2020 (1) TMI 673 - AT - Central Excise

CENVAT Credit - allegation that credit on the invoices issued by M/s Laxmi Dye Chem and M/s Harshlaxmi Chemisolv without receipt of inputs - reliance placed on statements and evidences - case of appellant is that the whole case has been made against them on the basis of documents alleged to have been seized from third party and statements of various parties without extending investigation of persons to whom the goods were actually alleged to be sold. HELD THAT - The allegations of non receipt of goods alongwith the invoices by both the Appellants from M/s Laxmi Dyechem and M/s Harshlaxmi Chemosolv are based upon the diary/ norte books seized from said two concerns. Further the statements of authorised persons of said two concerns as well as authorised persons of the Appellant concerns have also been relied upon to show that no inputs were received by them. In case of M/s Yahska Polymers, the statement of transporter has also been relied upon to show that no goods were consigned to M/s Yahska - However no investigations has been conducted to ascertain from the parties to whom the inputs were allegedly actually sold by M/s Laxmi Dyechem and M/s Harshlaxmi Chemisolv to ascertain the actual position - The SCN is absolutely silent about the investigation at the end of alleged actual recipients who allegedly received the goods without cover of invoice. Also, in absence of investigation at the end of actual recipients, the allegation of availing credit by the Appellants only on the basis of invoice without actual receipt of goods cannot be allowed to sustain. There are no reason to demand and recover Cenvat credit from both the Appellants - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Denial of cenvat credit based on alleged non-receipt of goods.
2. Reliance on seized documents and statements without thorough investigation of actual recipients.
3. Discrepancies in the investigation process and lack of evidence supporting the allegations.

Analysis:

Issue 1: Denial of cenvat credit based on alleged non-receipt of goods
The case involved appeals by two companies against orders denying cenvat credit due to alleged non-receipt of goods based on invoices issued by specific suppliers. The companies contended that they had purchased inputs through proper channels, maintained records, and utilized the goods in manufacturing finished products. They argued that the investigation failed to extend to actual buyers and solely relied on seized documents and statements.

Issue 2: Reliance on seized documents and statements without thorough investigation of actual recipients
The Tribunal noted that the denial of credit was primarily based on documents seized from suppliers and statements of involved parties. However, it highlighted the lack of investigation into the alleged actual recipients of the goods. The Tribunal emphasized that the records of the appellants showed proper receipt, utilization, and accounting of inputs, which remained undisputed. It questioned the validity of relying solely on third-party documents and statements without corroborating evidence.

Issue 3: Discrepancies in the investigation process and lack of evidence supporting the allegations
The Tribunal pointed out discrepancies in the investigation process, including the absence of evidence indicating cash returns after purchase. It emphasized that no discrepancies were found during visits to the appellants' premises. The Tribunal cited legal precedents where demands were set aside due to insufficient evidence and emphasized the importance of proper investigation before confirming allegations.

In conclusion, the Tribunal set aside the orders denying cenvat credit to both appellants, citing lack of substantial evidence and proper investigation. The judgment highlighted the necessity of thorough examination and corroborating evidence before penalizing companies based on seized documents and statements.