2015 (4) TMI 1352 - AT - Central Excise

Tribunal reverses denial of Cenvat credit, stresses need for concrete evidence in tax matters.

The Tribunal overturned the denial of Cenvat credit amounting to Rs. 9,71,097/- to the appellant based on investigations at the manufacturer's premises. ... CENVAT Credit - denial of credit on the ground that they have received only the invoices without the receipt of inputs in question - circumstantial evidences - third party evidences - corroborative evidences or not - HELD THAT:- The entire case of the Revenue is based upon the investigations conducted at the end of the manufacturing unit of M/s. Aggarwal Steel Rolling Mills & Metal Industries. Admittedly, the said manufacturer was also clearing the scrap or the defective goods, etc. to some extent. There is nothing on record to show that the goods were not actually received by the present appellant, which stands duly reflected by them in their RG-23 Part A register and stand utilised by them in the manufacture of their final product. Further, as seen from the impugned order of the Commissioner (Appeals), he has observed that there is circumstantial evidence available on record to indicate that the defective rounds produced by the manufacturer were not scrap. Such circumstantial evidence referred to by the Commissioner (Appeals) is the fact that the original manufacturing unit has shown more clearance of defective rounds than the prime quality rounds. There is otherwise no evidence to show that such excess cleared defective rounds were received by the present appellant. They may have received defective goods/scrap, which was admittedly defective and was capable of melting in the furnace. In the absence of any evidence to the contrary, it is found that the denial of Cenvat credit on the basis of the investigations conducted at the third party end cannot be adopted as the sole basis for denial of credit. Appeal allowed - decided in favor of appellant. Issues:Denial of Cenvat credit based on investigations at the manufacturer's end.Analysis:The judgment revolves around the denial of Cenvat credit amounting to Rs. 9,71,097/- to the appellant due to the alleged receipt of only invoices without the actual inputs in question. The lower authorities based their decision on investigations at the manufacturing unit of M/s. Aggarwal Steel Rolling Mills & Metal Industries, where it was discovered that defective CTD bars were being cleared as scrap, constituting a significant portion of production. The Revenue contended that prime quality bars were being passed off as defective, with corresponding melting scrap cleared under such invoices.The Tribunal scrutinized the case, emphasizing that the Revenue's stance relied solely on investigations conducted at the manufacturer's premises. While acknowledging the clearance of scrap or defective goods by the manufacturer, the Tribunal highlighted the absence of evidence indicating non-receipt of the goods by the appellant. The appellant had diligently recorded the receipt of goods in their register and utilized them in the final product manufacturing process. The Commissioner (Appeals) noted circumstantial evidence suggesting that the excess defective rounds cleared were not necessarily scrap, as the original unit showed more clearance of defective rounds than prime quality rounds. However, there was no concrete proof that the excess defective rounds were received by the appellant. Therefore, the Tribunal concluded that denial of Cenvat credit based solely on third-party investigations was unjustified, overturning the impugned order and granting relief to the appellants.In conclusion, the judgment underscores the importance of concrete evidence in denying Cenvat credit, cautioning against relying solely on investigations at a third party's premises without substantial proof of non-receipt by the appellant. The decision serves as a reminder of the necessity for clear documentation and verifiable records in tax matters to ensure fair treatment for taxpayers.