2023 (3) TMI 637 - AT - Central Excise

CENVAT Credit - forged documents - it is alleged that the imported inputs/ raw materials in respect of which Respondent availed the Cenvat Credit of CVD during the period January 2003 to March 2007, was transported from Nhava Sheva Ports to the Respondent s Godowns at Navi Mumbai and was sold in cash at Navi Mumbai and was not transported to its factory at Daman - revenue failed to discharge onus to prove - reliance placed on the third party evidences - Reliance placed on the RTO reports by the revenue - HELD THAT - In the entire investigation the evidences which were brought on records are transporters statements and their records i.e Daily Loading Reports (DLR) and Monthly Loading Reports (MLR) and RTO reports according to which the vehicles mentioned in the Challans/records of respondents have not entered into Gujarat via Bhilad Check Post. It is found that contrary to this evidences the fact that the respondent have recorded the receipt of the goods in their Raw materials account i.e. RG-23 Part I and RG-23 Part-II, the purchase of the imported goods under the Bills of Entry in question were booked in books of account. The Respondent has also shown the use of disputed inputs in their factory premises for manufacture of finished goods, even the payment of transportation was also made by cheque. The Revenue could not bring any evidence that the goods covered under the Bills of Entry were diverted to any other place. There is absolutely no evidence to show the substitution of raw material which in our view would cut the root of the allegation as the statutory records show that goods were manufactured. No shortage of raw material was detected during search of factory. No single buyer of diverted raw material was found by the revenue. In the present case no such inculpatory statement of alleged diverted imported inputs buyer is available, there was no shortage found in the stock if had the respondent availed the credit without receipt of inputs, there must be shortage of inputs which is not the case here. Thus, the Revenue has failed to discharge the onus as regards the source of receipt of raw materials from any other alternative source rather have made a bald allegation on the manufacturers that they have diverted the imported raw materials on payment in cash in market. The facts are established that the respondent have received the inputs in their factory used in the manufacture of final product and same was cleared on payment of duty. Further, the investigation is silent as to how the respondent-manufacturers, manufactured finished material without receiving the inputs. The law is settled that as long as duty payment is accepted on outputs, the benefit of credit available cannot be denied. Therefore, there are no substantial evidences which result the disallowance of credit. In this circumstance, there are no infirmity in the impugned order. Reliance on third party evidence - HELD THAT - In the present case the department for denying the Cenvat Credit placed reliance on third party evidence i.e. transporters documents /statements and RTO records. It is necessary to check the evidentiary value of the third party evidence as held in the judgments in the case of BAJRANGBALI INGOTS STEEL PVT. LTD., SURESH AGARWAL VERSUS CCE, RAIPUR 2019 (1) TMI 966 - CESTAT NEW DELHI held that the findings of clandestine removal cannot be upheld based upon the third party documents, unless there is clinching evidence of clandestine manufacture and removal of the goods - Thus, it has been consistently held that demands of whatever nature cannot be confirmed solely on the basis of third party s evidence/records. Reliance placed on the RTO reports by the revenue - HELD THAT - It is common that truck drivers in order not to pay local tax or/ toll tax for some other reasons, take their vehicle through alternate routes. In such case, only on the basis of check-post report, it cannot be concluded that the truck did not transport the goods to the respondent s factory. Further the said report appears to be of no evidentiary value as observed that it does not give true and correct details of the inward or outward details of vehicles. The said report is erroneous because if the vehicle has made an inward entry it must have an outward entry before making an inward entry and vice versa - the Revenue has not concluded the proper investigation to ascertain the truth, moreover, have relied upon third party documents/evidence which cannot be an evidence to deny credit - the respondent has correctly taken the credit. Once it is clear that the respondent were sought to be issued show cause notice without furnishing copies of relied upon documents and even the efforts were made on the part of the respondents to get the same did not yield any fruitful result and even today the copies of the documents are not made available to the respondents - the finding of the adjudicating authority on the point of non availability of relied upon documents can not be found faulted which does not warrant interference in the impugned order. There are no infirmity in the impugned order, hence the appeals of the revenue are not tenable - appeal of Revenue dismissed.

Summary

Issues Involved:

1. Diversion of imported inputs and availing Cenvat Credit without actual receipt.
2. Non-supply of relied upon documents (RUDs) and violation of principles of natural justice.
3. Reliance on third-party evidence and RTO reports.

Summary:

1. Diversion of Imported Inputs and Availing Cenvat Credit Without Actual Receipt:

The Revenue alleged that M/s. Garg Industries Pvt. Ltd. (GIPL) diverted imported inputs instead of using them in manufacturing and availed Cenvat Credit based on duty-paid documents without actual receipt of goods. The intelligence indicated that GIPL, with the help of M/s. Pankaj Shipping & Transport Co. (PSTC), prepared forged transportation documents to cover up the non-receipt of inputs. The adjudicating authority dismissed the charges, stating that the Respondent had recorded the receipt of goods in their raw materials account and used them in manufacturing. The Tribunal upheld this, noting no evidence of diversion or unaccounted procurement of inputs, and no admission of diversion from GIPL's director or employees.

2. Non-Supply of Relied Upon Documents (RUDs) and Violation of Principles of Natural Justice:

The Respondent argued that they were not provided with the RUDs despite several requests, which was a violation of natural justice. The adjudicating authority confirmed this, noting the investigating agency failed to produce any acknowledgment of receipt of RUDs by the Respondent. The Tribunal supported this, stating that the non-supply of RUDs severely prejudiced the Respondent's right to offer a proper explanation, rendering the show cause notice vitiated.

3. Reliance on Third-Party Evidence and RTO Reports:

The Revenue's case was based on third-party evidence, including transporters' statements, DLRs, MLRs, and RTO reports, which allegedly showed non-entry of vehicles into Gujarat. The Tribunal found that the Respondent had recorded the receipt of goods, paid transportation charges by cheque, and cleared finished goods on payment of duty. The Tribunal noted that third-party evidence alone, without corroborative evidence, cannot establish clandestine removal. The Tribunal also found the RTO reports unreliable, as vehicles could have taken alternate routes to avoid check-posts. The Tribunal concluded that the Revenue failed to establish non-receipt of inputs and their use in manufacturing, and thus, the Cenvat Credit was correctly availed by the Respondent.

Conclusion:

The Tribunal upheld the adjudicating authority's order, dismissing the Revenue's appeals and confirming that the Respondent correctly availed the Cenvat Credit. The Tribunal emphasized the importance of providing RUDs to ensure natural justice and the need for corroborative evidence to support allegations of diversion and non-receipt of inputs.