Tribunal overturns denial of CENVAT Credit on imported scrap due to lack of evidence

The Tribunal set aside the Order-In-Original denying CENVAT Credit for duty paid on imported scrap, as the revenue failed to prove diversion. Penalties imposed were deemed unsustainable due to lack of evidence. The judgment highlighted the importance of corroborative evidence and proper witness examination, emphasizing legal requirements. The appeals were allowed with consequential relief, emphasizing the necessity of meeting evidentiary standards.

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Issues Involved:
1. Denial of CENVAT Credit.
2. Alleged Diversion of Imported Scrap.
3. Reliance on Statements and Evidence.
4. Examination of Witnesses as per Section 9D of the Central Excise Act, 1944.
5. Imposition of Penalties.

Summary:

1. Denial of CENVAT Credit:
The appeal challenges the Order-In-Original dated 30-01-2012, which denied CENVAT Credit for duty paid on Aluminium/Copper/Brass/Zinc Scrap imported by M/s. Sainath Industries for manufacturing ingots. The Commissioner confirmed the demand for CENVAT Credit of Rs.87,89,457/- and imposed equivalent penalties.

2. Alleged Diversion of Imported Scrap:
The DGCEI alleged that the imported scrap was partially off-loaded at Bhiwandi/Navi Mumbai and sold in the local market, with non-duty paid bazaar scrap substituted in its place. This allegation was based on Daily Loading Reports (DLR) indicating Bhiwandi as the destination.

3. Reliance on Statements and Evidence:
The appellants contended that all inputs were received and accounted for in their factory, and no evidence supported the diversion claim. They argued that the statements of Rajeshwar R. Dubey were contradictory and unreliable, and no corroborative evidence of diversion or local scrap procurement was presented.

4. Examination of Witnesses as per Section 9D of the Central Excise Act, 1944:
The Tribunal noted that the DGCEI's reliance on statements without examining witnesses as required by Section 9D rendered the evidence insufficient. Previous Tribunal decisions in similar cases (e.g., Sunland Alloys, Sunland Metal Recycling Industries, and Garg Industries P. Ltd) held that without identifying buyers or proving cash transactions, CENVAT Credit could not be denied.

5. Imposition of Penalties:
The Tribunal found that the revenue failed to establish that the inputs did not reach the appellant's factory. The penalties imposed on Rajeshwar R. Dubey and Hitesh H. Kachhara were deemed unsustainable.

Conclusion:
The Tribunal set aside the impugned order, allowing the appeals with consequential relief, as the revenue could not substantiate the non-receipt of inputs in the factory. The judgment emphasized the necessity of corroborative evidence and proper examination of witnesses as per legal requirements.

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