2013 (11) TMI 1290 - AT - Central Excise

Tribunal upholds duty demand in excise duty fraud case; director's non-cooperation led to arrest.

The tribunal found the appellants engaged in fraudulent activities including availing cenvat credit without receiving goods, clandestine removal of ... Bogus invoices issued to take cenvat credit – Clandestine Removal of goods – Waiver of Pre-deposit – Held tha:- Lot of fraudulent activities have been undertaken by M/s.Puransons Alloys with active support of M/s.Punjab Metal Works - Both units were being controlled by Shri Puneet Bhandari Fake invoices have been issued to take cenvat accredit with a intention to defraud the Revenue - Serious prejudice has been done to the Revenue’s interest - Investigations by Revenue have been able to bring out enamours evidence in their favour. Revenue has been able to make out a very good case for fraudulent conduct and issue of paper transactions to avail irregular credit - Preponderance of probability is in the favour of Revenue. Further no financial hardship has been pleaded by the appellants - Assessee directed to deposit Rs.75 lakhs as pre-deposit – upon such submission rest of the duty to be waived till the disposal – Partial stay granted. Issues:Fraudulent activities in availing cenvat credit, clandestine removal of finished goods without payment of duty, shortage of finished goods involving central excise duty, non-cooperative behavior of a director leading to arrest, retraction of statement by a witness affecting duty demand, reliance on consignment agent status for supplies, absence of trading activity by a supplier, issuance of fake invoices to defraud revenue.Fraudulent Activities in Availing Cenvat Credit:The appellants, engaged in manufacturing lead ingots, were found to have availed cenvat credit based on invoices from a supplier without actually receiving any goods. Statements revealed that the invoices were generated to cover scrap received without proper documentation, leading to the fraudulent availment of credit. The investigation uncovered a significant amount of credit availed in this manner, indicating a deliberate attempt to defraud the revenue.Clandestine Removal of Finished Goods Without Payment of Duty:Evidence showed that the appellants engaged in the removal of finished goods without issuing invoices or paying excise duty. Statements from the authorized signatory confirmed the evasion of duty, attributing the instructions to another director. The physical verification revealed a shortage of finished goods, further highlighting the clandestine activities undertaken by the appellants.Shortage of Finished Goods Involving Central Excise Duty:During physical verification, a substantial shortage of finished goods was detected, indicating non-compliance with excise duty obligations. The shortage amounted to a significant sum in central excise duty, underscoring the financial impact of such non-compliant practices on the revenue.Non-Cooperative Behavior of a Director Leading to Arrest:One of the directors, identified as the mastermind behind the fraudulent activities, displayed non-cooperative behavior during the investigation. Subsequently, the director was arrested under the Central Excise Act, highlighting the serious consequences of non-compliance and fraudulent conduct in excise matters.Retraction of Statement by a Witness Affecting Duty Demand:The appellant argued against relying on the statement of a witness who later retracted his initial statement. However, the tribunal emphasized the preponderance of evidence supporting the duty demand, indicating that the retraction did not negate the findings of fraudulent conduct and irregular credit availment.Reliance on Consignment Agent Status for Supplies:The appellant contended that the supplies from the supplier were made as a consignment agent, referencing transport documents as evidence of receipt of inputs. The argument aimed to justify the absence of physical receipt of goods in the factory. However, the tribunal viewed this defense in light of the overall fraudulent activities and lack of trading activity by the supplier.Absence of Trading Activity by a Supplier:Investigations revealed that the supplier from whom the appellants claimed to receive goods had ceased trading activity since a certain date. This fact was used to support the argument that the premises were closed, justifying the lack of physical receipt of goods. The absence of trading activity raised suspicions regarding the legitimacy of transactions and credit availed.Issuance of Fake Invoices to Defraud Revenue:The tribunal concluded that the appellants, in collusion with another entity controlled by a common individual, engaged in issuing fake invoices to fraudulently avail cenvat credit. This deliberate act prejudiced the revenue's interests and constituted a serious breach of excise regulations. The tribunal found substantial evidence supporting the fraudulent conduct and upheld the duty demand and penalties imposed.This comprehensive analysis of the judgment highlights the various issues involved, ranging from fraudulent activities in availing credit to the clandestine removal of goods and non-cooperative behavior leading to legal consequences. The tribunal's decision underscores the gravity of excise duty violations and the importance of upholding compliance and integrity in financial transactions.