2023 (11) TMI 1071 - AT - Central Excise

Recovery of CENVAT Credit wrongly availed - disputed quantity of inputs of 9.857 MTs waste and scrap purchased by the Respondent, Arsh Alloys from various ship breaking units during the period from April 2007 to August 2010 - It is the case of department that Respondent has received only invoices from ship breaking units without actual receipt of inputs. HELD THAT - It can be seen that case of the department is not solely based on statements of various third parties but also other material viz. bazaar scrap, note book showing details of transactions with the ship breakers found at the premises of Respondent and discrepancies noticed in transport documents viz. quantity transported beyond permissible limit and absence of chantiwala (scrap sorter) engaged by the Respondent. As regards, bazaar scrap found during search at the premises of Respondent, learned Commissioner has observed that it is not possible to identify the nature of scrap from the photographs and that Panchnama does not disclose educational qualification and work experience of witnesess and hence they could not have been considered as experts for forming opinion on the nature of scrap - Mere fact that Respondent has also been buying bazaar scrap on which no duty is paid itself is not enough to hold that all 1366 consignments of duty paid inputs were not received by the Respondent during the period April 2007 to August 2010 and that the final products cleared during this period on which duties were admittedly paid were entirely manufactured out of bazaar scrap. As regards Respondent having not engaged any chantiwala (scrap sorter) the show cause notice in para 6.3.21 relies upon the statement of brokers which are found to be not reliable by the commissioner in absence of any corroborative evidence and further, some have been retracted/sought to be corrected by brokers by way of filing affidavits. Be that as it may, no question was put forth to the partner of Arsh Alloys in the statements dated 18.11.2010 and 13.03.2012 that in absence of Chantiwala having been engaged how they were able to purchase the scrap - no inference can be drawn on that basis to hold that inputs in question were not received by the Respondent. The next contention of the department is that evidence of cash flow back viz. note book has not been considered by the Learned Commissioner. Reliance has been placed by the department on the statements dated 7-9-2011, 16- 3-2012 and 16-4-2012 of broker namely Kalpesh Prabhudas Mehta who appears to have confirmed that the said entries in the note book pertain to cash amount paid back to the ship breakers against cheques issued by Respondent - There is no investigation undertaken or evidence gathered at the premises of re-rolling mills to whom goods were allegedly diverted. Similarly, reliance has been placed on the statement dated 16-3-2012 of broker named Priyesh Bharatbhai Parekh is also misplaced which in first place does not refer to the Respondent but Ahmed steel. It appears, the brokers have opined based on the statement of vehicle owners and entries of the note book and not based on perusal of the records of transaction maintained by them. There are otherwise no records of brokers investigated. Since, the statements are not supported with records maintained by the brokers with regard to the transactions in question; not even one entry in the note book stands corroborated with the records of the brokers, such statements of brokers were rightly discarded by the Learned Commissioner. Learned Commissioner has also discarded the statements of owner of vehicles and statements of authorized persons of rerolling mills being inadmissible evidence on account of absence of any investigation or records of such third parties brought in support of their statements - it is a settled law that where there are tangible documentary evidence in favour of the assesse and even there are overall statements of third party contradicting the documentary evidence, such tangible documentary evidence must be given primacy over the overall statements. Thus, there is no infirmity in the Order of Learned Commissioner and the same has to be upheld. In the result, impugned order is upheld and appeals of the appellant/revenue are dismissed.

Summary

Issues Involved:
1. Fraudulent availing of CENVAT credit without actual receipt of goods.
2. Admissibility and reliability of statements and documentary evidence.
3. Identification and nature of the scrap found during the search.
4. Alleged cash flow back and source of non-duty paid bazaar scrap.
5. Role and responsibility of ship breakers and brokers.
6. Procedural and evidentiary compliance under Section 9D of the Central Excise Act.

Summary:

1. Fraudulent Availing of CENVAT Credit:
The department alleged that the Respondent, M/s. Arsh Alloys, fraudulently availed CENVAT credit without actual receipt of waste and scrap of iron and steel from ship-breaking units. The department claimed that the Respondent procured bazaar scrap, which is non-excisable, to cover up the non-receipt of duty-paid scrap from ship-breakers. A Show Cause Notice dated 8.5.2012 was issued to recover CENVAT credit amounting to Rs. 2,30,50,926 from the Respondent.

2. Admissibility and Reliability of Statements and Documentary Evidence:
The adjudicating authority found that the statements relied upon by the department were not supported by tangible evidence and thus inadmissible under Section 9D of the Central Excise Act. The department's appeal challenged this finding, arguing that the statements of truck owners, brokers, and ship-breakers were sufficient. However, the tribunal upheld the adjudicating authority's decision, emphasizing that statements without corroborative evidence cannot be relied upon.

3. Identification and Nature of Scrap Found During Search:
The department argued that the scrap found during the search was bazaar scrap and not from ship-breaking yards. The adjudicating authority observed that the panchas (witnesses) lacked the necessary expertise to identify the nature of the scrap, and the photographs taken were insufficient for such identification. The tribunal agreed, stating that the working experience of panchas was not demonstrated and no substantial evidence was provided to prove that the scrap was bazaar scrap.

4. Alleged Cash Flow Back and Source of Non-Duty Paid Bazaar Scrap:
The department relied on a note book found at the Respondent's premises, which allegedly recorded cash transactions. The adjudicating authority dismissed this evidence, noting contradictions in the statements of brokers and the absence of corroborative records. The tribunal upheld this view, finding that the statements of brokers were self-contradictory and unsupported by any records.

5. Role and Responsibility of Ship Breakers and Brokers:
The department alleged that ship-breakers issued CENVATable invoices without actual dispatch of goods and returned the amounts in cash after deducting their charges. The adjudicating authority found no evidence to support these claims. The tribunal agreed, noting that the statements of ship-breakers and brokers were unreliable and not corroborated by tangible evidence.

6. Procedural and Evidentiary Compliance Under Section 9D:
The adjudicating authority, after examining the evidence and statements, formed an opinion under Section 9D that the statements were not reliable without corroborative evidence. The tribunal upheld this opinion, emphasizing the importance of tangible documentary evidence over uncorroborated statements.

Conclusion:
The tribunal upheld the adjudicating authority's order, finding no infirmity in the decision to drop the Show Cause Notice. The appeals of the department were dismissed, and the tribunal emphasized the necessity of corroborative evidence to support allegations of fraudulent CENVAT credit availing. The tribunal also reiterated the legal principle that documentary evidence must be given primacy over oral statements, especially when the latter are unreliable or contradictory.