Commissioner Of CGST And Central Excise, Howrah Commissionerate vs. M/S. Ashirwad Foundries Private Limited And Anr.

Held

The Court held that the CESTAT erred in deeming the statements recorded under Section 108 of the Customs Act inadmissible. The Court noted that at no point was there any retraction of these statements. The Court found that the decisions relied upon by the CESTAT, such as G-Tech Industries, Nirmal Singh Pehlwan, and Duncan Agro Industries, were distinguishable on facts. Specifically, in Duncan Agro Industries, the accused had retracted their confessional statements, which was not the case here. The Court also noted that officers conducting inquiries under Section 108 are not police officers, and statements made before them are not inadmissible under Section 25 of the Evidence Act. Consequently, the Court found that the statements could be relied upon. The Court allowed the appeal, set aside the CESTAT's order, and restored the adjudicating authority's order for the first respondent. Substantial questions of law (a) to (g) were answered in favour of the revenue. Substantial question of law (h) was rejected as the second respondent was deleted from the array of parties.

Facts

The Commissioner of CGST and Central Excise, Howrah, filed an appeal against an order of the Customs, Excise and Services Tax Appellate Tribunal (CESTAT) that allowed the respondent's appeal, setting aside a service tax demand and penalty. The respondent, M/s. Ashirwad Foundries Private Limited, was accused of fraudulently availing inadmissible CENVAT credit of Rs. 5,57,78,466/- during FY 2013-2014 and 2014-2015, based on fake invoices from non-existent manufacturers. The Commissioner confirmed the demand. The CESTAT, however, allowed the respondent's appeal, finding no incriminating documents during searches, no shortage/excess of goods, and deeming statements recorded under Section 14 of the Act inadmissible due to non-compliance with Section 9D. The CESTAT also found issues with the adjudication order regarding transportation vehicles and held that payment of tax during investigation did not amount to admission of guilt.

Key Issues

1. Whether the CESTAT was right in allowing CENVAT credit on inputs when the respondent could not satisfactorily account for their transportation/receipt to their premises, as per Rule 9(5) of the CENVAT Credit Rules, 2004? (Question of law) 2. Whether the CESTAT's findings regarding transportation vehicles were perverse, overlooking that some vehicles were unsuitable for transporting raw materials? (Question of mixed law and fact) 3. Whether the CESTAT was right in not considering that the respondent failed to produce conclusive evidence of inward movement of raw materials? (Question of law) 4. Whether the CESTAT was right in pointing out investigation lacunas while leaving the issue of raw material transportation undecided, thus allowing CENVAT credit? (Question of law) 5. Whether a statement recorded from a responsible person of an assessee should be treated as an admitted position of facts if not retracted? (Question of law) 6. Whether the CESTAT was justified in not giving due consideration to Supreme Court judgments relied upon by the adjudicating authority, stating that failure to produce best evidence implies evidence would go against them? (Question of law) 7. Whether the CESTAT was right in deleting the personal penalty imposed on the second respondent? (Question of law) Petitioner (Revenue) argued that the CESTAT's order was perverse, failed to consider the voluntary, unretracted statement of the respondent's Director, and that the grounds for relief granted by the CESTAT were not raised by the respondent earlier. They relied on Naresh J. Sukhwani and Gulam Hussain Shaikh Chougule. The respondent argued that statements recorded under Section 108 of the Customs Act are not admissible unless Section 9D of the Central Excise Act is complied with, citing G-Tech Industries. They also argued that payment of duty during investigation does not amount to admission.