Case Law Details
AIC Iron Industries Private Limited Vs Commissioner of CGST & CX (CESTAT Kolkata)
The first issue involved in this case is whether the Appellant had availed irregular CENVAT Credit as arrived by the Department holding that it was paper transaction without receipt of raw materials. Second issue is whether under the circumstances and the facts on record, extended period of limitation can be invoked. I find that there is no other evidence on record of cash flow-back or any inculpatory statement to substantiate that CENVAT Credit was taken irregularly based on paper transaction i.e. without receipt of raw materials against invoices. I find that the statements of the transporters are not corroborated with any evidence. Only on the basis of third party’s statement, demand cannot be made.
I also find that it is an undisputed fact that all the purchases were duly recorded in the statutory books of the Appellant and the goods were also found to be entered in the statutory records of the Appellant. There is no evidence which can show that the records maintained by the Appellant are not correct. Only on the basis of statement of some of the transporters, the credit is sought to be disallowed whereas the statements are in isolation with any corroboration. Therefore the entire demand of excess CENVAT Credit in absence of any corroborative evidence is nothing but based on presumption which is not permissible under the law. I find that the Appellant is duly registered with the Department and there is no allegation in the impugned order of non-submission of any periodical returns. The Appellant is subject to regular audits. Therefore, the allegation of suppressing the facts from the Department does not hold good in the event of periodic audits of the Appellant’s records. There is no other evidence in the impugned order to show that the Appellant has willfully suppressed the fact from the Department in order to evade payment of duty. As such, extended period of limitation cannot be invoked in the present case. In this case it is a fact on record that during the course of investigation, no shortage or excess of the goods were found in the premises of the Appellant. In that circumstance, duty is cast on the Revenue to ascertain the fact that if the Appellant has not received the goods, then from where they procured the goods and used the same for manufacture of dutiable finished goods which have been cleared on payment of duty. Moreover, the Department has relied upon the statements of the transporters, but opportunity to cross-examine them to ascertain the truth has not been given. I therefore hold that the impugned order for disallowance of credit to the Appellant is not sustainable. Accordingly, the demands are set aside. In the peculiar facts and circumstances of this case and in the absence of cogent evidence, the demands are not sustainable, as a consequence the penalties imposed upon both the Appellants are also not sustainable and are accordingly set aside.
FULL TEXT OF THE CESTAT KOLKATA ORDER
The present Appeals have been filed by the Appellants assailing the order of the Ld.Commissioner(Appeals).
2. Briefly stated, the facts of the case are that the Appellant company is engaged in manufacturing of MS Ingot falling under Chapter Heading 7206 of the Central Excise Tariff Act, 1985. They are holding Central Excise Registration and are availing CENVAT Credit in respect of inputs used in the manufacture of final products. A Show Cause cum Demand Notice dated 07.11.2014 was issued to the Appellant and its Director alleging wrong availment of CENVAT Credit on MS Round Cutting during the period from December 2012 to January 2013 amounting to Rs.7,64,588/-. It is the case of the Department that the said MS Round Cutting had actually not been received in the Appellants’ factory and had not been utilized for manufacturing of their finished goods. It was alleged that the aforesaid goods were claimed to be received from the supplier M/s. Shree Ganesh Forging Company but not actually received and hence the amount of such credit availed and utilized by them is irregular and the same is recoverable from them. Further CENVAT Credit availed on transportation of the disputed inputs amounting to Rs.2,037/- was also proposed to be disallowed and recovered. It was further alleged that Sri Vivek Adukia, Managing Director of the Appellant Company was well aware of the facts and he willingly and knowingly participated and monitored the said irregular availment of CENVAT Credit and accordingly it was proposed to impose penalty upon the Managing Director in terms of Rule 26 of the Central Excise Rules, 2002. The Appellants submitted reply to the Show Cause Notice vide their letter dated 11.07.2016 and inter alia denied the allegations made in the Show Cause Notice. The Appellants contested the demand of duty besides assailing the extended period of limitation and penal provisions. The Ld.Adjudicating authority passed the following order:-
(i) I disallow the irregular Cenvat Credit of Rs.7,64,588/- (Basic Rs.7,42,319/- + Education Cess Rs.14,846/- + Secondary & Higher Education Cess Rs.7,423/-) (Rupees Seven Lakh Sixty Four Thousand Five hundred Eighty-eight) only, availed by the Noticee No.1 on inputs during the period from March’ 10 to June’12, as detailed in the Show Cause Notice No.176/ADC/BOL/14 dated 07.11.2014, which is inadmissible and the same is recoverable along with interest under Rule 14 of the Cenvat Credit Rules, 2004 read with Section 11AA of the Central Excise Act, 1944;
(ii) I also disallow the irregular input service credit of Rs.2,037/-(Service Tax Rs.1,978/-, Education Cess Rs.40/- and Secondary & Higher Education Cess Rs.19/-) (Rupees Two thousand thirty-seven) only, irregularly availed and utilized by the Noticee No.1 on input service (on GTA) during the period from March’10 to June’12, as detailed in the Show Cause Notice No.176/ADC/BOL/14 dated 07.11.2014, which is inadmissible and the same is recoverable along with interest under Rule 14 of the Cenvat Credit Rules, 2004 read with Section 11AA of the Central Excise Act, 1944;
(iii) I impose a penalty of Rs.7,66,625/- (Rupees Seven lakh Sixty Six thousand Six hundred and Twenty Five) only on the Noticee No.1, in terms of Rule 15 of the Cenvat Credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944;
(iv) I also impose a penalty of Rs.10,000/- (Rupees Ten thousand) only on the Noticee No.2, in terms of Rule 26 of the Central Excise Rules, 2002.
