Drolia Electrosteel Pvt. Ltd. Vs Central Excise & Service Tax (CESTAT Delhi)
Summary: The CESTAT Principal Bench, New Delhi, in Drolia Electrosteel P. Ltd. Vs Commissioner, Customs, Central Excise & Service Tax, Raipur (Final Order Nos. 51470–51472/2023), allowed three appeals arising from denial of Cenvat credit of Rs. 3,90,48,579, recovery of interest and penalties. The manufacturer of sponge iron and MS billets claimed to have purchased MS scrap from registered dealers, paid through banking channels, recorded receipt and consumption of the inputs and paid duty on finished products.
The department alleged that the suppliers and upstream manufacturers were non-existent entities and that invoices had been issued without corresponding supplies of duty-paid scrap. Its case relied substantially on statements taken during investigation, panchnamas, departmental correspondence and information from commercial-tax authorities. The appellants challenged the evidence and submitted that the mandatory procedure under Section 9D of the Central Excise Act, 1944 had not been followed.
The Tribunal held that 35 investigation statements could not be treated as relevant evidence because their makers were not examined before the adjudicating authority and the statutory conditions for admission under Section 9D were not satisfied. Following Jindal Drugs Pvt. Ltd. Vs Union of India, it explained that examination of witnesses and the adjudicating authority’s decision to admit their statements must precede any opportunity for cross-examination.
The Tribunal noted serious contradictions in the department’s position: it had registered the allegedly non-existent manufacturers and dealers, later cancelled their registrations, yet issued show-cause and hearing notices to those same entities. The purchaser could reasonably rely on registrations issued by the department and was not expected to investigate the entire chain of upstream manufacturers and dealers. The remaining evidence did not justify denial of credit.
Accordingly, the Tribunal set aside the order-in-original dated 27 March 2018, restored the assessee’s Cenvat-credit entitlement and held that penalties against Rajiv Drolia and Anand Choudhary could not survive. All three appeals were allowed by order pronounced on 30 October 2023.
Cases Discussed
- Jindal Drugs Pvt. Ltd. Vs Union of India [2016 (340) E.L.T. 67 (P&H)] — Followed on the mandatory procedure under Section 9D.
- Ashok Sharma Vs CCE Raipur (CESTAT Delhi, Final Order Nos. 50426–50430/2019, 27.03.2019) — Cited by appellants as a related investigation decided in favour of assessees.
- Fortune Metaliks Ltd. Vs CCE Raipur (CESTAT, Final Order Nos. 51708–51709/2021, 06.08.2021) — Cited by appellants as another related matter.
- Trishul Mehta Industries Vs CGST (CESTAT, Excise Appeal No. 52313/2019, Final Order dated 27.12.2021) — Cited by appellants as another related matter.
FULL TEXT OF THE CESTAT ORDER
M/s. Drolia Electrosteel P Ltd.1 filed Excise Appeal No. 52612 of 2018 to assail the Order in Original2 dated 27.3.2018 which denied Cenvat credit of Rs. 3,90,48,579/- availed by it and ordered its recovery with interest and imposed of an equal amount of penalty on it.
2. Shri Rajiv Drolia3 filed Excise Appeal No. 52611/2018 to assail the penalty imposed on him.
3. Shri Anand Choudhary4 filed Excise Appeal No. 52610/2018 to assail the penalty imposed on him.
4. The operative part of the impugned order is as follows:
“(a) I disallow the Cenvat credit amounting to Rs. 3,90,48,579/- (including cess) (Rupees Three Crores Ninety Lacs Forty Eight Thousand Five Hundred and Seventy Nine only) and order for its recovery from the Noticee No. 1 under Section 11A (4) of the Central Excise, Act, 1944 read with Rule 14 of the Cenvat Credit Rules, 2004 and the amount of Rs. 3,20,82,192/- which was already paid/reversed by them is ordered for appropriation from the confirmed demand.
