2014 (9) TMI 147 - HC - Central Excise

Court denies rebate claim for fake export transactions involving CENVAT credit misuse.

Diwan Brothers A Propreitary Firm of Sanjay D. Jain Versus Union of India Thro The Joint Secretary & 1

The court upheld the denial of a rebate claim amounting to Rs. 30,43,944/- for goods exported as a merchant exporter due to fake transactions aimed at ... Rebate / Refund claim - export of goods - Rule 18 of the Central Excise Rules, 2002 - On inquiry it was found by the Department that the entire transactions were fake and as such they were only billing transactions only with a view to get the CENVAT credit as well as the rebate - Held that:- there are concurrent findings of fact given by all the authorities below with respect to the fake transactions between the petitioner and M/s. Universal Textiles, we are of the opinion that all the authorities have examined the case in detail and as such no interference is called for. The conclusions arrived at by the authorities below are on the basis of evidence on record and such conclusions are not pointed out to be perverse. Under the circumstances, as such no interference in exercise of powers under Articles 226 & 227 of the Constitution of India, therefore, can be made. - present Special Civil Application fails and the same deserves to be dismissed - decided against the assessee. Issues Involved:1. Rejection of rebate claim of Rs. 30,43,944/- under Rule 18 of the Central Excise Rules, 2002.2. Allegation of fake transactions and billing activities for availing CENVAT Credit and rebate.3. Physical movement of goods and actual payment of duty.4. Entitlement to rebate when goods are exported on payment of duty.5. Relevance of the decision in Commissioner of C.Ex. & Customs v. D.P. Singh.Detailed Analysis:1. Rejection of Rebate Claim:The petitioner sought to quash the impugned order dated 23.03.2011, which confirmed the disallowance of a rebate claim amounting to Rs. 30,43,944/- for goods exported as a merchant exporter. The petitioner argued compliance with Rule 18 of the Central Excise Rules, 2002, and submitted all necessary documents, including ARE-1 forms, for claiming the rebate.2. Allegation of Fake Transactions:The authorities scrutinized the rebate claim and found that the petitioner purchased goods from M/s. Universal Textiles, which were processed by M/s. Mamta Silk Mills Pvt. Ltd. Upon investigation, it was revealed that the transactions were fake, intended only for obtaining CENVAT credit and rebate. The show-cause notice highlighted a scam involving fraudulent rebate claims with bogus shipping bills and documents, indicating that no actual goods were sold or moved.3. Physical Movement of Goods and Actual Payment of Duty:The petitioner argued that the goods were physically exported and duty was paid, thus entitling them to the rebate. However, the Assistant Commissioner, Commissioner (Appeals), and Revisional Authority found that there was no physical movement of goods, and the transactions were mere paper activities. The authorities concluded that the petitioner failed to prove the actual movement of goods from M/s. Universal Textiles to the petitioner.4. Entitlement to Rebate When Goods are Exported on Payment of Duty:The petitioner contended that they were entitled to the rebate as they exported goods on payment of duty. The authorities, however, determined that the rebate could only be granted if it was established that the goods exported were manufactured using duty-paid inputs. The findings showed that the transactions were fake, and the petitioner did not use duty-paid inputs for the exported goods.5. Relevance of the Decision in Commissioner of C.Ex. & Customs v. D.P. Singh:The petitioner relied on the decision in Commissioner of C.Ex. & Customs v. D.P. Singh, arguing that they were bona fide purchasers who exported goods on payment of duty. The court distinguished this case, noting that the transactions between the petitioner and M/s. Universal Textiles were found to be fake. The court emphasized that the petitioner failed to prove the actual use of duty-paid inputs in the exported goods, making the decision in D.P. Singh inapplicable.Conclusion:The court upheld the concurrent findings of the authorities that the transactions were fake and there was no physical movement of goods. The petitioner failed to establish the actual use of duty-paid inputs in the exported goods. Consequently, the petition was dismissed, and the rebate claim of Rs. 30,43,944/- was denied. The court ruled that no interference was warranted under Articles 226 & 227 of the Constitution of India, and the petition was dismissed without any order as to costs.