2007 (5) TMI 550 - AT - Central Excise

Manufacturer denied rectification for credit mistake due to non-existent entity document. Duty payment required, penalty set aside.

The Tribunal found that the appellant manufacturer was not entitled to rectification of a mistake regarding the denial of credit due to invoices based on ... Rectification of mistake - Error apparent on face of record Issues:1. Rectification of mistake regarding denial of credit to the appellant manufacturer.2. Eligibility of Cenvat credit based on a document vitiated by fraud.3. Penal action on the appellant-manufacturer.Analysis:1. The main issue in this case was the rectification of a mistake regarding the denial of credit to the appellant manufacturer. The appellant contended that the benefit of doubt should go to them as per the finding in a previous judgment. However, the Tribunal found that the credit was not available as the invoices were based on a document issued by a non-existent entity, M/s. Muskan Prints. The Tribunal emphasized that any fraud vitiates the transaction, and the appellant, as the manufacturer, should have known the supplier of raw materials. Despite suspicions about the appellant's conduct, the benefit of doubt was given regarding their knowledge or intention in wrongly availing the Cenvat credit. The Tribunal concluded that the appellant was required to pay duty and interest as demanded, but the penalty was set aside due to the benefit of doubt.2. The second major issue addressed in the judgment was the eligibility of Cenvat credit based on a document vitiated by fraud. The Tribunal found that the appellant-manufacturer had taken credit based on invoices from M/s. Muskan Prints, which did not exist at the given address. The Tribunal highlighted that any fraud in a transaction renders the document invalid for the purpose of claiming credit. It was observed that the appellant should have known the supplier of raw materials and not solely relied on the merchant manufacturer. The Tribunal granted the benefit of doubt to the appellant regarding collusion with the non-existent entity but directed them to pay the duty and interest demanded.3. The final issue involved penal action against the appellant-manufacturer. Despite suspicions about the appellant's conduct, the Tribunal decided to set aside the penalty due to granting the benefit of doubt that the appellant might not have been in collusion with the non-existing entity, M/s. Muskan Prints. The Tribunal considered the overall evidence and circumstances of the case before making this decision. The judgment concluded that there was no mistake apparent on the record, and the order passed by the Tribunal was appealable. Consequently, the application for rectification of mistake was rejected by the Tribunal.