Tribunal overturns denial of cenvat credit citing lack of evidence

The Tribunal set aside the denial of cenvat credit on inputs due to the non-existence of the supplier, M/s S.K. Garg & Sons. Despite suspicions of receiving invoices without actual goods, the Tribunal emphasized the lack of conclusive evidence of non-receipt. The absence of investigations with the transporter or manufacturer/supplier and reliance on ER-1 returns accepted by the department led to the decision in favor of the appellants, citing precedent cases where similar allegations were refuted due to insufficient tangible evidence. The appeal was allowed, highlighting the necessity of thorough investigations before denying cenvat credit.

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Issues:
Denial of cenvat credit on inputs due to non-existence of supplier M/s S.K. Garg & Sons.

Analysis:
The appellants filed appeals against the denial of cenvat credit on inputs supplied by M/s S.K. Garg & Sons, a dealer found to be non-existent during an investigation. The investigation revealed that the premises of M/s S.K. Garg & Sons were locked, and the godown was non-existent, leading to the cancellation of their registration retrospectively. The appellants had availed cenvat credit on goods purchased from M/s S.K. Garg & Sons, which raised suspicions of receiving invoices without actual goods. A show cause notice was issued, resulting in the denial of cenvat credit, duty demand, interest, and penalty imposition.

The appellants argued that they physically received the goods and no inculpatory statement existed against them. They highlighted the lack of investigation with the transporter or manufacturer/supplier of the goods. The appellants also pointed out that M/s S.K. Garg & Sons had filed ER-1 returns accepted by the department, supporting their claim. Reference was made to the decision of CCE, Ludhiana Vs. Dhawan Steel Industries to bolster their case.

On the contrary, the Departmental Representative contended that M/s S.K. Garg & Sons engaged in issuing fake cenvatable invoices, with no actual storage facility for the goods. The Ld. Commissioner (A) had denied cenvat credit due to delays between invoicing and goods receipt, emphasizing the lack of storage capacity with M/s S.K. Garg & Sons.

After hearing both sides, the Tribunal found that crucial investigations were missing at the end of the manufacturer/supplier or transporter to ascertain the truth. Despite M/s S.K. Garg & Sons being a registered dealer filing ER-I returns accepted by the department, the absence of conclusive evidence regarding goods receipt prevented alleging that the appellants only received invoices. Citing the precedent of M/s Dhawan Steel Industries case, where similar allegations were refuted due to lack of tangible evidence, the Tribunal set aside the impugned order. Relying on previous decisions, the Tribunal allowed the appeal, emphasizing that without investigations at crucial junctures, cenvat credit denial was unwarranted.

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