CENVAT credit cannot be denied solely on untested statements admitted without complying with Section 9D.

The appellant, a manufacturer of TMT bars, wire rods and stainless-steel products, challenged the denial of CENVAT credit of ₹2,39,61,066, together with interest and an equal penalty, arising from an investigation into Shri Amit Gupta and companies allegedly issuing invoices without physical supply of non-ferrous metals.

The Department alleged that the appellant received locally procured, non-duty-paid copper scrap but obtained CENVATable invoices from companies associated with Amit Gupta to avail credit.

The appellant maintained that the goods were actually received under valid duty-paying invoices, transported to its factory, accounted for in its records, paid for through banking channels and used in manufacture; it also contended that the Department had not physically verified the stock or established that the invoices were unsupported by actual receipt of goods.

The adjudicating authority nevertheless confirmed the demand and penalty, principally relying on the investigation materials, alleged delayed retractions and the fact that some noticees had settled their cases under the SVLDRS.

Whether the Department could deny CENVAT credit and impose interest and penalty on the appellant without establishing, through specific and legally admissible evidence, that the appellant had received invoices without the corresponding physical goods.

Whether statements recorded during investigation could be relied upon in adjudication without compliance with the mandatory procedure under Section 9D of the Central Excise Act, 1944, including examination of the makers of the statements and an opportunity of cross-examination.

Whether the adjudicating authority’s general findings concerning multiple noticees, including reliance on other parties’ SVLDRS settlements, were sufficient to sustain the demand against the appellant.

The Tribunal applied Rule 14 of the CENVAT Credit Rules, 2004, under which wrongly availed or utilised CENVAT credit may be recovered with applicable interest, and Rule 26 of the Central Excise Rules, 2002, concerning penalties for knowingly dealing with documents connected with wrongful availment of credit.

Section 9D of the Central Excise Act, 1944 was treated as mandatory: where the exceptions in Section 9D(1)(a) do not apply, the maker of an investigative statement must first be examined before the adjudicating authority, the authority must decide whether the statement should be admitted in the interests of justice, and the affected party must thereafter be given an opportunity of cross-examination.

The Tribunal relied on J.K. Cigarettes Ltd. v. CCE, 2009 (242) E.L.T. 189 (Delhi); Ambika International v. Union of India, 2018 (361) E.L.T. 90 (P&H); Jindal Drugs Pvt. Ltd. v. Union of India, 2016 (340) E.L.T. 67 (P&H); Hi-Tech Abrasives Ltd. v. Commissioner of Central Excise & Customs, 2018 (362) E.L.T. 961 (Chhattisgarh); Additional Director General (Adjudication) v. Its My Name Pvt. Ltd., 2021 (375) E.L.T. 545 (Delhi); and Drolia Electrosteel, holding that statements not admitted in accordance with Section 9D could not be relied upon as evidence.

The Tribunal also followed its earlier decision in V.K. Bhuraria, M/s Brilliant Metals Pvt. Ltd. & Others, Final Order Nos. 51800–51808/2018, involving substantially identical allegations concerning Amit Gupta.

The Tribunal found that the adjudicating authority had issued a largely general order dealing collectively with numerous noticees and had failed to record specific findings regarding the appellant’s alleged acts and omissions.

The appellant’s claim of actual receipt of goods was not effectively rebutted by independent evidence. The Department had not undertaken a physical verification of raw-material or finished-goods stocks, nor had it produced adequate corroboration establishing that the appellant knowingly procured only invoices without goods.

The Tribunal further observed that the case against the appellant was principally constructed from statements of third parties. Amit Gupta’s statement was disputed during cross-examination, while the Department failed to produce several material witnesses, including persons whose statements were relied upon.

Reliance on delayed retractions was held insufficient, particularly because the statements were disclosed to the appellant only with the show-cause notice and the adjudication occurred several years after the investigation.

The adjudicating authority had also failed to follow the mandatory procedure under Section 9D before relying on the investigative statements. Consequently, those statements could not constitute legally admissible evidence for proving the alleged fraudulent availment of credit.

The settlements of some other noticees under the SVLDRS could not, by themselves, establish the appellant’s liability or operate as evidence against it.

The adjudicating authority had also violated the mandatory requirements of Section 9D by relying on investigative statements without properly examining and admitting them in evidence and without ensuring effective cross-examination.

Accordingly, the appeal was allowed, the impugned order was set aside insofar as it related to M/s Rathi Steel and Power Ltd., and consequential relief was granted in accordance with law.