CENVAT Credit cannot be Avail on the Basis of Second Stage Dealer's Invoices: CESTAT [Read Order]

The Delhi Bench of the Customs, Excise & Service Tax Appellate Tribunal(CESTAT) held that CENVAT Credit cannot be avail based on second-stage dealer's invoices.

M/s Bonafide Arsts Pvt Ltd., the respondent is a manufacturer of MS billets falling under Chapter Heading 720 71920 of the First Schedule of the Central Excise Tariff Act, 1985.  It avails CENVAT credit on the inputs which it receives and uses in the manufacture of the final products.  Based on an investigation report of the Directorate General of Central Excise Intelligence dated 17.07.2015 and an alert notice dated 05.1.2016, officers of the Central Excise Commissionerate.

Jaipur initiated enquiries from the second-stage dealer of Jaipur M/s Shree Mahalaxmi Scrap Trading Company who had supplied scrap to the respondent to ascertain the names of the first-stage dealers from whom M/s Shree Mahalaxmi purchased the goods and also the names of the manufacturers whose goods were supplied. 

Statements were recorded and after completing the investigation, a show cause notice dated 13.02.2018 was issued to the respondent proposing to recover CENVAT credit of Rs. 89,91,247/- under rule 14 of the CENVAT Credit Rules, 2004  read with section 11A (4) of the Central Excise Act, 1944. 

Interest was also proposed to be recovered under rule 14 of CCR read with section 11 AA of the Act.  The penalty was proposed to be imposed under rule 15 (2) of CCR read with section 11AC of the Act. On appeal, the Commissioner (Appeals), by the impugned order, set aside the O-I-O.  

The cross-examination of one of the persons Manoj Vijay was allowed in which he asserted that the goods were transported not to his premises but were transported directly to the premises of the respondent. 

The respondent is a user of the scrap which it procured from a second stage dealer. The second-stage dealer procured the goods from the first-stage dealers, who, in turn, indicated that they purchased from the manufacturers. 

The buyer of scrap or input is not required to launch an investigation to find out if his supplier had, in turn, purchased the goods properly from his suppliers (first-stage dealer) and that the first-stage dealer had, in turn, purchased the goods from the manufacturer and if that manufacturer had, during the relevant time, manufactured the goods and also paid excise duty.  All that is required is for the user to obtain the goods under the cover of proper invoices which the respondent did.  

A two-member bench of Justice Dilip Gupta, President and Mr P V Subba Rao, Member ( Technical )  viewed that if the manufacturer had not manufactured the goods they could not have been supplied by the manufacturer to the first stage dealer and further to the second stage dealer and the respondent.  It certainly creates enough reasons to doubt but the issue can only be decided through a thorough investigation. 

The CESTAT upheld the impugned order and dismissed the appeal filed by the Revenue.

To Read the full text of the Order CLICK HERE

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