Case Law Details
C.C.E. & S.T.-Bhavnagar Vs Arsh Alloys (CESTAT Ahmedabad)
CESTAT Ahmedabad held that no reliance can be placed on statements of third party without tangible corroborative evidence. Accordingly, recovery of Cenvat Credit under rule 14 rightly dropped.
Facts- The respondent-assessee is engaged in manufacture of excisable goods namely “M.S. ingots” in their Induction furnace unit. For the purposes of manufacture of the said goods, the Respondent mainly purchased duty paid inputs such as “waste and scrap of iron and steel”. The Respondent availed cenvat credit of duty paid on the inputs received and used in their factory of production. During the period April 2007 to August 2010, the Respondent purchased waste and scrap of iron and steel from various ship-breaking units who cleared the same ex-factory (ship-breaking yards) on payment of applicable central excise duty.
On 21-8-2010, the officers of department carried out search at premises of Respondent, acting upon intelligence that these units are engaged in availing cenvat credit without receipt of goods physically or are diverting the goods removed under the invoices issued by the ship-breaking units to other units – mainly re-rolling mills situated in or around Bhavnagar.
Based on material and statements, it was the case of the department that Respondent fraudulently availed cenvat credit without actual receipt of waste and scrap of iron and steel from the ship-breakers with the help of various brokers and to cover up the transaction, the Respondent was procuring bazaar scrap which is non-excisable waste and scrap purchased from local traders.
Accordingly, a Show Cause Notice was issued by which cenvat credit amounting to Rs. 2,30,50,926 was sought to be recovered from the Respondent under Rule 14 of CENVAT Credit Rules, 2004 read with Section 11A(1) of the Central Excise Act, 1944. Learned Commissioner after hearing the parties dropped the show cause notice dated 8-5-2012. Aggrieved, department has preferred the present appeal.
Conclusion- Gujarat High Court in the case of Commissioner Versus Motabhai Iron Steel Industries held that no reliance can be placed on statements of third party without tangible corroborative evidence.
Significantly the case in the show cause notice is built on the basis of thirty party statements of vehicles owners/transporters, brokers and authorized person of re-rolling mills, which themselves are not evidence of non-delivery of goods or replacement of goods or diversion of goods in absence of any corroborative tangible evidence to prove the content of such statements.
Held that it is a settled law that where there are tangible documentary evidence in favour of the assesse and even there are overall statements of third party contradicting the documentary evidence, such tangible documentary evidence must be given primacy over the overall statements.
FULL TEXT OF THE CESTAT AHMEDABAD ORDER
1. The present appeal is filed by the department against OIO No. BHV-EXCUS-000-COMM-11-2019-20 by which Learned Commissioner, CGST, Bhavnagar dropped the Show Cause Notice dated 8.5.2012 issued to M/s. Arsh Alloys, its Partner, Aminbhai Ismailbhai Lakhani, 16 persons who acted as brokers, 10 re-rolling/furnace units who were the alleged actual buyers of scrap of iron and steel and 66 ship breaking units who have issued duty paid invoices to M/s. Arsh Alloys and made co-noticees by way of issuing Addendum to show cause notice.
2. Briefly the facts of the case are that respondent-assessee, M/s. Arsh Alloys (“Respondent” herein after) is engaged in manufacture of excisable goods namely “M.S. ingots” in their Induction furnace unit. For the purposes of manufacture of the said goods, the Respondent mainly purchased duty paid inputs such as “waste and scrap of iron and steel”. The Respondent availed cenvat credit of duty paid on the inputs received and used in their factory of production. During the period April 2007 to August 2010, the Respondent purchased waste and scrap of iron and steel from various ship-breaking units who cleared the same ex-factory (ship-breaking yards) on payment of applicable central excise duty.
2.1 On 21-8-2010, the officers of department carried out search at premises of Respondent, Ahmed Steel and Shabana Steel Pvt Ltd acting upon intelligence that these units are engaged in availing cenvat credit without receipt of goods physically or are diverting the goods removed under the invoices issued by the ship-breaking units to other units – mainly re-rolling mills situated in or around Bhavnagar.
