The Allahabad Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has set aside a ₹2.39 crore CENVAT credit demand against assessee holding that the department failed to establish that the company received invoices without receiving copper scrap.
The Bench of P.K. Choudhary (Judicial Member) and P. Anjani Kumar (Technical Member) pointed to a gap between the department’s broad allegation and its investigation at the company’s premises. Although the assessee was accused of taking credit without receiving the corresponding material, investigators had made no effort to take stock of the raw material available at its factory. Such an exercise could have produced substantial evidence, the Bench observed.
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The dispute arose from a Directorate General of Central Excise Intelligence investigation into Amit Gupta and firms allegedly controlled by him. The department suspected that the firms passed on CENVAT credit through invoices for non-ferrous metals without physically supplying the goods. It alleged that assessee instead received non-duty-paid copper scrap from the local market and obtained invoices from the firms to account for those purchases and claim credit.
A show-cause notice issued on August 19, 2015, led to an adjudication order dated September 30, 2024, confirming denial of ₹2,39,61,066 in CENVAT credit, with interest and an equal penalty. The assesse appealed.
The company maintained that it had purchased and received copper scrap through a broker. The Tribunal noted that the broker and a transporter had described deliveries to assessee’s factory. In particular, the transporter stated that a representative of Mohit Gupta escorted vehicles carrying scrap and delivered the material at the factory. Yet, the investigation did not establish that the assessee had itself arranged scrap from the market or knew of any alleged manipulation by the suppliers, the Bench found.
Another central issue was the treatment of witness statements. Amit Gupta’s account during cross-examination differed from his earlier statements made during the investigation. Other persons whose statements were relied upon were not produced for cross-examination, and the adjudication order did not explain why. The Tribunal held that their statements could not simply be relied upon against assessee in those circumstances. It also faulted the adjudicating authority for failing to examine the witnesses under Section 9D of the Central Excise Act, 1944, before treating their investigation statements as evidence.
The Bench rejected the adjudicating authority’s approach of dismissing retractions as belated without addressing the timing of the proceedings. Third-party statements were supplied to assessee with the show-cause notice, so the company could seek cross-examination only after receiving that notice. The investigation, notice and adjudication had themselves stretched over several years, the Tribunal observed.
The adjudicating authority had also cited the fact that some other noticees settled their cases under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019. The Tribunal found that the authority had drawn general conclusions from the wider investigation instead of examining the particular evidence and submissions concerning assessee.
Describing the company’s claim that it received goods with invoices as uncounted by evidence, the Bench held that the order could not be sustained against it. It allowed assessee’s appeal with consequential relief, if any, in accordance with law. Although the company had sought a refund of an amount it said it had reversed during the investigation, along with interest, the Tribunal’s operative direction did not separately specify a refund amount or interest rate.
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