2022 (12) TMI 769 - AT - Central Excise

Tribunal overturns CENVAT Credit demands & penalties, stresses evidence importance

The Tribunal set aside the demand for excess CENVAT Credit on MS Round Cutting and disallowance of CENVAT Credit on transportation of disputed inputs due ... CENVAT Credit - paper transaction without receipt of raw materials - Third party statements - corroborative evidences or not - suppression of facts or not - extended period of limitation - HELD THAT:- There is no other evidence on record of cash flow-back or any inculpatory statement to substantiate that CENVAT Credit was taken irregularly based on paper transaction i.e. without receipt of raw materials against invoices. The statements of the transporters are not corroborated with any evidence. Only on the basis of third party’s statement, demand cannot be made. It is an undisputed fact that all the purchases were duly recorded in the statutory books of the Appellant and the goods were also found to be entered in the statutory records of the Appellant. There is no evidence which can show that the records maintained by the Appellant are not correct. Only on the basis of statement of some of the transporters, the credit is sought to be disallowed whereas the statements are in isolation with any corroboration. Therefore the entire demand of excess CENVAT Credit in absence of any corroborative evidence is nothing but based on presumption which is not permissible under the law. The Appellant is duly registered with the Department and there is no allegation in the impugned order of non-submission of any periodical returns. The Appellant is subject to regular audits. Therefore, the allegation of suppressing the facts from the Department does not hold good in the event of periodic audits of the Appellant’s records. There is no other evidence in the impugned order to show that the Appellant has willfully suppressed the fact from the Department in order to evade payment of duty. As such, extended period of limitation cannot be invoked in the present case. In this case it is a fact on record that during the course of investigation, no shortage or excess of the goods were found in the premises of the Appellant. The demands are set aside. In the peculiar facts and circumstances of this case and in the absence of cogent evidence, the demands are not sustainable, as a consequence the penalties imposed upon both the Appellants are also not sustainable and are accordingly set aside. Appeal allowed. Issues:1. Irregular availment of CENVAT Credit on MS Round Cutting.2. Disallowance of CENVAT Credit on transportation of disputed inputs.3. Imposition of penalties on the Managing Director and another individual.4. Validity of extended period of limitation.5. Adequacy of evidence to support the Department's claims.Analysis:1. The first issue pertains to the irregular availment of CENVAT Credit on MS Round Cutting by the Appellant. The Department alleged that the goods were not actually received by the Appellant's factory, leading to the disallowance of credit. However, the Appellant contended that all purchases were duly recorded, and there was no evidence of irregularity. The Tribunal found that the Department's demand was based on presumption without corroborative evidence, and the Appellant's records were found to be accurate. As a result, the demand for excess CENVAT Credit was set aside.2. The second issue involved the disallowance of CENVAT Credit on transportation of disputed inputs. The Appellant argued that the transporters admitted to delivering the goods and provided supporting documents. The Tribunal noted that there was no evidence of cash flow-back or inculpatory statements to substantiate the irregular credit claim. Additionally, the Department relied on transporter statements without allowing cross-examination, leading to the disallowance being deemed unsustainable. Consequently, the demand for disallowance of credit on transportation was set aside.3. The imposition of penalties on the Managing Director and another individual was also a key issue. The Tribunal found that in the absence of cogent evidence and sustainable demands, the penalties were not justified. As the demands were set aside due to lack of evidence, the penalties imposed were also deemed unsustainable and subsequently set aside.4. Regarding the validity of the extended period of limitation, the Tribunal ruled that as there was no willful suppression of facts by the Appellant and they were subject to regular audits, the extended period could not be invoked. The Tribunal emphasized the importance of corroborative evidence and the need for the Revenue to ascertain facts before making demands.5. The adequacy of evidence to support the Department's claims was a crucial aspect. The Tribunal highlighted the lack of corroborative evidence and the reliance on isolated statements without proper verification. It was emphasized that demands based on presumption without substantial evidence were not permissible under the law. The Tribunal ultimately allowed both Appeals, providing consequential relief to the Appellant in accordance with the law.