Cenvat Credit Cannot Be Denied Merely on Third-Party Statements Without Corroborative Evidence

The Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has overturned the denial of Cenvat credit amounting to ₹5,25,245 to Kandoi Metals Powders Mfg. Co. Pvt. Ltd. The tribunal found that the Department's allegations of fraudulent credit claims, based primarily on third-party statements and supplier chain investigations, lacked sufficient corroborative evidence. Despite the Department's claims, the appellant provided documentary proof, including transporter receipts and register entries, which were not effectively rebutted. CESTAT emphasised that uncorroborated oral statements cannot override documentary evidence, especially when the Department failed to conduct thorough investigations or comply with legal requirements for relying on such statements.

The Customs, Excise & Service Tax Appellate Tribunal (CESTAT), New Delhi, has set aside the denial of Cenvat credit of ₹5,25,245 to M/s Kandoi Metals Powders Mfg. Co. Pvt. Ltd., holding that the Department's allegations were not supported by sufficient corroborative evidence.

The Department alleged that the appellant had fraudulently availed Cenvat credit on copper ingots without actual receipt of goods. The allegation was based primarily on investigation into the supplier chain, including a concern allegedly involved in issuing invoices without actual movement of goods.

The appellant, however, produced documentary evidence including Goods Receipts (GRs) issued by the transporter and entries in the RG 23A Part-II register, showing receipt of the inputs. The Tribunal noted that the transporter had not been investigated or questioned by the Department, and the documentary evidence supporting transportation of the copper ingots had not been effectively rebutted.

CESTAT observed that the Department relied mainly on oral statements recorded during investigation, without producing corroborative documentary evidence. It held that documentary evidence could not simply be disregarded in favour of uncorroborated oral statements, and also noted the Department's failure to comply with the requirements of Section 9D of the Central Excise Act for relying upon such statements.

Importantly, the Tribunal found that:

• No enquiry was conducted with the transporter regarding the alleged non-receipt of goods.
• The appellant's premises were neither searched nor was its statement recorded.
• The appellant was clearing manufactured goods and paying Central Excise duty.
• The Department's case was substantially based on third-party data rather than direct evidence against the appellant.

CESTAT's Decision

The Tribunal held that the burden of proof rested on the Department, and that the documentary evidence produced by the appellant sufficiently contradicted the allegations. Consequently, the order denying Cenvat credit was set aside and the appeal was allowed.

This AI-generated summary is for informational purposes only. Please view attached original judgment for the complete text and authoritative interpretation.