Cenvat credit demand fails where undisclosed invoices and witness statements lack statutory safeguards and corroboration.
A demand of Cenvat credit and related penalties cannot be sustained on undisclosed or unverified invoices and witness statements unless the statutory safeguards for relying on such statements are followed, including disclosure of relied-upon documents and opportunity for cross-examination. Here, the invoices were not supplied, the witnesses were not examined for cross-examination, and the statements were vague, contradictory and uncorroborated, so the evidentiary basis for demand, confiscation and penalties failed. The extended period of limitation was also unavailable because the record did not show suppression of facts or wilful concealment; the relevant transactions were reflected in statutory records. The impugned order was set aside and consequential relief, including restoration of credit with interest according to law, followed.
Issues: (i) Whether the demand of Cenvat credit and the related penalties could be sustained on the basis of undisclosed invoices and statements of witnesses without compliance with the statutory requirements for relying on such statements. (ii) Whether the extended period of limitation was invokable in the absence of suppression or contumacious conduct.
Issue (i): Whether the demand of Cenvat credit and the related penalties could be sustained on the basis of undisclosed invoices and statements of witnesses without compliance with the statutory requirements for relying on such statements.
Analysis: The show cause notice did not disclose the source of the invoices relied upon, and those invoices were not supplied as relied upon documents. The adjudicating authority also did not ensure examination of the witnesses whose statements were used against the appellant, nor their availability for cross-examination, which offended the statutory requirement governing reliance on such statements and the principles of natural justice. The statements themselves were found to be vague, contradictory and unsupported by corroborative material. In these circumstances, the evidentiary foundation for the demand and the consequential penalties was held to be unsustainable.
Conclusion: The demand, confiscation and penalties could not be sustained on the basis of the materials relied upon by the Revenue.
Issue (ii): Whether the extended period of limitation was invokable in the absence of suppression or contumacious conduct.
Analysis: The record did not establish suppression of facts by the appellant. The credit availment, receipt of inputs, production and clearances were reflected in the statutory records, and the controversy stemmed from unverified allegations rather than proved concealment. On these facts, the precondition for invoking the extended limitation period was absent.
Conclusion: The extended period of limitation was not invokable.
Final Conclusion: The impugned order was set aside in entirety, and the appellant was held entitled to consequential relief, including restoration of the credit debited during the proceedings with interest according to law.
Ratio Decidendi: A demand based on undisclosed or unverified documents and witness statements cannot stand unless the statutory safeguards for reliance on such statements are complied with, and the extended period of limitation cannot be invoked without proof of suppression or wilful misstatement.
TaxTMI 
AI Drafter ✕
TaxTMI 
