CENVAT - A buyer can take steps which are in their control and he cannot be expected to verify records of dealer to check whether supplier has paid duty on goods supplied by him or not - as long as bonafide nature of consignee transaction is not doubted, credit should not be denied: CESTAT
By TIOL News Service
NEW DELHI, SEPT 04, 2013: M/s. Juhi Alloys Ltd. is engaged in the manufacture of MS bars, rounds, SS Flat and SS products and availing CENVAT credit of duty paid on the inputs i.e. MS ingots. The same were being procured by the said assessee from a registered dealer M/s. M K Steel, Kolkata.
Inquiries conducted by the department at the end of M/s. M K Steel revealed that they were showing procurement of the goods from a manufacturer M/s. Sarla Ispat (P) Ltd., Durgapur, West Bengal and these invoices issued by M/s. SarlaIspat (P) Ltd., were fake invoices inasmuch as M/s. SarlaIspat (P) Ltd., was not in existence.
Based upon the above investigation, proceedings were initiated against M/s Juhi Alloys Ltd. for denying the CENVAT Credit availed.
The order of the original adjudicating authority confirming the demand and imposition of penalties was set aside by the Commissioner (Appeals) and, therefore, Revenue is in appeal before the CESTAT.
The Commissioner (A) had observed that it is not in dispute that M/s Juhi Alloys Ltd. had received the inputs covered by the invoices raised by M/s. M K Steels Ltd. and were duly entered in their CENVAT credit account and used in the manufacture of final product which stand cleared on payment of duty; that a buyer can take steps which are in their control and he cannot be expected to verify the records of the supplier's broker to check whether in fact the supplier has paid duty on the goods supplied by him or not; that as long as bonafide nature of the consignee transaction is not doubted, credit should not be denied in view of Board's Circular No. 776/82/03-CX dated 15.12.03.
The Bench observed –
+ Revenue is not disputing the fact that M/s. M K Steels raised dealers invoice, giving all the particulars required to be given under law in the invoice supplied to the respondents. It is also not being disputed that the respondent received inputs and entered the same in their records. The said inputs were further used by them in the manufacture of their final product, which were cleared by them on payment of duty.
+ It is also a part of the record that the goods traveled from the dealer premises to the respondents premises under the cover of Form-31 of UP Trade Tax department. This fact is sufficient to prove the physical entries of the inputs in the assessee's premises. Further, the payment of the said inputs stand made by the recipient through cheques.
+ In terms of the provisions of Rule 7(4) of CCR, 2002 and Rule 9(5) of CCR, 2004, a manufacturer is required to check the particulars as mentioned in the invoice issued by the first stage dealer and he should be familiar with him.
+ As rightly observed by Commissioner (Appeals), it is not only possible but impractical also for an assessee to further check the records maintained by the first stage dealer and to verify correctness of the same. It is sufficient if the assessee buys the goods from first stage dealer whose status he has checked and verified. There is no dispute in the present case that M/s. M K Steels was registered as a dealer with the Revenue and the invoices issued by him reflected his registration number.
Holding that the Bench agrees with the finding of the appellate authority that denial of credit to the respondent manufacturing unit on the ground that first stage dealer has fraudulently received the goods is neither proper nor justified, all the Revenue appeals were rejected.
(See 2013-TIOL-1310-CESTAT-DEL)
