Cenvat Credit recovery demand set aside due to incomplete investigation covering only 27% transactions and procedural violations under Section 9D

CESTAT Kolkata allowed appellant's appeal against Cenvat Credit recovery demand. Tribunal held investigation covered only 67 of 245 transactions (27%), making demand on remaining 178 invoices legally unsustainable without proper verification. Demand of Rs.1,00,55,148 set aside due to flawed investigation. For 32 invoices with recorded statements, demand of Rs.18,69,286 was set aside as statements were recorded 1-5 years post-transaction without cross-examination opportunity and proper procedure under Section 9D. Vehicle department information insufficient to conclude non-delivery. Extended limitation period demand rejected as no suppression of facts proved by department.

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Issues Involved:
1. Legality of demand and recovery of Cenvat Credit for 178 invoices without investigation.
2. Validity of Cenvat denial based on statements of vehicle owners for 32 invoices.
3. Legitimacy of Cenvat denial due to discrepancies in vehicle registration for 35 invoices.
4. Sufficiency of evidence provided by the appellant regarding receipt and use of goods.
5. Applicability of extended period for issuing the Show Cause Notice (SCN).

Detailed Analysis:

1. Legality of demand and recovery of Cenvat Credit for 178 invoices without investigation:
The appellants argued that no investigation or verification was conducted for 178 out of the 245 invoices, making the demand of Rs.1,00,55,148 legally unsustainable. The tribunal agreed, noting, "The allegation can sustain only on such invoices on which the investigation has taken place and non-receipt is conclusively proved." Therefore, the demand related to these invoices was set aside.

2. Validity of Cenvat denial based on statements of vehicle owners for 32 invoices:
The appellant contended that the statements from vehicle owners were recorded 2-5 years after the transactions, making them unreliable. Additionally, the statements were not reiterated before the Adjudicating authority as required by Section 9D of the CEA 1944. The tribunal found that, "When the statement itself is recorded after about 1 to 5 years of the transaction, how far their statement can be relied on is doubtful." Consequently, the demand of Rs.18,69,286 was set aside.

3. Legitimacy of Cenvat denial due to discrepancies in vehicle registration for 35 invoices:
The tribunal found inconsistencies in the Vahan Department's records, such as vehicles being banned or no records existing. The tribunal ruled, "In some cases, the vehicles have been said to be banned. If the vehicle owner still operates the banned vehicle and delivers the goods at his risk, how is the appellant expected to know or stop the sameRs." Thus, the demand of Rs.19,87,697 was set aside.

4. Sufficiency of evidence provided by the appellant regarding receipt and use of goods:
The appellant provided freight vouchers, bank statements, and ledger copies as evidence of the transactions. The tribunal noted, "The purchase transaction of 5759.70 MT on payment through banking channel to the extent of Rs.14.91 crores cannot be simply brushed aside." The tribunal found that the Revenue failed to properly investigate and consider this factual evidence, leading to the conclusion that the confirmed demand was not legally sustainable.

5. Applicability of extended period for issuing the Show Cause Notice (SCN):
The appellant argued that all transactions were recorded in statutory books and monthly returns, with no evidence of suppression. The tribunal agreed, stating, "The Dept. has not brought in any evidence to the effect that any suppression has taken place from the appellant's side." Thus, the confirmed demand for the extended period was held to be time-barred.

Conclusion:
The tribunal allowed the appeals both on merits and on account of limitation, stating, "The appellant would be eligible for consequential relief, if any, as per law." The confirmed demands were set aside due to lack of thorough investigation, unreliable evidence, and the time-barred nature of the SCN.

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