2014 (2) TMI 443 - AT - Central Excise

Tribunal overturns excise penalties citing inadequate investigations and evidence misapplication.

Talson Mill Store Versus CCE & ST Ludhiana

The Tribunal set aside penalties imposed on the appellant dealer of excisable goods under Rule 13 of Cenvat Credit Rules, 2002, and Rule 15 of Central ... Bogus transactions - appellant is a dealer of excisable goods - Penalty in terms of provisions of Rule 13 of Cenvat Credit Rules, 2002, and Rule 15 of Central Excise Rules, 2002 read with section 11AC of the Central Excise Act, 1944 - Held that:- the entire case of the Revenue is based upon statement of Shri Sachin Aggarvanshi, proprietor of M/s. Sidh Balak Enterprises. - Reliance by the Revenue on the statement of Shri Sachin Aggarvanshi cannot be appreciated inasmuch as the said statement was in connection with the goods traded through M/s. Ved Trading Company. Shri Sachin Aggarvanshi in his statement has nowhere mentioned that the goods received by him from other manufacturer were also bogus and were not actually received by him. Revenue has also not bothered to conduct further inquiries either from the appellant or from the transporters or the actual manufacturer of the goods or from the recipient of the goods. In the absence of any such investigation, reliance on the sole statement of Shri Sachin Aggarvanshi which in any case does not apply to the goods dealt with by the present appellant, cannot be appreciated. I fail to understand as to why no statement of appellant was recorded or no inquiries were conducted by the actual manufacturer i.e. M/s. Patiala Strips Pvt. Ltd.. Further, no statement of representative of M/s. Ved Trading Company was recorded so as to arrive at the correct factual position. In the absence of any such inquiries and in view of the fact that statement of Shri Sachin Aggarvanshi is not applicable - Decided in favour of assessee. Issues:Penalty imposed under Rule 13 of Cenvat Credit Rules, 2002 and Rule 15 of Central Excise Rules, 2002 read with section 11AC of the Central Excise Act, 1944.Analysis:The appellant, a dealer of excisable goods, faced a penalty of Rs.52,045 under Rule 13 of Cenvat Credit Rules, 2002, and Rule 15 of Central Excise Rules, 2002 read with section 11AC of the Central Excise Act, 1944. The penalty was based on a transaction where the appellant purchased goods from a company, M/s. Sidh Balak Enterprises, and sold them to another company, M/s. Varindra Tools, who took Cenvat credit. The Revenue alleged the transaction to be bogus, initiating proceedings against all parties involved.The proceedings resulted in the imposition of penalties on M/s. Varindra Tools, M/s. Sidh Balak Enterprises, and the appellant. The appellant appealed the decision after the Commissioner (Appeals) rejected it. During the appeal hearing, the appellant argued against the Revenue's reliance on the statement of Shri Sachin Aggarvanshi, the proprietor of M/s. Sidh Balak Enterprises, to establish the transaction's illegitimacy. The appellant contended that the goods purchased were not from M/s. Ved Trading Company, as indicated by Shri Sachin Aggarvanshi's statement, but from other manufacturers.The appellant further pointed out that M/s. Varindra Tools clarified in their response that they availed Cenvat credit based on an invoice from M/s. Talson Mills Store, not M/s. Ved Trading Company. The goods in question originated from M/s. Patiala Strips Ltd., passed through M/s. Sidh Balak Enterprises, and reached M/s. Varindra Tools. The Revenue's reliance on Shri Sachin Aggarvanshi's statement, which pertained to goods traded through M/s. Ved Trading Company, was deemed unjustified. The appellant criticized the Revenue for not conducting further inquiries from relevant parties like the appellant, transporters, or the actual manufacturer, M/s. Patiala Strips Ltd.The absence of thorough investigations and the misapplication of Shri Sachin Aggarvanshi's statement led to the conclusion that penalties imposed on the appellant were unwarranted. The Tribunal found no valid reason to uphold the penalties and ruled in favor of the appellant, setting aside the penalties with consequential relief. The judgment emphasized the necessity of conducting proper investigations and gathering comprehensive evidence before penalizing parties involved in excise transactions.