Mere Paper Trail Or Endorsed Bills Of Entry Without Actual Movement Of Goods Not Enough To Claim CENVAT Credit: CESTAT Chennai

Vasa Seshagiri Rao (Technical Member) opined that mere creation of paperwork or paper trail to indicate movement of goods, or mere endorsement of Bills of Entry, is not sufficient to establish eligibility for credit. The essential conditions required for availing credit have therefore not been fulfilled.

In the case at hand, the appellant (assessee 1) was a registered manufacturer of TMT bars and ingots falling under Chapter 72 of the Central Excise Tariff Act, 1985.

The assessee had been availing CENVAT credit on raw materials procured for the manufacture of its final products and was also operating as a registered trade dealer from the same premises under a different door number (assessee 2)

M/s. Ganesh Ventures (assessee 3) was a registered trader operating from a different location. All three units belong to the same group and therefore share a common business interest.

The Assessee 1 imported iron and steel melting scrap for use in manufacturing. Whenever the material was not required for manufacturing, assessee 1 transferred the imported scrap to assessee 2, located within the same premises but under a different door number, by endorsing all Bills of Entry for trading purposes.

Assessee 2 subsequently transferred the material to assessee 3 by issuing invoices. Assessee 3, in turn, issued another set of invoices and transferred the scrap back to Assessee 1. However, the goods physically remained in the premises of assessee 1 throughout.

The department opined that it appears that the transactions between assessees 2 and 3 were only paper transactions without actual movement of goods, based on which assessee 1 availed CENVAT credit. In view of these facts, the assessees/Appellants had violated Rule 4 of the CENVAT Credit Rules, 2004.

Accordingly, a Show Cause Notice was issued proposing to demand an amount of Rs. 46,66,010/- under Rule 14 of the CENVAT Credit Rules, 2004, read with the proviso to Section 11A(1) of the Central Excise Act, 1944, on the ground of wrong availment of credit.

After due process of the law, the Adjudicating Authority confirmed the demand proposed in the Show Cause Notice and imposed penalties as proposed.

Aggrieved by the said order, the assessees preferred an appeal before the Commissioner (Appeals), which was dismissed.

The Tribunal stated that the issues involved clearly indicate that there is a violation of the provisions of CENVAT Credit Rules, 2004, making the appellant ineligible to avail of credit. It is also not clear how CENVAT credit has been availed or transferred without receipt of the goods involved physically.

The bench stated that there is no evidence to establish that any physical movement of goods actually took place. While endorsed documents may serve as evidence of duty payment, there must also be clear and credible proof of receipt of the goods under those documents and their subsequent use in manufacture/sale.

The Tribunal held that the assessees had failed to substantiate, with clear proof or evidence, that the transactions in question actually took place, based on the records available.

In view of the above, the Tribunal dismissed the appeal.

Case Title: M/s. Shree Ganesh Steel Rolling Mills Ltd. v. Commissioner of GST and Central Excise

Case Number: Excise Appeal No. 42213 of 2015

Counsel for Appellant/ Assessee: S. Murugappan

Counsel for Respondent/ Department: M. Selvakumar

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