2022 (9) TMI 534 - AT - Central Excise

CENVAT Credit - duty paying documents - reliability of the statements - statements made before the officers of Central Excise which were relied upon in the SCN were not put through the process under section 9D of the Central Excise Act,1944 - Revenue s case is that the trader Maruti Metals had issued invoices on the strength of which the respondent had availed the CENVAT credit but Maruti Metals could not have supplied the goods because it had recorded that it had received from SIPL who, in turn, had not supplied any goods to Maruti Metals. HELD THAT - As per Section 9D, any statement made before any central excise officer is relevant only if it has gone through the process prescribed therein. In this appeal, revenue has asserted that the cross-examination of the persons who made the statements were not allowed by the authority due to some reasons. However, cross-examination will be necessary only if the statements made before the Central Excise Officers are, in the first place, relevant and they will be relevant only if the procedure prescribed under section 9D is followed. Since this procedure has not been followed, the statements are not relevant to prove anything in this case and consequently are also not admissible. Cross-examination, therefore, becomes unnecessary because the statements are not relevant or admissible in the first place. The Committee of Commissioners who passed the Review order in this case seems to be under a mistaken notion that the Revenue has the power to decide whether the Tribunal s order must be followed by the Commissioner (Appeals) or not. It is not disputed that Maruti Metals had issued the invoices and the respondents had availed the CENVAT credit on them. It is not in dispute that Maruti Metals is a dealer registered to issue such invoices. It has also been recorded in the impugned order that the appellants had purchased the goods after paying duty thereafter availed the CENVAT credit on such invoices. Even if Maruti Metals had committed some fraud in CENVAT credit which it had taken, that cannot be held against the respondent. The respondent assessee is responsible for receiving goods and accounting for them - There is nothing in the CCR which requires any assessee to conduct such an investigation through its entire supply chain. The assessee is not an inspector and has no powers to examine the records of all the operators in its supply chain. It is for the officers who registered various entities and who receive regular returns, who audit their records and who have power to summon, seek information, search, seize etc., to ensure that no fraud is committed at their end. On a mistaken notion that all statements recorded by a central excise officer are admissible as evidence even if the statutory requirement under section 9D of the Excise Act has not been followed and that cross-examination can be denied by the officers even when requested for by the assessee - On a mistaken notion that the assessee has the responsibility to investigate complete chain of supply of the goods which it had purchased and to ensure that every operator in the supply chain has been following all the requisite procedures and has not committed any fraud - Without any evidence that Maruti Metals has supplied only invoices to the respondent without supplying the goods. Appeal dismissed - decided against Revenue.

Issues Involved:
1. Admissibility of statements made before Central Excise Officers under Section 9D of the Central Excise Act, 1944.
2. Binding nature of Tribunal's orders on lower authorities.
3. Responsibility of the assessee to verify the complete supply chain.
4. Evidence supporting the claim that only invoices were supplied without actual goods.

Issue-Wise Detailed Analysis:

1. Admissibility of Statements under Section 9D:
The Revenue's case relied heavily on statements made before Central Excise Officers. However, these statements were not put through the process prescribed under Section 9D of the Central Excise Act, 1944. Section 9D stipulates that such statements are relevant only if they meet specific conditions, such as the witness being unavailable or the statement being corroborated by the witness in court. The Tribunal highlighted that without following this procedure, the statements are neither relevant nor admissible. Consequently, the cross-examination of these statements becomes unnecessary. The Tribunal referred to the High Court of Punjab and Haryana's decision in Jindal Drugs Pvt. Ltd. vs UOI, which emphasized the mandatory nature of Section 9D procedures for the admissibility of statements.

2. Binding Nature of Tribunal's Orders:
The Revenue argued that the Commissioner (Appeals) wrongly followed a Tribunal's order that was under challenge in a higher court. The Tribunal clarified that lower authorities are bound to follow its orders unless they are set aside by a superior judicial forum. The Tribunal cited the Supreme Court's decision in Union of India vs Kamlakshi Finance Corporation Ltd., stressing the importance of judicial discipline and the binding nature of appellate orders on lower authorities. The Tribunal criticized the Revenue's mistaken notion that Tribunal orders are subject to their acceptance by the Revenue.

3. Responsibility of the Assessee to Verify Supply Chain:
The Revenue contended that the assessee should ensure that every operator in the supply chain follows all requisite procedures and does not commit fraud. The Tribunal rejected this argument, stating that there is no provision in the CENVAT Credit Rules (CCR) requiring the assessee to investigate the entire supply chain. The assessee's responsibility is limited to receiving goods under the cover of invoices, accounting for them, and paying duty. The Tribunal emphasized that it is the duty of the Revenue officers to scrutinize the records of traders and ensure compliance.

4. Evidence Supporting the Claim of Invoice-Only Supply:
The Tribunal found that there was no evidence to support the Revenue's claim that Maruti Metals supplied only invoices without actual goods. The statements and documents relied upon by the Revenue did not prove that Maruti Metals issued invoices without supplying goods. The Tribunal noted that the respondent had purchased goods, paid duty, and availed CENVAT credit on valid invoices issued by a registered dealer. Even if Maruti Metals committed fraud in availing CENVAT credit, it could not be held against the respondent, who had duly accounted for the goods received.

Conclusion:
The appeal by the Revenue was dismissed on multiple grounds, including the improper reliance on inadmissible statements, the binding nature of Tribunal orders, the incorrect assumption of the assessee's responsibility to verify the entire supply chain, and the lack of evidence to prove the fraudulent supply of invoices without goods. The Tribunal upheld the Commissioner (Appeals)'s order, setting aside the Joint Commissioner's decision and allowing the respondent's appeal.

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