2018 (1) TMI 467 - AT - Central Excise

Tribunal Grants Appeals on Cenvat Credit Denial & Refund Claims

The Tribunal allowed the appeals of JVIPL, GRPL, and JMWIPL, setting aside the impugned orders and granting consequential benefits. The denial of Cenvat ... Admissibility of statement under Section 9D of the Central Excise Act - relevance of statements recorded under Section 14 (RUD statements) - proof of diversion of inputs and denial of cenvat credit - benefit under Notification No.56/2002-CE and para 1A - reliability of documentary and transport records in diversion enquiries - application of extended period of limitation/Section 11ARelevance of statements recorded under Section 14 (RUD statements) - admissibility of statement under Section 9D of the Central Excise Act - Reliability and evidentiary value of multiple statements of the production manager (including alleged retraction) and the extent to which RUD statements could be relied upon without corroboration or re-examination. - HELD THAT: - The matter exhibits divergent views: one Member found the later statement and cross examination established the factual position and rejected reliance on the earlier coerced/recanted RUD statement; the other Member observed that the totality of statements and corroborative material required re appraisal before a conclusive finding. In view of these conflicting conclusions on admissibility, reliability and the need for further appraisal of corroborative evidence, the question of relying upon the RUD statements and their treatment under Section 9D requires fresh consideration.Remanded for fresh adjudication on the evidentiary value of the statements and their admissibility/weight.Proof of diversion of inputs and denial of cenvat credit - reliability of documentary and transport records in diversion enquiries - Whether cogent and credible evidence exists to prove diversion of copper cathodes by JVIPL/GRPL to JMWIPL and thereby justify denial of cenvat credit and imposition of demands and penalties. - HELD THAT: - The Judicial Member concluded there was no credible evidence of diversion, relying on statutory records, banking payments and the Jammu enquiry report; the Technical Member recorded that substantial incriminating material (transport records, non existent suppliers, check post verification and other inquiries) prima facie supported Revenue's case and warranted detailed re appraisal. Because the Bench is divided on the sufficiency and appraisal of documentary and oral evidence on diversion, the issue is directed to be re examined by the adjudicating authority/Third Member with point by point appraisal of transport, supplier and plant records.Remanded for comprehensive re adjudication on the question of diversion and the evidentiary weight of documentary and transport inquiries.Capacity to use copper cathodes as raw material - technical capability and admissibility of third party technical statements - Whether JVIPL and JMWIPL had the requisite plant, cutters and technical capability to use copper cathodes (including feasibility of cutting cathodes and comparative burning loss) and the admissibility/weight of corroborative technical statements and certificates. - HELD THAT: - The Members differ: one held available cutter, chartered engineer's certificate and admitted differences in furnace types negated adverse inference from burning loss; the other held that technical and corroborative evidence (including third party statements and transport/vehicle enquiries) required closer scrutiny. Given the split on technical findings and admissibility/weight of technical evidence, the capacity/technical issue is to be re examined with appropriate tests, production of witnesses for cross examination and consideration of expert certificates.Remanded for fresh technical appraisal and, if necessary, conduct of tests or expert evidence and opportunity for cross examination.Benefit under Notification No.56/2002-CE and para 1A - finality of refund/self credit orders - Whether JMWIPL was correctly denied benefit under Notification No.56/2002 CE (para 1A) on the premise of diversion and whether earlier refund/self credit orders attained finality so as to preclude recovery. - HELD THAT: - One Member held that, absent proof of diversion and having found that JMWIPL used non dutiable scrap (on which no cenvat credit existed), conditions of para 1A were not violated and that earlier adjudicated refund/self credit orders had attained finality; the other Member considered the factual matrix and evidentiary material adequate for re adjudication. Because the Bench is divided on the factual predicate for denial of Notification benefit and on the consequence of prior final refund orders, these questions require fresh detailed determination.Remanded for fresh adjudication on entitlement under Notification No.56/2002 CE and the effect of finality of prior refund/self credit orders.Application of extended period of limitation/Section 11A - Whether the demands were time barred or properly sustained under extended limitation provisions. - HELD THAT: - Both Members noted limitation contentions; the Judicial Member left the