Denial of credit for non-receipt of goods.

PJ/Case Law /2016-17/3275

Case:- ANJ METAL RECYCLING PVT. LTD. VERSUS COMMISSIONER OF C.E., CHANDIGARH

Citation:-2016 (337) E.L.T. 453 (Tri.-Chan.)

Brief Facts:-The facts of the case are that the investigation was conducted on one M/s. Jai Kara Steel Rolling Mills, Mandi Gobindgarh on 28-2-2005 and the gate-keeper of the said factory submitted that the factory is closed from last one year and factory started working about 4-5 months back and 9-10 workers are working in the factory, only 2-4 machines are in working conditions and there is no stock of finished goods as well as raw material and he has never seen any direct loading and unloading of material in the factory. As M/s. Jai Kara Steel Rolling Mills was dealing through registered dealers namely M/s. Jyoti Steels, the premises of M/s. Jyoti Steels was visited which was found locked. Thereafter, conducting more investigation a show cause notice was issued to the appellant on the basis that invoices issued by M/s. Jyoti Steels are only paper transactions and no goods have been received by the appellant. As well as M/s. Jyoti Steels which was adjudicated and availment of Cenvat credit on the invoices issued by M/s. Jyoti Steels was denied. Consequently, duty demand along with interest and penalty is also imposed on the appellant.

Appellant’s Contention:-Shri Gaurav Aggarwal, ld. advocate for the appellant appeared and submits that appellant is a manufacturer buyer of the impugned goods and they have received goods from M/s. Jyoti Steels against two invoices wherein the manufacturers have shown as M/s. R.S. Enterprises/M/s. Mittal Steel Industries & Rolling Mills. Therefore, on the basis of investigation conducted at the end of M/s. Jai Kara Steel Rolling Mills and concluding that as dealer is non-existent, the demand is not sustainable. As they have received the goods in their factory under the cover of duty paid invoices which shows the manufacturer and supplier of the goods and they have paid the amount against this invoice through cheque, therefore, without conducting investigation at the end of transporter and manufacturer supplier or physical verification of the stock, the demand is not sustainable.

Respondent Contention:-ld. AR opposes the contention of the ld. counsel and submits that in this case the first stage dealer who issued the invoice is non-existent. Therefore, question of receipt of goods by the appellant does not arise. He further submits that enquiries were revealed which shows that first stage dealer was not having any godown to store the goods. Moreover, he remained non-co-operative with the departmental officer during the course of the investigation itself. Therefore, burden casts on the appellant to prove that they have received goods physically in their factory which they failed to do so with any tangible evidence. He also relied on the statement of the authorized representative of the appellant. To support his contention he relied on the decision in the case of Neelkanth Steel Agro Industries- Final Order No. A/54432/2014-SM(BR), dated 29-10-2014 [2015 (317)E.L.T.322 (Tribunal)] and Sidh Industriesv. CCE, Chandigarh - 2010 (257)E.L.T.454 (Tri.-Del.).

Reasoning of Judgment:-On perusal of records it is found that the investigation started at the end of M/s. Jai Kara Steel Rolling Mills where they came out with the information that they are selling goods through M/s. Jyoti Steels. Thereafter, investigation was conducted at the premises of M/s. Jyoti Steels which was found non-existent and having no godown. In these set of facts, it is concluded against the appellant on the basis of the statement of proprietor of M/s. Jyoti Steels and authorized representative of appellant that appellant has procured invoice not physically received any goods. Therefore, Cenvat credit was denied. In this case, it was found that the manufacturer supplier of the goods is not M/s. Jai Kara Steel Rolling Mills at all. No investigation has been conducted by the Revenue at the end of manufacturer supplier who has issued the invoices on which the appellant has taken Cenvat credit. No investigation was conducted from the transporters to ascertain the fact whether goods have been transported to the appellant’s factory or not. Merely on the ground that M/s. Jyoti Steels is non-existent and having no godown, denial of Cenvat credit is proposed. It is not disputed by the Revenue that during the relevant period, M/s. Jyoti Steels was the registered dealer and registration was granted to M/s. Jyoti Steels by Central Excise Registration Department. If a supplier of goods is the registered dealer of the department itself, the department cannot allege that dealer is non-existent unless and until registration is cancelled.

Therefore, in absence of sufficient and cogent evidences to prove that the cenvat credit was taken without receipt of goods, the credit cannot be denied.

Decision:-Appeal allowed.

Comment:-The crux of the case is that credit cannot be denied to the receiver of goods without establishing that the credit was availed without receipt of goods. In the present case, the appellant has produced invoice on the strength on which they have availed Cenvat credit and the goods have been entered in their RG-23 register and same has been supported by the slips which were produced by the appellant. However, on the contrary, no investigation was conducted at manufacturer’s/transporter’s place to substantiate that there was no delivery of goods. Hence, credit cannot be denied on assumptions and investigation conducted at the end of dealer.

Prepared by:- Bharat Chouhan

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PJ/Case Law /2016-17/3275

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