority. The tribunal noted that reliance on statements not tested in cross-examination is not valid and remitted the issue concerning certain Bills of Entry to the adjudicating authority for reconsideration, allowing cross-examination of the concerned officials.

6. Verification of Transportation and Receipt of Goods:
The adjudicating authority found discrepancies in the transportation documents and financial records. Reports from the Commercial Tax Department and the Transport Department indicated that the vehicles mentioned in the consignment notes did not enter Andhra Pradesh. The tribunal noted that the main appellant had maintained statutory records and cleared manufactured products on payment of duty, which were not challenged during audits. The tribunal held that the revenue failed to prove the non-receipt of inputs beyond doubt.

Conclusion:
The tribunal set aside the demand for ineligible CENVAT credit and penalties for certain Bills of Entry, remitting the issue concerning specific Bills of Entry to the adjudicating authority for reconsideration, ensuring adherence to principles of natural justice. The penalties on all appellants were also set aside. The tribunal emphasized the need for corroborative evidence and proper cross-examination to substantiate the allegations.

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