By TIOL News Service

MUMBAI, AUG 17, 2016: THE assessee was issued a demand notice seeking to deny CENVAT Credit in respect of special denatured spirit received by them from M/s. Hanil Era Textile Ltd. on the ground that M/s. Hanil Era Textile Ltd. had fraudulently taken excess CENVAT Credit by showing more CENVAT Credit as closing balance at the end of the month of July 2008 and used the same to pay duty for clearance of special denatured sprit supplied to the appellant.

Rule 9(5) of the CCR, 2004 which reads thus is adverted by the lower authorities -

"The manufacturer of final products or the provider of output service shall maintain proper records for the receipt and consumption and inventory of the input and capital goods in which the relevant information regarding the value, duly paid, Cenvat credit taken and utilized, the person from whom the input or capital goods have been procured is recorded and the burden of proof regarding the admissibility of the Cenvat credit shall be upon the manufacturer or provider of output service taking such credit is not proper".

The demand was confirmed by the lower authorities and so the appellant is before the CESTAT.

It is submitted that the supplier of goods may have done something wrong but no wrongdoing has been pointed out so far as the appellants are concerned. Reliance is inter alia placed on the decision in Prachi Poly Products Ltd - 2005-TIOL-1574-CESTAT-MUM to emphasise that credit cannot be denied if the supplier of goods defaults any payment of duty.

The AR drew support from the decisions in Maihar Cement -Tri-Del, Spic Pharmaceuticals Division - 2015-TIOL-2126-HC-MAD-CX and Shiv Enterprises - 2015-TIOL-3029-HC-AHM-CX.

The Bench observed -

"4. …I find that in the case of Maihar Cement (supra) there was a deficiency in the invoice which an alert buyer could have seen and taken necessary action against the supplier of goods. In such circumstances, the credit taken was denied. In the case of Shiv Enterprises, the credit was taken on the strength of documents issued by a fictitious firm. Here again, it was possible for the buyers to find out if the firm is fictitious or not. In the case of Spic Pharmaceuticals Division, the decision is an interim decision remanding the matter. I find that the receipt of goods and use thereof has not been challenged. There is no evidence produced to assert that the appellants knew that the supplier of goods had wrongly availed Cenvat Credit. The decision of the Tribunal in the case of RS Industries (supra) is squarely covers the issue in this case…."

The appeal was allowed.

(See 2016-TIOL-2086-CESTAT-MUM)