(b) I order for recovery of interest from the Noticee No. 1 under the provisions of Rule 14 of the Cenvat Credit Rules, 2004 read with Section 11AA of the Central Excise Act, 1944.
(c) I impose penalty of Rs. 3,90,48,579/- (including cess) (Rupees Three Crores Ninety Lacs Forty Eight Thousand Five Hundred and Seventy Nine only) upon the Noticee No. 1 under Rule 15 (2) of the Cenvat Credit Rules, 2004 read with Section 11AC (1) (c) of the Central Excise Act, 1944.
(d) I impose a penalty of Rs. 5,00,000/- (Rupees Five Lakhs only) upon Noticee No. 2 under Rule 26 (2) of the erstwhile Central Excise Rules, 2002
(e) I impose a penalty of Rs. 5,00,000/- (Rupees Five Lakhs only) upon Noticee No. 3 under Rule 26 (2) of the erstwhile Central Excise Rules, 2002
(f) I impose a penalty of Rs. 5,00,000/- (Rupees Five Lakhs only) upon Noticee No. 6 under Rule 26 (2) of the erstwhile Central Excise Rules, 2002
(g) I do not impose penalty upon Noticee No. 4, Noticee No. 5, Noticee No. 7, Noticee No. 8, Noticee No. 9, Noticee No. 10 and Noticee No. 11 under Rule 26 (2) of the Central Excise Rules, 2002.
5. The assessee manufactures sponge iron and mild steel (MS) billets and is registered with the Central Excise department. It pays excise duty and avails Cenvat credit on the inputs and input service. During the relevant period, it claims to have purchased MS scrap from the following first and second stage dealers and availed Cenvat credit on the invoices issued by them:
a) M/s. Jetking Trading & Agencies Pvt. Ltd. Raipur
b) M/s RMS Steel Tech & Co., Raipur
c) M/s Jai Balaji Steels, Raipur
6. The Directorate General of Central Excise Intelligence5 received intelligence and investigated several manufacturers and traders including those which supplied the aforesaid invoices and the supporting manufacturers indicated in the invoices and came to the conclusion that the manufacturers and the traders did not exist at all at the addresses given in the invoices and only documents were supplied to enable the manufacturers of final products, including the assessee in this appeal, to take Cenvat credit without actually supplying the goods.
7. Based on the intelligence received and investigation by DGCEI and other enquiries, a Show Cause Notice6 5.1.2017 was issued by the Commissioner of Customs and Excise, Raipur to 11 noticees, including to the three appellants herein.
8. The Assessee, Drolia and Choudhary resisted the proposals in the SCN which were, however, confirmed in the impugned order. Aggrieved, these appeals have been filed by the appellants.
Submission on behalf of the appellants
9. Learned counsel for the appellant made the following submissions:
(i) The assessee had purchased goods based on Cenvatable invoices, paid for the goods through banking channels, duly received, weighed and used them in manufacture of final products on which it paid duty. All statutory records were also maintained.
(ii) The SCN was part of the larger investigation involving allegations of the same intermediate parties qua different sets of ultimate manufacturers and all those cases which reached this Tribunal were decided in favour of the assessees and against the department. These are:
(a) Ashok Sharma vs CCE Raipur decided by Final Order No. 50426-50430/2019 dated 27.3.2019 passed in Excise Appeal No. 53371-53373 of 2018, 53433/2018 and 53741/2018
(b) Fortune Metaliks Ltd. vs CCE Raipur decided in Final Order No. 51708-51709/2021 dated 6.8.2021 passed in Excise Appeal No. 51044-51045/2019
(c) Trishul Mehta Industries vs CGST in Final Order dated 27.12.2021 in Excise Appeal No. 52313/2019
(iii) There is no evidence in the SCN to support the alleged illegal availment of Cenvat credit. Requests for cross examination of witnesses were made.
