Credit couldn’t be allowed if assessee failed to establish actual movement of Goods: HC of Gujarat

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M/s Mangalam Alloys Ltd (“the assessee”) is a manufacturer of goods, the duty paid inputs were received by the assessee which are eligible for Cenvat credit. During the course of inquiries the assessee was also one of the recipient of the goods, the assessee’s record was checked. Since the Tribunal confirmed duty and penalty demands in respect of twelve such transactions. Further the Department had obtained a report from the RTO suggesting that the twelve invoices pertained to goods stated to have been transported by vehicles which were incapable of carrying the quantity of such inputs. The quantity of goods and the vehicle details would always be available in the assessee’s records or the corresponding records of the supplier. The RTO authorities certified that these were vehicles in the nature of three wheelers such as chhagdo rickshaw and auto-rickshaw and totally incapable of transporting the quantity of goods stated to have been done.

The High Court of Gujarat, in the case of Mangalam Alloys Ltd. vs. Commissioner of Central Excise Ahmedabad-III vide order no. R/TAX APPEAL NOS. 1088 AND 1089 OF 2018 dated September 5, 2018 stated that the transactions in question were non-existence. The assessee was not able to establish the actual movement of the goods. When the RTO report strongly suggested that the vehicles in which the goods were stated to have been transported were incapable of doing so, the burden would be on the assessee to dislodge these primary findings particularly when the report of the RTO was not challenged. This reason would be further augmented when seen in light of the statement of the representatives of the suppliers who also could not explain the discrepancy. The assessee’s stand that it had merely ordered goods on FOR value and, therefore, was not obliged to explain the manner of transportation is too simplistic in background of facts on record. When RTO report as it remained unexplained by the suppliers of the goods clearly establish that the goods could not have been transported in the vehicle stated to have been done, the assessee called a greater explanation.

The assessee, however, vehemently contended that the Tribunal proceeded merely on drawing presumptions and in similar circumstances in other transactions similar presumption has not been drawn.

  • The conclusions of the Tribunal are not based on drawing presumptions or adverse inference even though the Tribunal has fleetingly so stated. The findings are based on evidence suggesting no movement of goods.
  • The quality cannot be claimed in negative. If findings of the Tribunal in respect of these twelve invoices are not perverse, the Court would not entertain the appeal only to examine a contention that under similar circumstances the Tribunal has not adopted similar course.  And the appeal filed by the assessee deserved to be dismissed.

Citation: [2018] 98 taxmann.com 60 (Gujarat)