By TIOL News Service

NEW DELHI, JULY 08, 2014: THE issue involved is denial of CENVAT Credit on the inputs on the ground that the goods were not received by the assessee. According to the investigations, the assessee's unit is located in Himachal Pradesh and as per the provisions of Himachal Pradesh General Sales Tax Act, 1968, the owner or person in charge of goods, carriage or vessels entering the limits of H.P. State or leaving the H.P. state limits has to give, in triplicate, a declaration containing such particulars as may be prescribed of the goods carried in such vehicle or vessel as the case may be, before the officer in charge of the check post or barriers and ST-XXVI-A form is required to be generated/submitted at the barriers/check-posts for the goods entering into/leaving the State of H.P. It is the case of the department that the subject case was booked primarily on the basis of Sales Tax records pertaining to the supplier, M/s Karan & Co. Parwanoo. As per evidence gathered and confirmed by the Sales Tax Authorities, the goods have not even crossed the State border on the appointed dates, yet Cenvat Credit has been availed by the party.

The department is in appeal before the Tribunal against the order of Commissioner (Appeals) setting aside the demand confirmed by the original authority.

The appellant contended that the department found wrong with the supplier of the goods and not with the receipt of the goods. There was no challenge when manufacture of goods and subsequent payment of duty has not been challenged. If the goods have been manufactured, it is deemed that raw materials have also been used for manufacture of final products.

After hearing both sides, the Tribunal confirmed the demand and penalties by holding that:

In view of clear evidence in respect of non-crossing of Sale Tax check post barrier, a clear conclusion emerges of non-receipt of goods. Further from the records indicated in Annexure A for Sl. No. 3 to 9, it has been proved that goods in records are shown to have been cleared on a later date and receipt in factory has been shown on a prior date. There is no force in Commissioner (Appeals)'s findings that sales tax records cannot be relied upon. Once goods are proved not crossed border and then not received in factory, availment of Cenvat credit on such invoices becomes not maintainable and becomes fraudulent in nature.

Once movement of inputs is not proved, credit cannot be availed. No benefit can accrue merely because no challenge to manufacture and subsequent manufacture has been made. In view of clear emergence of evidence indicating non-receipt of materials in factory, manifesting fraudulent activities, demand has to be upheld.

It is held that Cenvat credit is available for transaction at Sl. No. 1 and 2 of Annexure A. Cenvat credit is not available for transaction at Sl. No. 3 to 9 of Annexure 'A'. Also Cenvat credit is not available for transactions shown at Sl. No. 1 to 3 in Annexure 'C'. Demand is required to be re-calculated. Similarly penalties are imposable for irregularly taken credit on the assessee and the supplier, but require to be modified in view of Cenvat credit ordered to be available at Sl. No. 1 & 2 of Annexure 'A'.

(See 2014-TIOL-1225-CESTAT-DEL)