By TIOL News Service

AHMEDABAD, JULY 24, 2015: INVESTIGATION by officers of DGCEI against M/s. Prasun Ferro Alloys & Metal Casting Pvt. Limited revealed that this manufacturer who obtained CE registration was not having any plant and machinery for the manufacture of Copper Rods/ Brass rods/ Copper ingots; that M/s. Prasun Ferro Alloys & Metal Casting Pvt. Limited also did not receive any inputs (but on which allegedly they availed CENVAT credit) and manufacture was shown only on paper; that only invoices were alleged to be prepared for Copper Rods/Brass rods/ Copper ingots and shown to have been cleared to different registered dealers including the appellant dealer in this case; that as per the investigation done by DGCEI the vehicles shown to have carried Copper Rods/ Brass rods/ Copper ingots to the appellant manufacturer and dealer were either Auto Rickshaw or transport registration numbers were not existing and that such vehicles never crossed RTO check post at Bhilad.

The present case is against the recipient of the purported "Copper Rods/ Brass rods/ Copper ingots" from the registered dealer who in turn allegedly procured the same from M/s. Prasun Ferro Alloys & Metal Casting Pvt. Limited.

CENVAT credit of Rs. 17,96,732/- has been disallowed to the appellant alongwith imposition of equivalent penalty and interest. A penalty of Rs.8 Lakh was also imposed upon the registered dealer for issuing cenvatable documents without receipt of goods from supplier manufacturer M/s. Prasun Ferro Alloys & Metal Casting Pvt. Limited.

As the lower appellate authority rejected their appeal, the assessee manufacturer and the dealer are before the CESTAT.

It is the case of the appellant manufacturer/dealer that they had actually received the inputs alongwith duty paying documents issued by registered dealer; that as per the statement of registered dealer, at the time of receipt of inputs they were not aware that original manufacturer M/s. Prasun Ferro Alloys & Metal Casting Pvt. Limited had no facility to manufacture such goods and that extended period cannot be invoked in view of the bonafide belief that the inputs received are covered by the documents issued by registered dealer; that at the time of receipt of documents/inputs in his client's premises his client is not required to go into the details of original manufacturer from whom the registered dealer has obtained the goods. Reliance is also placed on the decisions in Basudev Garg vs. Commissioner of Customs - 2013-TIOL-464-HC-DEL-CUS and PMS International Pvt. Limited vs. CCE, Ludhiana - 2014-TIOL-1669-CESTAT-DEL, to submit that cross-examination of the persons whose statements are relied upon was not extended and, therefore, their statements are required to be excluded as evidence while deciding the case; that there is no evidence that his client,the registered dealer, had received inputs from any other source as no cash transaction had been brought into light by the investigation; that the vehicle numbers mentioned on the cenvatable invoices were not required to be checked up with vehicles in which inputs were received; that penalty cannot be imposed on dealer u/r 15 of CCR, 2004. Support for the submissions is also drawn from the following cases to submit that CENVAT credit is admissible even if the manufacturing unit is found to be non-existing -

CCE, Kanpur vs. Juhi Alloys Limited - 2013-TIOL-1310-CESTAT-DEL

CCE, Kanpur vs. R.H.L Profiles Pvt. Limited - 2013-TIOL-426-CESTAT-DEL

Shakti Steel Rolling Mills vs. CCE, Chandigarh - 2014-TIOL-504-CESTAT-DEL

Nidhi Metal Auto Components Pvt. Limited vs. CCE Delhi - 2015-TIOL-667-CESTAT-DEL

The AR defended the orders passed by the lower authority and submitted that the appeals need to be dismissed.

The Bench observed -

+ There is no evidence on record that appellant M/s. Dhakad Metal Corporation did not receive the inputs alongwith cenvatable invoices issued by M/s. Bhavna Metal Company.

+ It is also not on record whether M/s. Dhakad Metal Corporation was aware that the inputs received had been shown manufactured by M/s. Prasun Ferro Alloys & Metal Casting Pvt. Limited which had no facility for manufacturing of such inputs.

+ It is beyond comprehension that a man will get invoices without inputs and separately acquire inputs clandestinely from other sources to manufacture his goods. There is no whisper about M/s. Dhakad Metal Corporation to be indulging in clandestine removal of finished goods in these proceedings.

+ It is now well settled legal position that a case cannot be established on the basis of few confessional statements without other corroborative evidences like shortage of raw materials, cash transactions, alternative procurement of raw materials.

+ Appellant requested for cross-examination of the persons whose statements are relied upon but the same was not extended. It is now well settled law that cross-examination of the persons whose witness are relied upon by the Revenue should be extended to the appellant and in the absence of such cross-examination extended, the statements of such persons cannot be relied upon as evidence.

+ It is also observed that Revenue has not contested with any documentary evidence to show that M/s. Dhakad Metal had knowledge that the inputs received alongwith invoices, at the time of taking credit, was from M/s. Prasun Ferro Alloys & Metal Casting Pvt. Limited who had no facility for manufacturing such inputs.

+ In the above factual matrix, appellant M/s. Dhakad Metal Corporation cannot be held to have any malafide intention to take wrong credit and extended period of demand cannot be invoked in the present case against them. In this case, the demand is for the period 2005-06 whereas the show cause notice was issued on 20.02.2009. As the extended period is not invokable, therefore, the demand is also time barred in addition to credit being admissible on merits.

The appeal filed by the manufacturer was allowed.

Penalty on dealer imposed u/r 15 of CCR, 2004:

Held: …Penalties under Rule 15 of Cenvat Credit Rules, 2004 are required to be imposed upon the persons who has taken or utilised CENVAT credit in respect of inputs or capital goods wrongly in contravention of any of the provisions of Cenvat Credit Rules. Appellant M/s. Bhavna Metal Company has not been shown to have taken any credit wrongly. Further from the case records it is observed that it is not brought out by the Revenue that at the time of issuing cenvatable invoices registered dealer did not receive inputs alongwith duty paying documents. The fact of duty being paid by M/s. Prasun Ferro Alloys & Metal Casting Pvt. Limited has not been denied by the Revenue. Though later investigations done by the department does raise a strong suspicion of not receiving the inputs but the same is not corroborated by any independent evidence, except few statements. In the absence of cross-examination of relied upon witness given the evidentiary value of the relied upon statements is lost.

Both the appeals were allowed.

In passing: Perhaps, this is not the last that we hear of this DGCEI case…

(See 2015-TIOL-1520-CESTAT-AHM)