Arjan Das & Sons Pvt. Ltd Vs Commissioner of CGST & Central Excise (CESTAT Kolkata)
Summary: CESTAT Kolkata set aside a confirmed CENVAT credit demand of Rs.10,38,428/- against Arjan Das & Sons Pvt. Ltd., holding that the assessee had produced documentary evidence showing purchase, receipt and accounting of the inputs. The assessee, a manufacturer of non-alloy MS-Ingot, had purchased iron and steel scrap from Satabdi Tie-Up Private Limited under 34 invoices during November-December 2010. Revenue alleged, on the basis of an investigation against the supplier, that only paper invoices had been issued without actual movement of goods.
The Tribunal noted that the assessee produced input invoices, stock accounts, the vendor’s ledger and bank statements. These records showed that the goods were received under invoices issued in terms of Rule 9 of the CENVAT Credit Rules, 2004, accounted for in the stock records and paid for through banking channels. In contrast, Revenue’s demand was based solely on evidence allegedly recovered from the supplier without proper corroboration in the assessee’s proceedings. The Tribunal therefore set aside the Rs.10,38,428/- demand on merits. It also held the demand time-barred because the transactions had been accounted for in RG 23A Part I and reflected through ER-1 returns, and Revenue failed to establish suppression.
However, the separate demand of Rs.59,260/- arising from shortage of finished goods remained uncontested; while no interest was payable because the amount had been paid immediately after detection, the corresponding penalty of Rs.59,260/- was recoverable. The uncontested penalty of Rs.1,00,000/- imposed on Director Sandip Agarwal was also held recoverable.
Cases Discussed
- CCE Kanpur v. Juhi Alloys Ltd., 2013 (296) ELT 533 (Tri.-Del.) — relied upon for the proposition that CENVAT credit at the recipient-manufacturer’s end could not be denied merely because of irregularities concerning the supplier/dealer where receipt, accounting, use and payment for inputs were supported by records.
- Guantanam Pipers Ltd v. CCE Kolkata, Appeal No. E-25 by 2010 and E-26 by 2010, Final Order No. FO/7772-7773/2017 dated 08.11.2017 — cited by the appellant in support of its contention that investigation against the supplier cannot by itself defeat the buyer’s CENVAT credit when receipt and accounting of goods are established.
FULL TEXT OF THE CESTAT KOLKATA ORDER
The appellant is the manufacturer of non-alloy MS-Ingot falling under Chapter 7206. During the period November 2010 to December 2010, they had purchased some iron and steel scrap from Satabdi Tie-Up Private Limited [STPL]. The purchases were made under 34 different invoices. On the ground that the appellant has not received the goods in question, but has only received paper invoices from the supplier STPL, a Show Cause Notice was issued demanding Rs.10,38,428/-. In the same Show Cause Notice, it was also alleged that there was a shortage of 3.066 MT of MS-ingots and 11.396 MT of Steel ingots when stock verification was conducted by the Revenue officials. On this shortage, the Excise Duty of Rs.59,260/- was demanded. The appellant submitted their detailed reply stating that they have received all the goods in question and submitted the details of transporter and the freight charges paid by them for movement of such goods. However, the lower authorities have confirmed the demand of Rs.10,38,428/- on account of the Cenvat taken. In respect of demand on account of shortage, the appellant did not effectively contest the same by offering any substantive defence. Hence, the demand of Rs.59,260/- was confirmed along with penalty of Rs.59,260/-. The Adjudicating authority also imposed penalty of Rs.1,00,000 on Sri Sandip Agarwal. Being aggrieved, the appellant company contested the confirmed demands before the Commissioner (Appeals). The confirmed penalty of Rs.1,00,000/- on Sandip Agarwal, (Director) was not contested by him before the Commissioner (Appeals). The Commissioner (Appeals), affirmed the Order in Original and dismissed the appeal filed by the present appellant. Hence, the appellant is before the Tribunal.
