The Delhi Bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has observed thatthe Buyer of inputs can’t verify all the supplier duty liability and held that CENVAT credit can be allowable to Bonafide purchaser of goods which includes a duty.
Shri D.K.Mohanty& Shri P.K.Sahoo, both Advocates for the Appellant (s) and Shri J.Chattopadhyay, Authorized Representative for the Respondent (s)
The Appellant, M/s.New Modern Technomech Private Limited is engaged in the manufacture of Galvanized Steel towers, Transmission Line Towers, H.T. Stay Sets, L.T. Stay Sets, Clamps Structural materials etc. The Appellant used various inputs and one among them is Furnace Oil.
The Appellant purchased 15,711 Kilo Litres of Furnace Oil for an amount of Rs.7,28,978/- from one of the vendors viz. M/s.Sri Kamala Udyog has its factory and availed CENVAT Credit of Rs.92,660/- (including Cess). Show Cause Notice dated 27.01.2016 was issued on the ground that M/s. Sri Kamala Udyog has no existence and no plant and machinery are there in their declared premises and they are not performing any manufacturing activities.
It was alleged that said M/s.Sri Kamala Udyog had undertaken only paper transactions and issued fake Central Excise invoices. Hence the CENVAT Credit availed by the assessee against the invoice issued by the alleged fraud manufacturer cannot be treated as CENVAT in terms of Rule 3 and the invoices are not proper documents under Rule 9(1)(a) of CENVAT Credit Rules, 2004 for availing of credit. So, the credit availed on the said documents is inadmissible and recoverable along with interest and penalty.
The Commissioner of Central Excise confirmed that M/s. Sri Kamala Udyog, Rishra has no existence. The executing authority disallowed credit of Rs.92,660/- and ordered for recovery along with interest and also imposed a penalty of an equal amount under Section 11AC of the Central Excise Act, 1944 read with Rule 15 of the CENVAT Credit Rules, 2004. On appeal, the Commissioner(Appeals) rejected and upheld the adjudication order.
The Appellant was a bona fide purchaser of the goods for a price which included a duty element based on a valid certificate of registration issued to the manufacturer/supplier by the Superintendent of Central Excise supported with a Cenvatable invoice. The Appellant has substantively taken reasonable steps to comply with the provisions of Rule 9(5). The fact that the assessee made payments by cheque is held to be proof of his bona fide. Further, the Revenue has failed to establish that the Appellant received any unlawful kickback for executing the alleged purchase.
The buyer can take only those steps which are within his control and cannot be expected to verify the records of the supplier to check whether he had paid duty on the goods supplied by him. The only reasonable steps he can take is to ensure that the supplier is trustworthy, as the inputs are received and the documents, prima facie, appeared to be genuine.
The Circular of the Central Board of Excise and Customs dated 15.12.2003 clarifies that CENVAT Credit should not be denied to a user manufacturer as long as the bonafide nature of the consignee’s transaction is not doubted.
While allowing the appeal, the Bench of Shri P K Choudhary, member(judicial) observed that there is no failure and/or willful suppression of any fact of the transaction by the Appellant, having entered and recorded the transaction in its books of accounts and penalty can’t be invoked.
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