Mere recording of contrary statements do not establish claim of credit as bogus

Brief facts of the case:

The appellant (assessee) was engaged in the manufacture of Electrical Wiring Accessories falling under Chapter 85 of the Schedule to the Central Excise Tariff Act, 1985. They were availing CENVAT credit under Cenvat Credit Rules, 2004. During investigation, it was found that the appellant availed CENVAT credit amounting to Rs. 11,59,698/- on the basis of invoices issued by M/s. Annapurna Impex Pvt. Limited, Ludhiana  without receiving the inputs.  The Central Excise officers recorded the statements of the employee of the appellants, broker of M/s. Annapurna.

A show cause notice was issued proposing demand of duty of Rs. 11,59,698/- along with interest and to impose penalty on the ground that the appellant wrongly availed CENVAT credit on the strength of duty paying documents of M/s. Annapurna, without actual receipt of inputs. Aggrieved by the order of the adjudicating authority, assessee preferred an appeal before the Commissioner (Appeals) who upheld the order of adjudicating authority and rejected assessee’s appeal. Assessee now is in appeal before the CESTAT.

Contention of the Assessee:

The learned counsel for the assessee submitted that the appellant purchased the materials from M/s. Annapurna and directly sent to the Job Workers.  After processing of the raw materials, received from the input suppliers, the Job Workers delivered the processed materials to the appellant along with challans and bills of labour charges, which were used in the manufacture of final products and cleared on payment of duty.  He further submitted that the entire transaction was recorded in the CENVAT records and other statutory records. He submitted that the appellant produced all the documents before the adjudicating authority and no dispute was raised.

He further placed the copy of letter obtained in response to the application under the Right to the Information Act, 2008 which proved that M/s. Annapurna was in existence during the material period and not a fake entity.

Contention of the Revenue:

The learned counsel for the revenue submitted that the statement of the employee of the appellant Company and broker of M/s. Annapurna from the adjudication order that the appellant availed cenvat credit on the basis of the invoices without actual receipt of the goods.

He further contended that the investigation revealed that M/s. Annapurna was not having any plant or machinery to manufacture the copper bars/ ingots and no record relating to production and clearances of the goods, were available at the factory. Thus, they had fraudulently claimed cenvat credit, without receipt of raw materials and they do not manufacture any goods that they prepared only invoices in the names of the customers.

Decision of the CESTAT:

The tribunal after considering the rival submissions observed that the allegations of availment of cenvat credit on the basis of invoices without receipt of the goods was on the basis of statements of various persons.  The appellant challenged the charges particularly by showing various evidences of receipt of goods, Lorry Receipt, Purity Check report, Payment of Labour Bills and other details, which were not disputed by the lower authorities. In the present case, appellant produced documents that M/s. Annapurna was in existence during the material period as established by their invoices and the Central Excise monthly returns.  So, the appellant has discharged their responsibility and therefore, CENVAT credit availed on the basis of invoices of M/s. Annapurna cannot be denied.

Accordingly, the assessee’s appeal was allowed.