Tribunal allows Cenvat credit for Vardhman Strips, stresses supply chain investigation

The tribunal ruled in favor of the appellant, M/s Vardhman Strips Pvt Ltd Unit-II, holding that they correctly availed Cenvat credit. The tribunal emphasized the importance of investigating the entire supply chain before denying Cenvat credit based on invoice discrepancies. The impugned order was set aside, allowing the appeals with consequential relief, and no penalties were imposable.

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Issues:
Appeal against denial of Cenvat credit based on investigation findings.

Analysis:
The appeal involved a case where the appellant, M/s Vardhman Strips Pvt Ltd Unit-II, was denied Cenvat credit based on the investigation conducted by DGCEI against a party issuing invoices without supplying goods. The investigation revealed that the appellant received only invoices without the accompanying goods, leading to the denial of Cenvat credit and imposition of penalties. However, the appellant argued that they purchased goods from other suppliers, M/s Godawari Enterprises and M/s North Star Industries Pvt Ltd, who confirmed supplying goods along with invoices. The appellant maintained that all payments were made through accounted cheques, and VAT on goods was paid and used in manufacturing final products. The appellant contended that since there was no discrepancy in the invoices and goods were received, Cenvat credit should not be denied. The appellant cited relevant tribunal decisions to support their argument.

The department argued that the appellant admitted to wrongful availment of Cenvat credit by paying a sum of Rs. 2 lakhs, leading to the confirmation of the demand based on the admission. However, upon hearing both parties and considering the submissions, the tribunal found that the sole basis for denying Cenvat credit was the investigation against the party issuing invoices without goods. The tribunal noted that the suppliers of the appellant confirmed supplying goods along with invoices, and there was no discrepancy found in the invoices received by the appellant. Without investigating the transporters supplying goods to the appellant, the department could not deny Cenvat credit. The tribunal emphasized that the appellant, as a bona fide purchaser, was required to ensure duty payment on goods received. Therefore, without evidence that goods were not received, the tribunal held that the Cenvat credit was taken correctly by the appellant. The tribunal also referenced similar decisions arising from the same investigation to support its conclusion and set aside the impugned order, allowing the appeals with consequential relief.

In conclusion, the tribunal ruled in favor of the appellant, M/s Vardhman Strips Pvt Ltd Unit-II, holding that they correctly availed Cenvat credit, and no penalties were imposable. The tribunal emphasized the importance of investigating the entire supply chain before denying Cenvat credit based on invoice discrepancies.

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