(iv) The SCN relies heavily on statements recorded by the Central Excise officers which are relevant only if the procedure prescribed in section 9D of the Act is followed and it was not followed in this case by the Adjudicating Authority. Neither was the examination in chief conducted nor was the cross examination followed it. Therefore, bulk of the evidence in the SCN cannot be relied upon and if this is not relied upon, nothing survives in the SCN.
(v) There is no substantial evidence against the appellant and only third party evidence was used and exculpatory evidence available has been deliberately sidelined.
(vi) All the dealers from whom the scrap was purchased were duly registered with the Central Excise department and were filing Returns and their registrations were cancelled only after the investigation.
(vii) The appellant had verified their registration with the department before procuring inputs from the dealers. All the goods were received against the invoices, duly accounted for in the records and payments for the goods so procured were made through banking channels.
(viii) It is also an undisputed fact that the appellant manufactured final products from the inputs so procured and cleared them after paying duty.
(ix) For these reasons, neither the Cenvat credit can be denied to the assessee nor can any the penalties on any of the three appellants be sustained.
(x) The impugned order may, therefore, be set aside.
Submissions on behalf of Revenue
10. Learned authorized representative supported the impugned order and made the following submissions:
(i) The assessee procured the goods through dealers who, in turn, claim to have procured them from the manufacturers and it was found during investigation that they did not even exist. The dealers had, in fact, supplied bazaar scrap (i.e., post consumer use scrap on which no duty is paid).
(ii) The manufacturers either existed only on paper or existed for a short period of time.
(iii) Statements of several individuals who were involved in the case were recorded in which they admitted that no duty paid scrap was procured from the manufacturers (of scrap) in Dhanbad, Jharkhand and the transactions on the basis of which invoices were raised for supply to the appellant were fake.
(iv) Investigation also showed that a large number of the vehicles shown in the invoices were not even vehicles which could carry the goods because they were either cars or motor cycles etc. Therefore, the assertion of the assessee that the goods were procured cannot be accepted.
(v) In view of the above, there is no force in the three appeals which may be dismissed and the impugned order may be upheld.
Findings
11. The submissions advanced by both the sides have been considered and the records and the evidence available on record have also been considered.
12. The Show Cause Notice relied on 62 documents in support of the allegations made in it, of which 35 are statements of various persons recorded by the Central Excise officers under section 14 of the Act, 16 are panchnamas drawn at various locations, 2 are summons issued to Mr. Rajiv Drolia, 1 is a letter sent to Mr. Drolia calling for information and 1 is his response. The remaining 6 are letters exchanged between officers. The details are as follows:
Statements made by various persons before central excise officers under section 14- Relied upon documents 8,23,24,25,26,27,28,31,32,33,34,35,36,37,38,40,41,42,43,
44,45,46,47,48,49,50,51,52,53,54,55,56,61 and 62
Panchnamas- Relied upon documents 6,9,10,11,12,13, 14,15, 16,17,18,19,20,21,22 and 39
Summons issued to Shri Drolia- Relied upon documents 57 &58
Letter sent to Shri Drolia calling for information- Relied upon document 59
Reply of Shri Drolia- Relied upon document 60
Letter sent to state Commercial tax department- Relied upon document 29
Reply of the commercial tax department- Relied upon document 30
Letters exchanged within the department- Relied upon documents 1,2,3,4 and 5
13. Of the above, the 35 statements of various persons recorded under the Central Excise Act will be relevant to the proceedings only as per section 9D which lays down the procedure to be followed to make them relevant and the exceptions to such procedure. This section reads as follows:
Section 9D. Relevancy of statements under certain circumstances (1) A statement made and signed by a person before any Central Excise Officer of a gazette rank during the course of any inquiry or proceeding under this Act shall be relevant, for the purpose of proving, in any prosecution for an offence under this Act, the truth of the facts which it contains, –
(a) when the person who made the statement is dead or cannot be found, or is incapable of giving evidence, or is kept out of the way by the adverse party, or whose presence cannot be obtained without an amount of delay or expense which, under the circumstances of the case, the Court considers unreasonable; or
(b) when the person who made the statement is examined as a witness in the case before the Court and the Court is of opinion that, having regard to the circumstances of the case, the statement should be admitted in evidence in the interests of justice.
