CESTAT Kolkata held that it was not correct to disallow credit on the strength of invoices issued by unregistered dealer (intermediate supplier), when actual receipt of goods was not disputed.
Facts- The appellant is a manufacturer exporter of agricultural machinery falling under Chapter 84. They source raw materials through a registered dealer.
It is the case of the department that the appellant had sourced only the Cenvatable Credit invoices without actual receipt of the goods and thereby contravened the various provisions of the Act and the Rules and availed the said Cenvat Credit not due on the strength of the eight invoices issued by the registered dealer.
Conclusion- The impugned goods have been found to be duly accounted for in statutory records, payments made, transportation details indicated in the invoices and as there is not an iota of evidence to suggest non-receipt of goods by the appellants, Cenvat Credit therefore cannot be denied. Also since it is not the case that no goods were produced by the appellants and also under the circumstances no alternative receipt/supply of goods for such manufacture has been brought out by the department, the charge levelled gets demolished under its own weight.
In the case of Apollo Metalex PVt. Ltd. V. CCE & ST Noida, the Tribunal held that it was not correct to disallow credit on the strength of invoices issued by unregistered dealer (intermediate supplier), when actual receipt of goods was not disputed.
FULL TEXT OF THE CESTAT KOLKATA ORDER
The appellants M/s Marco Blowers (India) Pvt. Ltd., vide present appeal have assailed the order in appeal no.12/SLG-CGST/2018 dated 06.06.2018 passed by the Ld. Commissioner, upholding the order passed by the Ld. Adjudicating Authority. The Adjudicating Authority vide Order in Original No.20/12/Ac/Joka/Kol-v/Adjn2015-16 dated 29.01.2016, had disallowed the Cenvat Credit of Rs.1,77,745/- (Rupees One lakh seventy seven thousand seven hundred & forty five only) and also imposed penalty of Rs.88,873/- (Rupees Eighty eight thousand eight hundred seventy three only), under Rule 15(2) of Cenvat Credit Rules 2004 besides demand for interest under Section 11AA, was also confirmed.
2. The appellant is a manufacturer exporter of agricultural machinery falling under Chapter 84. They source raw materials through Roshanlal Bhogirathmal a registered dealer. As per the invoices issued by the said registered dealer the name and address of the buyer, if not consignee is shown as;
i. Shreeluxmi IronTrading Company.
ii. Venus Trading Corporation.
(Both local traders and unregistered dealers).
3. The appellants manufacture parts of paddy driers out of M.S. Angels, M/s Channel, M/S Plates and R.S. Joist on which they availed input credit. During the period 2010-11 and 2014-15 the appellants have availed Cenvat Credit for 1,77,745/- on the strength of cenvatable invoices issued by Roshanlal Bhogirathmal (RB) a first stage dealer. The invoices were issued in their name through the two said unregistered dealers.
3.1 The appellants contend that they place orders for supply of goods on the unregistered dealer (trader), who in turn negotiates with the registered dealer to supply the said goods to the appellants. The impugned goods were supplied to them directly by the registered dealer at their factory premises under cover of dealers invoice making a mention of the name of the buyers (unregistered dealer) and indicating the appellants as consignee in the invoices issued. It is an admitted position that the goods so received via unregistered dealers were supplied directly at the appellant’s site and therefore they state that the credit availed by them on the strength of the invoices of the registered dealer has been rightly availed. In support of their contention they relied on Board’s Circular No.1003/10/2015-C dated 05.05.2015.
3.2 It is the case of the department that the appellant had sourced only the Cenvatable Credit invoices without actual receipt of the goods and thereby contravened the various provisions of the Act and the Rules and availed the said Cenvat Credit not due on the strength of the eight invoices issued by the registered dealer.
4. Heard the rival submissions and perused the records. The facts of the case are not in dispute.
5. The department in support of their contention have alleged that the goods which have been utilized in the manufacture are not the one’s in respect of which the impugned invoices have been issued and on the strength of which Cenvat Credit has been availed by the appellants. It is their contention that the dealer only to promote the business of the impugned buyer/consignee, unlawfully benefited the consignee by issuing cenvatable invoices without supplying any material. As the appellants have not purchased the impugned goods from the dealer, so they are not entitled to availment of credit based on the invoices issued by the dealer. The department have also attributed suppression of facts, misstatement as the appellants having availed of irregular credit intentionally without receipt of goods and therefore invoked extended period of limitation.
6. It has been an admitted position both by the supplier of goods, as well as the recipient thereof, that they have been negotiating the sales through the said two unregistered dealers. In fact the registered dealer has submitted, to negotiate supplies of manufactured goods through traders, for sale of his goods. The appellant relies heavily on Board’s of Circular no. 1003/10/2015- CX dated 05.05.2015. It is noticed that the said circular of the Board caters to a situation as herein and was based upon representations received from the trade. Vide para 3 of the circular, the Board has spelled out the purpose behind amending Central Excise Rules 2002 and inserting two provisos (third & fourth) in Rule 11(2) thereof. Para 3 of the circular states that the intendment for amendment was to allow an additional facility for direct transport of goods from the manufacturer to the consignee who avails Cenvat Credit based on the cenvatable invoices issued by the registered dealer. It further mentions that this change was so brought about to obviate the need for goods to be brought to the premises of registered dealers for subsequent transport of the goods to the consignee. Relevant portion of the circular is quoted below:
“5- Various specific issues referred to by the trade are classified as follows-
i. Where a registered dealer negotiate sale of an entire consignment from a manufacturer or a registered importer and orders direct transport of goods to the consignee, credit can be availed by the consignee on the basis of invoice issued by the manufacturer or the registered importer. In such cases no Cenvatable invoice shall be issued by the registered dealer in favour of the consignee though commercial invoice can be issued.Where a registered dealer negotiates sale of goods from the total stock ordered on a manufacturer or an importer to multiple buyers and orders direct transportation of goods to the consignees and the manufacturer or the importer is willing to issue individual invoices for each sale in favour of the consignees for such individual sale, the same procedure shall apply.
