2024 (1) TMI 1116 - AT - Central Excise

Clandestine/ fraudulent operations - CENVAT Credit - fake invoices - credit availed without actually receiving the material as shown in the invoices issued by M/s V.K Metal Works, Jammu - HELD THAT - On the preliminary objections raised by the Department that as the decision of the Tribunal in the case of M/s V.K Metal Works is under challenge before Hon ble High Court of Jammu Kashmir Ladakh, the present proceedings should be kept in abeyance, it is found that, as submitted by learned Counsel for the appellant, there is no stay granted by Hon ble High Court of Jammu Kashmir Ladakh; Tribunal has decided cases of similar customers of M/s V.K Metal Works even after the issue was under challenge as there was no stay granted - no case has been made by the Department to keep this case pending. Department has issued a show-cause notice to the appellants on the excisability of copper keeth thereby indirectly accepting that there was manufacturing activity and that the Department cannot take the stand that there was no manufacturing activity. It is also found that the Principal Bench relied on the case of R.A Castings Pvt. Ltd. 2008 (6) TMI 197 - CESTAT NEW DELHI upheld by Hon ble Allahabad High Court 2010 (9) TMI 669 - ALLAHABAD HIGH COURT and by Hon ble Supreme Court 2011 (1) TMI 1302 - SC ORDER and decided the case in favour of M/s V.K Metal Works. The Tribunal decided the case of M/s Rachna Metal Industries Pvt. Ltd. 2018 (11) TMI 973 - CESTAT ALLAHABAD in favour of the appellants therein, similarly placed as the present appellant observing that Even in the abovereferred case of M/s V.K. Metals and Others, the clandestine removal findings stands set aside by the Tribunal by observing that there has to be shown the receipt of raw material, utilization of the same, actual manufacture of the finished goods, the evidence of transportation and identity of the buyers etc. Inasmuch as nothing has been shown in the present case by the Revenue, we find no reasons to confirm the demand. It is found that the facts of the present case are identical and the proceedings emanated from the same investigation against M/s V.K Metal Works. There is no reason as to why a different view can be taken in this case. Accordingly, the impugned order is not sustainable. Appeal allowed.

Summary

Issues involved:
The issues involved in the judgment are related to the denial of CENVAT credit to the appellants based on the investigation against M/s V.K Metal Works, Jammu for alleged fraudulent activities including bogus receipts of raw material and passing on CENVAT credit to various parties.

Summary of Judgment:

Issue 1: Challenge to the proceedings based on the pending case against M/s V.K Metal Works
The Revenue objected to the proceedings citing a pending challenge before the High Court against the case of M/s V.K Metal Works. However, the appellant argued that no stay has been granted by the High Court and similar cases have been decided by CESTAT without a stay order. The Tribunal found no valid reason to keep the present case pending based on the lack of stay order and past precedents.

Issue 2: Merits of the case regarding manufacturing activity and CENVAT credit
Upon reviewing the merits of the case, the Tribunal found that there was sufficient evidence of transportation of copper scrap to the factory of M/s V.K Metal Works, indicating manufacturing activity. The Principal Bench's decision in a similar case was relied upon, which found in favor of M/s V.K Metal Works. The Tribunal also referenced a case involving M/s Rachna Metal Industries Pvt. Ltd., where the lack of affirmative evidence led to the set aside of demands, similar to the present case. The Tribunal concluded that the impugned order denying CENVAT credit to the appellants was not sustainable and allowed the appeal.

In conclusion, the Tribunal dismissed the Revenue's objection to keep the proceedings pending due to the challenge against M/s V.K Metal Works. The judgment focused on the presence of evidence supporting manufacturing activity and the lack of affirmative evidence for fraudulent activities, leading to the allowance of the appeal and consequential relief as per law.