Whether the Cenvat credit be recovered if the registered dealer supplying goods is declared to be not in existence by the department?

PJ/Case Law /2016-17/3284

Case:- JAIN ISPAT PVT. LTD. Versus COMMISSIONER OF C. EX., CHANDIGARH

Citation:-2016 (339) E.L.T. 602 (Tri. - Del.)

Brief Facts:-Appellant is in appeal against the impugned order demanding duty along with interest and imposing penalty by denying Cenvat Credit on input to the appellant.
The facts of the case are that during the period 23-8-2007 to 20-9-2007 the appellant procured pig iron (Input) from M/s. Rohit Ispat a registered dealer who procured goods from IDCOL, Kalinga Iron Works Ltd., Barbil, Orissa, who is a manufacturer of pig iron. Appellant procured the said goods under duty paid invoices issued by the registered dealer and paid for the same through account payee cheque. An investigation was conducted at the end of the registered dealer and in result of the investigation it was alleged that the registered dealer is bogus. Therefore, the appellant has not received the goods in the cover of invoices as same are bogus as the registration certificate of the dealer has been cancelled on 19-2-2008 with retrospective effect. As a result of this investigation, a show cause notice was issued to the appellant on 7-7-2008 to deny Cenvat Credit availed by the appellant on the strength of the invoices issued by M/s. Rohit Ispat. The matter was adjudicated. The demand of duty along with interest was confirmed by denying Cenvat credit availed by the appellant on the strength of the invoices issued by M/s. Rohit Ispat and penalty was also imposed. Aggrieved from the said order appellant is before me.

Appellant’s Contentions:-.The ld. Counsel for the appellant submits that the appellant has received the goods in their factory and same has been used in the manufacture of their final product. No investigation was conducted at the premises of the appellant nor any investigation was conducted at the end of manufacturer supplier or transporter of the goods. The Cenvat credit sought to be denied on the premises that registered dealer from whom the appellant procured the goods is non-existent. The same cannot be the reason to deny Cenvat credit as appellant has procured the goods from the registered dealer and made the payment through account payee cheque which have been used by the appellant in manufacture of their final product. Therefore, impugned order is to be set aside. He further submits that the registered dealer was given registration certificate on 20-11-2008 and thereafter no investigation was conducted as per Central Excise Manual directions. Therefore, it is between department and the registered dealer whether he is bogus or not. Appellant has received the goods and taken the Cenvat credit thereon. No cross-examination of the registered dealer was granted to reveal the truth.
Respondent’s Contentions- .On the other hand, ld. AR reiterated the observation made by the lower authorities in the impugned order.

Reasoning Of Judgement-Heard the parties. Considered the submissions. In this case Department sought to deny Cenvat credit to the appellant on the basis of fact that the registered dealer from whom the goods have been procured by the appellant found to be non-existent. It is not the case of the Department that appellant has not received the goods. In fact, no investigation has been conducted at the end of the appellant to ascertain they have received the goods or not. Revenue has not made any investigation at the end of the manufacturer supplier of the goods. No investigation was conducted at the transporter of the goods or at the premises of the appellant to reveal the truth. No cross-examination of the registered dealer was granted to the appellant to reveal the truth. In these circumstances, Cenvat credit cannot be denied to the appellant on the basis of deficient investigation.

Decision:-Therefore, I set aside the impugned order and consequently appeal is allowed with consequential relief, if any

Comment:-If actual purchase is made from the dealer and there is a reasonable belief that the dealer is not bogus than Cenvat on such goods shall be allowed.

Prepared By- Tushar Gupta

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PJ/Case Law /2016-17/3284

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