ii. Where a registered dealer negotiates sale by splitting a consignment procured from a manufacturer or a registered importer and issues Cenvatable invoices for each of the sale, it would now be possible for the dealer to order direct transport of the consignments as per the individual sales to the consignee without bringing the goods to his godown. This would save time and transportation cost for the dealer adding to ease of doing business. This is a new facility which flows from the amended provisions. Procedure as prescribed in the third proviso of rule 11(2) shall be applicable in such case.
iii. Where a un-registered dealer negotiates sale of an entire consignment from a manufacturer or a registered importer and orders direct transport of goods to the consignee, credit can be availed by the consignee on the basis of invoice issued by the manufacturer or the registered importer. As the dealer is not registered, there is no question of issuing any Cenvatable invoice by him. Such dealers as in the past can continue to be un-registered.
iv. Where goods are sold by the registered importer to an end-user (say a manufacturer) who would avail credit on the basis of importer’s invoice and the goods are transported directly from the port or warehouse at the port to the buyer’s premises, the amendment prescribes that for such movement the factum of such direct transport to the buyer’s premises needs to be recorded in the invoice.
6.1 For earlier period, the appellant has adverted to Circular No.218/52/96-CX dated 04.06.1996 concerning transit sale movement of goods under Rule 52-A invoice. Moreover, even the circular referred supra clearly states that the impugned changes need to be read harmoniously keeping the governments intention in mind and that these were by way of additional facility to registered dealer for direct dispatch of goods from the manufacturer to consignee when they were issuing cenvatable invoice. Moreover, it is noted that the department’s stance is purely conjectural in respect of their claim that the entire scheme was so manipulated to benefit the consignee by issuing cenvatable invoices and to promote the business of buyer/consignee. It belies logic that if as alleged no goods were received by the consignee, then how can the business be promoted.
7. In view of above, when non receipt of goods by the appellant, is not substantiated, it would not be appropriate to deny them the facility of Cenvat Credit availment on the strength of the invoice of the registered dealer, duly accounted for in their RG-23A-Pt.I & II. The department’s contention of mere receipt of documents and no goods were supplied is without even a toehold of substance. It is at best only presumed or assumed that the appellants had not received the said goods as per the said cenvatable invoices issued. There is no sound basis to allege so and harbor such a belief by the department. It is also stated both by the registered dealer as well as the appellant’s in their statements before the authority that primarily it was the buyer (unregistered dealer) who would arrange for transport of goods, which were sent directly to the consignee. It is also noted that the invoice issued by the registered dealer clearly indicates the mode of transport and the vehicle number by which the said goods were supplied directly at the consignee’s site. They have however, referred to various challans and consignments notes, in support of their stance of receipt of goods directly in response to Q. 13 of the statement of the Director, recorded under Section 14 of the Central Excise Act on 15.07.2015. Obviously, no finished goods would have been produced if said goods were not received by them. Also sourcing and negotiating of supplies through vendors, who may be unregistered is a normal industry practice, and seeks to improve and facilitate the conduct of business. So is also the purport of in the circular issued providing for direct dispatch of goods from a registered dealer to the consignee. It is also noted that the appellants have also enclosed bank statements showing the payments made to the unregistered dealer through whom the said purchases have been said to be negotiated with the registered dealer. I find the situation for supply of goods herein is specially provided for in Rule 11(2) proviso and it provides for availment of Cenvat Credit on the strength of the said invoices issued by the registered dealer. Further, the provisions have been made applicable mutatis mutandis in case of a first stage dealer or a second stage dealer (refer Rule 11(7) of the Central Excise Rules 2002.
8. In view of the aforesaid discussion there is nothing to disentitle the availment of Cenvat Credit when such facility is clearly envisaged in law and the intention of the government so to do also spelled out by way of circular to promote/facilitate ease of doing business, and the elaborate circumstantial evidence indicating the receipt of the goods. Thus as the impugned goods have been found to be duly accounted for in statutory records, payments made, transportation details indicated in the invoices and as there is not an iota of evidence to suggest non-receipt of goods by the appellants, Cenvat Credit therefore cannot be denied. Also since it is not the case that no goods were produced by the appellants and also under the circumstances no alternative receipt/supply of goods for such manufacture has been brought out by the department, the charge levelled gets demolished under its own weight.
I find that the Tribunal has also so held and allowed credit in the case of Dashmesh Castings PVt. Ltd., 2015(320)E.L.T. 450TCCE & ST, Chandigarh. In the case of Apollo Metalex PVt. Ltd. V. CCE & ST Noida 2015(323) E.L.T. 394T, the Tribunal held that it was not correct to disallow credit on the strength of invoices issued by unregistered dealer (intermediate supplier), when actual receipt of goods was not disputed.
9. The order of the Learned Commissioner passed in appeal is therefore set aside and the appeal filed by the party is allowed.
(Dictated and pronounced in the open court on 18.05.2023)