2025 (4) TMI 934 - AT - Central Excise

Availment of Cenvat Credit on the strength of invoices issued by various traders which were investigated by the Director General of GST Intelligence Ludhiana - fake invoices without the supply of material mentioned therein - Revenue has not afforded the opportunity of cross-examinations of the witnesses whose statements were relied upon by the Revenue against them - Violation of principles of natural justice - prayer for remand of matter back to the original authority with the direction to original authority to afford an opportunity to the appellant - HELD THAT - In the present case the department has made out the case on the basis of statement of Director of the company who has admitted the factum of fake invoices issued by M/s Blue Star Exports Ludhiana and has also reversed the Cenvat Credit availed wrongly by them. Further it is found that Director of the company had never retracted his statement made before the authorities below. The request for cross-examination made by the appellant will not serve any purpose as the case was not built on the basis of statements of dealers rather it was on the basis of various documents recovered during investigation such as ICC Barrier Report VAT 23 Returns of the traders Replies of source manufacturers Invoices of traders Details of invoices of source manufacturers etc. and finally the admitted statement of Director of the appellant in all the cases. The documents were shown to Director of the appellant Sh. Anil Kumar Jindal who in his statement clearly admitted the facts that Cenvat Credit was not admissible to them. On the basis of documents produced before him he had also stated that they had reversed the Cenvat Credit in all the cases. Further the appellants have also failed to prove the admissibility of Cenvat Credit in terms of Rule 9(5) of the Cenvat Credit Rules. Tribunal in identical facts in the case of M/s Unipearl Alloys 2024 (8) TMI 8 - CESTAT CHANDIGARH has dismissed the appeal of the assessee when the department had sufficient proofs to prove the wrong availment of Cenvat Credit on the basis of fake invoices. Conclusion - Cenvat Credit cannot be availed on the basis of fake invoices without actual supply of goods and that admitted statements of the parties and documentary evidence are sufficient to establish such fraud. The right to cross-examination is not absolute and may be denied where the case is not solely dependent on witness statements and where the party has failed to raise such a plea before the lower authorities. There is no infirmity in the impugned orders passed by the learned Commissioner (Appeals) - Appeal dismissed.

Summary

The core legal issues considered by the Appellate Tribunal revolve around the admissibility of Cenvat Credit availed by the appellants on the basis of invoices issued by various traders, which were alleged to be fake and unsupported by actual supply of goods. The primary question is whether the appellants were entitled to Cenvat Credit on such invoices and whether the appellants were denied natural justice by not being afforded the opportunity to cross-examine the witnesses whose statements were relied upon by the Revenue. Further, the Tribunal examined whether the demand of duty, interest, and penalties confirmed by the adjudicating authority and Commissioner (Appeals) were justified.

The issues can be grouped as follows:

1. Whether Cenvat Credit availed by the appellants on the basis of invoices from certain traders was admissible under the Cenvat Credit Rules, especially when investigations revealed the invoices to be fake and the goods not supplied.

2. Whether the appellants were denied the opportunity of cross-examination of witnesses whose statements were relied upon by the Revenue, thereby violating principles of natural justice.

3. Whether the impugned orders confirming demand, interest, and penalties are sustainable in law.

Issue 1: Admissibility of Cenvat Credit on the basis of invoices found to be fake

The legal framework governing this issue is primarily the Cenvat Credit Rules, particularly Rule 9(4) and Rule 9(5), which restrict the availment of credit where inputs or input services have not been received or where documents are found to be fabricated or not genuine. The Tribunal also considered precedents where credit availed on fake invoices was disallowed.

The facts reveal that the appellants availed Cenvat Credit on the strength of invoices issued by traders such as M/s A-Mito Impex, Kryption, Prakash, and M/s Blue Star Exports. Investigations by the Director General of GST Intelligence and other authorities established that these traders either did not have transactions with the purported manufacturers or did not carry out any actual business, as evidenced by VAT returns, ICC Barrier data, and verification reports. Proprietors of these traders admitted to issuing fake invoices without actual supply of goods. The Director of the appellant companies also admitted to availing credit on such fake invoices and acknowledged reversal of the wrongly availed credit.

The Tribunal noted that the case was not solely based on the statements of the traders but was supported by documentary evidence including ICC Barrier Reports, VAT returns, source manufacturers' replies denying transactions, and invoices. The admitted statements of the appellants' directors further corroborated the Revenue's case.

The Tribunal applied the law to these facts and found that the Cenvat Credit availed was inadmissible under the Cenvat Credit Rules. The appellants failed to prove the genuineness of the credit in terms of Rule 9(5) of the Rules, and the Revenue had sufficient material to confirm the demand.

Issue 2: Denial of opportunity to cross-examine witnesses and violation of natural justice

The appellants contended that they were denied the opportunity to cross-examine the witnesses whose statements were relied upon by the Revenue, which is a violation of principles of natural justice. They sought remand of the matter to the adjudicating authority for such cross-examination.

The Tribunal examined the submissions and the relevant case law cited by both parties. The appellants relied on precedents supporting the right to cross-examine witnesses in adjudicatory proceedings. However, the Revenue submitted that the appellants had never raised the plea for cross-examination before the adjudicating authority or the Commissioner (Appeals), and the case was not built solely on witness statements but on documentary evidence and admitted statements of the appellants themselves.

The Tribunal observed that the Director of the appellant companies had admitted the facts regarding fake invoices and reversal of credit, and the documentary evidence was substantial. The Tribunal held that the request for cross-examination would not serve any purpose as the case was not solely dependent on the statements of the traders. The Tribunal also noted that the appellants did not contest the merits of the case during arguments.

Thus, the Tribunal concluded that there was no denial of natural justice that warranted remand or further cross-examination.

Issue 3: Sustainability of the impugned orders confirming demand, interest, and penalties

Given the findings on the inadmissibility of Cenvat Credit and the absence of violation of natural justice, the Tribunal considered the impugned orders confirming demand, interest, and penalties. The Tribunal found no infirmity in the orders passed by the Commissioner (Appeals) and upheld them. The penalties imposed on the appellants and their directors were also sustained given the admitted facts and evidence of fraudulent availment of credit.

Significant holdings and core principles established:

"The documents were shown to Director of the appellant, Sh. Anil Kumar Jindal who in his statement clearly admitted the facts that Cenvat Credit was not admissible to them. On the basis of documents produced before him, he had also stated that they had reversed the Cenvat Credit in all the cases."

"Request for cross-examination made by the appellant will not serve any purpose as the case was not built on the basis of statements of dealers rather it was on the basis of various documents recovered during investigation."

"The appellants have also failed to prove the admissibility of Cenvat Credit in terms of Rule 9(5) of the Cenvat Credit Rules."

"There is no infirmity in the impugned orders passed by the learned Commissioner (Appeals), accordingly I uphold the same by dismissing all the appeals of the appellant."

The Tribunal reaffirmed the principle that Cenvat Credit cannot be availed on the basis of fake invoices without actual supply of goods and that admitted statements of the parties and documentary evidence are sufficient to establish such fraud. The right to cross-examination is not absolute and may be denied where the case is not solely dependent on witness statements and where the party has failed to raise such a plea before the lower authorities. The Tribunal upheld the confirmed demands, interest, and penalties imposed on the appellants and their directors.