2021 (10) TMI 1169 - AT - Central Excise

Tribunal rules in favor of appellant in CENVAT credit dispute emphasizing procedural requirements

The Tribunal ruled in favor of the appellant, setting aside the department's allegations of availing ineligible CENVAT credit based on invoices from ... CENVAT Credit - demand based on statements only and is not supported by any documentary evidence - reliability of statements - section 9D of Central Excise Act, 1944 - HELD THAT:- The case of the department is merely based on the statements given by G. Baskaran, proprietor of M/s. Sri Amman Steels and A. Veluchamy of M/s. Kamaraj Steels. These persons have not been examined under sec. 9D of the Central Excise Act, 1944 and therefore their statements cannot be admitted or relied in evidence. The Hon'ble High Court of Punjab and Haryana in the case of M/S G-TECH INDUSTRIES VERSUS UNION OF INDIA AND ANOTHER [2016 (6) TMI 957 - PUNJAB & HARYANA HIGH COURT] has held that the procedure under section 9D of Central Excise Act, 1944 has to be followed in adjudication proceedings. If the procedure of examining the witnesses is not done, the statement becomes irrelevant and no reliance can be placed on such statements. The content of the document (lab test report) has to be proved by primary evidence i.e., document itself. Document when reduced in writing are considered to be best evidence and is placed on a higher footing than the oral evidence. The very object of documenting something is to perpetuate the memory of what has been written down so as to furnish prove of itself. If the department relies upon the difference in the chemical composition of the raw materials used by the appellant and the goods cleared by the manufacturer as waste from their factory to be different, then they have to produce both these lab test reports. The difference is comprehended by the department on the basis of the statement of Shri P. Periyannan which is not admissible in law. None of these persons have been examined at the time of adjudication and only the statements are relied to confirm the demand. There are no hesitation to conclude that the department has miserably failed to establish the allegations raised in the Show Cause Notice - demand cannot sustain - appeal allowed. Issues:1. Alleged availing of ineligible CENVAT credit by the appellant based on invoices from dealers.2. Reliance on statements of dealers and lack of examination under section 9D of Central Excise Act, 1944.3. Discrepancies in chemical composition of raw materials and reliance on lab test reports.4. Adjudication process and reliance on oral evidence without proper documentation.5. Appropriation of amounts from rebate claim without compliance with predeposit requirements.Issue 1: Alleged availing of ineligible CENVAT creditThe appellant was engaged in manufacturing cast articles of iron and steel and availing CENVAT credit on invoices from dealers supplying raw materials. The department alleged that the dealers procured non-duty paid goods and passed ineligible CENVAT credit to the appellant. Show Cause Notices were issued proposing recovery of the credit, penalties were imposed, and the appellant appealed to the Tribunal.Issue 2: Reliance on statements and lack of examination under section 9DThe department relied on statements of dealers and the appellant's factory manager regarding discrepancies in raw materials. However, the statements were not supported by proper examination under section 9D of the Central Excise Act, 1944. The Tribunal emphasized the necessity of following procedural requirements for examining witnesses in adjudication proceedings.Issue 3: Discrepancies in chemical composition and reliance on lab test reportsThe department alleged differences in chemical composition of raw materials based on lab test reports and statements. However, the Tribunal noted that the department failed to produce lab test reports of the appellant and relied solely on statements, which were deemed inadmissible in law. The requirement for primary evidence to prove the content of documents was highlighted.Issue 4: Adjudication process and reliance on oral evidenceThe Tribunal critiqued the department for basing its case on statements without proper examination and documentation. The lack of adherence to evidentiary rules under the Evidence Act was emphasized, stating that oral evidence alone cannot establish the content of documents. The Tribunal highlighted the importance of following legal procedures in adjudication proceedings.Issue 5: Appropriation of amounts from rebate claimThe appellant's appeal against the rejection by the Commissioner (Appeals) for failure to comply with predeposit requirements led to the Tribunal setting aside the order and remanding the matter for fresh consideration. The Tribunal ruled that the demand did not survive, and the appropriation of amounts from the rebate claim needed to be set aside, emphasizing compliance with predeposit requirements.This detailed analysis covers the issues involved in the legal judgment, addressing the allegations, procedural lapses, evidentiary shortcomings, and compliance requirements, as deliberated by the Tribunal in the case.