2023 (7) TMI 584 - AT - Service Tax

CENVAT Credit - capital goods - invoices issued by the manufacturer were not genuine and the appellant has indulged in paper transaction without bringing the capital goods in their factory in connivance with the supplier - HELD THAT - It is the fact on record that the appellant has availed cenvat credit on capital goods procured from the supplier/manufacturer against duty paying documents, who was having Central Excise Registration. In that circumstances, the cenvat credit cannot be denied to the appellant as held by this Tribunal in the case of SUNVIK STEELS LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, BANGALORE 2011 (8) TMI 926 - CESTAT, BANGALORE , wherein this Tribunal has observed Since the supplier was a registered unit, and had paid duty from PLA as well as the Cenvat credit and the department itself had failed to notice the fact that no goods were manufactured by the supplier for a period of five years, it is difficult to expect an assessee located in Karnataka to go and verify whether the manufacturer had the facility and whether he had really manufactured the goods before purchasing the same. The very fact that the supplier was in existence for 15 years, had availed Cenvat credit of more than Rs. 18 crores would show that the supplier did have some standing in the market. Since the Cenvat credit availed by the appellant is reflecting the duty paid on the goods by the supplier for which no evidence is available to show to the contrary and in view of the above circumstances, it will not be appropriate to demand duty and deny the Cenvat credit from the appellant. As the appellant has taken cenvat credit on the procurement of capital goods on the strength of duty paying documents, therefore, the cenvat credit cannot be denied - Appeal allowed.

Summary

Issues:
The denial of cenvat credit to the appellant for the period 01.03.2005 to 05.08.2005 based on the alleged non-receipt of capital goods from the supplier.

Summary:

Issue 1: Alleged non-receipt of capital goods and denial of cenvat credit:
An investigation revealed that the supplier did not have sufficient manufacturing infrastructure to produce the capital goods supplied to the appellant. The Department alleged that the appellant engaged in a paper transaction to claim cenvat credit on non-received goods. A show-cause notice was issued for recovery of cenvat credit, interest, and penalty. The demand was confirmed, and penalty imposed on the appellant, leading to the appeal.

Issue 2: Arguments of the Appellant and Revenue:
The appellant contended that they received the capital goods, made payments through proper channels, and used the goods for manufacturing their final products. They argued that since they relied on genuine invoices and the supplier had Central Excise Registration, the cenvat credit should not be denied. The Revenue, however, emphasized that the supplier did not have the manufacturing facility, hence denying the cenvat credit was justified.

Issue 3: Tribunal's Decision and Precedents:
After considering both sides, the Tribunal focused on whether the appellant was entitled to cenvat credit based on duty shown in the supplier's invoices. Citing precedents like Sunvik Steels Limited and Dhakad Metal Corporation, the Tribunal ruled in favor of the appellant. The Tribunal highlighted that if duty payment evidence exists and there is no fraud or suppression, cenvat credit cannot be denied. Therefore, the impugned order was set aside, and the appeal was allowed with consequential relief.

In conclusion, the Tribunal held that since the appellant availed cenvat credit based on genuine duty paying documents from a registered supplier, the denial of credit was unwarranted. The decision was supported by legal precedents emphasizing the importance of duty payment evidence and absence of fraudulent intent. As a result, the impugned order was overturned, and the appeal was allowed.