2023 (9) TMI 1189 - AT - Central Excise

CENVAT Credit - imported scrap - denial of inputs on the ground that the destination mentioned in the DLRs was Bhiwandi, the said imported inputs were diverted to local markets and sold in cash and that the imported inputs so diverted were substituted with bazaar (local) non-duty paid scrap - penalty - HELD THAT - This Tribunal in various cases has held that since there is not even an iota of evidence of disposal of the goods at Bhiwandi/ Navi Mumbai, there being not even a single buyer of the goods who is identified and there being no evidence of receipt of any cash against such alleged disposal, the Cenvat Credit cannot be denied merely on the ground that the destination mentioned in the DLRs/ MLRs of the transporter, Pankaj Shipping and Transport Co was Bhiwandi/ Navi Mumbai. This Tribunal has further held that in the absence of any evidence of procurement of the scrap from alternate source/ bazaar scrap, it cannot be assumed that the imported duty paid scrap was substituted with local non-duty paid bazaar Scrap and the Cenvat Credit of the duty paid on the imported scrap cannot be denied. Reliance can be placed in M/S SUNLAND ALLOYS, PRAVIN KUMAR A RANKA, SHIVRAJ SINGHAL VERSUS C.C.E. S.T. -VAPI 2015 (10) TMI 1104 - CESTAT AHMEDABAD and M/S SUNLAND METAL RECYCLING INDUSTRIES, SHRI SURENDRA P. KACHHARA VERSUS COMMISSIONERS OF CENTRAL EXCISE, CUSTOMS AND SERVICE TAX-VAPI 2016 (2) TMI 534 - CESTAT AHMEDABAD . In the instant case, it can be observed that at the time of search of the factory on 1-12-2006 no bazaar scrap was found in the factory, there is absolutely no evidence of procurement of local non-duty paid bazaar scrap for substitution of the imported duty paid scrap. In fact, Rajeshwar R. Dubey has in his Statement dated 29-11-2007 stated that the Appellants were not purchasing any Scrap from the local market. There is not a single buyer identified to whom the imported duty paid scrap was allegedly sold and there is no evidence whatever of any cash received by the Appellant for such alleged sale. In that view, it is impossible to hold that there is diversion of 842 M.Tons worth Rs. 5 crores without even a single buyer being identified and without any evidence of receipt of cash payment by the Appellant of such a large amount; all the imported duty paid inputs have been duly accounted for in RG 23 A Register and the final products have been manufactured and cleared on payment of duty. Since, the DRI has withdrawn all the records, the Appellants cannot be expected to produce documents showing transport of the imported scrap to the Appellants factory - On identical facts in the case of Sunland Metal Recycling Industries and Ors v CCE, Vapi, this Tribunal has held that where DRI had just prior to investigations by DGCEI taken away all records pertaining to the import of scrap, the manufacturer cannot be expected to produce documents showing transport and receipt of the goods in the factory. Further, since none of the deponents of the Statements recorded by DGCEI have been examined in the adjudication proceedings, as required by Section 9D of the Central Excise Act 1944, the same cannot be considered as evidence. Thus, the revenue could not establish that the appellant have not received the input in their factory, hence the demand of Cenvat credit in the present case is not sustainable. Consequently the penalties are also not sustainable. Appeal allowed.

Summary

Issues Involved:
1. Denial of CENVAT Credit.
2. Alleged Diversion of Imported Scrap.
3. Reliance on Statements and Evidence.
4. Examination of Witnesses as per Section 9D of the Central Excise Act, 1944.
5. Imposition of Penalties.

Summary:

1. Denial of CENVAT Credit:
The appeal challenges the Order-In-Original dated 30-01-2012, which denied CENVAT Credit for duty paid on Aluminium/Copper/Brass/Zinc Scrap imported by M/s. Sainath Industries for manufacturing ingots. The Commissioner confirmed the demand for CENVAT Credit of Rs.87,89,457/- and imposed equivalent penalties.

2. Alleged Diversion of Imported Scrap:
The DGCEI alleged that the imported scrap was partially off-loaded at Bhiwandi/Navi Mumbai and sold in the local market, with non-duty paid bazaar scrap substituted in its place. This allegation was based on Daily Loading Reports (DLR) indicating Bhiwandi as the destination.

3. Reliance on Statements and Evidence:
The appellants contended that all inputs were received and accounted for in their factory, and no evidence supported the diversion claim. They argued that the statements of Rajeshwar R. Dubey were contradictory and unreliable, and no corroborative evidence of diversion or local scrap procurement was presented.

4. Examination of Witnesses as per Section 9D of the Central Excise Act, 1944:
The Tribunal noted that the DGCEI's reliance on statements without examining witnesses as required by Section 9D rendered the evidence insufficient. Previous Tribunal decisions in similar cases (e.g., Sunland Alloys, Sunland Metal Recycling Industries, and Garg Industries P. Ltd) held that without identifying buyers or proving cash transactions, CENVAT Credit could not be denied.

5. Imposition of Penalties:
The Tribunal found that the revenue failed to establish that the inputs did not reach the appellant's factory. The penalties imposed on Rajeshwar R. Dubey and Hitesh H. Kachhara were deemed unsustainable.

Conclusion:
The Tribunal set aside the impugned order, allowing the appeals with consequential relief, as the revenue could not substantiate the non-receipt of inputs in the factory. The judgment emphasized the necessity of corroborative evidence and proper examination of witnesses as per legal requirements.