2019 (11) TMI 782 - AT - Central Excise

Tribunal dismisses Cenvat credit fraud allegations due to lack of evidence and investigative flaws.

The Tribunal found insufficient evidence to prove that the appellants availed irregular and fraudulent Cenvat credit based on invoices without actual ... CENVAT Credit - duty paying documents - Whether on the basis of documents recovered and various statements recorded during the investigation, the cenvat credit can be denied to the furnace units who has taken cenvat credit on the strength of the invoices issued by the scrap dealers, namely, M/s SST, M/s SMM and M/s YT? - imposition of penalties. HELD THAT:- The documents recovered from the bag which was found are photocopies and no original documents have been placed on record. Further, we find that that pen drive resumed from the godown of M/s SST on 27.11.2012 did not contain any incriminating documents. Moreover, the rolling mills who are alleged to be received goods without cover of invoice were not made part to the show cause notice. Reliability on statements - denial of cross-examination - HELD THAT:- During the cross examination, Shri Avtar Singh, Manager has stated that no bag was recovered in his presence, but, the visiting team has informed him that one bag is recovered from their premises. Further, he stated that the statements dated 22.05.2013 and 21.11.2012 were not voluntary but forced to give statements - Further, Shri Sanjay Kumar Goel, during the course of adjudication was cross examined and has stated that all the statements were given under pressure and threat and also stated that no original documents were shown to me while recording my statement. As, Shri Avtar Singh in his cross examination has stated that he was working on his table at office at the time of visit and he alone was present and there was no other person present in the godown. The godown is in 8 bighas area, there are four rooms and rest of the area is open. No recovery of bag was made in his presence, the visiting staff informed him recovery of bag from the godown, the visiting staff also did not offer their personal search, therefore, the recovery of cloth bag containing documents & pendrive is doubtful - the panchas to the panchnama dt. 27.11.2012 are not independent witnesses, but, they are under active influence in the Central Excise Department, as Shri Sachin Brar S/o Shri Dalip Brar R/o House No. 92, Sector 5, Block A, Prem Nagar, Mandi Gobindgarh was working in Central Excise Department, Mandi Gobindgarh on 27.11.2012 as an recruit of Manpower Contractor even upto 01.07.2017, whose cross examination was not allowed. The above facts are on record and are not denied by the revenue though any corroborative evidence. The denial of cross examination of the Panch Shri Sachin Brar (who was working with the department) create doubt on the truthfulness of the panchnama dated 27.11.2012, therefore, the documents recovered through the said panchnama are not admissible. Reliability on photocopies of documents - HELD THAT:- The photocopies of the documents recovered during the course of search in the premises of M/s SST cannot be relied upon documents. Moreover, the recoveries of these documents also create doubts; as these documents were found in the bushes. As there is an open area in the godown having 6 feet boundary wall and the documents recovered in the back area of godown in bushes in a cloth bag whereas as per the panchnama it has been recorded that M/s SST is keeping their records in Almirahs for the rooms in their office, therefore, the recovery of the documents from the premises of M/s SST is in doubt. Further, no demand is based on the registered resumed from the office of Motia Khan. Rather, the demand has been raised on the basis of comparison of photocopies of the documents resumed in cloth bag which are photocopies from the godown of M/s SST - the whole effort made by the Ld. Commissioner in the impugned order to corroborate the photocopies of documents (of whom originals are not available is in vain). Merely on the basis of the photocopies of documents whose original are not available which has been recovered from bushes in the godown of M/s SST, the allegation is not sustainable against the appellants - there are several discrepancies in the investigation as well as in the adjudication. In the absence of any documentary/tangible evidence on record, the allegation of diversion of goods by the scrap dealers is not sustainable. Consequently, the cenvat credit taken by furnace units on the strength of invoices issued by M/s SST, M/s SMM and M/s YT cannot be denied. Accordingly, no recovery of cenvat credit can be made as per the impugned order - Therefore, as the charges alleged by the revenue against the appellant remain unproved, no penalty is imposable on the appellants. Appeal allowed - decided in favor of appellant. Issues Involved:1. Whether the appellants had availed irregular and fraudulent Cenvat credit on the basis of invoices issued by M/s Sai Steel Traders (SST), M/s Sai Multi Metals (SMM), and M/s Yashoda Traders (YT) without actual receipt of goods.2. Whether penalties can be imposed on the appellants under Rule 25(1)(d) and 26(2) of the Central Excise Rules, 2002.Detailed Analysis:Issue 1: Irregular and Fraudulent Cenvat CreditThe case revolves around the allegation that the appellants availed Cenvat credit based on invoices without actual receipt of goods. The investigation claimed that SST, SMM, and YT issued invoices without supplying goods, and the goods were sold in cash without invoices. The main evidence was a cloth bag containing photocopies of documents and a pen drive found in the bushes of SST's godown.Search and Recovery:- The search at SST's premises led to the recovery of a cloth bag with photocopies of documents and a pen drive, which did not contain incriminating documents.- The recovery was contested as the bag was not found in the presence of Avtar Singh, the only person present during the search. He claimed the visiting staff informed him about the recovery.- The panchas to the panchnama were not independent witnesses, and one was under the influence of the Central Excise Department, casting doubt on the recovery's authenticity.Statements and Cross-Examinations:- Sanjay Kumar Goel, Manager of SST, stated that his statements were given under pressure and threat, and no original documents were shown to him.- Raj Kumar Kakaram Bansal, partner of SST, and Avtar Singh also denied the allegations during cross-examinations.- The photocopies of documents recovered were not admissible as evidence without the original documents, as per the Hon'ble Supreme Court's decision in J. Yashoda vs. K. Shobha Rani.Investigation Flaws:- The investigation did not yield any excess or shortage of stock at SST or the alleged buyers' premises.- Transporters confirmed the transport of goods but were not questioned about the delivery locations, indicating incomplete investigation.- The correlation between invoices, payments, and goods details was not established.Manufacturing Units:- The appellants, such as M/s Jogindra Castings Pvt. Ltd. and M/s Oasis Enterprises Pvt. Ltd., showed substantial production and clearance of finished goods on payment of duty, questioning the allegation of non-receipt of raw materials.- There was no allegation or evidence of procurement of raw materials from the market without invoices.Conclusion on Issue 1:The Tribunal found the evidence insufficient to prove the allegations. The photocopies of documents, the recovery process, and the investigation's flaws led to the conclusion that the Cenvat credit taken by the furnace units could not be denied.Issue 2: Imposition of PenaltiesGiven the unproven allegations and the lack of conclusive evidence, the Tribunal held that no penalties could be imposed on the appellants under Rule 25(1)(d) and 26(2) of the Central Excise Rules, 2002.Final Judgment:The Tribunal set aside the impugned order and allowed the appeals filed by the appellants, providing them with consequential relief.