2015 (4) TMI 996 - AT - Central Excise

Tribunal overturns denial of CENVAT Credit due to lack of evidence.

The Tribunal set aside the decision to deny CENVAT Credit amounting to Rs. 5,57,58,449.00, along with interest and penalties, due to lack of evidence ... CENVAT Credit - Bogus invoices - entire investigation was conducted under impression that it is not commercially viable for any manufacturer to manufacture copper scraps out of copper ingots/ wires/ bars - transporters had not availed to route through RTO check post - Held that:- Probative value of the document needs to be established by independent corroboration. In the said case, the Tribunal set-aside the demand of duty and observed that there being a conspicuous absence of actual diversion of the goods in the domestic market and flow-back of funds; a demand of duty cannot be sustained on the basis of mere statements made by the transporters of goods. In the present case, we have already stated that there is absence of evidence of the huge quantity of material of 103 consignments were sold in the open market, flow back of funds, etc. In such situation, CENVAT Credit can not be denied, on the basis of statements of the transporter, evidence of third party and the goods were not transported through the check post. As per Section 14AA, if the Commissioner of Central Excise has reason to believe that the credit of duty availed of or utilized under the rules made under this Act by a manufacturer of any excisable goods; has been availed of or utilized by reason of fraud, collusion or any willful mis-statement or suppression of facts; he may direct such manufacturer to get the accounts of his factory, office, depot, distributor or any other place, as may be specified by him, audited by a cost accountant or Chartered accountant nominated by him. The cost accountant or Chartered accountant so nominated shall, within the period specified by the Commissioner of Central Excise, submit a report of such audit duly signed and certified by him to the said Commissioner mentioning therein such other particulars as may be specified. The manufacturer shall be given an opportunity of being heard in respect of any material gathered on the basis of the audit and proposed to be utilized in any proceeding under this Act or rules made thereunder. Adjudicating authority had not directed to get the account of Appellant would be audited by a Cost Accountant or a Chartered Accountant as per the provisions of Central Excise Act, 1944. On the other hand, the appellant produced Cost certificate, Chartered Accountant certificate of utilization of input in the manufacture of final product. Therefore, the contention of the Adjudicating authority on this issue cannot be accepted. - demand of duty along with interest and penalty cannot be sustained. Accordingly, the impugned order is set aside - Decided in favour of assessee. Issues Involved:1. Denial of CENVAT Credit on the ground of non-receipt of inputs.2. Violation of principles of natural justice, particularly the right to cross-examine witnesses.3. Allegation of non-viability of manufacturing scrap from imported copper ingots.Issue-wise Detailed Analysis:1. Denial of CENVAT Credit on the ground of non-receipt of inputs:The core issue was whether the appellant had wrongfully availed CENVAT Credit without actually receiving the inputs in their factory. The investigation by the Directorate General of Central Excise Intelligence (DGCEI) led to a Show Cause Notice proposing to deny CENVAT Credit amounting to Rs. 5,57,58,449.00, along with interest and penalties, based on the allegation that the appellant did not receive the inputs in their factory premises. The adjudicating authority confirmed the demand and imposed penalties. However, the appellant argued that they had duly recorded the receipt and utilization of inputs in their statutory records and produced a Cost Accountant certificate to substantiate the viability of their manufacturing process, which was not disputed by the adjudicating authority. The Tribunal found that the appellant had sufficient machinery for manufacturing scrap, as evidenced by the Panchnama dated 10.02.2006, and there was no material evidence to prove that the inputs were not received or that the machinery was removed post this date.2. Violation of principles of natural justice, particularly the right to cross-examine witnesses:The appellant contended that the adjudicating authority did not allow cross-examination of several key witnesses, despite the Tribunal's earlier remand order emphasizing the principles of natural justice. The Tribunal noted that the right to cross-examine is a valuable right in quasi-judicial proceedings and that the denial of this right without exceptional circumstances, as specified under Section 9D of the Central Excise Act, 1944, was not justified. The Tribunal cited several judicial precedents affirming the necessity of cross-examination to uphold the principles of natural justice. The Tribunal concluded that the adjudicating authority's decision to deny cross-examination was not supported by sufficient reasons and thus, the matter could be decided based on available evidence without further remand.3. Allegation of non-viability of manufacturing scrap from imported copper ingots:The revenue's case was largely built on the premise that it was not commercially viable to manufacture scrap from costly imported copper ingots, suggesting that no prudent businessman would engage in such activity. The appellant countered this argument by presenting a Cost Accountant certificate demonstrating the economic viability of their manufacturing process. They explained that remelted copper ingots, which were cheaper than refined copper, were used to manufacture scrap due to their demand in the steel industry. The Tribunal found that the adjudicating authority had not disputed the cost certificate and that the viability of manufacturing costs should be determined following standard accounting principles. The Tribunal also noted that the revenue had not directed a special audit under Section 14AA of the Central Excise Act, 1944, to verify the appellant's accounts, further weakening the revenue's case.Conclusion:The Tribunal concluded that the demand of duty, along with interest and penalties, could not be sustained. The evidences provided by the appellant, including statutory records, Cost Accountant certificates, and the lack of material evidence from the revenue to prove non-receipt of inputs, led to the decision to set aside the impugned order. The appeals filed by the appellant were allowed with consequential relief, emphasizing the importance of adhering to principles of natural justice and providing substantial evidence before denying CENVAT Credit.