Department Cannot Rely on Statements Recorded Without Section 9D Compliance for CENVAT Credit Denial

CESTAT New Delhi allowed the appeal regarding CENVAT credit denial. The department alleged appellant received only invoices without actual goods delivery, relying on statements from a supplier and transporter denying supply. However, CESTAT held these statements inadmissible as department failed to comply with Section 9D of Central Excise Act before recording them. Following precedents including Andaman Timber Industries v. Commissioner (SC) and Skyrise Overseas v. Commissioner (Calcutta HC), statements recorded without Section 9D compliance cannot be relied upon. Since appellant manufactured and cleared excisable goods with duty payment undisputed, and department found no alternative raw material sources, the credit denial was unsustainable. Order set aside.

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Issues:
- Appeal against order upholding rejection of appeal by original Adjudicating Authority
- Allegations of passing on inadmissible Cenvat Credit
- Admissibility of statements recorded during investigation
- Compliance with provisions of Cenvat Credit Rules and Central Excise Rule
- Reliance on judgments in support of contentions
- Principles of natural justice regarding provision of documents to the appellant
- Proper service of notice
- Imposition of penalty based on coerced statements
- Connection of appellant with registered dealer for credit availment
- Reliance on statements without compliance with Section 9D of Central Excise Act
- Procurement of goods by the appellant
- Compliance with Rule 9(3) of Cenvat Credit Rules

Analysis:
The appeal challenged the order of the Commissioner of Central Excise and Central Goods and Service Tax upholding the rejection of the appeal filed by the Appellants. The case revolved around allegations of passing on inadmissible Cenvat Credit by the appellant company, which was engaged in the manufacturing of 'Copper Wires.' The investigation revealed that the appellant had received invoices without physical receipt of goods, leading to fraudulent availment of credit in contravention of Cenvat Credit Rules and Central Excise Rule. The appellant disputed the allegations, citing genuine transactions conducted through proper banking channels and challenging the coercion behind statements obtained during the investigation.

The Departmental Representative supported the impugned order, asserting that the appellant had not physically received the goods but only procured invoices for credit availment. However, the Tribunal, after considering the submissions and case record, found discrepancies in the Department's evidence. The Tribunal noted that the Department failed to provide evidence of compliance with Section 9D of the Central Excise Act before relying on statements obtained, leading to a lack of reliance on those statements. The Tribunal also highlighted the appellant's compliance with payment of duty and lack of evidence regarding other sources of raw materials procured by the appellant.

Moreover, the Tribunal referenced relevant case laws to support its decision, emphasizing the importance of reasonable steps taken by the appellant to ensure the legitimacy of inputs for which Cenvat credit was claimed. The Tribunal concluded that the impugned order was unsustainable and set it aside, thereby allowing the appeals of the appellants. As the main appellant's appeal was deemed unsustainable, there was no basis for imposing penalties on any other appellant involved in the case. The judgment highlighted the significance of compliance with Rule 9(3) of the Cenvat Credit Rules in determining the legitimacy of credit availment based on reasonable steps taken by the appellant.

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