2022 (2) TMI 544 - AT - Central Excise

CENVAT Credit - duty paying invoices - wrongful availment of credit on the basis of duty paid invoices of different inputs without actual receipt of the inputs against such documents - diversion of goods - correctness of reliance placed on the third party statements and evidences entire case of the Revenue is that the respondent have not transported the goods from ICD, Tughlakabad to Daman but the same was diverted somewhere else - Section 14 of the Central Excise Act, 1944 - HELD THAT - Merely because there is distance between Nhava Sheva to Tughlakabad and then transportation to Daman, it cannot be presumed that the goods might not have transported to Daman. Irrespective of distance there may be various other reasons and it is up to the assessee to take a commercial decision whether to transport the goods directly from Nhava Sheva to Daman or Nhava Sheva to Tughlakabad and then to Daman. At the most, this activity can create a suspicion but only on this basis, it cannot be concluded that goods have not been transported from ICD Tughlakabad to Daman. Therefore, the ground taken by the Revenue on this aspect is on assumption and presumption. Whether statements of transporters are not found to be reliable regarding unloading of the goods? - HELD THAT - The Adjudicating Authority perused the statements/ explanation of the local transporters of Delhi revealed that they have not indicated any specific place or premises where the goods were unloaded by them except vaguely specifying the areas. The Adjudicating Authority also observed that it would be the drivers of the local transporters who would know the exact place of unloading of these consignments as held in the various decisions on the subject. The Adjudicating Authority also relied upon various decisions in this regard. In the absence of clear statement of the transporters that goods were not unloaded to the respondent s destination only the vague statements cannot be used as conclusive evidence. There are no infirmity in these findings of the Adjudicating Authority inasmuch as the Adjudicating Authority has not found the statements of the transporters to be reliable. There is no investigation and no evidence to establish alleged clandestine disposal of disputed inputs in or around Delhi and not even a single alleged buyer out of 1670 MT is brought on record. Similarly, there is no details of transportation of goods or about financial transactions or about any blow back from the suppliers or from the alleged buyers. Therefore, the alleged clandestine disposal of the disputed inputs remains unsubstantiated, despite some stray evidence relied upon in the show cause notice. There is not a single statement of any supplier to the effect that the disputed inputs were not supplied to the Respondent and were supplied to some third parties. There is no evidence that some third party have made payments to the suppliers of the disputed inputs. The statements of transporters are not corroborated with any evidence. The entire case of the department is based on the record of the transporters and only on the basis of third party statements or record, the demand for denial of Cenvat credit cannot be sustained. It is also fact on record that there is no investigation made at the factory of the respondent and no statement of any production staff or excise/ stores staff is recorded. There is no allegation of flow back of money from the suppliers to the respondent - When the investigating offices visited the factory of the respondent as well as that of the job workers, they did not find any discrepancy about the inventory of inputs or final products. There is neither any investigation nor an iota of evidence that the respondent had procured the inputs from open market for substitution of the disputed inputs. The case of the department is built up mainly on recorded statements of a few transporters of the disputed inputs. As the statements were retracted or contradicted during cross-examination, there has to be some other evidence sufficient to conclude that the disputed inputs was actually not received. The statements of co-accused necessarily need to be corroborated by some independent evidence - Since all these statutory records are not under dispute then the burden rests heavily upon the Revenue to establish with cogent evidence that the inputs were not actually received in the factory. Mere third party evidence like transporter s statements, RTO reports, Check Post records etc. which were not examined cannot suffice to prove the department s case. The department could not establish beyond doubt that the alleged inputs were diverted in or around Delhi and not transported to Daman to the Respondent. Therefore, the Adjudicating Authority has rightly dropped the proceeding of the show cause notice - Appeal dismissed - decided against Revenue.

Summary

Issues Involved:
1. Wrong availment of Cenvat credit by M/s. Taha Wires Pvt. Limited.
2. Non-transportation of goods from ICD, Tughlakabad to Daman.
3. Reliability of statements from transporters and other parties.
4. Alleged clandestine disposal of disputed inputs.
5. Substitution of disputed inputs by locally procured scrap.

Issue-wise Detailed Analysis:

1. Wrong Availment of Cenvat Credit:
The case revolves around the alleged wrongful availment of Cenvat credit by M/s. Taha Wires Pvt. Limited on copper ingots/wire bars. The Revenue's investigation suggested that Taha Wires Pvt. Limited used non-duty paid scrap for manufacturing and availed Cenvat credit based on duty-paid invoices without actual receipt of inputs. The factory premises were searched, and documents were seized, leading to a show cause notice demanding recovery of ?3,93,98,286/- and imposition of penalties. The initial adjudication confirmed the demands, but on appeal, the Tribunal remanded the case for de-novo adjudication, which resulted in dropping the proceedings.

2. Non-transportation of Goods:
The Revenue contended that the goods were not transported from ICD, Tughlakabad to Daman but were diverted elsewhere. The Tribunal found that the mere distance between Nhava Sheva, Tughlakabad, and Daman does not conclusively prove non-transportation. The commercial decision to route goods through Tughlakabad was upheld, and the Revenue's assumption was deemed speculative.

3. Reliability of Statements:
The Adjudicating Authority found the statements of transporters unreliable as they vaguely specified unloading areas without concrete details. The Tribunal upheld this finding, noting that vague statements cannot serve as conclusive evidence. The Tribunal also observed that statements retracted during cross-examination, such as those from M/s. Singal Road Carriers, could not be used as evidence.

4. Alleged Clandestine Disposal:
The Revenue failed to provide direct evidence of clandestine disposal of disputed inputs. The Tribunal noted the absence of any identified buyers or financial transactions for the alleged 1670 MT of inputs. The investigation did not reveal any flow-back of money or substitution of inputs with locally procured scrap. The Tribunal emphasized that mere reliance on third-party statements and records without corroborative evidence is insufficient to sustain the allegations.

5. Substitution of Disputed Inputs:
The Tribunal found no evidence of procurement or transportation of substitute scrap. The respondents provided comprehensive documentary evidence, including RG23A Part-I & II records, job work challans, and payment records, which corroborated the receipt and utilization of disputed inputs for manufacturing. The Tribunal noted the lack of investigation into the respondent's factory and job workers' premises, where no discrepancies were found in stock records.

Conclusion:
The Tribunal upheld the Adjudicating Authority's decision to drop the proceedings, finding no cogent evidence to support the Revenue's claims. The appeal was dismissed, and the respondents' compliance with statutory records and procedural requirements was acknowledged. The Tribunal relied on precedents that supported the respondents' case, emphasizing the need for direct and corroborative evidence in establishing allegations of non-receipt of inputs and clandestine disposal.