3. On Appeal the Ld.Commissioner(Appeals) upheld the Order-in-Original. Hence the present Appeal before this Tribunal.
4. Authorized Representative appearing on behalf of the Appellants submits that the Ld.Adjudicating authority has relied on the letters submitted by the three vehicle owners out of 11 vehicles who were hired by the transporters M/s. Saheb Roadways and M/s. Kalyaneshwari Transport to carry the disputed inputs to the Appellants’ factory. It is his submission that the Appellant did not engage the vehicles directly and requested for copies of the letters sent by the owners of the three vehicles since the same were not enclosed with the Show Cause Notice. Further, the Appellant wanted to cross-examine the said vehicle owners, but neither they were supplied with the copies of the letters nor cross-examination was allowed. He further submitted that the transporters M/s. Saheb Roadways and M/s. Kalyaneshwari Transport admitted having transported the disputed goods to the Appellants’ factory and submitted documents in support of transport and receipt of payment (freight). He also submitted that the disputed goods were procured on payment through banking channels and entered in RG-23A part-I and the inputs were issued for manufacture of dutiable final products. He vehemently argued that there is no allegation of any flow-back and there is no inculpatory statement brought on record to substantiate receipt of Cenvatable invoices without receipt of goods thereto.
5. Authorized Representative appearing for the Department justified the impugned orders and prayed that the Appeal be dismissed being devoid any merits.
6. Heard both sides and perused the Appeal records.
7. The first issue involved in this case is whether the Appellant had availed irregular CENVAT Credit as arrived by the Department holding that it was paper transaction without receipt of raw materials. Second issue is whether under the circumstances and the facts on record, extended period of limitation can be invoked. I find that there is no other evidence on record of cash flow-back or any inculpatory statement to substantiate that CENVAT Credit was taken irregularly based on paper transaction i.e. without receipt of raw materials against invoices. I find that the statements of the transporters are not corroborated with any evidence. Only on the basis of third party’s statement, demand cannot be made. I also find that it is an undisputed fact that all the purchases were duly recorded in the statutory books of the Appellant and the goods were also found to be entered in the statutory records of the Appellant. There is no evidence which can show that the records maintained by the Appellant are not correct. Only on the basis of statement of some of the transporters, the credit is sought to be disallowed whereas the statements are in isolation with any corroboration. Therefore the entire demand of excess CENVAT Credit in absence of any corroborative evidence is nothing but based on presumption which is not permissible under the law. I find that the Appellant is duly registered with the Department and there is no allegation in the impugned order of non-submission of any periodical returns. The Appellant is subject to regular audits. Therefore, the allegation of suppressing the facts from the Department does not hold good in the event of periodic audits of the Appellant’s records. There is no other evidence in the impugned order to show that the Appellant has willfully suppressed the fact from the Department in order to evade payment of duty. As such, extended period of limitation cannot be invoked in the present case. In this case it is a fact on record that during the course of investigation, no shortage or excess of the goods were found in the premises of the Appellant. In that circumstance, duty is cast on the Revenue to ascertain the fact that if the Appellant has not received the goods, then from where they procured the goods and used the same for manufacture of dutiable finished goods which have been cleared on payment of duty. Moreover, the Department has relied upon the statements of the transporters, but opportunity to cross-examine them to ascertain the truth has not been given. I therefore hold that the impugned order for disallowance of credit to the Appellant is not sustainable. Accordingly, the demands are set aside. In the peculiar facts and circumstances of this case and in the absence of cogent evidence, the demands are not sustainable, as a consequence the penalties imposed upon both the Appellants are also not sustainable and are accordingly set aside.
In view of the above discussions, both the Appeals are allowed with consequential relief, as per law.
(Order pronounced in the open court on 15 December 2022.)