2.2 During the search of the office premise of Respondent, documents viz. purchase bills, freight vouchers, daily production report, note book, loose papers, loose weighment slips were seized. During the search at the factory premises of the Respondent, raw material viz. waste and scrap lying in stock in the factory premises of the Respondent was found and the photographs of such stock were also taken by the officers of department, which appeared to be local bazaar scrap and not one obtained from breaking of ship.
2.3 The officers of department thereafter recorded statement of various ship-breaking units, re-rolling units, transporters, vehicle owners, brokers, local traders and partner of the Respondent.
2.4 Based on above material and statements, it was the case of the department that Respondent fraudulently availed cenvat credit without actual receipt of waste and scrap of iron and steel from the ship-breakers with the help of various brokers and to cover up the transaction, the Respondent was procuring bazaar scrap which is non-excisable waste and scrap purchased from local traders based at Bhavnagar.
2.5 Accordingly, a Show Cause Notice dated 8.5.2012 was issued for the period 01.04.2007 to 10.08.2010 by which cenvat credit amounting to Rs. 2,30,50,926 was sought to be recovered from the Respondent under Rule 14 of CENVAT Credit Rules, 2004 (“Rules” herein after) read with Section 11A(1) of the Central Excise Act, 1944 (“Act” herein after). Learned Commissioner after hearing the parties dropped the show cause notice dated 8-5-2012. Aggrieved, department is in appeal.
3. Shri R K Agarwal, learned Superintendent (Authorized Representative) appearing for the department reiterates the grounds of appeal as follows:
3.1 The findings in impugned order that no inquiry was conducted by the department to ascertain the actual nature of waste and scrap found lying at the factory premises of Respondent during search and that the panchas were not expert having any knowledge of the nature of goods given their education qualification, is not proper; adjudicating authority should have appreciated that education qualification can’t be the only criteria but working experience can serve the purpose.
3.2 The finding in the impugned order that it can’t be established from the photographs of waste and scrap taken during the Panchama that the said waste and scrap were of discarded household items, oil tins, drums, cycle parts, auto parts, etc. is also not proper; adjudicating authority should have appreciated that the demand of duty is not restricted to the quantity of stock of the scrap available as on the date of the search i.e. 21.08.2010 and that panchnama also records that no goods of ship-breaking yard were physically available in stock;
3.3 That adjudicating authority has erred in not appreciating the fact that Respondent was bringing bazaar scrap and not keeping records of it as required in terms of Rule 10 of Central Excise Rules and that such bazaar scrap was being brought to cover up the non-receipt of duty paid scrap from ship-breaking units; that there was no evidence to suggest that bazaar scrap is being used in the manufacture of the final products in addition to the quantity procured from the ship-breaking units.
3.4 The findings in the impugned order that the statements of truck owners/authorised persons are not enough material and were required to be supported by other tangible evidences which are absent is also not proper; adjudicating authority erred in not appreciating that the truck owners/authorised representatives in their statements have confessed that the name of drivers appearing in the freight vouchers who collected the inward transportation charges have never worked with them; that adjudicating authority has failed in noticing from the annexures to the show cause notice that in certain cases the person’s name, who collected the transportation charges, have been changed though the vehicle number remains the same; adjudicating authority has not considered the fact that the owners of some of the vehicles have given name of specific units for which their trucks were plying instead of M/s. Arsh Alloys and have even produced evidences thereof; that Proprietor of M/s. R.K. Roadways, Bhavnagar in his statement dated 22.11.2011 furnished the details of the movement of their trucks viz., GJ4V-2784, GJ4V-2457, GJ4V-5846, GJ4V-5057 and GJ4X-5013 which were engaged by other parties for the transportation of their goods on the particular date when their vehicles were shown to be transporting goods to M/s. Arsh Alloys;
3.5 The adjudicating authority could not have accepted the argument of the Respondent that illiterate/semi-illiterate truck drivers may have erroneously written incorrect truck registration numbers, particularly because invoices were prepared by the person working with the ship-breakers whereas, corresponding inward transport charge vouchers were prepared by person sitting at the premise of M/s. Arsh Alloys; that in order to arrive at the net weight of the goods the vehicles are required to be taken to the weighbridge for ascertaining tare weight and gross weight and hence wrong mentioning of registration numbers is illogical in both the occasions; that, apart from the above, the case of the department was also supported by the statements of the brokers, ship-breakers and the Regional Transport Authority reports.