(2) The provisions of sub-section (1) shall, so far as may be, apply in relation to any proceeding under this Act, other than proceeding before a Court, as they apply in relation to a proceeding before a Court.
14. Evidently, the statements will be relevant under certain circumstances and these are given in clauses (a) and (b) of sub- section (1). There is no assertion by either side that the circumstances indicated in (a) existed in the case. It leaves us with (b) which requires the court or the adjudicating authority to first examine the person who made the statement and form an opinion that having regard to the circumstances of the case, the statement should be admitted in evidence. Of course, the party adversely affected by the statement will have to be given an opportunity to cross examine the person who made the statement but that comes only after the statement is, in the first place, after examination by the adjudicating authority, admitted in evidence. This has not been done in respect of any of the 35 statements. Therefore, all the statements are not relevant to the proceedings.
15. It has been held in a catena of judgments including Jindal Drugs Pvt. Ltd. versus Union Of India7 that section 9D is a mandatory provision and if the procedure prescribed therein is not followed, statements cannot be used as evidence in the proceedings under Central Excise Act. The relevant extracts are as follows:
“13. Once the ambit of Section 9D(1) is thus recognized and understood, one has to turn to the circumstances referred to in the said sub-section, which are contained in clauses (a) and (b) thereof.
14. Clause (a) of Section 9D(1) refers to the following circumstances :
(i) when the person who made the statement is dead,
(ii) when the person who made the statement cannot be found,
(iii) when the person who made the statement is incapable of giving evidence,
(iv) when the person who made the statement is kept out of the way by the adverse party, and
(v) when the presence of the person who made the statement cannot be obtained without unreasonable delay or expense.
15. Once discretion, to be judicially exercised is, thus conferred, by Section 9D, on the adjudicating authority, it is self- evident inference that the decision flowing from the exercise of such discretion, i.e., the order which would be passed, by the adjudicating authority under Section 9D, if he chooses to invoke clause (a) of sub- section (1) thereof, would be pregnable to challenge. While the judgment of the Delhi High Court in J&K Cigarettes Ltd. (supra) holds that the said challenge could be ventilated in appeal, the petitioners have also invited attention to an unreported short order of the Supreme Court in UOI and Another v. GTC India and Others in SLP (C) No. 2183/1994, dated 3-1-1995 wherein it was held that the order passed by the adjudicating authority under Section 9D of the Act could be challenged in writ proceedings as well. Therefore, it is clear that the adjudicating authority cannot invoke Section 9D(1)(a) of the Act without passing a reasoned and speaking order in that regard, which is amenable to challenge by the assessee, if aggrieved thereby.
16. If none of the circumstances contemplated by clause (a) of Section 9D(1) exists, clause (b) of Section 9D(1) comes into operation. The said clause prescribes a specific procedure to be followed before the statement can be admitted in evidence. Under this procedure, two steps are required to be followed by the adjudicating authority, under clause (b) of Section 9D(1), viz.
(i) the person who made the statement has to first be examined as a witness in the case before the adjudicating authority, and
(ii) the adjudicating authority has, thereafter, to form the opinion that, having regard to the circumstances of the case, the statement should be admitted in evidence in the interests of justice.
17. There is no justification for jettisoning this procedure, statutorily prescribed by plenary Parliamentary legislation for admitting, into evidence, a statement recorded before the Gazetted Central Excise Officer, which does not suffer from the handicaps contemplated by clause (a) of Section 9D(1) of the Act. The use of the word “shall” in Section 9D(1), makes it clear that, the provisions contemplated in the sub-section are mandatory. Indeed, as they pertain to conferment of admissibility to oral evidence they would, even otherwise, have to be recorded as mandatory.
