2022 (3) TMI 99 - AT - Central Excise

Tribunal overturns order, upholds Cenvat credit validity.

M/s. Jai Balaji Industries Limited Versus Commissioner of Central Excise, Bolpur

The Tribunal set aside the impugned order, ruling in favor of the Appellant. It found that the Cenvat credit availed on capital goods from M/s. Saha ... CENVAT Credit - bogus transaction - fake invoices - entire transaction were based upon fake invoices, which were merely on paper - burden/onus to prove - HELD THAT:- Ld. Commissioner has nowhere observed that the Appellant had actually received the said capital goods from other alternate source. Therefore, the whole case of the department that the transactions with M/s. Saha Industries were fake transactions and the Appellant took credit without receipt of the capital goods or non receipt of the goods clearly falls down - Even in the show cause notice it was alleged that the Appellant had utterly failed to verify the antecedents of the supplier-manufacturer for the purpose of availing of Cenvat credit. This would also mean that the goods were actually received by the Appellant without verifying the antecedents of the supplier- manufacturer. It is well settled law that onus of proof that the Appellant received the capital goods from some other source was squarely on the department which it failed to prove. On the contrary in the show cause notice sweeping allegations were made that the Appellant had taken Cenvat credit without receipt of the capital goods - reliance can be placed in the case of Uniworth Textiles Ltd Vs. CCE, Raipur [2013 (1) TMI 616 - SUPREME COURT] and Kishanch and Chellaram Vs. Commissioner of Income Tax [1980 (9) TMI 3 - SUPREME COURT] wherein it has been held that the burden of proof is on the person who makes the allegation and not vice versa - the present case is on a higher pedestal as the capital goods received from M/s. Saha Industries were duly installed in the factory of the Appellant and were being used in the manufacture of finished goods. The Department failed to bring on record any contrary evidence. The Hon’ble Allahabad High Court in Juhi Alloys Ltd [2014 (1) TMI 1475 - ALLAHABAD HIGH COURT] relied upon the findings of the Tribunal as well as Commissioner (Appeals) wherein it was held that the transaction on the part of the assessee was bona fide and a buyer can take only those steps which are within his control and would not be expected to verify the records of the supplier to check whether in fact he had paid duty on the goods supplied by him. The only reasonable step which he can take is to ensure that the supplier is trustworthy, the inputs are in fact received and that the documents, prima facie, appear to be genuine. The fact that the assessee made payment by cheque was held to be a proof of his bona fides - In the present case the above findings rendered by the Hon’ble Allahabad High Court are applicable on all fours to the facts of the present case. Time limitation - the period involved is from Sept- Oct 2006 to Feb-March, 2007 and the show cause notice was issued on 01-07-2009 under extended period of limitation - HELD THAT:- There is no evidence that even if the goods were not actually manufactured by M/s.Saha Industries the fact remained that the same were duly received by the Appellant and M/s.Saha Industries have duly discharged the central excise duty on the same. In such a case following the law laid down by the Hon’ble Gujarat High Court extended period of limitation could not be invoked against the Appellant. The Ld. Commissioner has therefore erred in confirming the duty demand under extended period of limitation. The impugned Order cannot be sustained both on merits and on the point of limitation - Appeal allowed - decided in favor of appellant. Issues Involved:1. Validity of Cenvat credit availed by the Appellant on the basis of invoices issued by M/s. Saha Industries.2. Allegations of fake transactions and non-receipt of goods.3. Onus of proof regarding the receipt of goods.4. Reliability of Chartered Engineer’s certificate and transporters' statements.5. Jurisdiction and scope of the Adjudicating Authority's findings.6. Applicability of the extended period of limitation for demand of duty.Detailed Analysis:1. Validity of Cenvat Credit:The Appellant availed Cenvat credit on capital goods purchased from M/s. Saha Industries using 48 duty-paid invoices. The Appellant contended that the goods were duly received, recorded in statutory records, and payments were made through banking channels. The Tribunal noted that M/s. Saha Industries was registered with the Central Excise Department and had paid central excise duty on the goods.2. Allegations of Fake Transactions and Non-Receipt of Goods:The Show Cause Notice (SCN) alleged that M/s. Saha Industries issued fake invoices without delivering goods, and the Appellant availed wrongful Cenvat credit. The Commissioner upheld these allegations based on the poor infrastructure of M/s. Saha Industries and statements from transporters. However, the Tribunal found no evidence that the Appellant received goods from an alternative source, and the goods were indeed installed and used in the Appellant's factory.3. Onus of Proof:The Tribunal emphasized that the burden of proof lies on the department to establish that the Appellant did not receive the goods. It relied on the Supreme Court judgments in Uniworth Textiles Ltd. and Kishanchand Chellaram, which state that the onus is on the party making the allegation. The Tribunal found that the department failed to provide concrete evidence to support its claims.4. Reliability of Chartered Engineer’s Certificate and Transporters' Statements:The Chartered Engineer's certificate, obtained in August 2008, stated that M/s. Saha Industries lacked the infrastructure to manufacture the goods. The Tribunal noted that this certificate was not contemporaneous with the period in question (Sept-Oct 2006 to Feb-March 2007) and could not be relied upon. Additionally, the statements from transporters were not part of the relied-upon documents in the SCN, rendering them inadmissible.5. Jurisdiction and Scope of the Adjudicating Authority's Findings:The Commissioner’s finding that M/s. Saha Industries was not an assessee of Central Excise and could not issue valid invoices was beyond the scope of the SCN. The Tribunal highlighted that M/s. Saha Industries was indeed registered with the Central Excise Department, as acknowledged in the SCN. The Tribunal relied on Supreme Court judgments that the Adjudicating Authority cannot travel beyond the scope of the SCN.6. Applicability of the Extended Period of Limitation:The Tribunal noted that the period involved was from Sept-Oct 2006 to Feb-March 2007, and the SCN was issued on 01-07-2009. It relied on the Gujarat High Court judgment in Prayagraj Dyeing & Printing Mills Pvt Ltd, which held that the extended period of limitation could not be invoked if the credit was availed based on invoices from a registered manufacturer. The Tribunal concluded that the demand was barred by limitation.Conclusion:The Tribunal set aside the impugned order, holding that the Appellant had duly received the capital goods, and there was no evidence of alternative sourcing. The findings against M/s. Saha Industries were beyond the scope of the SCN, and the demand was barred by limitation. The appeal was allowed with consequential relief.