Whether reliance can be placed on the sole statement of one dealer without supported by investigation/inquiries conducted thereon?

PJ/Case Laws/2012-13/1256

Case:- M/s TALSON MILL STORE Vs COMMISSIONER OF CENTRAL EXCISE, LUDHIANA

Citation: - 2012-TIOL-1267-CESTAT-DEL

Brief fact: - The Appellant is a dealer of excisable goods and is duly registered with Central Excise department. During the course of investigation against one M/s. Jay Aay Alloys Pvt. Ltd., an induction furnace located in Himachal Pradesh, it was found that they were clearing steel ingots allegedly manufactured by them through their Mandi Gobindgarh based consignment agent namely M/s. Ved Trading Company. M/s. Ved Trading Company was further selling the goods to various dealers. One such dealer was M/s, Sidh Balak Enterprises located in Mandi Gobindgarh. The proprietor of the said M/s. Sidh Balak Enterprises, Shri Sachin Aggarvanshi, in his statement recorded on 5.4.2007, admitted that though in his records, he has shown the receipt of ingots from M/s. Ved Trading Company and has further issued bills for sale of such ingots but in reality he has neither received the goods from M/s. Ved Trading Company nor dealt with ingots at all. He further clarified that he was receiving the commission of Rs. 50/- PMT in respect of ingots shown to have been received from M/s. Ved Trading Company and further shown to have been sold to various manufacturers. He also deposed that he was not having any godown address, landline number and mobile number etc. mentioned in the bills issued to the dealers of Ms. Ved Trading Company.

The Appellant had also purchased goods from M/s. Sidh Balak Enterprises under the cover of invoice No. 612 and 613 both dated 4.2.2006 and had farther sold 15.820 MT of cenvatable goods i.e. bars/flats under the cover of their own invoice No. 356 dated 6.2.2006 to M/s. Varindra Tools who took Cenvat credit of Rs.52,045/-, Revenue entertained a view that the said transaction was also bogus. Accordingly, proceedings were initiated against the appellant as also against M/s. Sidh Balak Enterprises and M/s. Varindra Tools. The said proceedings culminated into an order passed by Deputy Commissioner confirming the demand of Rs.52,045/- against M/s. Varindra Tools along with imposition of penalty. In addition, penalties of identical amounts were imposed upon M/s. Sidh Balak Enterprises and on the appellant M/s. Talson Mills Store.

Being aggrieved with the above order, appellant filed an appeal before Commissioner (Appeals) who rejected the same.

Being aggrieved by the same appellant is in appeal before Tribunal

Appellant Contention: - . The Appellants have taken a strong objection to such reliance on the statement of Shri Sachin Aggarvanshi by submitting that the goods purchased by the appellant from M/s. Sidh Balak Enterprises were received by him from other manufacturers and not from M/s. Ved Trading Company.

Respondent Contention:- Revenue placed reliance upon statement of Shri Sachin Aggarvanshi, proprietor of M/s. Sidh Balak Enterprises that he never received goods from M/s Ved Trading Company. Therefore, the transaction entered by M/s. Sidh Balak Enterprises with the appellant was held to be bogus.

Reasoning of Judgment: The Tribunal held that the revenue has relied upon the statement of Shri Sachin Aggarvanshi in respect of all the dealings made by him whereas the fact is that statement of Shri Sachin Aggarvanshi was in respect of goods received from M/s. Ved Trading Company. It is also seen that M/s. Varindra Tools, in their reply to the show cause notice have clearly stated that they had availed the Cenvat credit on the basis of invoice No. 356 dated 6.2.2006 issued by M/s. Talson Mills Store to whom the goods were supplied by the first stage dealer M/s. Sidh Balak Enterprises, Mandi Gobindgarh and the goods in question were manufactured and supplied to the said first stage dealer by M/s. Patiala Strips Ltd. Mandi Gobindgarh under the cover of their invoice No. 515 dated 12.11.2005. As such it is seen that goods were originally manufacture by M/s. Patiala Strips Ltd. consigned to first stage dealer M/s. Sidh Balak Enterprises who in turn sold the same to second stage dealer M/s. Talson Mill Stores who further sold the same to manufacturing unit M/s. Varindra Tools Pvt. Ltd. As such in the entire transaction, the name of M/s. Ved Trading Company does not appear. Reliance by the Revenue on the statement of Shri Sachin Aggarvanshi cannot be appreciated inasmuch as the said statement was in connection with the goods traded through M/s. Ved Trading Company. Shri Sachin Aggarvanshi in his statement has nowhere mentioned that the goods received by him from other manufacturer were also bogus and were not actually received by him.

The Revenue has also not bothered to conduct further inquiries either from the appellant or from the transporters or the actual manufacturer of the goods or from the recipient of the goods. In the absence of any such investigation, reliance on the sole statement of Shri Sachin Aggarvanshi, which in any case does not apply to the goods dealt with by the present appellant cannot be appreciated.

The Tribunal fails to understand as to why no statement of appellant was recorded or no inquiries were conducted by the actual manufacturer i.e. M/s. Patiala Strips Pvt. Ltd and also no statement of representative of M/s. Ved Trading Company was recorded so as to arrive at the correct factual position.In the absence of any such inquiries and in view of the fact that statement of Shri Sachin Aggarvanshi is not applicable, there is no reason to impose penalties upon the appellant. The same is accordingly, set aside and appeal allowed with consequential relief.

Decision: -Appeal allowed

Comments:- This decision has highlighted the ratio that the demand cannot be confirmed on the basis of only statement of one person. It has to be supported by investigation and inquiry done by the department. This decision will be very helpful for the consultants.

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PJ/Case Laws/2012-13/1256

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