question open after deciding on merits, while the Technical Member considered that remand should permit reassessment including limitation aspects. Given the differing approaches and the dependence of limitation questions on fact finding on diversion and documentary evidence, the time bar issue is to be considered afresh by the adjudicating authority.Remanded for reconsideration of limitation/extended period in light of factual findings to be made on remand.Final Conclusion: The Bench recorded a difference of opinion. The appeals and the core factual and legal questions (reliability of RUD statements, proof of diversion, technical capability to use cathodes, admissibility/weight of transport and supplier records, entitlement under Notification No.56/2002 CE and limitation) are not finally decided and are remitted for fresh and comprehensive adjudication; the matter is referred for consideration by a Third Member / re adjudication as directed by the Tribunal. Issues Involved:1. Alleged diversion of copper cathodes by JVIPL and GRPL to JMWIPL.2. Denial of Cenvat credit on copper cathodes.3. Alleged fraudulent availing of Cenvat credit by JVIPL and GRPL.4. Alleged non-receipt of copper scrap by JMWIPL.5. Jurisdiction of the Commissioner of Central Excise, Delhi-II regarding JMWIPL.6. Reliability of statements given by key witnesses.7. Admissibility of evidence and compliance with Section 9D of the Central Excise Act.8. Discrepancies in burning loss between JVIPL and JMWIPL.9. Validity of the refund claims under Notification No. 56/2002-CE.10. Invocation of extended period of limitation.Detailed Analysis:1. Alleged Diversion of Copper Cathodes:The appellants, JVIPL and GRPL, were accused of diverting copper cathodes to JMWIPL, Jammu, instead of using them in manufacturing. The Anti-Evasion Officers alleged that JVIPL and GRPL used copper scrap instead of copper cathodes and diverted the cathodes to JMWIPL, Jammu. The statement of Mr. Shivji Gupta, Production Manager, was pivotal in this allegation. However, during cross-examination, Mr. Gupta retracted his earlier statement, claiming it was obtained under coercion. The Tribunal found the retraction credible, noting the lack of corroborative evidence for the initial statement.2. Denial of Cenvat Credit on Copper Cathodes:The denial of Cenvat credit was based on the alleged diversion of copper cathodes. The Tribunal found that JVIPL and GRPL had the necessary infrastructure to use copper cathodes, supported by a Chartered Engineer's certificate and the lack of contrary evidence from the Revenue. The Tribunal held that the denial of Cenvat credit was unjustified.3. Alleged Fraudulent Availing of Cenvat Credit:The Tribunal noted that the payments for copper cathodes were made through banking channels, and there was no evidence of cash flow back to JVIPL or GRPL. The Tribunal found no credible evidence of fraudulent availing of Cenvat credit.4. Alleged Non-Receipt of Copper Scrap by JMWIPL:The Tribunal found that JMWIPL had received copper scrap, supported by transport documents and statements from transporters. The Tribunal held that the allegation of non-receipt of copper scrap was unsubstantiated.5. Jurisdiction of the Commissioner of Central Excise, Delhi-II:The Tribunal noted that the Commissioner of Central Excise, Delhi-II, had no jurisdiction over JMWIPL, Jammu, and the allegations against JMWIPL were based on inquiries made without jurisdiction.6. Reliability of Statements Given by Key Witnesses:The Tribunal found the statement of Mr. Shivji Gupta dated 26.03.2008 unreliable due to coercion and upheld his subsequent statement dated 30.08.2010. The Tribunal emphasized the importance of cross-examination and compliance with Section 9D of the Central Excise Act.7. Admissibility of Evidence and Compliance with Section 9D of the Central Excise Act:The Tribunal held that the statement of Mr. V.K. Mittal was inadmissible as evidence since he was not produced for cross-examination, violating Section 9D of the Act and principles of natural justice.8. Discrepancies in Burning Loss Between JVIPL and JMWIPL:The Tribunal found that the difference in burning loss was due to the type of furnace used (open furnace at JVIPL and closed furnace at JMWIPL). The Tribunal held that the allegation of diversion based on burning loss was untenable.9. Validity of the Refund Claims Under Notification No. 56/2002-CE:The Tribunal held that JMWIPL was entitled to the refund claims as they had used copper scrap, for which no Cenvat credit was available. The Tribunal found that the refund claims were valid and the denial of the benefit under Notification No. 56/2002-CE was unjustified.10. Invocation of Extended Period of Limitation:The Tribunal did not address the issue of limitation since the appeals were allowed on merits.Conclusion:The Tribunal set aside the impugned orders, allowing the appeals of JVIPL, GRPL, and JMWIPL with consequential benefits. The Tribunal left the issue of limitation open. The dissenting opinion by the Member (Technical) proposed remanding the matter for re-adjudication, but the majority opinion prevailed, resulting in the appeals being allowed.