18. The rationale behind the above precaution contained in clause (b) of Section 9D(1) is obvious. The statement, recorded during inquiry/investigation, by the Gazetted Central Excise Officer, has every chance of having been recorded under coercion or compulsion. It is a matter of common knowledge that, on many occasions, the DRI/DGCEI resorts to compulsion in order to extract confessional statements. It is obviously in order to neutralize this possibility that, before admitting such a statement in evidence, clause (b) of Section 9D(1) mandates that the evidence of the witness has to be recorded before the adjudicating authority, as, in such an atmosphere, there would be no occasion for any trepidation on the part of the witness concerned.
19. Clearly, therefore, the stage of relevance, in adjudication proceedings, of the statement, recorded before a Gazetted Central Excise Officer during inquiry or investigation, would arise only after the statement is admitted in evidence in accordance with the procedure prescribed in clause (b) of Section 9D(1). The rigour of this procedure is exempted only in a case in which one or more of the handicaps referred to in clause (a) of Section 9D(1) of the Act would apply. In view of this express stipulation in the Act, it is not open to any adjudicating authority to straightaway rely on the statement recorded during investigation/inquiry before the Gazetted Central Excise Officer, unless and until he can legitimately invoke clause (a) of Section 9D(1). In all other cases, if he wants to rely on the said statement as relevant, for proving the truth of the contents thereof, he has to first admit the statement in evidence in accordance with clause (b) of Section 9D(1). For this, he has to summon the person who had made the statement, examine him as witness before him in the adjudication proceeding, and arrive at an opinion that, having regard to the circumstances of the case, the statement should be admitted in the interests of justice.
20. In fact, Section 138 of the Indian Evidence Act, 1872, clearly sets out the sequence of evidence, in which evidence-in-chief has to precede cross-examination, and cross-examination has to precede re-examination”.
16. Therefore, the 35 statements relied upon in the SCN are not relevant and hence also not admissible.
17. Of the 16 panchnamas, one was drawn to record the seizure of a pen drive and the remaining 15 are drawn at various places which indicate that that the concerned businesses did not exist and/or were not operating at the concerned premises. Of these, only four pertain to the manufacturers/traders concerned with the invoices in question on which the appellant had taken Cenvat credit. Other panchnamas pertain to other manufacturers or traders and are not relevant to this case because they had not issued the invoices. These four panchnamas are :
(i) RUD- 16 drawn at the premises of High Tide Infra Projects Pvt. Ltd. who is one of the three manufacturers who are supposed to have manufactured the scrap which the appellant purchased through the second stage dealer.
(ii) RUD-17 drawn at the premises of Supreme Multi-Trade Pvt. Ltd. who is also one of the three manufacturers of the scrap which the appellant purchased through second stage dealers.
(iii) RUD-20 drawn at the premises of M/s Singh Minerals and Infratech who is the third manufacturer of the scrap which the appellant purchased through second stage dealers.
(iv) RUD 21 drawn at the premises of M/s.Jetking Trading, one of the two first stage dealers who are supposed to have supplied the scrap to the second stage dealer who, in turn, is supposed to have sold it to the appellant.
18. These panchnamas do indicate that the dealers did not exist at the addresses.
19. Of the remaining relied upon documents are two summons (RUD 57&58) issued to Drolia and after he expressed his inability to appear, a letter (RUD 59) was issued to him calling for information and he replied (RUD 60). In this reply, he stated that they had placed orders, and procured scrap and availed Cenvat credit and had taken all necessary precautions and no irregularity was noticed and they paid Rs. 3,20,82,192/- when pointed out by the department UNDER PROTEST and that they will examine the remaining Cenvat credit of Rs. 69,66,387/-. Nothing in this statement supports the contention in the SCN that the appellant had received only invoices and had not received the duty paid scrap.