3.6 The findings in the impugned order that the investigation has failed to bring on record the flow back of cash and source of non-duty paid bazaar scrap worth crores of rupees is not proper; adjudicating authority erred in not appreciating that the broker namely Kalpesh Mehta and Priyesh Bharatbhai Parekh in their statements stated 16.03.2012 have identified certain cash transactions mentioned against the names in the Note book seized from the factory premises of M/s. Arsh Alloys and confirmed that the details thereof were of the amounts returned in cash against the payments made in cheques against some of the invoices without the delivery of goods by the ship-breakers. As regard the source of non-duty paid bazaar scrap, most of the traders of non-duty paid bazaar scrap in their statements have confirmed having supplied the goods regularly in the last three years to M/s. Arsh Alloys. The adjudicating authority has failed to consider the fact that 3 drivers of tempo who were caught during transit checks, in their statements had also confirmed that they had regularly supplied non-duty paid bazaar scrap to M/s. Arsh Alloys.
3.7 The adjudicating authority has also failed to consider the fact that 10 owners/authorized representatives of the re-rolling mills/furnace mills whose names were disclosed by the brokers, have admitted in their statements that they have received consignments diverted by the brokers/Arsh Alloys without any invoice and paid the proceeds in cash.
3.8 The adjudicating authority has failed to consider the statements of all 17 brokers appearing in the sales invoices more precisely (i) 729 invoices out of 842 covered in Annexure B1.1, (ii) 36 invoices out of 62 covered in B2.1 and (iii) 55 invoices out of 68 covered in B3.1 to the SCN, whereby upon perusing the respective invoices they had (i) agreed to the fact that the consignments have been diverted or were just paper transactions (ii) provided the names of re-rolling mills/furnace units to where the consignments were diverted (iii) even confirmed the details of cash transactions jotted down in the note book seized from the factory premises of M/s. Arsh Alloys.
3.9 The adjudicating authority erred in not considering certain important facts brought before him that no Chantiwala was engaged by Arsh Alloys as confirmed by Shri. Aminbhai Ismailbhai Lakhani, partner in his statement dated 18.11.2010 which has also reconfirmed by ship breakers, brokers in their respective statements, and that indicates that such service required were not hired.
3.10 The adjudicating authority has erred in not considering the fact that as per invoices against which cenvat credit was taken by Arsh Alloys shows that as many as 910 out of 972 consignments were loaded with above 10 MT scrap, whereas the loading capacity below 10 MT are allowed by the local transport.
3.11 The adjudicating authority has erred in not considering the fact that the owners/authorized representatives of re-rolling mills/furnace mills in their statements have confirmed to have acquired excisable scrap removed by ship breaking units under the invoices issued in favour of M/s. Arsh Alloys and the consideration towards such diverted goods were paid in cash and that they have returned back the invoices issued by the ship breaking units to the representatives of brokers/Arsh Alloys and no documents in respect of this transaction were maintained.
3.12 As regards, 66 ship breakers, arrayed as respondents, it was submitted on behalf of the department that they were actively involved by way of issuing cenvatable invoices without actual dispatch of goods, diversion of excisable goods, by way of quoting varied vehicle registration numbers which were turned out to numbers of the vehicles which did not operate in Alang area or were incapable of carrying the load/quantity of goods mentioned in such invoices and that these parties have collected the amounts mentioned in the invoices through banking channels and returned the amount in cash to M/s. Arsh Alloys/re-rolling mills after deducting their charges for issuing paper invoices which resulted into fraudulent availment of cenvat credit by M/s. Arsh Alloys.
3. Shri Paresh M. Dave, learned Counsel appearing on behalf of M/s. Arsh Alloys urged that adjudicating authority after examining all the material above viz. the documentary evidences as well as the statements of various person and against that the evidences lead by the Respondent in the form of statutory registers like RG 23 part-I and II and records to prove that there was no case of non-receipt of inputs. After considering these evidences adjudicating authority has held that goods were actually supplied by the input suppliers to the respondent and the respondent was eligible to claim the cenvat credit of duty paid on the said inputs. Respondent-assesse has mainly submitted as below:
4.1 There is no evidence on record that the respondent has availed any cenvat credit on any bazaar scrap and there is also no demand of cenvat credit in respect of the quantity of goods found at the premises of the Respondent; it is not shown by the department that the panchas shri chotubhai temubha rana and shri vamanbhai kababhai were having any qualification or any working experiences to give any opinion about the nature of scrap found at the premises of the respondent; that photographs were taken but it was only visible inspection and no inspection regarding quantity and nature of the scrap was done.
