CESTAT allows CENVAT credit for machinery purchase despite missing supplier logo on invoices

CESTAT Kolkata allowed the appeal regarding disallowance of CENVAT credit. The appellant purchased machinery and mechanical appliances from a supplier through 27 Central Excise invoices during 2004-2005 and claimed credit after receiving goods. Revenue disallowed credit alleging non-receipt of goods, citing absence of supplier's logo/stamp. CESTAT held that machinery was physically present in factory and used for manufacturing MS Ingots and steel forgings for four years. The adjudicating authority's finding of credit availment without goods receipt was erroneous and unsupported by evidence. Disallowance was set aside along with consequential interest and penalty.

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1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Tribunal were:

(a) Whether the appellant had actually received the goods (machine and mechanical appliances such as moulds, machine tools, dies for forging, EOT crane, furnace, and ovens) purchased from the supplier, as claimed, or merely availed Cenvat credit on the basis of invoices without physical receipt of goods;

(b) Whether the non-availability of the supplier's logo or stamp on the goods after prolonged use could be a valid ground to deny the Cenvat credit;

(c) Whether the statements and documentary evidence produced by the appellant and the supplier sufficiently established receipt of goods to justify availing Cenvat credit;

(d) Whether the disallowance of Cenvat credit, along with interest and penalty imposed by the adjudicating authority and upheld by the Commissioner (Appeals), was legally sustainable.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (a): Actual Receipt of Goods vs. Credit Availed on Paper

The legal framework governing Cenvat credit requires that credit can only be availed on inputs actually received and used in manufacturing. The department alleged that the appellant had availed credit only on paper, without receipt of goods.

The Tribunal analyzed the facts that the appellant had purchased goods under 27 Central Excise invoices between 01.07.2004 and 07.01.2005, and had entered these details in RG-23A part 1 and 2 registers. The goods were received at the appellant's factory on the same dates as clearance from the supplier's factory. The appellant used these inputs in manufacture of MS Ingots and forging products, and the goods were scrapped after becoming unusable due to wear and tear.

The Tribunal noted that the mechanical appliances were physically present in the appellant's factory and used in production. The department's officers could not identify the goods as supplied by the supplier due to absence of supplier's logo/stamp on the goods, but the Tribunal held that this absence alone does not negate receipt of goods. The Tribunal emphasized that if the supplier had not supplied the goods, the question arises as to who else could have supplied them.

The Tribunal further observed that the departmental visit and investigation occurred more than four years after the purchase, making it natural that supplier's identification marks might have worn off due to normal use.

The Tribunal also relied on the statement of the supplier's director, recorded on 02.03.2006, who confirmed the sale of goods to the appellant during the relevant period. The appellant's director also confirmed receipt of all materials mentioned in the 27 invoices and payment by account cheques, supported by ledger evidence. There was no contradictory evidence from the supplier's side or any other source.

Accordingly, the Tribunal concluded that the adjudicating authority's finding that the appellant had availed credit without receipt of goods was erroneous and not supported by evidence.

Issue (b): Effect of Non-availability of Supplier's Logo/Stamp on Goods

The department contended that absence of the supplier's logo or stamp on the goods found in the appellant's factory was a ground to disallow credit. The Tribunal examined this contention in light of the facts that the goods were used for over four years before the departmental visit.

The Tribunal held that non-availability of logo or stamp after such prolonged use cannot be a valid reason to deny credit, as wear and tear over time naturally results in fading or loss of such identification marks. The Tribunal underscored that physical presence and usage of the goods, coupled with documentary evidence, sufficed to establish receipt.

Issue (c): Sufficiency of Statements and Documentary Evidence

The Tribunal considered the statements of the supplier's director and appellant's director, along with documentary evidence such as Central Excise invoices, balance sheets, ledger accounts, and ER-1 copies. The supplier's director did not deny supply of goods to the appellant, and the appellant's director affirmed receipt and payment for the goods.

The Tribunal found no contradictory statements or evidence from the supplier or department to challenge these assertions. Therefore, the evidence was sufficient to establish receipt of goods and entitlement to credit.

Issue (d): Sustainability of Disallowance of Credit, Interest and Penalty

The adjudicating authority had confirmed demand of Rs.40,76,512/- disallowing Cenvat credit, and imposed interest and penalty. The Commissioner (Appeals) upheld these demands.

Given the Tribunal's findings that the appellant had received the goods and credit was rightly availed, the disallowance was held to be unsustainable. Consequently, the Tribunal set aside the demand, interest, and penalty, holding that if credit disallowance fails, the question of interest and penalty does not arise.

3. SIGNIFICANT HOLDINGS

The Tribunal made the following crucial legal determinations:

"Non-availability of logo/stamp of Supplier in the goods does not mean that those machines were not purchased from the supplier. If supplier did not supply those goods then who supplied those machines."

"The machines and machine tools were available in the factory and the same were used for the manufacture of MS Ingots, alloy steel forging machine square and non-alloy steel forging square in the factory for the past four years."

"The finding of the adjudicating authority that the appellant has availed the credit without receipt of the goods into the factory is erroneous and not supported by any evidence."

"Accordingly, the disallowance of the credit to the appellant in the impugned order is not sustainable and hence, we set aside the same. As the disallowance of the credit is not sustained, the question of demanding interest or imposing penalty does not arise and hence we set aside the same."

The core principles established include:

• Receipt of goods for Cenvat credit purposes must be established by evidence of physical possession and use, not merely by presence of supplier's marks;
• Wear and tear over a prolonged period can lead to loss of supplier's identification marks, which cannot be a ground for denial of credit;
• Statements and documentary evidence from both supplier and recipient, when uncontradicted, are sufficient to establish receipt of goods;
• Disallowance of credit without evidence is unsustainable, and consequential interest and penalty cannot be imposed.

Final determinations were that the appellant had legitimately received the goods and availed credit, and the impugned orders disallowing credit, interest, and penalty were set aside with consequential relief.

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