20. A letter was sent (RUD 29) by the department to the Commissioner of Commercial Taxes, Raipur, Chattisgarh, who, in reply (RUD 30) confirmed that none of the several firms indicated in his letter including M/s. Jetking Trading and M/s RMS Steel (the two first stage dealers in this case) had shown any purchase of any goods from Dhanbad, Jharkhand. This supports the contention of the Revenue that the three manufacturers of Dhanbad from whom the first stage dealers claim to have purchased the scrap had not purchased duty paid scrap at all. If they had not purchased duty paid scrap, by logical extension, they could not have sold it to the second stage dealer, who, further, could not have sold it to the appellant.
21. The remaining relied upon documents (RUD 1 to 5) are communications between different officers of the department. RUD1 is the letter of Commissioner Dhanbad to Commissioner, Raipur providing intelligence. RUD 2 is a follow up letter by Commissioner, Dhanbad providing further details. RUD 3 is a letter from the Additional Commissioner, Dhanbad intimating that the registrations of the non-existent manufacturers/dealers had been revoked. RUD 4 is a letter sent by the Commissionerate of Raipur to DGCEI asking for details of their investigation and RUD 5 is their reply.
22. From these five RUDs, it is evident that the „non-existent manufacturers/ dealers‟ were all given registrations by the Central Excise Commissionerate. According to the learned counsel for the appellant they all have also been filing excise returns with the department. It needs to be pointed out at this stage that duty is paid by the manufacturer and Cenvat credit can be taken on the strength of it. However, if some traders want to buy goods from the manufacturer and further sell and also pass the benefit of the Cenvat credit, they need to be registered with the Central Excise department. Cenvat credit can be taken only on invoices issued by those traders who are registered with the Central Excise department and not on the strength of invoices issued by any other trader. The registered dealers could be first stage dealers who buy goods from the manufacturers and further sell or second stage dealers who buy goods from first stage dealers and further sell. The traders‟ invoices issued by the first or second stage dealer also mention the invoice number of the original manufacturer who paid the duty.
23. Thus, registration of a trader by the Central Excise is one of great responsibility as Cenvat credit becomes available on the strength of the invoices issued by such traders and every rupee available as Cenvat credit is a rupee less of tax paid in cash. The case of the Revenue in this appeal is that the manufacturers and the traders did not exist at all but they were still registered by the department. There is no justification for such registrations by the department. The DGCEI or the Commissionerate does not investigated or even questioned the officers who issued these registrations to manufacturers and dealers who did not even exist. Further, if the allegedly non-existent registrants were also filing returns which were also being accepted and scrutinized by the officers as claimed by the learned counsel for the appellants, there does not appear to be any investigation as to how the Returns of the „non-existent‟ Registrants were being accepted by the officers.
24. Once the registration is issued by the department, the buyer of goods can procure goods from such a registered trader and take credit on the strength of such invoices. The case of the Revenue is that the traders and the manufacturers never existed but they issued Cenvatable invoices only on paper and had not supplied duty paid scrap at all and they could have supplied bazar scrap (post consumer scrap) against such invoices.
25. What is more interesting is that after investigating and concluding that the manufacturers and traders did not exist at all and cancelling their registration, the Show Cause Notice was issued not only to the three appellants herein but also to those very manufacturers and traders who were supposed to not exist at all and at the addresses where they were found to not exist as per the investigation proposing imposition of penalties on them. Needless to say that if they had not existed, SCN could not have been issued to such non-existent entities. As per the SCN, the manufacturers and traders did not exist and for that reason Cenvat credit taken by the assessee needed to be reversed but the manufacturers and traders also existed at the addresses indicated therein and they were asked as to why penalties should not be imposed on them.