4.2 The adjudicating authority has held that statements relied upon by the department are not supported by any tangible evidence; the adjudicating authority has formed an opinion under section 9D of the Act which has not been challenged by the department in the present appeal. As per section 9D of the Act, the examination-in-chief of the witnesses whose statements are recorded during investigation is to be done and if the adjudicating authority is of the opinion that statements of the witnesses are admissible, then cross-examination is required to be offered to the assessee. In the present case, the adjudicating authority after considering the statements made by the witnesses has formed the opinion that the statements cannot be relied upon in absence of the corroborative evidences. Therefore, the cross-examination was not granted to the respondent. The respondent submitted that statements recorded by the department are inadmissible as evidence and no reliance can be placed on such statements. In this regard, the respondent relied upon the following decisions:
i. JP Iscon Pvt. Ltd. – 2022 (63) GSTL 64.
ii. Forward Resources Pvt. Ltd. – 2023 (69) GSTL 76.
iii. Shree Hari Steel Industries & Others Vs. Commissioner, Bhavnagar – 2022(8) Tax Management India 1251.
iv. Patidar Products Vs. Commissioner, Bhavnagar – Final Order No. A/11216-11224/2022 dated 18.10.2022.
v. M/s. Bajrang Castings Pvt. Ltd./Motabhai Iron and Steel Industries – 2015 (316) ELT 374 (Guj.)
4.3 It was submitted that there is no evidence on record to substantiate that maximum 10MT scrap can be transported in one truck. If there is any circular issued by the municipal corporation regarding permissible limit of scrap transportation, then such circular has not been brought on record by the appellant. It is merely a ground for argument without any substance. No such ground was raised in the show cause notice. The appellant cannot be permitted to improve upon the show cause notice at the appellate stage.
4.4 It was further submitted on behalf of Respondent that adjudicating authority has righty held at para 29.13 that it is not correct to allege that the goods were not delivered when the invoices issued by the suppliers are genuine and the raw materials were duly accounted for in their raw material stock register in RG 23A Part I showing receipt and utilization of inputs in the manufacture of final product; that adjudicating authority has rightly held in para 29.26 that it is not even suggested in the show cause notice that the statutory records/registers were fabricated or manipulated or that the Range and Divisional officers who verified and scrutinized such statutory records and registers of the Respondent as well as that of manufacturers of the inputs viz. Ship Breakers have noticed any manipulations or falsifications while finalizing the assessments; that such documentary evidence unless proved to be falsified or manipulated has to be given due weightage.
4. On behalf of ship breakers, arrayed as respondents, it was submitted that they have denied the allegation of having not delivered the scrap under the invoices in question. It was submitted that they have cleared scrap on payment of applicable duty on ex-factory basis through brokers/buyers and transportation was therefore not responsibility of seller; price of such goods is received from the buyers by cheque; that once goods left premises at Alang yard, the ownership stands transferred to the buyers and sellers have no authority, interest or obligation in respect of the said goods. It was further submitted that they have been wrongly joined as co-noticee by way of addendum which cannot be treated as show cause Notice. None represented on behalf of 10 re-rolling mills/furnace mills.
5. We have carefully considered the submissions made by both the sides and perused the records. The present case involves the disputed quantity of inputs of 9.857 MTs waste and scrap purchased by the Respondent, Arsh Alloys from various ship breaking units during the period from April 2007 to August 2010. The Respondent had purchased duty paid inputs in 1366 consignments, out of which, 663 consignments of inputs are disputed by the department. It is the case of department that Respondent has received only invoices from ship breaking units without actual receipt of inputs; that bazaar scrap was procured by the Respondent in cash for replacement of duty paid inputs and that respondent has wrongly availed Cenvat Credit of Rs. 2,30,50,926/-.
