2026 (1) TMI 322 - AT - Central Excise

Cenvat credit claims for alleged paper input purchases without delivery; denial reversed as VAHAN checks and statements fell short

Whether Cenvat credit could be denied as fraudulently availed on paper transactions without receipt of inputs was determined against the Revenue, as ... Irregular availment of Cenvat Credit - availment and utilization of Cenvat Credit in violation of laid down legal principles merely, on the basis of paper transactions, fraudulently made without receiving goods in the factory of production - admissibility of the computerized data as obtained from the web Portal - HELD THAT:- Merely on the basis of enquiries conducted on the basis of VAHAN portal and statement of owners identified in a few of the cases of such vehicles, cannot constitute a conclusive inference to allege non-receipt of the said goods. It is a foregone conclusion that as long as the vehicle is identified, to be of a non-commercial nature, the owner of the said vehicle will certainly assert its actual and non-commercial nature. Any enquiry therefore does not go into establishing the revenue’s charge. This is all the more so when the transactions are substantiated through bank transactions and not an iota of doubt is cast upon their veracity. It fails the fundamental principle of economics to conclude that one would make payments through licit channels when no material supply is effected by the suppliers. Such obviously fallacious conclusions are not supported in law and that is why the rigors of Section 36B also come into play. The Learned Commissioner (Appeals) has held that “the contention of making payments through account pay checks or RTGS also did not hold good” and observed that M/s. Gagan Ferrotech Ltd. was a regular customer of the supplier company and adjustment of such payments against other supplies was not a very difficult task - It is noted that no discrepancy at even a single place with regard to incorporation of the goods in various accounts like RG-23 A Part I or Part II or the DSA or Raw material register or even ER-1 return filed have been pointed out or ascertained by the revenue. Also no case of short receipt or excess stocks of finished goods or any other transactional evidence has been placed on record in support by the Revenue vis-à-vis the banking transactions. This leads to the inevitable conclusion that the claims of the revenue are completely unfounded and baseless and therefore fail on the touchstone of legality of the evidence relied upon. There is lack of legal merit in the order of the lower authority, denying the cenvat credit availed and the same is therefore set aside. Penalties as imposed on the various appellants herein are also clearly not sustainable and are required to be dismissed - Appeal allowed. Issues: Whether denial of Cenvat credit and imposition of penalties on the appellants could be sustained solely on the basis of vehicle-registration data from the VAHAN portal and related enquiries, and whether the computerized VAHAN data was admissible without compliance with Section 36B of the Central Excise Act.Analysis: The Tribunal examined whether vehicle-number discrepancies and VAHAN portal enquiries, without independent corroboration, suffice to conclude non-receipt of inputs and to deny Cenvat credit. The Tribunal considered evidence of receipt and utilization of inputs in manufacture, bank payments through account-payee cheques/RTGS, supplier and recipient confirmations, absence of any flow-back of funds, and lack of transactional irregularities in statutory records. The Tribunal analysed the legal requirements for admitting computer-generated or portal-derived documents and held that such material qualifies as a document and must satisfy Section 36B of the Central Excise Act before being relied upon. The Tribunal reviewed authorities holding that wrong vehicle numbers or VAHAN reports, in isolation, are not conclusive if other contemporaneous records substantiate receipt and use of inputs. The Tribunal also considered principles applicable to imposition of penalty on a director and held that penalty cannot be sustained in absence of culpable evidence.Conclusion: The denial of Cenvat credit and the penalties imposed were unsustainable. The order of the lower authority is set aside and the appeals are allowed; penalties are dismissed. The decision is in favour of the assessee.Ratio Decidendi: Portal-derived vehicle-registration data and isolated discrepancies in vehicle numbers cannot, without compliance with Section 36B and independent corroborative evidence, justify denial of Cenvat credit or imposition of penalties where banking transactions, statutory entries, and supplier/recipient confirmations substantiate receipt and utilization of inputs.