Denial of cenvat credit on ground of non-receipt of inputs without corroborative evidences

PJ/CASE LAW/2015-16/2908

Case:- MANORANJAN SINGH DUGGAL VERSUS COMMR. OF C. EX., DELHI-IV, FARIDABAD

Citation:-2015 (325) E.L.T. 892 (Tri. - Del.)

Brief facts:- Both these appeals have been filed against the impugned order dated 8-4-2014 passed by the Commissioner (Appeals), wherein duty demand and penalty confirmed in the adjudication order were upheld.
The reason for confirmation of the cenvat demand and imposition of penalty are that M/s. Aar Aar Technoplast Pvt. Ltd. has availed cenvat credit of Rs. 1,95,970/- on the basis of invoices without receiving the goods in the factory. The investigation conducted in this regard by the Department revealed that the first stage dealer M/s. Jagruti Resins Pvt. Ltd. has not supplied the goods to the second stage dealer M/s. Shree Sai International, Faridabad, from whom goods have been purchased by the appellant.

Appellant’s contention:- Shri. R.P. Jindal, ld. Consultant, appearing for the appellant submits that the goods covered under the disputed invoices have been received in the factory and used in or in relation to manufacture of the final products. To substantiate that the goods have been received and used for the intended purpose, the ld. Consultant submitted the documents such as, payment vouchers, material receipt report, gate entry register etc. before the authorities below. However, no findings have been recorded either by the adjudicating authority or the first appellate authority regarding the documents submitted by the appellant. He further submits that the investigation conducted at the first stage dealer’s premises, without conducting any investigation at the second stage dealer’s end, cannot be the reason for disallowance of cenvat credit to the appellant. It is his further submission that the vehicle number indicated in the invoices of the second stage dealer has not been verified by the department to arrive at the conclusion that the goods have not been received in the factory of the appellant.

Respondent’s contention:- Per contra : ld. DR Shri G.R. Singh appearing for the respondent reiterates the findings recorded in the impugned order and further submits that investigation conducted by the Department clearly revealed that the vehicle has not been used for transportation of the goods from first stage dealer’s premises to the second stage dealer. Ld. DR further submits that since the goods have not been supplied by the first stage dealer to the second stage dealer, there is no question of receipt of the goods by the appellant in their factory premises and thus, cenvat credit taken by the appellant is not admissible to them.

Reasoning of judgment:-They have heard the ld. Counsels for both the sides and perused the records.
They find that the cenvat credit on the input has been denied to the appellant on the sole ground that the first stage dealer M/s. Jagruti Resins Pvt. Ltd. had not supplied the goods to the second stage dealer M/s. Shree Sai International, Faridabad, from whom the goods have been purchased by the appellant. They find that the appellants have maintained proper records to prove that the goods have been received in their factory premises. In this regard, the records such as, material receipt register, gate entry register etc., though were produced before the authorities below, but no findings have been recorded regarding such claim of the appellant and also the authenticity of the documents have not been doubted. Further, register maintained by the appellant clearly shows that the amount indicated therein has been paid to the second stage dealer for supply of the goods and that the said payment has been routed through approved banking channel. Denial of cenvat credit on the ground of investigation conducted at the premises of the first stage dealers, cannot be the defensible ground, especially in view of the fact that no investigation has been conducted at the premises of the second stage dealer, from whom the goods have been purchased by the appellant.
Since, the Department has not adduced any plausible evidence regarding non-receipt of the disputed goods by the appellant, penalty imposed on Shri Manoranjan Singh Duggal, President of the appellant company is not sustainable under the law.
In view of above, they are of the opinion that denial of cenvat credit and imposition of penalties on the appellant are not justified, and thus, the impugned order is set aside and the appeals are allowed in favour of the appellant.

Decision:-Appeals allowed.

Comment:- The analogy of the case is that when appellants have maintained proper records to prove that the goods have been received in their factory premises and their genuineness is not doubted then the investigation at the first stage dealer cannot be the sole grounds for denial of cenvat credit to the appellant. In this regard, the records such as, material receipt register, gate entry register etc., though were produced before the authorities but no findings have been recorded regarding such claim of the appellant and also the authenticity of the documents have not been doubted. Further, register maintained by the appellant clearly shows that the amount indicated therein has been paid to the second stage dealer for supply of the goods and that the said payment has been routed through approved banking channel. Hence, denial of credit is not justified in the absence of proper investigation conducted against the appellant and in absence of cogent and corroborative evidences.

Prepared by:- Monika Tak

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PJ/CASE LAW/2015-16/2908

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