2026 (2) TMI 1272 - AT - Central Excise

Reliance on Unverified Transport Records insufficient to deny CENVAT credit or sustain penalties; appeals allowed.

Denial of CENVAT credit and imposition of penalties were found unsupported where revenue relied solely on VAHAAN portal checks and uncorroborated ... Denial of CENVAT credit - Imposition of penalty under Rule 26(1) of the Central Excise Rules, 2002 - Reliability of transporter statements - VAHAN portal verification as evidence - Obligation of Revenue to investigate supplier and trace procurement - Requirement of evidence beyond presumption - Verification under Section 9D of the Central Excise Act, 1944 - HELD THAT:- In the present case, no investigation has also been conducted by the Revenue to show that if the appellants have not procured the goods mentioned in the invoices in question, then from where have the appellants procured such a huge quantity of inputs as has been used by the appellants for manufacture of the final product, on which they have paid duty by utilizing CENVAT Credit as well as PLA. Merely on the basis of assumptions and presumptions, the demand has been made against the appellants, by alleging that their goods had not been transported to their premises. It is also a fact on record that the said statements of the transporters have not been verified in terms of Section 9D of the Central Excise Act, 1944 and no supporting evidence has been produced by the Revenue in support of the said statements. In these circumstances, we find that the said statements of such transporters are not reliable statements. In fact, the whole case is based on some verification from the ‘VAHAAN’ portal and from the statement of certain transporters, which cannot be the basis for denial of CENVAT Credit to the appellants. It is an admitted fact that the appellant/company has used these inputs in the manufacture of their final product, and paid duty on their clearances. Therefore, without establishing as to from where the appellants have procured inputs to manufacture such a huge quantity, the CENVAT Credit availed by them cannot be denied merely on the basis of the evidences as relied upon by the Revenue in support of their allegations, in the facts and circumstances of the case. We find that on the said allegation that one of the suppliers had not supplied goods to the appellant-company, a Show Cause Notice was issued, inter alia, to impose penalty on the appellant on the said allegation. Thus, we hold that the CENVAT Credit cannot be denied to the appellant. Therefore, the impugned order qua recovery of CENVAT Credit availed by the appellant, in question, along with interest, and imposition of penalty on all the appellants, is set aside. Issues: Whether the denial of CENVAT credit availed by the appellant and the imposition of penalties under Rule 26(1) (and Rule 26(2)) of the Central Excise Rules, 2002 are justified.Analysis: The revenue's case rested on transport-related verifications from the 'VAHAAN' portal and statements attributed to certain transporters, asserting that the vehicle types and transporter statements demonstrated non-supply of inputs by the suppliers to the appellant. No parallel investigation was conducted at the end of the suppliers who issued the invoices to verify whether goods were actually supplied, nor was evidence produced to show from where the appellants procured the large quantities of inputs used in manufacture. The transporters' statements were not verified in accordance with Section 9D of the Central Excise Act, 1944 and no supporting documentary evidence was produced to corroborate those statements. It is an admitted fact that the inputs were used in manufacture and duty was paid on clearances. Absent investigation of suppliers or other corroborative evidence, reliance solely on VAHAAN verification and unverified transporter statements does not constitute reliable evidence to deny CENVAT credit or to sustain penalties under Rule 26 of the Central Excise Rules, 2002.Conclusion: The denial of the CENVAT credit and the imposition of penalties are set aside and the appeals are allowed; decision is in favour of the assessee.