26. The impugned order also does not mention that although the SCN was issued, it could not be served on these non-existent manufacturer and traders and the notices were returned undelivered. It proceeds on the belief that the SCN was served upon them and that they had not sent any replies in defence. In paragraph 23.3 of the impugned order, the Commissioner, inter alia, recorded that “the noticee no. 4,5,6,7,8 and 9 did not submit their reply to show cause notice which was issued over an year ago. In order to ensure natural justice, opportunities of personal hearing were extended to them but they did not appear on any of the dates scheduled for personal hearing to defend their case. It is observed that the Noticees did not intend to defend their case…”. The first stage dealers in dispute in this case are noticees no. 4&5 and the manufacturers are noticees no. 7,8 &9 above. In the impugned order, however, no penalties have been imposed against them relying on some case laws. Thus, according to the impugned order, while these entities did not exist at all and for that reason, Cenvat credit is inadmissible on the basis of the second stage dealer‟s invoices issued on the basis of the invoices issued by these manufacturers and first stage dealers on the one hand, they did exist and had been served the SCN and notices of personal hearing but such opportunities were not availed.
27. Like the Schrodinger‟s cat8 which is both dead and alive, according to the Revenue, these firms both existed and did not exist. Their existence was presumed when they were registered and their existence was denied when their registrations were cancelled. In the SCN and the impugned order, their existence was presumed when the SCN and the notices for personal hearing was sent but in the same SCN and the impugned order their existence is denied to deny the Cenvat credit to the assessee.
28. The case of the appellant is that it had placed orders on the registered traders, received the goods, accounted for them in its records and availed Cenvat credit on the invoices. Balancing the two sides, we find that the issue tilts in favour of the appellant. When the department registered the so called „non-existent manufacturers/dealers‟ and it cancelled registrations much later, after this investigation, the irresistible conclusion is that the officers had either fraudulently issued the registrations or they issued registrations believing that the manufacturers/traders existed and only much later came to know that they did not exist at all. There is no evidence or allegation of fraud by the officers, hence, it is reasonable to presume that they believed that the manufacturers/traders existed. Such being the case, the appellant cannot be faulted for also believing that the manufacturers/traders existed and trusting the registrations issued by the department and placing orders on the traders. The appellant, as the buyer, cannot be expected to investigate if the departmental officers had issued the registrations correctly or not and take business decisions accordingly. The appellant is also neither required nor is competent to launch an investigation to see if the registered dealer who was issuing to him an invoice had, in fact, maintained the records properly and that he had procured the goods from a first stage dealer who existed at his address and further that first stage dealer had, in fact, procured the goods from a manufacturer and that such manufacturer (who is registered with the department) existed, manufactured the goods, accounted for them properly and issued a correct CENVATABLE invoice to the first stage dealer.
29. The reasonable precautions which the appellant or any other assessee is expected to take is placing orders on a registered manufacturer or dealer and receiving goods along with a Cenvatable invoice indicating all required details. The assessee is not required to launch an investigation. At any rate, as discussed above, Revenue itself was ambiguous about the existence of these units from the time they were registered until and including when the impugned order was issued. We, therefore, find no grounds to deny Cenvat credit to the assessee. Consequently, the penalties imposed on Drolia and Choudhary also cannot be sustained.
30. In view of the above, the impugned order is set aside and all three appeals are allowed.
(Order pronounced in open court on 30/10/2023.)
Notes:
1 Assessee
2 Impugned order
3 Drolia
4 Choudhary
5 DGCEI
6 SCN
7 2016 (340) E.L.T. 67 (P&H)
8 Erwin Schrodinger, the Nobel laureate physicist developed ‘Schrodinger’s Cat’ as a thought experiment to explain the concept of quantum duality- such as electrons being a particle and a wave at the same time. If a cat is put in a box with a vial of toxin and the box is closed, after some time, until the box is opened, the cat is both alive and dead because both are possibilities. Only when the box is opened is this resolved and the cat will be either dead or alive.
