2018 (4) TMI 832 - AT - Central Excise

Appellate tribunal remands Cenvat credit case for re-examination

The appellate tribunal remanded the case involving the appellant's availing of Cenvat credit on returned goods back to the Original Adjudicating Authority ... Cenvat credit - returned goods - loss of essential character and reduction to scrap - admissibility of statement evidence and right to cross-examination - procedure under Section 9D of the Central Excise ActCenvat credit - returned goods - loss of essential character and reduction to scrap - Whether Cenvat credit claimed on returned Diamond Impregnated Segments and Circular Saw Blades was wrongly availed because goods were not returned or had lost their essential character and were reduced to scrap - HELD THAT: - The adjudicating authority found, on the basis of buyers' statements and departmental inquiry, that certain credits were availed in respect of goods not received back and in respect of returned goods which, according to statements of the buyers and internal personnel, had become used and reduced to scrap and thereby lost the essential characteristics of segments. The Tribunal, however, did not adjudicate the merits of these factual contentions because the conclusions of the lower authorities were founded exclusively on third party statements which were not subjected to testing by cross examination. Given that the appellants have maintained statutory records and filed D 3 returns, the Tribunal considered that the truth of the buyers' statements and the factual question whether the goods were returned in usable condition required verification through proper evidentiary procedure rather than being accepted at face value. [Paras 1, 3]The factual determination whether the credits were wrongly availed is not finally adjudicated and is remanded to the Original Adjudicating Authority for fresh consideration after affording opportunity to produce and cross examine the deponents whose statements were relied upon.Admissibility of statement evidence and right to cross-examination - procedure under Section 9D of the Central Excise Act - Whether statements of purchasers relied upon by the Revenue could be acted upon without production of deponents and opportunity for cross examination - HELD THAT: - The Tribunal emphasised that where the Revenue's case rests exclusively on statements recorded from purchasers or third parties, those statements cannot be relied upon automatically to displace the assessee's records. Citing authoritative precedents, the Tribunal held that the assessee must be given the opportunity to test the veracity of such statements by production of the deponents for examination in chief and cross examination, in accordance with the procedure envisaged under the statute. The absence of such procedure renders the reliance on those statements impermissible for finally deciding the claim. Accordingly, the Tribunal found it necessary to remit the matter to permit compliance with the required evidentiary procedure. [Paras 3, 4, 5]Statements of purchasers cannot be used to decide the matter without producing the deponents and affording opportunity of cross examination; matter remanded to enable the Original Adjudicating Authority to follow the requisite procedure and then decide the issue afresh.Final Conclusion: The appeal is disposed of by remitting the matter to the Original Adjudicating Authority for production of the deponents whose statements were relied upon, permitting examination in chief and cross examination, and thereafter fresh adjudication on the claims of Cenvat credit; no final decision on the correctness of the credits is recorded by the Tribunal. Issues:1. Availment of Cenvat credit on returned goods under Rule 16 of Central Excise Rules, 2002.2. Reliance on statements of buyers without cross-examination.3. Applicability of legal precedents regarding reliance on statements.Analysis:1. The case involved the appellant availing Cenvat credit on Diamond Impregnated Segments & Circular Saw Blades under Rule 16 of Central Excise Rules, 2002. The Central Excise Officers alleged that the goods returned by buyers were either short received or reduced to scrap, not qualifying for credit. The adjudicating authority confirmed a demand of Rs. 8,94,691/-, imposing penalties under Rule 14 of Cenvat Credit Rules, 2004 and Section 11AC of the Central Excise Act, 1994.2. The Commissioner (Appeals) upheld the decision, leading to the present appeal. The appellate tribunal noted that the Revenue's case heavily relied on statements of buyers without allowing cross-examination by the appellant. The tribunal emphasized the necessity of testing the veracity of such statements through cross-examination, citing legal precedents emphasizing the importance of following procedural requirements before relying on statements against an assessee.3. Referring to judgments like Jindal Drugs Pvt. Ltd. vs. Union of India, Basudev Garg vs. CC, Mahek Glazes Pvt. Ltd. vs. Union of India, and Andaman Timber Industries vs. CCE, Kolkata - II, the tribunal emphasized the need for producing deponents for cross-examination to ensure fairness in the adjudication process. Consequently, the tribunal remanded the matter to the Original Adjudicating Authority for proper examination and cross-examination of the deponents. The appeal was disposed of accordingly on 04/04/2018.