Cenvat Credit Allegedly Availed without Receiving Goods in Factory: CESTAT quashes Demand and Penalty for Insufficient Evidence [Read Order]

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Hyderabad Bench, heard allegations of Cenvat credit being availed without receiving the goods in the factory. Ultimately, the tribunal quashed the demand and penalty due to insufficient evidence.

The department initiated investigation and recorded a statement to allege that the appellant has availed credit on certain inputs without receiving the goods into their factory in violation of Rule 3 ofCenvat Credit Rules (CCR), 2004. The appellant bought HR coils for manufacture of ‘empty gas cylinders’ and removed them, though not completely, to two different companies.

The Chartered Accountant for the appellant contested that the goods were received in their factory and thereafter were cleared to two companies. The CA submitted that the appellant was reversing the Cenvat credit on removal of said HR coils in the same month or the immediate next month.

The CA produced duplicate copies of invoices and a transporter’s document wherein their factory’s address was mentioned. Further, entries in the gate register showing receipt of goods which were subjected to audit twice in the disputed period without quoting any discrepancy were also supported by the store register. The appellants have passed certain mandatory tests and a test certificate has been issued.

The tribunal observed that the statement relied upon by the adjudicating authority has been interpreted in a manner so as to imply that the person has accepted that the goods were not actually received in the factory of the appellant.

The bench of A.K. Jyotishi (Technical Member) and Angad Prasad (Judicial Member) allowed the appeal, giving the rationale that the entire premise of the case of the department is based on the assumption that the goods had not reached the factory premises of the appellant but the same has been not supported by sufficient evidence. The demand was accordingly set aside.

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