2022 (2) TMI 5 - AT - Central Excise

Tribunal overturns denial of cenvat credit, emphasizes recipient's duty to verify suppliers

M/s Angel Pipes and Tubes Pvt. Ltd. Versus Commissioner, Central Excise and Central Goods and Service Tax, Jodhpur (Rajasthan).

M/s Angel Pipes and Tubes Pvt. Ltd. Versus Commissioner, Central Excise and Central Goods and Service Tax, Jodhpur (Rajasthan). - TMI Issues involved:Whether denial of cenvat credit by the adjudicating Authority was justified based on the appellant's alleged wrongful availment of credit without receipt and use of inputs in manufacturing final products.Analysis:Issue 1: Denial of cenvat credit by the adjudicating AuthorityThe case involved the denial of cenvat credit amounting to &8377;40,26,474 by the adjudicating Authority, along with interest and penalties, on the grounds that the appellant had availed the credit on inputs without their receipt and use in or in relation to the manufacture of final products. The appellant, engaged in the manufacture of Stainless-Steel Pipes & Tubes, was alleged to have received invoices without actual receipt of goods, leading to the issuance of a show cause notice. The appellant contested the notice, providing evidence to substantiate their legitimate availment of credit. The adjudicating Authority confirmed the demand, which was upheld by the Commissioner (Appeals), prompting the present appeal.Issue 2: Legitimacy of cenvat credit availmentThe appellant argued that the allegation of wrongful availment of cenvat credit was baseless, supported by various pieces of evidence. They cited a judgment by the Hon'ble Allahabad High Court, emphasizing that the recipient should not be burdened with verifying the original manufacturer's genuineness beyond reasonable diligence. The appellant presented undisputed facts, such as accounting for purchases in excise records, transportation evidence, payment of freight, and bank transactions, to establish the genuineness of the transactions. They also relied on a judgment by the High Court of Jharkhand to support their contention that verifying the supplier dealer's duty payment was impractical.Issue 3: Tribunal's decisionUpon considering the contentions, the Tribunal found that the appellant had substantiated the legitimate credit availment and the genuineness of transactions regarding the purchase and receipt of inputs. It noted that the appellant had used the inputs in manufacturing dutiable finished goods, cleared on payment of duty, without any alternative source of raw material identified by the Revenue. Relying on the Allahabad High Court judgment, the Tribunal held that the appellant had fulfilled their onus for credit of the goods under the Act and Cenvat Credit Rules. Consequently, the Tribunal allowed the appeal, setting aside the impugned order and granting consequential benefits to the appellant.In conclusion, the Tribunal's decision highlighted the importance of substantiating the genuineness of transactions for cenvat credit availment and emphasized the recipient's reasonable diligence in verifying suppliers. The judgment serves as a precedent for cases involving the denial of cenvat credit based on alleged wrongful availment without proper receipt and use of inputs in manufacturing processes.