2017 (11) TMI 935 - AT - Central Excise

Tribunal emphasizes actual usage over invoice discrepancies for Cenvat credit

M/s Automax (Unit of Omax Autos Ltd.) Vinod Kapoor, AGM, Auto, N.K. Pachauri, Dy. MGR, Automax Hero Cycles Ltd. (C.R. Division) Versus CCE, Delhi-III, Gurgaon

M/s Automax (Unit of Omax Autos Ltd.) Vinod Kapoor, AGM, Auto, N.K. Pachauri, Dy. MGR, Automax Hero Cycles Ltd. (C.R. Division) Versus CCE, Delhi-III, ... Issues Involved:1. Denial of Cenvat credit due to discrepancy in the description of goods in invoices.2. Investigation and verification of the actual receipt of goods.3. Applicability of Rule 7(1)(a) of the Cenvat Credit Rules, 2004.4. Burden of proof under Rule 9(5) of the Cenvat Credit Rules, 2004.5. Role and involvement of suppliers in the alleged modus operandi.Issue-wise Detailed Analysis:1. Denial of Cenvat Credit Due to Discrepancy in the Description of Goods in Invoices:The appellants were denied Cenvat credit on the grounds that the description of goods in the invoices (CRC sheets) did not match the purchase order or the goods received (HR Sheets). The appellants argued that the actual goods received were HR Sheets/Strips, which were used in manufacturing the final product, but the invoices mistakenly described them as CRC Sheets. The Tribunal noted that the description in the invoices was CRC Sheets-HROP (Hot Rolled Oil Pickled), and no investigation was conducted by the Revenue to verify the actual receipt of goods, leading to the conclusion that mere discrepancy in description cannot be a reason to deny Cenvat credit.2. Investigation and Verification of the Actual Receipt of Goods:The Tribunal highlighted that the Revenue did not investigate at the supplier's end to verify whether the goods were supplied as described in the invoices. No investigation was done at the transporter's end to confirm the transportation of goods to the appellant's factory. The Tribunal relied on the decision in Omex Autos Ltd. vs. CCE, where it was held that Cenvat credit is available if the actual goods received were used in manufacturing, irrespective of the invoice description.3. Applicability of Rule 7(1)(a) of the Cenvat Credit Rules, 2004:Rule 7(1)(a) mandates that the documents should contain details of duty, description of goods, assessable value, and the registration number of the person issuing the invoice. The Tribunal found that although the description of goods did not match, the actual receipt of HR Sheets was not denied. Therefore, the appellants were entitled to take Cenvat credit as per the rule, as the goods were received and used in manufacturing.4. Burden of Proof Under Rule 9(5) of the Cenvat Credit Rules, 2004:The Tribunal noted that the appellants had placed purchase orders for HR Sheets, received them, and used them in manufacturing. The Revenue failed to prove that the appellants did not receive the goods as described in the invoices. The Tribunal concluded that the appellants discharged their burden of proof under Rule 9(5) by providing evidence of actual receipt and usage of HR Sheets.5. Role and Involvement of Suppliers in the Alleged Modus Operandi:The Tribunal observed that the suppliers, M/s Hero Cycles Ltd. and M/s J.D. Sons Steel Pvt. Ltd., stated that they only supplied CR Sheets as per the invoices. The appellants argued that the suppliers mistakenly invoiced HR Sheets as CR Sheets. The Tribunal found that the suppliers' statements and the appellants' internal records (MRRs) consistently showed receipt of HR Sheets. The Tribunal dismissed the Revenue's claim of a modus operandi to avail Cenvat credit fraudulently, as there was no substantial evidence of such a scheme.Separate Judgments Delivered:The case involved separate judgments by the members. One member allowed the appeal, relying on the decision in Omex Autos Ltd., stating that the discrepancy in description did not justify denying Cenvat credit. The other member upheld the denial of credit, emphasizing the suppliers' statements and the appellants' internal records, which indicated a discrepancy in the description of goods.Conclusion:The matter was referred to the Hon'ble President to resolve the difference of opinion between the members on whether Cenvat credit can be denied for contravention of Rule 57AB of the Cenvat Central Excise Rules, 1944, and Rule 3 of the Credit Rules, 2002/2004.