2022 (2) TMI 1167 - AT - Central Excise

Clandestine Removal - availment of irregular CENVAT Credit - duty paying documents - allegation is that the credit availed fraudulently on the strength of Cenvatable invoices against which no goods i.e. Copper ingots were received by them physically in their factory premises - existence of manufacturing activity or not - sufficient evidences present or not - sufficient investigation done by the Department or not - demand based on third party evidences - HELD THAT - Apparently and admittedly, there is no evidence on record as against the present appellant other than the statement of Shri Rajesh Chouhan, the authorised signatory of the appellant. Irrespective Shri Yogesh Singh, Director of M/s. Sypher Impex Alloys Pvt. Ltd. had repeatedly admitted for having no trading activity in his factory at Bhiwadi since 2013. But there is no evidence procured by the Department about any arrangements by M/s. Sypher Impex Alloys Pvt. Ltd. with the present appellant. Though the appellants have been receiving material through M/s. Amtek India Ltd. which in turn was receiving from Swastik the said Swastik was having invoices of M/s. Sypher Impex Alloys Pvt. Ltd. but this trail is highly insufficient to hold precisely the invoices in the hands of the appellants are such, against which no goods were sent. To substantiate his case the appellants have placed on record voluminous documents including the purchase orders, invoices, gate registers, GRRs and ledger account. Perusal thereof shows the clear connectivity in these documents reflecting that the appellants were purchasing the copper raw material for their final product against the duly issued invoices by the supplier. These invoices were precisely mentioning the details of the vehicles through which the goods were to be transported from the suppliers for being received by the appellant. Apparently and admittedly there is no investigation from the driver or owner of the said vehicles. The said lacunae creates a major bubble of doubt, the benefit of which is to be extended in favour of the appellants. The law i.e. as to whether the third party records can be adopted as an evidence for arriving at the findings of clandestine removal, in the absence of any corroborative evidence, is well established - Further, unless there is clinching evidence of the nature of purchase of raw materials, use of electricity, sale of final products, clandestine removals, the mode and flow back of funds, demands cannot be confirmed solely on the basis of presumptions and assumptions. Clandestine removal is a serious charge against the manufacturer, which is required to be discharged by the Revenue by production of sufficient and tangible evidence. On careful examination, it is found that with regard to alleged removals, the department has not investigated various aspects - thus, to prove the allegation of clandestine sale, further corroborative evidence is also required. For this purpose no investigation was conducted by the Department. Hence the reliance of Commissioner (Appeals) merely on oral testimony is held not relevant and unjustified specially when there is no apparent admission as is alleged. Otherwise also the statements recorded are nothing more than third party evidence - Law is clearly settled that third party evidence cannot be held as the basis for proof of guilt of some other person. Admittedly no search was conducted in the appellants premises. No record was recovered from the appellants custody, nor any material was seized . The findings against the appellants are accordingly held to be nothing but outcome of assumptions based upon the Panchnama drawn in the factory premises of M/s. Sypher Impex Alloys Pvt. Ltd. Thus, it is held that the documents as that of invoices, gate registers, raw material registers, GRs and ledger account as have been relied upon by the appellants, since the stage of filing of reply to the show cause notice. The goods mentioned in the invoices were duly been received by the appellants. The invoices were Cenvatable invoices. Accordingly, the credit thereupon is therefore held to have been rightly availed. The order under challenge is therefore, set aside - Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Alleged fraudulent CENVAT credit availed by the appellant.
2. Rejection of appeals by Commissioner (Appeals) and challenge before Tribunal.

Issue 1: Alleged fraudulent CENVAT credit availed by the appellant

The case involved the appellant, engaged in the manufacture of cast iron, receiving goods from M/s. Sypher Impex Alloys Pvt. Ltd. based on allegedly fraudulent CENVAT credit availed by M/s. Chandra Proleco Ltd. The department issued show cause notices to the appellant, alleging wrongful CENVAT credit availed without physical receipt of goods. The orders confirming the proposals were challenged before the Commissioner (Appeals) and subsequently before the Tribunal. The appellant contended that the allegations were based on insufficient evidence and sought the same benefit granted to another company facing similar allegations. The department emphasized the lack of manufacturing activity at M/s. Sypher Impex Alloys Pvt. Ltd. to support the allegation of non-cenvatable invoices.

Issue 2: Rejection of appeals by Commissioner (Appeals) and challenge before Tribunal

The appellant's counsel argued that relevant records proving bonafide intentions were ignored, and invoices connecting transactions to M/s. Sypher Impex Alloys Pvt. Ltd. were unfairly targeted. The appellant provided evidence such as purchase orders and invoices, showing connectivity and receipt of goods. The departmental representative highlighted a search panchnama at M/s. Sypher Impex Alloys Pvt. Ltd. to support the allegation of non-cenvatable invoices. The Tribunal analyzed the evidence, emphasizing the lack of concrete evidence against the appellant beyond statements and panchnama, contrary to established legal standards requiring tangible evidence for confirming clandestine removal.

The Tribunal found that the appellant had substantiated their case with voluminous documents, including invoices and gate registers, proving the receipt of goods against which CENVAT credit was availed. The Tribunal cited legal precedents emphasizing the need for concrete evidence in cases of clandestine removal, which was lacking in the present matter. The reliance on third-party evidence without sufficient corroboration was deemed unjustified. Ultimately, the Tribunal set aside the order under challenge, allowing both appeals in favor of the appellant based on the documented evidence provided, concluding that the CENVAT credit was rightfully availed.

This summary provides a detailed analysis of the legal judgment, covering the issues involved comprehensively while preserving the legal terminology and significant phrases from the original text.