2015 (10) TMI 1104 - AT - Central Excise

Tribunal grants relief in Cenvat Credit case, stresses importance of evidence, cross-examination

The Tribunal allowed the appeals filed by the appellants, granting consequential relief. The decision emphasized the importance of corroborative evidence ... Disallowance of fraudulent CENVAT Credit - allegation that inputs imported in certain containers were diverted elsewhere instead of taking these inputs to their factory and only Cenvat Credit was taken on the basis of documents/ Bills of entry without receipt of inputs - Penalty u/s 26 - Held that:- Revenue has relied upon certain letters written by M/s J.N. Baxi and M/s NYK Link (I. Ltd.), who are the container providers in which imported scrap was transported from the port of import. As per the date of containers received back by the container provider, as reported by container provider, containers have returned back in certain cases before taking of credit. There is not even a confessional statement from the main appellant that inputs were not received in their factory and Cenvat Credit was taken only on the basis of Bills of entry. Shri Rajeshwar Prasad R Dubey has given contradictory statements and being third party witness his cross-examination was must. On the issue of taking of Cenvat Credit on an allegation that inputs were not received by an asessee Gujarat High Court in the case of Commissioner Vs. Motabhai Iron and Steel Industries [2014 (10) TMI 723 - GUJARAT HIGH COURT] - in this case larger bench held that oral evidence made by the Managing Director of the appellant and the positive documentary evidence recovered from the factory were of clinching nature. However as already mentioned in the present proceedings there is no confessional statement regarding diversion of inputs by the main appellant. The statements of Shri Rajeshwar Prasad R Dubey, proprietor of PSTC, recorded at different times are contradictory, and cannot be relied upon as evidence in the absence of any cross-examination and corroboration - Decided in favour of assessee. Issues Involved:1. Disallowance of Cenvat Credit.2. Alleged diversion of imported inputs.3. Denial of cross-examination.4. Evidentiary value of statements and documents.5. Reliance on previous case laws.Detailed Analysis:1. Disallowance of Cenvat Credit:The main appellant, M/s Sunland Alloys, was disallowed a Cenvat Credit of Rs. 16,35,297/- under Rule 14 of the Cenvat Credit Rules 2004 by the Adjudicating Authority, which was upheld by the first appellate authority. This disallowance was accompanied by interest and an equivalent penalty. The disallowance was based on the allegation that the appellant took Cenvat Credit on imported scrap without receiving the inputs in their factory.2. Alleged Diversion of Imported Inputs:The Revenue's case was built on the assertion that the imported scrap was diverted to Bhiwandi instead of being transported to the appellant's factory. This claim was supported by statements from employees of PSTC and the Manager-cum-Authority Signatory of the main appellant, as well as loading reports from PSTC. The Revenue argued that the Cenvat Credit was taken based on documents without actual receipt of inputs.3. Denial of Cross-Examination:The appellant contended that the Revenue's case was based on uncorroborated statements and documents. They argued that no cross-examination of the witnesses, whose statements were relied upon, was allowed, thereby diminishing the evidentiary value of those statements. The appellant cited the case of Basudev Garg Vs. Commissioner of Customs, which emphasized the necessity of cross-examination when statements are used against an assessee.4. Evidentiary Value of Statements and Documents:The Tribunal noted that the statements of Shri Rajeshwar Prasad R Dubey, Proprietor of PSTC, were contradictory. Initially, he stated that the imported scrap was unloaded at Bhiwandi for further transportation, but later claimed that the goods were never transported beyond Bhiwandi. The Tribunal emphasized that in the absence of corroborative evidence and cross-examination, these statements could not be relied upon to disallow the Cenvat Credit.5. Reliance on Previous Case Laws:The appellant relied on several case laws to support their arguments, including:- Commissioner Vs. Motabhai Iron and Steel Industries [2015(316) E.L.T. 374 (Guj.)]- Commissioner of Central Excise, Ludhiana Vs. Peejay International Ltd. [2010(255) E.L.T. 418 (Tri-Del.)]- Commissioner of Central Excise, Chandigarh Vs. Neepaz Steels Ltd.-2008 (230) E.L.T. 218 (P&H)- Sakeen Alloys Pvt. Ltd. Vs. Commissioner of Central Excise, Ahmedabad- 2013 (296) E.L.T. 392 (Tri.-Ahmd)The Tribunal found that the Revenue did not provide sufficient evidence to prove the alleged diversion of inputs. They noted that the statutory records maintained by the appellant were not questioned, and there was no evidence of alternative procurement of raw materials by the appellant. The Tribunal also highlighted the necessity of cross-examination, as emphasized in the cited case laws.Conclusion:The Tribunal allowed the appeals filed by the appellants, granting consequential relief. The decision underscored the importance of corroborative evidence and the right to cross-examination in adjudicating cases involving allegations of diversion and disallowance of Cenvat Credit. The Tribunal's judgment emphasized that mere statements and uncorroborated documents could not form the basis for disallowing Cenvat Credit without giving the appellant an opportunity for cross-examination.