5.1. It can be seen that case of the department is not solely based on statements of various third parties but also other material viz. bazaar scrap, note book showing details of transactions with the ship breakers found at the premises of Respondent and discrepancies noticed in transport documents viz. quantity transported beyond permissible limit and absence of chantiwala (scrap sorter) engaged by the Respondent.
5.2. As regards, bazaar scrap found during search at the premises of Respondent, learned Commissioner has observed that it is not possible to identify the nature of scrap from the photographs and that Panchnama does not disclose educational qualification and work experience of witnesess and hence they could not have been considered as experts for forming opinion on the nature of scrap. He further observed that although Respondent has admitted that they do purchase bazaar scrap and do not account such small quantity on which they cannot avail cenvat credit, nevertheless, type of scrap and quantity was required to be identified by the officers of department to arrive at any conclusion therefrom. It can be seen that working experience of panchas can be a valid ground to test the admissibility of their opinion, but their working experience is not shown by department at any stage of the investigation. That apart there is no evidence mentioned in the appeal that a small quantity of goods found at the respondent’s premises was actually in the nature of bazaar scrap. In that view, opinion of panchas cannot be relied upon to hold that the entire stock of inputs found at the premises of the Respondent was in the nature of bazaar scrap and hence ground of appeal that working experience would serve the purpose cannot sustain. Mere fact that Respondent has also been buying bazaar scrap on which no duty is paid itself is not enough to hold that all 1366 consignments of duty paid inputs were not received by the Respondent during the period April 2007 to August 2010 and that the final products cleared during this period on which duties were admittedly paid were entirely manufactured out of bazaar scrap.
5.3. As regards Respondent having not engaged any chantiwala (scrap sorter) the show cause notice in para 6.3.21 relies upon the statement of brokers which are found to be not reliable by the commissioner in absence of any corroborative evidence and further, some have been retracted/sought to be corrected by brokers by way of filing affidavits. Be that as it may, no question was put forth to the partner of Arsh Alloys in the statements dated 18.11.2010 and 13.03.2012 that in absence of Chantiwala having been engaged how they were able to purchase the scrap. (On the other hand, as can be seen from the statement of ship breakers, for instance M/s. G K Steel that information of transport and chantiwala are sent by the brokers. It appears from the statements of ship beakers that brokers manage significant part of the transaction between ship breakers and buyer of scrap. In that view no inference can be drawn on that basis to hold that inputs in question were not received by the Respondent.
5.4. The next contention of the department is that evidence of cash flow back viz. note book has not been considered by the Learned Commissioner. Reliance has been placed by the department on the statements dated 7-9-2011, 163-2012 and 16-4-2012 of broker namely Kalpesh Prabhudas Mehta who appears to have confirmed that the said entries in the note book pertain to cash amount paid back to the ship breakers against cheques issued by Respondent. In this regard, it can be seen from the statement of partner of Respondent that question was posed to partner of the Respondent regarding the amount and against that, name of the broker in note book page number 2 and it was answered that the same pertained to cheque issuance details to ship breakers. Further, upon perusal of the statement of Kalpesh Prabhudas Mehta, it appears that there exist apparent self-contradictions; for example, in answer to question no. 7 he states that he acted as broker in respect of invoices issued by the ship breakers and in answer to question no. 8 after perusing statements of vehicle owners/authorized persons he states that most of the transactions were not real, in the sense that actual goods mentioned in the invoice were never transported. He states the same in subsequent statement dated 16-3-2012 in answer to question no. 4 after referring to note book entries. It is not understood, how both the facts coexist at the same time; if he has acted as broker in a transaction of purchase and sale of scrap then goods were indeed delivered and if goods were diverted to other unit, he would be in position to specify as to where the said goods were delivered. There is no investigation undertaken or evidence gathered at the premises of re-rolling mills to whom goods were allegedly diverted. Similarly, reliance has been placed on the statement dated 16-3-2012 of broker named Priyesh Bharatbhai Parekh is also misplaced which in first place does not refer to the Respondent but Ahmed steel. It appears, the brokers have opined based on the statement of vehicle owners and entries of the note book and not based on perusal of the records of transaction maintained by them. There are otherwise no records of brokers investigated. Since, the statements are not supported with records maintained by the brokers with regard to the transactions in question; not even one entry in the note book stands corroborated with the records of the brokers, such statements of brokers were rightly discarded by the Learned Commissioner.
