Commissioner vs Dhanlaxmi Tubes and Metal Industries

Harsha Devani, J.—The Commissioner of Central Excise & Customs, Ahmedabad-II has, in this appeal u/s 35G of the Central Excise Act, 1944 (the Act), challenged the order dated 7-8-2009 [2010 (261) E.L.T. 508 (Tri. - Ahmd.)] made by the Customs, Excise & Service Tax Appellate Tribunal (the Tribunal), proposing the following questions:

(1) Whether provisions of Rule 3 and Rule 9 provides for availing CENVAT credit on the basis of invoices only when such invoices are accompanied by same corresponding goods or credit is available even if some other goods, other than shown in the invoices, are received in the factory?

(2) Whether the CESTAT was correct to allow a CENVAT credit on the basis of invoices when investigations have, on the basis of documentary evidences, established that the inputs for which such invoices were issued have not been transported to the factory?

(3) Whether CESTAT is correct in holding that the goods were received by the assessee when the evidences are clearly indicting that the registered dealer has not received the goods under the invoices against which he has issued invoices?

(4) Whether CESTAT is correct in allowing the credit to the manufacturer on the basis of invoice issued by the dealer showing the reference of suppliers invoice wherein the goods mentioned in the suppliers invoices has not been received by the dealer?

(5) Whether CESTAT is right in holding that the manufacturer can take credit wrongly passed on by the dealer on the basis of documents received by him from the supplier without receipt of the goods mentioned therein?

The respondent-assessee, a manufacturer of copper and brass tubes etc., was availing Cenvat credit under the Cenvat Credit Rules, 2004 on the inputs purchased by it. The officers of DGCEI had collected intelligence to the effect that the respondent was using non-duty paid scrap in the manufacture of its final products. However, in order to avail the Cenvat credit, it was obtaining duty paid invoices of different inputs and was wrongly availing cenvat credit on the strength of such documents without actual receipt of inputs against such documents. The intelligence also indicated that since the duty paid raw material as shown in the duty paying documents were not physically received in its factory for being used by it in or in relation to manufacture of finished goods, the Cenvat credit in such cases where inputs were actually not received and only duty paying documents were being received, was not admissible to the assessee. Accordingly, investigation came to be carried out which revealed that the assessee was procuring different inputs, such as, copper scrap, copper wire scrap, copper rods, copper ingots etc. and had availed the Cenvat credit on such inputs. It was further revealed that the assessee had availed Cenvat credit mainly on the strength of invoices of M/s. Pranav Metal Mart, Nadiad, the registered dealer, who had shown purchases of copper ingots and rods from Jammu based units as well as copper ingots/wire etc. purchased from various registered dealers from Delhi. M/s. Pranav Metal Mart, a registered dealer of Nadiad, also had shown purchases of imported copper of Sri Lankan origin from the registered dealers of Delhi. Such registered dealers of Delhi also imported copper of Sri Lankan origin and sold on high sea sales basis to other manufacturers of articles of copper of Daman and Gujarat. The investigation also revealed that such imported consignments of copper never reached the manufacturers of Gujarat and Daman and credit was availed by the assessees on the strength of only bills of entry and bogus LRs while the goods were sold in or around Delhi only. It, therefore, appeared that M/s. Pranav Metal Mart, Nadiad, also did not receive the copper from Jammu based units as well as imported copper of Sri Lankan origin from Delhi based registered dealers and that it had also obtained only invoices and issued such invoices to the assessee and other units to enable them to avail Cenvat credit. Based on the aforesaid, a show cause notice came to be issued to the respondent assessee which culminated into an order dated 3-10-2008 made by the adjudicating authority confirming the demand of Rs. 2,83,191/- under Rule 19 of the Cenvat Credit Rules, 2004 (the Rules) read with Section 11A of the Act along with interest and penalty. Being aggrieved, the assessee carried the matter in appeal before the Commissioner (Appeals), but did not succeed. The assessee, therefore, preferred second appeal before the Tribunal, who vide the impugned order, allowed the appeal with consequential relief.

Ms. Sejal Mandavia, learned Standing Counsel for the appellant, reiterated the grounds stated in the memo of appeal and placed reliance upon the reasoning adopted by the adjudicating authority as well as by the appellate Commissioner.

