2024 (2) TMI 74 - AT - Central Excise

Appeal allowed on CENVAT credit denial due to violation of natural justice principles in cross-examination

CESTAT Ahmedabad allowed the appeal regarding wrongful availment of CENVAT credit based on allegedly fake documents. The tribunal held that denial of ... Wrongful availment of CENVAT Credit - Fake documents without actual receipts of the inputs against such documents - credit availed only on the strength of Bills of Entry without actual receipts of imported inputs - demand on the basis of the statements of transporters and other persons whose cross-examination have not been allowed - violation of principles of natural justice - HELD THAT:- It is found that the request for cross-examination of the persons whose statements have been relied upon has been turned down on the ground that in the facts and circumstances of the case there is no need to give an opportunity to cross-examine the persons and what have been stated by the transporters and panch witnesses are their voluntary statements which have never been retracted by them. In this regard, it is found that the reasons assigned by the authorities below to reject cross-examination is clearly unsustainable in legal parlance for the obvious reason that no adverse inference can be drawn against assessee where statements are to be relied by the Revenue without ascertaining the veracity in the absence of cross-examination. Therefore the said statements cannot be relied upon as admissible evidence in terms of the provisions of Section 9D of the Act. Reliance is placed on the ruling of the Hon’ble Punjab & Haryana High Court in the case of M/S JINDAL DRUGS PVT. LTD. AND ANOTHER VERSUS UNION OF INDIA AND ANOTHER [2016 (6) TMI 956 - PUNJAB & HARYANA HIGH COURT] wherein the Hon’ble High Court laid down the detailed procedure, inter alia, providing for cross-examination of the witness of the Revenue by the Adjudicating Authority and thereafter, if the Adjudicating Authority is satisfied that the statement of the witness is admissible in evidence than the Adjudicating Authority is obligated to offer such witnesses for cross-examination by the other side/assessee. Such view has also been affirmed by the Hon’ble Supreme Court in the case of ANDAMAN TIMBER INDUSTRIES VERSUS COMMISSIONER OF CENTRAL EXCISE, KOLKATA-II [2015 (10) TMI 442 - SUPREME COURT]. The conditions for allowing the Cenvat credit on the inputs used for manufacturing excisable goods are stipulated in Cenvat Credit Rules 2004 and similarly the documents on which the Cenvat Credit be allowed has also been well defined in Rule 9 of Cenvat Credit Rules 2004. What is required to be established, only receipt of the inputs in the factory under cover of valid duty-paying documents and utilization of the goods in the manufacture of the final products cleared on payment of duty. On perusal of the records and facts of the case it is found that in the present case itself it is admitted facts that the Appellant shown the receipts of duty paid goods and use of the goods in their factory. Therefore there are no reason for disallowance of Cenvat credit in this matter specifically when the supplier of the goods/raw material, nowhere admitted that, they have not supplied the goods to Appellant and any evidence in relation to diversion of disputed imported raw materials. When the inputs are used in the manufacture of dutiable final products, the benefit of Cenvat credit in respect of such input cannot be denied. There is no other evidences on record to show that the Appellant either did not receive the raw materials, on which they have taken the credit or after receiving the same and availing the credit, the same stand removed by them in the open market. Further in the entire case there is no admission in the statements of Appellant’s directors or employees to the effect that the raw materials were not actually received by them. There is also no admission in the said statements to the effect that raw materials stand diverted in the open market. It is also found that 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 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 statements of Transports and their private records, the huge credit is sought to be disallowed whereas the statements are in isolation with no corroboration - in the present matter disallowance of credit to the Appellant is not sustainable. The demand of Cenvat credit is not sustainable. Accordingly, impugned order is set aside - Appeal allowed. Issues Involved:1. Whether the appellant wrongly availed Cenvat credit without actual receipt of inputs.2. Validity of statements and denial of cross-examination.3. Admissibility of evidence under Section 9D of the Central Excise Act.4. Compliance with procedural requirements under Cenvat Credit Rules, 2004.Summary:1. Wrongful Availment of Cenvat Credit:The appellant was accused of availing Cenvat credit on non-duty paid scrap by using duty-paid invoices without actual receipt of inputs. The investigation revealed that 10 imported consignments and 2 consignments from Jammu were not physically received in the factory. The adjudicating authority confirmed the Cenvat demand along with interest and penalties, leading to the present appeals.2. Validity of Statements and Denial of Cross-Examination:The appellant argued that the statements of transporters, which were the basis for the department's case, were not signed by a gazetted officer and lacked evidentiary value. The appellant also contended that the denial of cross-examination violated principles of natural justice. The Tribunal found that the rejection of cross-examination was unsustainable and that the statements could not be relied upon without cross-examination.3. Admissibility of Evidence under Section 9D:The Tribunal referred to Section 9D of the Central Excise Act, which outlines the conditions under which statements can be treated as relevant evidence. The Tribunal emphasized that adverse inferences could not be drawn without cross-examination, making the statements inadmissible. The Tribunal relied on precedents from the Punjab & Haryana High Court and the Supreme Court, which supported the necessity of cross-examination.4. Compliance with Procedural Requirements:The Tribunal examined the procedural requirements under the Cenvat Credit Rules, 2004. It found that the appellant had shown receipt of duty-paid goods and their use in manufacturing. The Tribunal noted that the department failed to provide corroborative evidence of non-receipt or diversion of inputs. The Tribunal held that the appellant's records were consistent and payments were made through banking channels, supporting the legitimacy of the Cenvat credit.Conclusion:The Tribunal concluded that the demand for Cenvat credit was not sustainable based on the available evidence. It set aside the impugned order and allowed the appeals with consequential relief. The judgment emphasized the importance of cross-examination and compliance with procedural requirements in adjudicating Cenvat credit disputes.