2017 (2) TMI 878 - AT - Central Excise

CENVAT credit - duty paying documents - refusal on the basis of certain irregularities alleged with reference to transportation and non-existence of evidence for transportation of duty paid inputs to the premises of the respondent - Held that - The original authority has recorded that vehicles which transported the duty paid inputs were deployed by Shri Ravikant Dwivedi Director of M/s. Saral Logistics System Pvt. Ltd. from his office situated in Rama Chauraha. The question regarding the transportation of raw material has been discussed at length by the original authority - the original authority also recorded that the freight has been regularly paid on cash payment voucher which are acknowledged by the transporter. Revenue could not in any manner bring out the non-receipt of duty paid raw materials or the bogus nature of all the transactions - appeal rejected - decided against Revenue.

Summary

The core legal questions considered in this appeal revolve around the validity of Cenvat credit availed by the respondent on certain raw materials, specifically:

• Whether the respondent was entitled to avail Cenvat credit on raw materials (copper and nickel) for which there were allegations of non-receipt of goods.
• Whether the Revenue's investigation and evidence sufficiently established that the goods covered by 18 invoices were not transported to the respondent's premises, thereby invalidating the Cenvat credit.
• The adequacy and reliability of the evidence regarding transportation of duty-paid inputs, including the role and records of the transporter companies involved.
• Whether the findings of the Commissioner in dropping the demand for recovery of Cenvat credit were legally sustainable.

Issue-wise Detailed Analysis

Entitlement to Cenvat Credit and Non-Receipt Allegations

The legal framework governing Cenvat credit requires that inputs on which credit is availed must have been received and used in manufacture. The Revenue challenged the credit on the ground that the goods corresponding to 18 invoices were never received by the respondent, relying on investigation findings and statements from the transporter company's proprietor denying transportation of the goods.

The Tribunal examined the impugned order of the Commissioner, who had carefully considered the facts. The Commissioner noted that the show cause notice did not deny removal of goods from the suppliers' factories (M/s. Indo Micro Nutrients and M/s. Inter Metal Trade Ltd.). Crucially, there was no evidence to show what happened to the goods after removal from the suppliers' premises. The absence of any adverse findings in the panchnama of the search at the suppliers' factories regarding stocks further supported the conclusion that goods were indeed removed.

Additionally, the Commissioner observed that there was no evidence indicating the final destination of the goods after removal, nor was there any proof that the respondent did not receive the inputs. The respondent's factory records showed no discrepancy in raw material or finished goods stocks, undermining the Revenue's allegation that inputs were not received. Moreover, payment for the inputs was made by crossed cheques and demand drafts, with no evidence suggesting that the respondent was defrauded or that the payments were made without receipt of goods.

The Tribunal upheld this reasoning, emphasizing that the Revenue failed to produce concrete evidence disproving receipt of goods by the respondent. Mere allegations or sketchy evidence without corroboration could not justify denial of Cenvat credit.

Reliability of Transportation Evidence and Investigation

The Revenue's case heavily relied on statements from Shri Atlant Dwivedi, proprietor of M/s. Sujay Transport Company, which allegedly did not transport the goods in question. The Commissioner, however, found that the investigation only examined records from one office of the transporter company (Sagare Kuti Chauraha), ignoring other offices. The vehicles that transported the inputs were deployed by a different office (Rama Chauraha) under the direction of Shri Ravikant Dwivedi of M/s. Saral Logistics System Pvt. Ltd.

The Commissioner also noted that freight payments were regularly made and acknowledged by the transporter through cash payment vouchers. While some discrepancies in vehicle numbers were noted, these did not conclusively prove non-transportation of goods or any fraudulent activity.

The Tribunal concurred with the Commissioner's assessment that the investigation was incomplete and the evidence regarding transportation was insufficient to disprove receipt of inputs by the respondent. The Tribunal emphasized that the Revenue's failure to examine all relevant transporter offices and produce comprehensive records weakened its case substantially.

Application of Law to Facts and Treatment of Competing Arguments

The Tribunal applied the principle that denial of Cenvat credit requires clear, cogent, and corroborated evidence of non-receipt or fraud. The Revenue's reliance on partial investigation, uncorroborated statements, and absence of direct evidence was insufficient to overturn the findings of the Commissioner.

The respondent's argument that goods were received as per proper invoices and delivery records was supported by the absence of discrepancies in stock and payments made through legitimate banking channels. The Tribunal found the respondent's evidence more credible and consistent with the facts.

Competing arguments about transportation irregularities were examined in light of the entire record. The Tribunal noted the lack of evidence about alternative transportation arrangements or destinations for the goods if the alleged trucks were not used, which undermined the Revenue's case.

Significant Holdings

The Tribunal held that "the investigation by the Revenue could not in any manner bring out the non-receipt of duty paid raw materials or the bogus nature of all the transactions." It further stated that "in the absence of such evidence, it will not be legally tenable to deny the credit based piece meal/sketchy evidence, without corroboration."

The core principle established is that Cenvat credit cannot be denied on mere suspicion or incomplete investigations; there must be substantive evidence disproving receipt of inputs or proving fraudulent transactions.

The Tribunal affirmed the Commissioner's order dropping the demand for recovery of Cenvat credit, concluding that the Revenue's appeal lacked merit and was accordingly rejected.