2024 (1) TMI 673 - AT - Central Excise

CENVAT Credit - inputs - goods were not received by the appellant and only invoices were moved and on the basis of invoices - investigation was not conducted at the stage of first stage dealer/second stage dealer by the Revenue - HELD THAT - As appellant has received goods from first stage dealer/ second stage dealer on payment of duty and have produced transport receipt evidencing transportation of goods from first stage dealer/second stage dealer to their factory, in that circumstances, the appellant has complied with the conditions to Rule 9 of Cenvat Credit Rules, 2004 which enables appellant to take Cenvat credit on the strength of invoices which mentions duty has been paid on the goods in question. It is also a fact on record no investigation was not conducted at the stage of first stage dealer/second stage dealer by the Revenue. Moreover, only it is coming out from the investigation that since January 2013 manufacturer has not paid duty, but it is not a fact on record when the manufacturer stopped manufacturing and since when manufacturer is non-existent. As investigation to this question with regard to this extent is silent, in that circumstances, benefit of doubt goes in favour of the appellant. Further, Revenue has also failed to establish if the appellant has not received goods against the invoices, in question, in that circumstances, from where the appellant has procured the inputs which has been in manufacturing of final products on which duty has been paid by the appellant. Therefore, the appellant is entitled to take Cenvat credit on the invoices issued by first stage dealer/second stage dealer which showing the details of manufacturer of goods and payment of duty. Therefore, the impugned order deserves no merits, accordingly, the same is set aside. The appeal is allowed.

Summary

Issues involved:
The denial of Cenvat credit on inputs for the period January 2015 to June 2017 based on the allegation that goods were not received by the appellant and only invoices were moved.

Summary:

Issue 1: Denial of Cenvat credit on inputs

The appellant, a manufacturer of Cast Steel GM Balls and Forged Steel GM Balls, had procured inputs and taken Cenvat credit based on invoices issued by first and second stage dealers. An audit revealed that the manufacturer of the goods was non-existent, leading to the denial of Cenvat credit. The Revenue alleged that since the manufacturer had not paid duty since January 2013, the appellant could not have received the goods. A show cause notice was issued, and the demand was confirmed, denying Cenvat credit along with interest and penalty.

Judgment:
The appellant contended that they had indeed received the inputs from the dealers, and duty had been paid on the final products manufactured. They provided transport receipts as evidence of goods received, and no investigation was conducted with the dealers or transporters. The Revenue's presumption of a paper transaction was refuted, as they failed to prove that the appellant did not receive the goods against the invoices. The Cenvat credit cannot be denied without proper evidence.

Issue 2: Existence of the manufacturer and payment of duty

The authorized representative supported the denial of Cenvat credit, stating that the manufacturer's non-existence breaks the chain, and no duty was paid against the invoices. The appellant was accused of availing credit based on cenvatable invoices without actual receipt of inputs due to the non-existence of the manufacturer.

Judgment:
After hearing both sides and examining the records, it was found that the appellant had received goods from the dealers and complied with the Cenvat Credit Rules by paying duty. The lack of investigation at the dealer level and uncertainty regarding when the manufacturer became non-existent raised doubts. The benefit of doubt favored the appellant, as the Revenue failed to establish non-receipt of goods against the invoices. Therefore, the appellant was deemed entitled to take Cenvat credit on the invoices showing payment of duty.

Conclusion:
The impugned order denying Cenvat credit was set aside, and the appeal was allowed in favor of the appellant with consequential relief, if any.