Cenvat Credit on Capital goods procured after due diligence - cannot be denied due to some allegations of fraud, scam etc against the supplier

PJ/Case Laws/2010-11/1100

Case: Tarsen Polyfab Pvt. Ltd v/s Commissioner of C. Ex., Noida

Citation: 2011 (264) E.L.T 225 (Tri. Del)

Issue:- Procurement of Capital goods after due care – cenvat credit admissible – for allegation of any scam against the supplier, assessee cannot be penalized.

Brief facts:- Information was received by the Department that M/s Hindustan Electronics had issued invoices for the capital goods but they have not supplied any capital goods with the impugned invoices to the appellant and the appellants had taken the credit on said fake invoices. Accordingly, premises of appellant was searched and during the course of investigation pachanama was drawn. The statement of appellant no. 2, director of the company was recorded.

As per the statement on record, show cause notice was issued to the appellants. The demand was confirmed by the Adjudicating Authority and penalty was imposed on the both the appellants. Aggrieved with the same, the appellants are in appeal before the Tribunal.

Appellants Contention:- It was submitted that as per panchanama, it is on record that the machines which are in question, which they procured against the duty paid invoices were available in their factory and they have procured these machines against proper duty paid invoices and availed 50% of the Cenvat Credit on duty paid on these machines. It was submitted that on persuasion of the department officers during the course of visit to their factory premises, they took the 50% of the credit and reversed the credit taken on the invoices against which they procured these machines. It was submitted that there was no allegation against the appellants that these machines were not available in their factory and they had procured these machines from the open market or somewhere else without any invoices.

Reasoning of Judgment:- The Tribunal concluded that there was no allegation against the appellants that the capital goods in question which were procured against the said invoices were not available in the factory of the appellants. Moreover, the department has not corroborated with any evidence from where these capital goods were procured, if they are not procured against the impugned invoices. The only allegation in this case that the supplier has done some ‘ghapla’ of central excise duty. In that case, if at all any demand is to be made was to be made against the supplier. The appellants had taken due care while procuring capital goods. Hence, in the facts, and circumstances of this case, the duty demand and penalties are not sustainable.

Judgment:- Appeals allowed with consequential relief.

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PJ/Case Laws/2010-11/1100

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