5.5. For the above reasons, Learned Commissioner has also discarded the statements of owner of vehicles and statements of authorized persons of re-rolling mills being inadmissible evidence on account of absence of any investigation or records of such third parties brought in support of their statements. He has held that statements of individual vehicle owners/authorized persons were recorded; no statement of driver of truck was recorded to ascertain truth of transportation of goods. He has further held that possibility of incorrect vehicle numbers/incorrectly mentioned in the invoice in respect of some of the cases cannot be ruled out given the nature of transport industry and that by itself is not enough to hold that goods were actually not delivered. It is settled law as laid down in decision of Commissioner Versus Motabhai Iron Steel Industries upheld by Hon’ble Gujarat High Court as reported in 2015 (316) ELT 374, that no reliance can be placed on statements of third party without tangible corroborative evidence. This judgement is accepted by the department and is part of the board circular No. 1063/2/2018-CX dated 16.2.2018.
5.6. Significantly the case in the show cause notice is built on the basis of thirty party statements of vehicles owners/transporters, brokers and authorized person of re-rolling mills, which themselves are not evidence of non-delivery of goods or replacement of goods or diversion of goods in absence of any corroborative tangible evidence to prove the content of such statements. Learned commissioner has formed an opinion that the statements relied upon by the department are not relevant and these statements cannot be admitted without corroborative evidence. It can be seen that department has not challenged the said opinion formed by learned commissioner under section 9D of the Act, in that view decisions cited by the Respondent supra are applicable.
5.7. On the other hand, it is observed that statements of Partner of Respondent and ship breakers confirm the fact of physical delivery of goods; further fact remains undisputed that raw materials were duly accounted for in raw material stock register in RG23A Part I showing receipt and utilization of inputs in the manufacture of final product by Respondent; that it is not even suggested in the show cause notice that the statutory records/registers were fabricated or manipulated or that the Range and Divisional Officers who verified and scrutinized such statutory records of the respondent and of manufacturers of the inputs viz. ship breakers have noticed any manipulations or falsifications, while finalizing the assessments. Such documentary evidence unless proved to be falsified or manipulated has to be given due weightage. Moreover, it is a settled law that where there are tangible documentary evidence in favour of the assesse and even there are overall statements of third party contradicting the documentary evidence, such tangible documentary evidence must be given primacy over the overall statements. This is supported by catena of judgements, some of the judgments are extracted below:
- Monarch Metal 2010(261)ELT 508 (Tri-Ahm):
“8. As is clear from the above that the appellate authority has not considered and appreciated various evidences on record which stand discussed in detail by the original adjudicating authority. He has allowed Revenue’s appeal on short ground which was the basis for the issuance of show cause notice that LR do not bear the check-post stamp and the statement of the transporter. The appellants have rightly contended that statement of the transporter being in the nature of co-accused, cannot be made the sole basis for holding against the appellant, unless corroborated with material particulars. I find that there is no such evidence on record. On the contrary, the assessee has produced ample evidence in the shape of documentary record to reflect upon the fact that they had actually received the inputs from the first dealer and had made payments to them through Demand Draft. In any case, the fact of non-stamping of LR is only in respect of the goods received by the registered dealer. As rightly observed by the original adjudicating authority, the same would not reflect upon the fact of non-receipt of the inputs by the appellant from the dealer inasmuch as the dealer might have supplied the inputs obtained by him from other source.
9. In view of the above, set aside the impugned order of Commissioner (Appeals) and restore the order of original adjudicating authority and allow the Appeal Nos. E/686, 693/2009 with consequential relief to the appellants.
