Tribunal overturns order demanding payment, finding no proof of fraudulent Cenvat credit, directs refund

The Tribunal allowed the appeals of the appellant company and its Director, setting aside the order directing them to pay wrongly availed cenvat credit. The Tribunal found the allegations of fraudulent availing of Cenvat credit to be unsubstantiated, noting that the appellants had properly received goods, paid duty, manufactured finished products, and cleared them. The lack of evidence of an alternate source of raw materials and the supporting documentation regarding the input supplier led to the dismissal of the Commissioner's decision. The Tribunal directed the refund of the disputed Cenvat credit with interest in cash.

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Issues:
- Alleged fraudulent availing of Cenvat credit
- Proper receipt of goods under proper documents
- Evidence of manufacturing and clearance of finished goods
- Lack of evidence of alternate source of raw materials
- Rulings of the Division Bench of the Tribunal
- Dismissal of the appeal by the Commissioner (Appeals)

Analysis:

The appellant company and its Director appealed against the order-in-appeal directing them to pay wrongly availed cenvat credit of Rs. 11,67,818 along with interest and penalty. The case involved allegations that the appellants fraudulently availed Cenvat credit based on invoices from an input supplier, M/s. Abhay Chemicals, Jammu. The appellant contended that they properly received goods, manufactured finished products, and cleared them after paying duty. The appellant argued that no evidence of procurement from other sources was found, and relied on various case laws to support their contentions.

The appellant highlighted the ruling of the Division Bench regarding Abhay Chemicals, emphasizing various documents and evidence of manufacturing activities by Abhay Chemicals. The Tribunal noted that Abhay Chemicals was engaged in production as evidenced by certificates, permissions, financial statements, and plant-based checks. The jurisdictional Commissioner's report also confirmed the operation of Abhay Chemicals and other similar units. The appellant sought the allowance of their appeals based on this information.

The respondent/Department reiterated the findings of the Commissioner (Appeals) and requested the dismissal of the appeal. However, after considering the contentions from both sides, the Tribunal found that the allegations of irregular Cenvat credit were based on vague communication and lacked concrete evidence. The Tribunal observed that the appellants had received inputs with duty-paying documents, made payments by cheque, manufactured finished products, and cleared them after paying duty. The Tribunal also noted that no alternate source of raw materials was identified clandestinely. Referring to the ruling on Abhay Chemicals and other units, the Tribunal concluded that the Revenue's allegations were unfounded, allowing the appeals and setting aside the impugned order.

The Tribunal directed the Adjudicating Authority to grant the refund of disputed Cenvat credit in cash along with interest as per Transitory Provisions under the CGST Act. The judgment was pronounced on 01.09.2020 by the Member (Judicial) of the Appellate Tribunal CESTAT New Delhi.

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