A perusal of the record of the case shows that the detailed facts as regards the investigation carried out by the Department are set out in the show cause notice dated 11-1-2008. Upon going through the lengthy show cause notice in its entirety, the Court finds that though on the face of it appears that ample evidence has been collected during the course of investigation, in fact, the evidence collected against the assessee is to the effect that the record of the transporters shows that the vehicles through which the copper ingots/wire scrap were stated to have been sent, had actually transported goods other than copper ingots/wire scraps to the manufacturers at Gujarat, Daman or Silvassa. The entire case of the Department is based on the record of the transporters without the support of any other evidence. The record indicates that there is no dispute that copper ingots purchased from units located at Jammu were transported by trucks from Jammu to Delhi. After transshipment at Delhi, they were shown to be transported from Delhi to the premises of M/s. Pranav Metal Mart, at Nadiad. According to M/s. Pranav Metal Mart, the goods so transported have in fact been received by it under proper invoices. It is also the say of M/s. Pranav Metal Mart that the goods were sold to the assessee and it is the case of the assessee that such goods were received by it along with invoices.

A perusal of the order passed by the adjudicating authority indicates that the officers at the check post had entered the receipt of copper ingots in their record. Thus, even the official records maintained at the check post indicate receipt of copper. Merely because in the record of the transporter, two types of LRs had been issued in respect of the goods carried/transported by M/s. Singal Road Carriers which indicated transportation of miscellaneous goods and the other which indicated transportation of copper ingots/wire brass, the Department has jumped to the conclusion that copper ingots had not actually been transported. Except for the aforesaid evidence, there is no evidence whatsoever to indicate that M/s. Pranav Metal Mart, Nadiad had not received copper ingots or that the respondent assessee had not received the ingots along with the invoices. The statement of Shri Atul Navrattan Lal Sharma, Proprietor of M/s. Singal Road Carriers indicates that it is the categorical case of the said party that it had received raw material at its premises along with the LRs and other documents. The statement of the partner of the assessee, Shri Umesh Shah, also indicates that it was the categorical case of the assessee that it had received central excise invoices issued by the dealers through the truck driver who brought the consignments to its premises. In fact, from the statement of Shri Heda, it is apparent that M/s. Pranav Metal Mart, Nadiad, had even shown receipts of copper consignments and entered such receipts in the RG 23D registers. Likewise, the assessee had also recorded receipts of the raw materials in RG 23A Part-I record.

A bare perusal of the orders made by the adjudicating authority as well as the appellate authority clearly indicates that neither of the said authorities have discussed the evidence in detail and have merely placed reliance upon the report of the transporter for the purpose of holding that the assessee had in fact not received the goods referred to in the invoices and that only invoices had been issued to it and, therefore, the credit was not admissible to the assessee.

As can be seen from the impugned order of the Tribunal, the Tribunal after appreciating the evidence on record has recorded that there is no evidence to reflect upon the fact that the inputs were not actually received by the assessee; there was no dispute that the LRs were issued by the transporter showing that the assessee is the consignee of the goods; the case of revenue was based on the goods registers maintained by the transporter which indicates the description of the goods as "miscellaneous". According to the Tribunal, this fact, by itself, could not be held to be sufficient for arriving at the conclusion that the inputs were never transported to the assessee''s factory. The Tribunal found as a matter of fact that all documentary evidence on record supported the assessee''s case about the receipt of inputs, whereas there was no independent corroborative evidence produced on record by the revenue in support of its case.

From the facts noted hereinabove, it is apparent that the Tribunal has appreciated the facts of the present case in proper perspective and upon appreciating the evidence on record, has as a matter of fact, recorded that except for the goods registers maintained by the transporter, there is no other evidence on record to indicate that the assessee has in fact not received the goods in question. In the circumstances, in the absence of any evidence to the contrary being pointed out on behalf of the revenue, the conclusion arrived at by the Tribunal being based upon findings of fact recorded by it upon proper appreciation of the evidence on record, cannot be said to be unreasonable or perverse. For the foregoing reasons, there being no infirmity in the impugned order of the Tribunal, the same does not give rise to any question of law, as proposed or otherwise, much less a substantial question of law so as to warrant interference. The appeal is, accordingly, dismissed.