Ashirwad Foundries Private Limited Vs Commissioner of CGST and Central Excise (Supreme Court of India)
Summary: The Supreme Court of India, in Ashirwad Foundries Private Limited Vs Commissioner of CGST and Central Excise, dismissed the special leave petition filed against the judgment of the Calcutta High Court concerning the alleged fraudulent availment of CENVAT credit amounting to ₹5,57,78,466. The Supreme Court, after hearing counsel for both parties, found no reason to interfere with the High Court’s reasoned order. The Supreme Court did not undertake an independent examination of the evidence or deliver detailed findings concerning Section 9D of the Central Excise Act, cross-examination or the admissibility of statements. Its dismissal left undisturbed the High Court’s decision restoring the adjudicating authority’s order against the manufacturer.
The underlying dispute concerned CENVAT credit allegedly availed during financial years 2013-14 and 2014-15 on invoices issued by fictitious and non-existent manufacturers. The adjudicating authority confirmed the demand on 28 December 2017, but the CESTAT allowed the manufacturer’s appeal on 16 December 2020. The Tribunal relied on deficiencies in the investigation, including the absence of incriminating material during the factory search, and considered statements recorded under Section 14 of the Central Excise Act inadmissible without compliance with Section 9D. The Revenue challenged that decision before the Calcutta High Court.
The High Court found that the Tribunal had failed to properly appreciate material evidence, particularly the director’s unretracted statements acknowledging the fictitious nature of the suppliers and transactions. It also considered discrepancies in transportation records, including verification of approximately 300 vehicles showing that several were mopeds, three-wheelers or other non-transport vehicles. The High Court held that payment through banking channels and payment of service tax on transportation did not automatically establish the genuineness of the transactions. It further observed that the manufacturer had not specifically identified the witnesses whose cross-examination was sought or established how Section 9D had been violated in the circumstances of the case.
The High Court concluded that the adjudicating authority had sufficient material to establish fraudulent availment of credit on the applicable standard of preponderance of probabilities. It also upheld invocation of the extended period of limitation. Accordingly, it set aside the Tribunal’s order and restored the adjudication order against the company. The substantial questions of law concerning the manufacturer’s credit were answered in favour of the Revenue, while the question relating to the personal penalty on the second respondent was rejected because that respondent had been deleted from the proceedings. The Supreme Court subsequently declined to interfere with this judgment. The outcome therefore rests on the High Court’s fact-specific evaluation of the admissions, documentary evidence, procedural objections and surrounding circumstances, rather than on any fresh declaration of law by the Supreme Court.
Legal Analysis
Admissibility of statements: The High Court attached substantial importance to the director’s unretracted admissions and the supporting investigation material. Its reasoning distinguished between statements forming part of the manufacturer’s own admissions and the alleged procedural deficiencies concerning statements of other witnesses. The decision should not be interpreted as dispensing with the statutory requirements of Section 9D in every adjudication proceeding.
Cross-examination and natural justice: The High Court examined the manufacturer’s failure to identify the relevant witnesses or demonstrate the specific prejudice arising from denial of cross-examination. The Court’s conclusion was based on the particular objections and evidence in the proceedings. It did not establish an unrestricted power to deny cross-examination whenever the Department relies on witness statements.
Fraudulent CENVAT credit: The High Court considered the director’s admissions, the alleged non-existence of suppliers, transportation discrepancies and the absence of satisfactory evidence establishing genuine receipt of inputs. It held that these circumstances supported the adjudicating authority’s findings. Banking-channel payments alone were not considered sufficient to displace the Department’s evidence.
Burden of proof and limitation: The High Court applied the standard of preponderance of probabilities applicable to the departmental adjudication. It found that the Revenue had produced sufficient material to support its allegations and that the manufacturer had failed to satisfactorily establish the genuineness of the transactions. The Court also upheld the extended limitation period on the facts presented.
Conclusion
The Supreme Court dismissed the special leave petition without adding substantive reasoning. The Calcutta High Court’s decision restoring the adjudicating authority’s order against Ashirwad Foundries Private Limited consequently remained undisturbed. The case illustrates the evidentiary significance of unretracted admissions supported by documentary and circumstantial material in CENVAT credit disputes, while the applicability of Section 9D and cross-examination safeguards continues to require examination in the factual and statutory context of each case.
Related High Court Judgment: The Calcutta High Court examined the evidentiary significance of statements recorded under Section 108 of the Customs Act, 1962, which had not been retracted, in proceedings concerning alleged inadmissible CENVAT credit. Read: Calcutta High Court: Order Ignoring Recorded and Unretracted Statements Is Untenable.
FULL TEXT OF THE SUPREME COURT JUDGMENT/ORDER
We have heard learned counsel for the petitioner and learned senior counsel for the respondent-department. We find no reason to interfere with the well reasoned order passed by the Division Bench of the High Court.
Hence, the Special Leave Petition is dismissed. 1
Pending application(s), if any, shall stand disposed of.
