By TIOL News Service

ALLAHABAD, SEPT 21, 2016: THE appellants are engaged in the manufacture of M.S. Ingots and availed Cenvat Credit on channels, Joist, C.R. Strips, H.R. Coils, G.R. Strips, Angles etc. on the invoices issued by M/s Bansal Structurals Pvt. Ltd., M/s Bhawna Steels, M/s Bhagwati Traders and M/s V.K. Enterprises who were either registered as first stage or second stage dealers.

Pursuant to enquiries and statements of dealers (who allegedly supplied materials) and owners of transport companies, the department viewed that the appellant did not receive the inputs and, therefore, the credit was wrongly taken.

A SCN came to be issued by the ADG, DGCEI seeking recovery of Cenvat Credit of Rs.76,16,327/- and imposition of penalty on Director u/r 26 of CER. Through the same SCN, M/s Raj Ratan Industry Ltd . were also called upon to show cause as to why Cenvat Credit amounting to Rs.17,78,078/- should not be recovered from them on similar allegations and their Director should not be saddled with penalty.

Incidentally, the appellant had requested for cross-examination of 11 witnesses but Revenue could produce only four witnesses. The appellant had, therefore, filed a Writ Petition for permitting them to cross-examine rest of the witnesses. The Allahabad High Court dismissed the Writ Petition with the observation that in the event of prejudice caused to appellant, on account of the statement of such witnesses whose cross-examination could not take place, it was open to the appellant to challenge the same with the concerned authority.

The demands were confirmed and penalties were imposed by the adjudicating authority.

Before the CESTAT, the appellant relied upon the decisions in Chandan Tubes & Metals - 2005-TIOL-644-CESTAT-MUM, BasudevGarg - 2013-TIOL-464-HC-DEL-CUS wherein it is held that the testimony of witnesses who could not be produced for cross-examination should not be relied upon as evidence. However, the adjudicating authority had relied upon these very statements while confirming the demand. It is also submitted that payments to the dealers were made through banking channels. Decision in Motabhai Iron and Steel Industries - 2014-TIOL-1617-HC-AHM-CX is also relied upon.

The Bench considered the submissions made by both sides and observed thus -

++ we have taken into consideration the fact that the original authority has relied upon the findings only on the basis of statements of such witnesses whose cross-examination could not be conducted, since the respondent could not produce them.

++ the contention of Revenue is that the inputs were not received by the appellants but it is a fact that appellants manufactured their final product and paid duty on the final product and filed statutory returns for the same and such returns are not questioned by Revenue then, obviously Revenue should have investigated as to from which raw materials the assessee i.e. appellant manufactured the goods.

++ the failure of the Revenue to establish the source of Raw material in the absence of non-receipt of inputs on which Cenvat Credit was taken, brings us to the conclusion that the entire case of Revenue is on the basis of presumption.

Holding that the case laws cited by the appellant are squarely applicable to the facts on hand, the impugned Order-in-Original was set aside and the appeals were allowed.

(See 2016-TIOL-2468-CESTAT-ALL)