Fraudulent Cenvat credit on forged invoices justified restoration of the original penalty for suppression of facts.

Cenvat credit taken on forged invoices issued by non-existent suppliers was treated as fraudulent availment, because the assessee failed to verify the identity and existence of the suppliers before claiming credit. That failure amounted to suppression of material facts, so the penalty had to be assessed on the established record rather than on the assessee's defence. The Tribunal held that the reduced penalty was not sustainable and restored the original penalty equal to the credit involved.

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Issues: Whether the reduced penalty imposed by the Commissioner (Appeals) was sustainable in a case where Cenvat credit was taken on the basis of forged and non-existent invoices, and whether the original penalty equal to the credit demanded was liable to be restored.

Analysis: The credit was availed on invoices issued by suppliers found to be non-existent, and the assessee had not verified the identity or existence of the suppliers before availing credit. The forged invoices vitiated the entire transaction and the assessee's failure to verify the documents amounted to suppression of material facts. In such circumstances, the penalty was to be determined on the basis of the established material and not on the assessee's defence. The Tribunal accepted the Revenue's contention that the fraud and misuse of forged documents justified restoration of the original penalty.

Conclusion: The reduced penalty was set aside and the penalty imposed by the original adjudicating authority was restored, with the Revenue's appeal being allowed.

Final Conclusion: Penalty equal to the credit involved was upheld in view of the established fraudulent availment of Cenvat credit on forged invoices.

Ratio Decidendi: Where Cenvat credit is availed on forged invoices issued by non-existent suppliers, the fraudulent transaction and suppression of facts justify restoration of penalty on the basis of the material established on record.

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