Appeal Nos. E/802, 840, 925/09 :
(i) The Modvat credit of Rs. 2,83,191/- stand denied to M/s. Dhanlaxmi Tubes & Metals Industries (for short DTMI) along with imposition of penalty upon various persons on the ground that the inputs such as copper scrap, copper wire scrap, copper rod etc. have not actually been received by them and only invoices have been issued by the dealer PMM. For the above finding, the lower authorities have, though admitted, movement of trucks to Nadiad under the cover of LR issued by the transporter, but have denied the credit on the ground that delivery register of the transporter showed that the goods were of miscellaneous nature and not copper. I find that apart from the above, there is no other evidence to reflect upon the fact that the inputs were not actually received by the appellant. In the present case, there is no dispute that the LRs were issued by the transporter showing the appellant as the consignee of the goods. However, Revenue has based his case on the Goods Register maintained by the transporter indicating the description of the goods as ‘Miscellaneous’. This fact, by itself, cannot be held to be sufficient for arriving at conclusion that the inputs were never transported to the appellant’s factory. All the documentary evidence on record supports the appellant’s case about the receipt of the input whereas there is no independent corroborative evidence by the Revenue produced on record.
(ii) The above findings find support from the Tribunal’s order in case of M/s. Ajay Industrial Corporation v. CCE, Delhi – 2009 (237) E.L.T. 175 (Tri.-Del.) as also from the Tribunal’s decision in case of M/s. Shree Jagdamba Castings (P) Ltd. v. CCE, Bhopal, 2006 (206) E.L.T. 695 (Tri.-Del.). It has been held in said judgments that the credit availed on the basis of invoices issued by the registered dealer, cannot be denied on the ground that the transporters have admitted the fact of non-transportation of the goods and the addresses of truck owners were found to be fake. Similarly, in the case of M/s. Malerkotla Steels & Alloys Pvt. Ltd. v. CCE, Ludhiana, 2008 (229) E.L.T. 607 (Tri.-Delhi), it was held that a manufacturer cannot be denied the credit on the ground that registered dealer had not received the inputs. The Tribunal in case of M/s. Lloyds Metal Engg. Co. v. CCE, Mumbai, 2004 (175) E.L.T. 132 (Tri.-Mumbai) has held that burden to prove non-receipt of the inputs is required to be discharged by Revenue by sufficient evidence. Where disputed consignments are entered in RG-23A Part I and Part II in chronological order, the allegations of non-receipt of the inputs cannot be upheld.
(iii) In view of the above, I find no justifiable reason to uphold the impugned order and the same is, accordingly set aside and the Appeal Nos. E/802, 840, 925/2009 are allowed with consequential relief to the appellants.”
- Upheld by Guj HC – 2012 (282) ELT 206 (Guj):
“5. A perusal of the order passed by the adjudicating authority indicates that the officers at the check post had entered the receipt of copper ingots in their record. Thus, even the official records maintained at the check post indicate receipt of copper. Merely because in the record of the transporter, two types of LRs had been issued in respect of the goods carried/transported by M/s. Singal Road Carriers which indicated transportation of miscellaneous goods and the other which indicated transportation of copper ingots/wire brass, the Department has jumped to the conclusion that copper ingots had not actually been transported. Except for the aforesaid evidence, there is no evidence whatsoever to indicate that M/s. Pranav Metal Mart, Nadiad had not received copper ingots or that the respondent assessee had not received the ingots along with the invoices. The statement of Shri Atul Navrattan Lal Sharma, Proprietor of M/s. Singal Road Carriers indicates that it is the categorical case of the said party that it had received raw material at its premises along with the LRs and other documents. The statement of the partner of the assessee, Shri Umesh Shah, also indicates that it was the categorical case of the assessee that it had received central excise invoices issued by the dealers through the truck driver who brought the consignments to its premises. In fact, from the statement of Shri Heda, it is apparent that M/s. Pranav Metal Mart, Nadiad, had even shown receipts of copper consignments and entered such receipts in the RG 23D registers. Likewise, the assessee had also recorded receipts of the raw materials in RG 23A Part-I record.
6. A bare perusal of the orders made by the adjudicating authority as well as the appellate authority clearly indicates that neither of the said authorities have discussed the evidence in detail and have merely placed reliance upon the report of the transporter for the purpose of holding that the assessee had in fact not received the goods referred to in the invoices and that only invoices had been issued to it and, therefore, the credit was not admissible to the assessee.
