2017 (3) TMI 649 - AT - Central Excise

Appellate Tribunal rules in favor of M/s Genus Power Infrastructures Limited in cenvat credit dispute

The Appellate Tribunal CESTAT NEW DELHI adjudicated on the case involving M/s Genus Power Infrastructures Limited, disallowing cenvat credit and imposing ... Admissibility of cenvat credit on proof of receipt of inputs - reversal and inter unit transfer regularisation as evidence of receipt - requirement of proof of clandestine removal or diversion to deny cenvat credit - procedural requirement for examination and cross examination of witnesses relied upon by Revenue - remand for de novo adjudication with fresh personal hearing and evidenceAdmissibility of cenvat credit on proof of receipt of inputs - reversal and inter unit transfer regularisation as evidence of receipt - Whether cenvat credit taken by the assessee on the strength of invoices issued by M/s SPM Enterprises (97 invoices) could be disallowed for non receipt of inputs. - HELD THAT: - The adjudicating authority found on the material before it, including invoices, ledger entries, bilties and the reversal/transfer of inputs to the Haridwar unit, together with confirmation by the Deputy Commissioner, Dehradun, that the goods were received by the assessee. The Tribunal observed that the Revenue did not adduce evidence beyond doubt to establish that the transactions were only on paper or that there was flow back of money from dealer to the assessee. On these facts the Commissioner's finding that the assessee was a bona fide purchaser and that the goods were received was upheld. The authorities and case law relied upon by Revenue were held inapplicable to the present facts. [Paras 8, 75]Revenue's appeal dismisssed; Commissioner's finding that the goods were received and cenvat credit (in respect of those invoices) was not liable to be disallowed is affirmed.Requirement of proof of clandestine removal or diversion to deny cenvat credit - procedural requirement for examination and cross examination of witnesses relied upon by Revenue - remand for de novo adjudication with fresh personal hearing and evidence - Whether the partial disallowance of cenvat credit amounting to Rs. 10,66,300/- and imposition of equivalent penalty could be sustained without a finding of clandestine removal or diversion, and whether the assessee was afforded adequate opportunity to meet the evidence relied upon. - HELD THAT: - The impugned order confirmed demand for a specified quantity of PP granules but did not record any finding that those goods were clandestinely removed or diverted. The Tribunal held that denial of credit cannot legally stand where the inputs have been received at the factory and there is no proof of clandestine removal. Further, because the adjudication relied on statements of witnesses, the assessee's contention regarding the need for cross examination and opportunity to produce fresh evidence required consideration. In view of these deficiencies the Tribunal concluded that the matter requires fresh examination by the original authority with a personal hearing and opportunity for production of fresh evidence, to be decided de novo. [Paras 9, 71, 72, 78]Assessee's appeal allowed by way of remand; confirmation of the specified demand and penalty set aside for de novo adjudication with fresh personal hearing within four months.Final Conclusion: The Revenue's appeal is dismissed and the Commissioner's finding that the assessee received the inputs is upheld; the assessee's appeal against the partial disallowance is allowed by remand for de novo adjudication (with fresh hearing and opportunity to produce evidence) within four months. Issues:1. Admissibility of cenvat credit disallowed to the appellant.2. Allegation of non-receipt of inputs by the appellant.3. Cross-examination of witnesses relied upon by the department.4. Confirmation of demand and penalty imposition on the appellant.5. Legal reasoning for disallowance of cenvat credit.Admissibility of Cenvat Credit Disallowed to the Appellant:The impugned order dated 31.12.2012 adjudicated on the show cause notice issued to the appellant, M/s Genus Power Infrastructures Limited, disallowing cenvat credit of Rs. 10,66,300 and imposing a penalty under Rule 15(2) of Cenvat Credit Rules, 2004. The appellant contested this demand, arguing that the inputs were actually received and used in manufacturing, supported by documentation and ledgers. The Commissioner observed that the appellant was a bona fide purchaser, and the goods were received for further use in manufacturing the final product. The impugned order concluded that the goods were received by the appellant, and the Revenue's appeal lacked substance as no substantial evidence was provided to prove otherwise.Allegation of Non-Receipt of Inputs by the Appellant:The Revenue alleged that cenvat credit of Rs. 55,30,722 availed by the appellant based on 97 invoices was wrongly claimed as the inputs were not received. However, the impugned order found that the appellant was a bonafide purchaser, and the goods were received for manufacturing the final product. The Commissioner noted that there was no evidence to prove non-receipt of inputs, and the Revenue's appeal lacked merit as the cited case laws were inapplicable. Consequently, the Revenue's appeal was rejected.Cross-Examination of Witnesses Relied Upon by the Department:The appellant argued for the allowance of cross-examination of witnesses relied upon by the department, citing legal precedents requiring examination in chief and cross-examination of witnesses. However, the impugned order did not address this issue, leading to the conclusion that the inputs were received by the appellant. The appellant's appeal was allowed by way of remand for fresh examination by the original adjudicating authority, ensuring a fair opportunity for cross-examination and production of evidence.Confirmation of Demand and Penalty Imposition on the Appellant:The confirmation of the demand of Rs. 10,66,300 against the appellant was based on presumptive reasoning not alleged in the show cause notice. The appellant argued that vague allegations in the notice deprived them of a proper opportunity to respond. The impugned order discussed the issue of non-use of raw material for manufacturing and confirmed the inadmissible cenvat credit. However, without evidence of diversion or clandestine removal, the denial of credit could not be legally sustained. The appellant's appeal was allowed for a fresh examination by the adjudicating authority.Legal Reasoning for Disallowance of Cenvat Credit:The impugned order detailed the use and non-use of raw material for manufacturing by the appellant, leading to the confirmation of the demand. However, without evidence of diversion or clandestine removal, the denial of cenvat credit could not be upheld. The order required a fresh examination by the adjudicating authority, allowing the appellant an opportunity for a fair hearing and production of evidence. The appellant's appeal was allowed by way of remand for a de novo decision within four months.This comprehensive analysis of the legal judgment from the Appellate Tribunal CESTAT NEW DELHI covers all the issues involved, providing a detailed breakdown of the arguments and conclusions for each aspect of the case.