2. The Learned Counsel appearing on behalf of the appellant submits that the appellant has received the scrap from the Vendor STPL under 34 invoices. He submits that all these invoices are showing the details of the appellant as the receiver of the goods and these invoices show the details of the quantity dispatched by the vendor and the Excise Duty and VAT paid thereon. He submits that only on the basis of such valid invoices in terms of Rule 9 of Cenvat Credit Rules, 2004, the appellant has taken the credit. These invoices have been duly accounted for in their RG23A Part I and also in the ledger account of the vendor. All the payments have been made to the vendor by way of banking transactions. He further submits that the vehicles used for transportation have been duly paid for the freight charged by them. He submits that all these factual details prove that the goods were actually received by the appellant in their factory and the same were put to use in their manufacturing operation.
3. The Learned Counsel also places reliance on the case law of CCE Kanpur v. Juhi Awas Ltd-2013-296 ELT 533 Tri-Delhi and the case law of Guantanam Pipers Ltd v. CCE Kolkata – Appeal No. E-25 by 2010 and E-26 by 2010. Final Order No.FO/7772-7773 /2017 dated 8-11-2017. In these cases it has been held that if any investigation is taken up against the supplier of the goods, the same cannot stand in the way of granting the CENVAT Credit at the end of the buyer who shows the details of accounting for these goods and invoice details in their books of account. Accordingly, it is prayed that the appeal may be allowed on merits.
4. He also takes the stand that the Show Cause Notice issued on 25.03.2015 for the purchases made in November 2010 to December 2010 is fully time-barred. He submits that all the details of CENVAT Credits have been shown in the respective ER 1 Returns. The goods have been received under proper invoices and the same have been accounted for in the books of account like RG 23A Part-I, Vendor’s Ledger, Bank Ledger etc. Therefore, he submits that the Department is in error in invoking the extended period provisions, when all the facts have been properly disclosed by the appellant. Hence, it is requested that the appeal may be allowed even on account of time-bar.
5. The Learned A.R. appearing on behalf of the respondent Revenue submits that a detailed investigation was taken up against the Vendor STPL. It was found that they have defrauded the Revenue by more than Rs.3.68 crores, by issuing paper Invoices, without any actual movement of the goods. From this investigation, it has emerged that STPL had issued 34 invoices to the present appellant only on paper without supplying any material. Therefore, the factual details prove that the appellant has not received any material from STPL but they have only taken the Cenvat Credit. He submits that no defence has been put up by the appellant in respect of the confirmed demand of Rs.59,260/-, either before the Commissioner (Appeals) or before this Tribunal. On these grounds, he justifies the confirmed demand.
6. Heard both sides, perused the appeal papers and the documentary evidence placed before me.
7. I find that in view of the discovery of alleged evasion by STPL, the factory of the present appellant was also visited by the officials. The officials visited the factory of the appellant on 26.07.2013 and found that there was a shortage of 3.066 mt of MS ingots and 11.396 mt of steel ingots at the factory premises of the appellant. This verification was duly signed by the authority signatory of the appellant and the Central Excise Officer. After this, the appellant has paid Rs. 59,260/- on 26.07.2013. From the records, it is seen that the appellant has not offered any substantive argument nor have they contested this amount at any stage right from the Adjudication stage to the Commissioner (Appeals) and even at Tribunal stage level as can be seen from the Grounds of Appeal and the Synopsis presented before the Bench. This amount has been confirmed by the adjudicating authority at the OIO level. Therefore, the issue of confirmed demand of Rs.59,260/- along with interest and penalty has reached finality since no defence has been brought in by the appellant. This amount was paid immediately after discovery of the shortage by the officials. Therefore, no interest would be payable. However, the confirmed penalty of Rs.59,260/-, now remaining uncontested, becomes recoverable from the appellant.
8. Now, I take up the issue of the balance contested demand of Rs.10,38,428/-. The appellant has provided copies Input Invoices, the stock account of inputs, Vendor’s Ledger and Bank Statement. Some copies are reproduced below.
9. These documents show that the goods in question have been received under proper Invoice issued in terms of Rule 9 of the CCR 2004. The inputs have been accounted for by the appellant in their stock account. The Ledger account of STPL shows the details of purchases and the details of payments made to the Vendor. The Bank statement shows the payments made to the Vendor. These documentary evidence, clarify that the appellant has been able to show proper documentary evidence towards the purchase and accounting of the goods in their books of accounts. On the other hand, the entire demand from the Revenue’s side solely based on the purported recovery of some evidence at the end of STPL, for which no proper corroboration has been brought in by the Revenue in the present proceedings. I also find that even as the reliance is placed on the purported documents recovered from STPL, they have not been made co-noticee in the present proceedings, which is erroneous.