7. As can be seen from the impugned order of the Tribunal, the Tribunal after appreciating the evidence on record has recorded that there is no evidence to reflect upon the fact that the inputs were not actually received by the assessee; there was no dispute that the LRs were issued by the transporter showing that the assessee is the consignee of the goods; the case of revenue was based on the goods registers maintained by the transporter which indicates the description of the goods as “miscellaneous”. According to the Tribunal, this fact, by itself, could not be held to be sufficient for arriving at the conclusion that the inputs were never transported to the assessee’s factory. The Tribunal found as a matter of fact that all documentary evidence on record supported the assessee’s case about the receipt of inputs, whereas there was no independent corroborative evidence produced on record by the revenue in support of its case.”
- Raj Petroleum 2005(192) ELT 806:)
“ ——-
——-
——-
(ix) The notice seeks and subjects to rely on the statements of the 3 Directors of RPM along with the statements of the Production Supervisor (Anil Lad) and Chemists (Prakash Suryavanshi) as also the Manager (Dungar C. Chothani alias Kakubhai). These statements cannot be read in isolation and when read in the context of the Gate Register and Lab Register as found above are not relevant for establishing clandestine removal. Force is found in this submission. As the documentary evidence does not establish clandestine removal, the oral statements based thereon, which travel beyond the documentary evidence have to be viewed with suspicion and in the event of a conflict, the documentary evidence should prevail; thereby when documentary evidence does not establish clandestine removal, the statements based thereon cannot prove [see R.P. Industries v. Collector, 1996 (82) E.L.T. 129]. Besides, these statements are qualified and conditional. The statements have to be read together and as a whole are not in part and pieces, when so read, the statements do not establish clandestine removal.”
- Upheld by Bombay High Court in Santogen 2017 (347) ELT-581(Bom):
“30. It appears that the conclusion arrived at by the CESTAT is solely on two factors : (i) on the basis of a statement of the estranged brother of one of the Directors of the appellant who stated that his firm never carried out any job work for the appellant; and (ii) on the basis of the statements recorded of the transporters of the 14 suppliers who stated that they had transported the raw material only upto Bhiwandi. We find that the heavy reliance placed on these statements, and ignoring everything else, is wholly incorrect and erroneous for more than one reason. Firstly, it is not in dispute and in fact even admitted by the appellant that the transporters of the suppliers had transported the raw materials only upto Bhiwandi. It is the specific case of the appellant that this raw material was thereafter transported by the appellant to their factory in their own transport vehicles and this is why there is no proof regarding transport of the said raw materials from Bhiwandi to appellant’s factory. However, the voluminous documentary evidence read with the statements of the Excise Inspectors referred to by us, clearly indicates otherwise. Secondly, the evidence (documentary and oral) would clearly go to indicate that the stand of the Revenue that no raw material ever reached the appellant’s factory cannot be sustained. It is not the case of the Revenue that the Excise Inspectors who were in-charge of the appellant’s factory and who have signed the various statutory registers and documents in anyway connived with the appellant. Neither is it the case of these Officers that they were misled in putting their signatures on various documents that indicate that the raw materials reached the appellant’s factory, and were not diverted. In view of this voluminous documentary evidence read with the statements of the Excise Inspectors recorded under Section 14 of the Act, we are clearly of the view that the reliance placed by the CESTAT as well as the Revenue only on the oral statements of an estranged brother of one of the Directors of the appellant as well as the transporters of the suppliers (to come to the conclusion that the raw material – yarn had been diverted), was wholly erroneous and contrary to all well-known settled legal principles. It is now trite law that documentary evidence has far greater weightage against oral evidence especially when the oral evidence is contrary to the documentary evidence. This position in law is very well settled but if one needs to refer to any authority on the subject, it would be apposite to refer to a decision of the Privy Council in the case of Ramdhandas Jhajharia v. Ramkisondas Dalmia and Others [AIR 1946 Privy Council page 178], wherein their Lordships have inter alia held that in a case where oral testimony is of an unreliable and untrustworthy character, the safest policy would be to let the documents speak for themselves. Where the oral evidence is unreliable and contradictory, the Court cannot safely depart from the written evidence of the documents.”
5.8. In view of above, we are of the considered view that there is no infirmity in the Order of Learned Commissioner and the same has to be upheld. In the result, impugned order is upheld and appeals of the appellant/revenue are dismissed. Cos also stand disposed of.
(Pronounced in the open Court on 02.11.2023)
Author Bio
