Uncorroborated third-party statements and lack of jurisdiction defeated Cenvat credit denial and drawback recovery claims.
Recovery of excess drawback sanctioned by Customs at the port of export could not be sustained by the Central Excise authority, because any such recovery lay with the jurisdictional Customs authority and the alleged excess was not independently proved. Denial of Cenvat credit also failed where the allegation of bogus invoices rested mainly on third-party statements and documents, those statements were disputed in cross-examination, and no corroborative evidence from the appellants' own records showed non-receipt of goods or fraud. On both issues, the demand was unsustainable and the Revenue's challenge failed.
Issues: (i) Whether the Central Excise authority could sustain recovery of excess drawback where the drawback had been sanctioned and paid by Customs authorities at the port of export. (ii) Whether Cenvat credit could be denied on the basis of alleged bogus invoices and third-party statements, in the absence of corroborative evidence from the appellants' records.
Issue (i): Whether the Central Excise authority could sustain recovery of excess drawback where the drawback had been sanctioned and paid by Customs authorities at the port of export.
Analysis: The drawback claim had been processed and paid by the Customs authority under the All Industry Rate scheme. The alleged excess drawback was not supported by independent evidence showing that the export goods had been made from inputs on which credit had in fact been taken. In such circumstances, recovery action for any excess drawback lay with the jurisdictional Customs authority and not with the Central Excise authority.
Conclusion: The demand for recovery of excess drawback was not sustainable and the Revenue's appeal on this issue was rejected.
Issue (ii): Whether Cenvat credit could be denied on the basis of alleged bogus invoices and third-party statements, in the absence of corroborative evidence from the appellants' records.
Analysis: The case against the appellants rested substantially on third-party documents and statements collected from suppliers and transport-related persons. Those statements were disputed in cross-examination, and no independent material from the appellants' own records established receipt of goods without corresponding movement or their participation in any fraud. The alleged invoices were not sufficiently proved to be bogus by reliable corroborative evidence, and demand could not be founded only on uncorroborated third-party material.
Conclusion: The denial of Cenvat credit was unsustainable and the impugned demand was set aside.
Final Conclusion: The appellants succeeded, the demand of Cenvat credit was quashed, and the Revenue's challenge to the dropped drawback demand failed.
Ratio Decidendi: A fiscal demand based primarily on uncorroborated third-party statements and documents, especially where denied in cross-examination and unsupported by the assessee's own records, cannot be sustained; likewise, recovery of drawback sanctioned by Customs cannot be pursued by the Central Excise authority without jurisdiction.
TaxTMI 
AI Drafter ✕
TaxTMI 
