2019 (5) TMI 213 - AT - Central Excise

CENVAT credit - duty paying documents - credit availed based on invoices raised and issued by second stage dealers - it appeared that appellant had received only non-duty paid M.S. Scrap without any valid cenvat documents for the same from the Central Excise registered dealers and fraudulently taken ineligible Cenvat credit - HELD THAT - The entire allegations are supported only by the statement of Shri G.Baskaran, Proprietor of Amman Steels. The examination of Shri G. Baskaran was requested for by the appellants vide their letter dt. 05.01.2011. However, from the facts on record (para16) of the OIO dt. 30.03.2011, it emerges that Shri Baskaran vide a letter dt. 16.03.2011 conveyed his disinclination to appear for a cross examination on the grounds that they had already filed their reply to the SCN and that they were also a co-noticee in the SCN. The reply alluded to by Shri Baskaran is the letter dt.16.08.2010, reference to which is found in para-13 of the OIO. In the said reply, the allegations made in the SCN have been denied and it has been contended that the depositions made were not corroborated with any tangible or material evidence; that they received payments from the appellant for the supplies and it could not be alleged that they had issued only their invoices. Even the slender thread of supporting evidence namely the statement of Shri G. Baskaran, Proprietor of Amman Steels, also stands neutralized. This being so, any allegation based on that sole statement will surely lose their bite. When the investigations have found discrepancies in only 10% of the invoices examined for a disputed period of 17 months between June 2005 and November 2006, that too on the basis of a sole statement which also has been subsequently denied by the person concerned, and in the absence of any samples of inputs drawn for corroboration, the allegation that appellants had received only locally procured scrap instead of CR, HR, CR sheets etc. in the input invoice, will not have any legs to stand upon. The allegations made out against the appellants have not been convincingly proved - appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Discrepancies in the description of goods between invoices and material inward register.
2. Allegation of availing Cenvat credit on non-duty paid materials.
3. Validity and reliability of statements from dealers.
4. Denial of cross-examination of witnesses.
5. Lack of evidence and investigation by the department.

Issue-wise Detailed Analysis:

1. Discrepancies in the description of goods between invoices and material inward register:
The department alleged discrepancies between 37 input invoices and the material inward register maintained by the appellants. The appellants explained that these discrepancies arose because the register mentioned the commercial invoice number and date, while the department compared it with the Central Excise invoice. The appellants also stated that they entered all materials received as MS scrap, whereas dealers mentioned specific descriptions as per their purchase invoices.

2. Allegation of availing Cenvat credit on non-duty paid materials:
The department contended that the appellants received non-duty paid MS scrap but took Cenvat credit based on invoices indicating duty-paid inputs like CR, HR, CR sheets. The appellants argued that they paid suppliers by cheque, including the excise duty element, and thus the department's presumption was baseless. The department failed to conduct investigations with first-stage dealers or manufacturers to verify if duty-paid materials were supplied.

3. Validity and reliability of statements from dealers:
The department's case relied heavily on the statement of Shri G. Baskaran, Proprietor of Sri Amman Steels, who stated that the goods supplied were non-duty paid. However, this statement was later denied by the dealers in their replies to the SCN. The appellants questioned the voluntariness and correctness of Baskaran's statement, noting that he signed in Tamil and could not have deposed in English. The Tribunal found that the statement lacked corroborative evidence and thus could not be solely relied upon.

4. Denial of cross-examination of witnesses:
The appellants requested cross-examination of Shri G. Baskaran and Shri S. Murugappan, which was denied as they did not appear. The Tribunal highlighted that the department failed to provide the opportunity for cross-examination, which is crucial when a statement is used as evidence against a person.

5. Lack of evidence and investigation by the department:
The Tribunal noted that the department did not conduct basic protocols like stock-taking or sample testing during their investigation. There was no evidence to support the allegation that the materials received were non-duty paid. The department also did not investigate whether the dealers received duty-paid materials from manufacturers. The Tribunal found that the department's case was based on assumptions without tangible evidence.

Conclusion:
The Tribunal concluded that the allegations against the appellants were not convincingly proved. The discrepancies in invoices represented only 10% of the total invoices, and the sole statement relied upon by the department was denied and lacked corroborative evidence. The Tribunal set aside the impugned order and allowed the appeal with consequential benefits.