2014 (10) TMI 512 - AT - Central Excise

Appellant Wins Cenvat Credit Battle Over Supplier Registration Issue

The appellant's Cenvat credit was initially denied due to using invoices from a registered dealer whose registration was later cancelled. Despite ... Denial of CENVAT credit - Credit stand denied on the ground that the said registered dealer was not found available at the premises disclosed in his registration and his registration was cancelled with retrospective effect - Held that:- Appellant availed credit on the basis of invoices issued by the registered dealer who were carrying all the requisite particulars along with his registration number. The said invoices so received by the appellant duly stand entered by them in their RG 23A Part I register and shown to have been used in the manufacture of final product cleared on payment of duty. Apart from the general statement of the dealer of the manufacturer, there is no evidence on record to show that inputs were not actually received by the appellant or they have procured the inputs from any other sources. In the absence of inputs, the appellant could not have manufactured their final product. Accordingly, in the absence of any allegation of procurement of inputs from any other sources, the inputs received by the appellant have to be held as having been received under the cover of cenvatable invoices issued by the registered dealer. As per the provisions of Rule 7 of Cenvat Credit Rules, a manufacturer is under a legal obligation to verify the identity of the person supplying the inputs and is not expected to go beyond it and find out as to whether the supplier was procuring the goods in accordance with the law or not. - Following decision of Talson Mill Store v. CCE & ST, Ludhiana [2014 (2) TMI 443 - CESTAT NEW DELHI] - Decided in favour of assessee. Issues:1. Denial of Cenvat credit based on invoices from a registered dealer.2. Allegation of paper transactions by the registered dealer.3. Interpretation of Rule 7 of Cenvat Credit Rules.4. Comparison with a previous Tribunal decision.Analysis:1. The appellant's Cenvat credit of Rs. 71,022 was denied due to availing it based on invoices from M/s. Sidh Industries, a registered dealer, whose registration was retrospectively cancelled. The period in question was when the dealer was registered. The Revenue relied on statements suggesting paper transactions, but no direct link to the appellant was established.2. The appellant had entered the invoices in their register and used them for manufacturing final products. There was no evidence indicating non-receipt of inputs or procurement from unauthorized sources. Without these inputs, final products couldn't have been manufactured. Rule 7 of Cenvat Credit Rules imposes the obligation to verify the supplier's identity, not their sourcing legality.3. A similar case was decided in Talson Mill Store v. CCE & ST, Ludhiana, where the Tribunal favored the assessee, emphasizing the insufficiency of relying solely on statements. Given the identical circumstances, the current judgment followed the precedent and allowed the appeal, providing relief to the appellant.4. The judgment, delivered on 27-2-2014 by Ms. Archana Wadhwa, Member (J), overturned the denial of Cenvat credit, highlighting the importance of proper verification of suppliers' identities as per Rule 7. The decision aligned with the Tribunal's consistent stance on such matters, ensuring fair treatment for appellants facing similar issues.