Whether Cenvat credit can be denied on ground that there was fake vehicle number on vehicle on which inputs were transported to assessee without further corroborative evidence?

PJ/Case Laws/2012-13/1025

Case: C.C.E., LUDHIANA V/s PARMATMA SINGH JATINDER SINGH ALLOYS P.LTD.

Citation: 2012 (25) S.T.R. 281 (Tri.-Del.)

Issue:- Whether Cenvat credit can be denied on ground that there was fake vehicle number on vehicle on which inputs were transported to assessee without further corroborative evidence?

Brief Facts:- Respondent-assessee is engaged in the manufacture of non alloy steel ingots product falling under Chapter 72 of the Central Excise Tariff Act, 1985. They were availing the benefit of modvat credit of duty paid on inputs. The dispute in the present case relates to modvat credit of Rs. 87,447/- availed on the basis of invoices issued by the registered dealer M/s. Amit Steel Traders. Investigation revealed that vehicle no. mentioned in invoices issued by registered dealer were fake and fictitious inasmuch as the transport company named in the invoices were found to be non existence.

Revenue issued show cause notice on the ground that goods were clandestinely removed to other destination and were never received by the respondent in their factory. The Adjudicating Authority confirmed the demand of duty against the respondent by denying them the modvat credit. In addition penalty was also imposed upon both respondents.

In appeal, the Commissioner (Appeals) set aside the impugned orders by accepting the stand of the Respondent that there was no other corroborative evidence to show non-receipt of inputs in Respondent’s factory and of diversion of goods to another unit. Reliance was placed on CCE, Chandigarh v/s Shakti Roll Cold strips Pvt Ltd [2007 (80) RLT 207 (CESTAT-DEL]. The Commissioner by another order has set aside the penalty on the dealer.

Hence, Revenue is in appeal before the Tribunal.

Appellant’s Contention:- Revenue contended that as per investigations conducted the vehicle nos. mentioned in the invoices issued by the registered dealer were fake and fictitious inasmuch as the transport company named in the invoices was found to be non existence. In one of the cases, the vehicle no. belongs to an oil tanker. Accordingly, the goods cleared by the said registered dealer were not actually received by the manufacturing unit and were diverted to other small scale manufacturers.

Respondent’s Contention:- Respondent argued that apart from discrepancies in the vehicle nos. there is no other evidence on record to show that the inputs have not been received by them. They have submitted that the inputs received under the cover of the said invoices were duly entered in their stock register and other statutory records were maintained by them as also by the supplier of the material. The payments for such inputs were made through cheques to the consigner. They also submitted copies of GRs covering the disputed consignment and freight payment vouchers in respect of freight paid to the transporters to prove actual receipt of goods to the appellant’s premises. They contested the revenue's case that the goods were diverted to some SSI unit is based upon assumption and presumption and no identity of any such SSI unit stand disclosed by the Revenue. As such they submitted that there being no evidence as regards diversion of the inputs and there being no dispute, the denial of credit was neither justified nor warranted and Commissioner (Appeals) has taken a correct decision.

As regards the vehicle nos. being wrong or the transporter being not in existence, they have submitted that the goods were purchased from the registered dealers, though on ex-godown basis, it is the dealer who arranges the transport vehicle for the goods. The buyer makes payment towards freight and other expenses relating to transportation. The mistake, if any, is on the part of the supplier of the goods engaging such transporter who may be using fake number plate or fake GR. They have further submitted that it may happen that the truck in question are owned by a single person working in inorganised way or using fake number to avoid various direct or indirect taxes or other legal formalities, the use of fictitious truck number is a fraudulent practice and the person availing the services of vehicles have no means of knowing whether the number of vehicle is correct registration number or fictitious number. Many a times fake registration nos. or certificates are arranged by the transporter in a fraudulent manner with an intent to evade road tax or to escape from other legal complication relating to Motor Vehicle Act.

Reasoning of Judgment:- The Tribunal held that apart from the wrong vehicle numbers, there is virtually no other evidence available on record to reflect upon the fact that the inputs were not actually received by the respondent and were diverted to the other SSI units. The observation of the original adjudicating authority as regards diversion of the inputs is based on conjectures and surmises inasmuch as there is virtually no evidence on record showing such diversion. Further, the appellants have also entered the said inputs in their RG-23A Part-I records and have shown the consumption of the same for manufacture of the final product. The said plea of the appellant does not stand rebutted by the revenue. If that be so, the allegation as regards diversion cannot be upheld. Once the assessee takes the modvat credit on the inputs, he is under legal obligation to simultaneously enter the inputs in their stock record and to show the utilisation of the same in the manufacture of the final product. It is not the revenue case that credit stand availed without entering the inputs in the records. If the inputs have also been entered and used in the final product, which stand cleared, on payment of duty, the denial of credit on the sole ground that the vehicle numbers were not found to be genuine cannot be made the basis for arriving at a finding against the assessee. The assessee explanation that such use of fake number plate by the transporter who are operating one or two trucks is something which is not uncommon and such use is very frequent, has some force.

Similarly, it was held that the respondent's contention that the consideration for the goods was paid through cheques, freight payments were made by vouchers and there is no other evidence on record, have to be held as tilting the weight of evidence in their favour. Further, the reliance on the various decisions of the Tribunal is appropriate inasmuch as in identical circumstances it stand held that wrong vehicle numbers cannot be made the basis for denial of credit where the payments for the inputs have been made by cheque, inputs are entered in records used in the manufacture of the final product, which were cleared on payment of duty.

Decision:- Appeals rejected.

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PJ/Case Laws/2012-13/1025

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