In a significant ruling, the Mumbai bench of the Customs Excise and Service Tax Appellate Tribunal (CESTAT) has ruled that Cenvat Credit Rs. 14, 67,774/- is admissible on Central Excise invoices pertaining to copper bars and ingots.
Based on information provided by the Directorate General of Central Excise Intelligence (DGCEI), Mumbai Zone, it was observed that the appellants had availed inadmissible CENVAT credit using central excise invoices for copper bars/ingots issued by M/s Annapurna Impex Pvt. Ltd. (AIPL), Ludhiana, without physically receiving the goods. DGCEI claimed the appellants unlawfully availed CENVAT credit amounting to Rs. 14, 67,774/- and used it for paying central excise duty, violating the Central Excise Rules, 2002. Additionally, the DGCEI alleged that the appellants aided M/s Mars International, Mumbai, in claiming inadmissible CENVAT credit by arranging AIPL invoices for job work involving materials other than those listed on the invoices. A show cause notice was issued on May 25, 2009, after the investigation.
The show cause notice was adjudicated by the Additional Commissioner, Central Excise, Mumbai-V, confirming the demand of Rs. 14,67,774/- along with interest and penalties under the Central Excise Rules, 2004. Dissatisfied with this order, the appellants filed an appeal before the Commissioner (Appeals), who upheld the order on February 8, 2011. The appellants further appealed to the tribunal, and remanding the matter back to the adjudicating authority with instructions to conduct cross-examinations of witnesses and issue a detailed order.
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Following the tribunal’s directions, the adjudicating authority conducted cross-examinations of two out of seven witnesses and reconfirmed the demand through an Order-in-Original dated June 6, 2018. The appellants appealed again, and after a hearing on August 12, 2020, the Commissioner (Appeals) concluded that the original authority’s findings—based on witness statements and documentary evidence proved the appellants’ involvement in availing inadmissible CENVAT credit. The Commissioner upheld the original order and dismissed the appeal on September 7, 2020, prompting the appellants to bring the matter back to the Tribunal.
The tribunal reviewed the case records, including additional submissions. The key issue before the tribunal was whether the appellants were entitled to CENVAT credit of Rs. 14, 67,774/- for inputs allegedly sourced from AIPL, Ludhiana. It was noted that credit was denied because DGCEI’s investigation revealed that AIPL lacked manufacturing facilities for the goods listed on the invoices. During the first appeal, the tribunal had observed that the case relied heavily on the statements of third parties unrelated to the appellants, such as AIPL representatives and brokers. Further emphasized that cross-examination of witnesses was necessary, as mandated by Section 9(d) of the Central Excise Act, 1944.
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In the denovo adjudication, the appellants were cross-examined by two witnesses, including a manager from Star Metal & Tubes Ltd., who confirmed receiving AIPL invoices along with materials. However, the adjudicating authority maintained that AIPL did not have facilities to manufacture copper rods or ingots, concluding that the invoices were issued without actual material supply. The Commissioner (Appeals) upheld this conclusion, but AIPL disputed the department’s claim and obtained a civil court order in 2006, which confirmed the existence of machinery for producing copper ingots at AIPL’s factory.
The tribunal noted that the civil court’s findings and the cross-examination of witnesses supported the appellants’ claim that they received legitimate goods and invoices from AIPL. In a similar case involving the same supplier, the tribunal had ruled that CENVAT credit could not be denied based on documents showing that AIPL supplied the materials.
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The single bench, presided over by Technical Member M.M. Parthiban found no merit in the Commissioner’s order denying CENVAT credit. Consequently, the tribunal set aside the impugned order dated September 7, 2020, and allowed the appeal in favor of the appellants, granting them relief.
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