2019 (11) TMI 555 - AT - Central Excise

Tribunal rules in favor of appellant, overturns denial of Cenvat credit and penalties

The tribunal overturned the denial of Cenvat credit and imposition of penalties on the appellant, ruling in their favor. It found flaws in the ... CENVAT Credit - credit denied on the ground that the appellants have received only invoices and not the goods as per the statement of one Sh. Amit Gupta who was investigated by DGCEI - HELD THAT:- Revenue has failed to prove that if the said inputs have not been received in their factory, then from where the inputs have been replaced by the appellants against those invoices - also M/s Prime Metalloys Pvt Ltd have specifically mentioned that they have supplied the goods to the appellant. In the absence of any contrary evidence to the above facts, the Cenvat credit cannot be denied to the appellant - the investigation conducted by the DGCEI in this case is not proper and having various infirmities, the benefit of doubt goes to the favour of the appellants - Cenvat credit cannot be denied to the appellant. Penalty - HELD THAT:- As Cenvat credit cannot be denied, therefore, no penalty can be imposed on the appellants. The investigating team has issued the show cause notice only on the basis of pick and choose method without proper investigation. In that circumstance also, the impugned investigation is not sustainable against the appellants - Appeal allowed. Issues Involved:- Denial of Cenvat credit based on invoices without physical receipt of goods- Adequacy of investigation by DGCEI- Examination of directors and suppliers of goods- Verification of goods received by the appellant- Imposition of penaltiesAnalysis:1. Denial of Cenvat credit based on invoices without physical receipt of goods: The case involved an appeal against the denial of Cenvat credit to the appellant on the grounds that they had received only invoices and not the actual goods. The investigation revealed a scheme where invoices were issued without physical receipt of goods, leading to inadmissible Cenvat credit. The appellant contested this denial, arguing that proper investigation was lacking, and the goods were indeed received and used in their factory for dutiable goods, which were cleared after payment of duty.2. Adequacy of investigation by DGCEI: The appellant raised concerns about the adequacy of the investigation conducted by the DGCEI. They pointed out that no investigation was carried out on the directors of the supplier firm, the manufacturers/suppliers of the goods, or the transporters mentioned in the invoices. The appellant also highlighted discrepancies in the investigation process, emphasizing that no evidence was presented to show that the inputs were not received in their factory.3. Examination of directors and suppliers of goods: The appellant argued that the directors of the supplier firm were not investigated to verify the supply of goods. However, the respondent contended that the statements of the main accused, who admitted to the fraudulent scheme, were sufficient to establish the denial of Cenvat credit.4. Verification of goods received by the appellant: The appellant maintained that the goods were indeed received in their factory, as confirmed by their staff, but no further verification was conducted by the investigating team. The lack of examination of the staff who received the goods raised doubts about the validity of denying Cenvat credit to the appellant.5. Imposition of penalties: The issue of imposing penalties on the appellant was also addressed. The appellant argued that since the Cenvat credit could not be denied due to lack of proper investigation, no penalties should be imposed. The tribunal agreed with the appellant's arguments and set aside the impugned order, ruling in favor of the appellant and allowing the appeals.In conclusion, the tribunal found that the investigation conducted by the DGCEI was flawed and lacked proper verification, leading to the benefit of the doubt being given to the appellants. Consequently, the denial of Cenvat credit and the imposition of penalties were overturned, and the appeals were allowed.