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2022 (3) TMI 983 - AT - Central ExciseCENVAT Credit - availment of fraudulent credit without receipt of goods - denial of request of cross-examination of Director and employee of the Company - relevance of statement as evidences - HELD THAT - In Cenvat credit rules some minimum precaution was prescribed to ascertain the bona fide on the part of consignor of input or capital goods i.e. under Rule 4 and Rule 9 of Cenvat Credit Rules, 2004 - the credit can be taken on the basis of Invoice after the inputs covered by such Invoice is received. It is important that goods covered by the invoices are received by the manufacturer. In the facts of the present case we find that the appellant have received the goods on duty paying documents and recorded the receipt of the goods in their raw material account and cenvat account i.e. RG-23A-Pt. I and Pt. II and the said disputed inputs used in manufacture of dutiable goods. The purchase of the goods under the invoices in question were booked in books of account. The payment against the said invoices were made through cheque. For confirmation of cenvat demand the learned Adjudicating Authority relied upon the admission of Director of Appellant recorded during the Panchanama dated 21.01.2011, wherein he admitted that they did not receive these goods physically but availed the Cenvat credit only on the basis invoices and Statement dated 28.01.20211 of Bhavani Shankar Vasu, Induction Furnace In-charge. It is on record that in the present matter Appellant also requested for cross -examination of Director and aforesaid Employee which has been denied by the adjudicating authority and for this only the separate appeal also filed by the Appellant. It is found that this denial of cross-examination has resulted in denial of principle of natural justice. In the present matters, the case of revenue also on the ground of transporters admission that the goods were not supplied to the appellant and according to their statements the vehicle number shown in invoices are not capable of transporting the goods. During the Cross- Examination the transporter has clearly stated that the goods have been delivered to the appellant - there is no allegation by the department regarding the financial flow back that against the invoices for which the payments were made through cheque, any cash payment was received by the appellant. It is further noticed that nothing objectionable has been mentioned in the panchnama of search dated 21-01-2011 at the factory premises of Appellant in respect of the stock of finished goods/inputs. Nothing has been brought on record to show as to how Appellant produced their final products in the event of not having received the inputs in their factory. It is on the record that neither the department have produced evidence beyond doubt that the alleged inputs were not received in the unit and it was only a paper transaction nor able to prove that any other raw material was received and used by the appellant for production of their final product. Also, the records produced by the Appellant shows bona fide transaction on their part. Thus the contentions of the adjudicating authority in absence of any positive and tangible evidences are not tenable - Further, from the records of cross-examination of suppliers and some transporters, it is found that they have admitted that the goods were delivered to Appellant. Hence, there are no reason to deny the Cenvat credit to Appellant. Cenvat demands and penalties imposed against M/s Rajputana Stainless Ltd. are not sustainable - appeal allowed - decided in favor of appellant.
Issues Involved:
1. Denial of request for cross-examination of the Director and employees. 2. Allegations of availing Cenvat credit without actual receipt of goods. 3. Compliance with Cenvat Credit Rules, 2004. 4. Admissibility of statements under Section 9D of the Central Excise Act, 1944. 5. Violation of principles of natural justice. Issue-wise Detailed Analysis: 1. Denial of Request for Cross-Examination: The appellants contended that they were denied the opportunity to cross-examine the Director and employees whose statements were relied upon by the adjudicating authority. This denial was seen as a breach of the principles of natural justice. The Tribunal noted that cross-examination is mandatory for compliance with natural justice principles, as supported by the case of *Andaman Timber Industries v. Commissioner* and *HI TECH ABRASIVES LTD. v. Commissioner of C. Ex. & Cus., Raipur*. The Tribunal held that the denial of cross-examination resulted in an unfair bias and violated natural justice principles. 2. Allegations of Availing Cenvat Credit Without Actual Receipt of Goods: The Revenue alleged that the appellants availed Cenvat credit on the basis of invoices without the actual receipt of goods. The Tribunal found that the appellants had received goods on duty-paying documents, recorded the receipt in their raw material and Cenvat accounts, and used the disputed inputs in the manufacture of dutiable goods. Payments for these goods were made through cheques, and there was no evidence to suggest that the goods were not received or that any alternative raw materials were used. The Tribunal concluded that the appellants correctly availed the Cenvat credit and the department's contention was not tenable. 3. Compliance with Cenvat Credit Rules, 2004: The Tribunal reviewed the relevant rules, including Rule 4 and Rule 9 of the Cenvat Credit Rules, 2004, which stipulate conditions for availing Cenvat credit. The rules require that credit can be taken on the basis of invoices after the inputs are received. The Tribunal noted that the appellants complied with these rules by recording the receipt of goods and making payments through banking channels. The Tribunal found no evidence that the appellants did not receive the goods or used any unaccounted inputs. 4. Admissibility of Statements Under Section 9D of the Central Excise Act, 1944: The Tribunal emphasized that for statements to be admissible as evidence, the person making the statement must be examined and cross-examined as per Section 9D of the Central Excise Act, 1944. The Tribunal cited the case of *HI TECH ABRASIVES LTD. v. Commissioner of C. Ex. & Cus., Raipur*, which held that statements recorded during investigations cannot be treated as relevant evidence without compliance with Section 9D. The Tribunal found that the adjudicating authority failed to comply with this provision, rendering the statements inadmissible. 5. Violation of Principles of Natural Justice: The Tribunal observed that the adjudicating authority's approach violated the principles of natural justice by not allowing cross-examination and relying on statements recorded on the back of the appellants. The Tribunal cited various cases, including *Andaman Timber Industries v. Commissioner* and *Commissioner v. Kurle Pan Products Pvt. Ltd.*, to support the importance of cross-examination for ensuring natural justice. The Tribunal concluded that the adjudicating authority's actions showed unfair bias and violated natural justice principles. Conclusion: The Tribunal set aside the impugned order denying Cenvat credit and ordering its recovery along with interest and penalties. The appeals were allowed with consequential reliefs, if any, emphasizing the importance of compliance with natural justice principles and proper adherence to the Cenvat Credit Rules, 2004.
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