10. The Tribunal in the case of CCE KANPUR Vs JUHI ALLOYS LTD. – 2013 (296) ELT 533 (Tri.-Del), dealing on a similar issue, has held as under:
“3. Certain inquiries were conducted at the end of M/s. M.K. Steel and it was found that they were showing procurement of the goods from a manufacturer M/s. Sarla Ispat (P) Ltd., Durgapur, West Bengal. Further, inquiries revealed that invoices issued by M/s. Sarla Ispat (P) Ltd. were fake invoices and as such, M/s. Sarla Ispat (P) Ltd., was not inexistence.
4. Based upon above, proceedings were initiated against the present respondents proposing to deny the Cenvat credit on the ground that M/s. M.K. Steel has received the inputs from M/s. Sarla Ispat (P) Ltd., which was non-existent and as such, the invoices issued by him as registered dealer were fake invoices and the recipient of the inputs were not eligible to avail the Cenvat credit. Such proceedings resulted in passing of an order by the original adjudicating authority, confirming the demand and imposition of penalties. However, on appeal, Commissioner (Appeals) set aside the said order-in-original and allowed the appeal. Hence, the present appeal by the Revenue.
7. I find Revenue is not disputing the fact that M/s. M.K. Steels raised dealers invoice, giving all the particulars required to be given under law in the invoice supplied to the respondents. It is also not being disputed that the respondent received inputs and entered the same in their records. The said inputs were further used by them in the manufacture of their final product, which were cleared by them on payment of duty. It is also a part of the record that the goods travelled from the dealer premises to the respondents premises under the cover of form 31 of UP Trade Tax department. This fact is sufficient to prove the physical entries of the inputs in the assesses premises. Further, the ledger account and RG 23A records maintained by the assessee also proves the receipt of the goods. Further, the payment of the said inputs stand made by the recipient through cheque.
8. xxxxxxxxxxxxxx As such, I fully agree with the finding of the appellate authority that denial of credit to the respondent manufacturing unit on the ground that first stage dealer has fraudulently received the goods is neither proper nor justified. Reliance by the appellate authority on various Tribunal’s decision is proper.
9. In view of the above discussion, I reject all the appeals filed by the Revenue”.
11. In view of the above observations and the factual evidence brought in and the cited case law, I do not find any merit in the confirmed demand against the appellant. Accordingly, I set aside the confirmed demand of Rs.10,38,428/- on account of the CENVAT Credit taken by the appellant on merits.
12. I also find force in the appellant’s argument that the extended period could not have been invoked in respect of the CENVAT Credit taken by them during November 2010 to October 2010 by issuing the Show Cause Notice on 25.03.2015. As could be seen from the above extracts of documents, all the transactions have been properly accounted for in the RG 23 A Part I which would also form part of the ER 1 Returns filed by the appellant. Hence, the Revenue has failed to prove any suppression on the part of the appellant on account of the demand of Rs.10,38,428/- on account of the Cenvat Credit taken. However, my observations about non applicability of extended period does not extend this benefit, to the confirmed demand of Rs.59,260, which is on account of the shortage of finished goods noted at the time of physical verification.
13. The non-contesting of the penalty of Rs.1,00,000 imposed on the Director Sandip Agarwal, proves fatal to his case. This amount is recoverable by the Revenue.
14. To summarize:
(a) The confirmed demand of Rs.10,38,428/- stands set aside both on merits as well as on account of Time Bar.
(b) The appellant is required to pay the penalty of Rs.59,260/- imposed on them under OIO, which has not been contested by the them by way of any cohesive arguments against the confirmation.
(c) The penalty of Rs.1,00,000 imposed on the Director Sandip Agarwal, being uncontested, becomes recoverable dues for the Revenue.
15. The appellant would be eligible consequential relief, if any, as per law.
(Pronounced in the open court on 19.08.2026)
