2014 (11) TMI 239 - AT - Central Excise

Appellate Court Upholds Penalty for Ineligible Credit: Central Excise Rule Violation

The appellate court upheld the penalty imposition on M/s MTC Business Pvt. Ltd. and its Director under Rule 26(2) of the Central Excise Rule, 2002. The ... Availment of CENVAT credit - appellant deliberately and with mala fide intention supplied invoices enabling the recipient to take benefit of the CENVAT credit without supplying the corresponding goods - Held that:- Shri Shiv Govind Pandey, Director of M/s Indian Steel and M/s Jai Ambe Multi Trade in statement given under Section 14 has clearly admitted to supply of bazaar scrap under the cover of Central Excise invoices to the appellant M/s MTC Business Pvt. Ltd. Shri Lalit Inderchand Baliya, Director has also admitted that they have purchased the scrap from M/s Indian Steel and M/s Jai Ambe Multi Trade on visual examination basis and after verifying the quantity of the goods supplied. He has also confirmed that when the goods were purchased, they supervised and again checked the quantity. If the appellant had verified the scrap on visual examination basis and also verified the quality and quantity as admitted by Shri Lalit Inderchand Baliya in his statement the appellant should have certainly known that the scrap procured by them from M/s Indian Steel and M/s Jai Ambe Multi Trade was not manufactured scrap but bazaar scrap. The appellant cannot take plea that they did not know the various types of scrap. Therefore, the contention of the appellant that they were not aware the nature of scarp procured by them but blindly believed what the supplier stated is difficult to accept. Therefore, I am of the view that the appellants have not made out a case for complete waiver of penalty adjudged against them. In these circumstances, I direct the appellants to make a pre-deposit of 25% of the penalty imposed on them within a period of six weeks - Partial stay granted. Issues:Imposition of penalties under Rule 26(2) of Central Excise Rule, 2002 on the appellant M/s MTC Business Pvt. Ltd. and its Director.Analysis:The judgment revolves around the confirmation of penalties imposed on the appellant by the Commissioner of Central Excise (Appeals) under Rule 26(2) of the Central Excise Rule, 2002. The allegations against the appellant included procuring MS scrap from specific dealers and passing on credit to the purchaser, knowing that the documents did not pertain to the goods, thereby enabling the buyers to avail CENVAT credit on non-duty paid wire scrap. The charge was supported by the statement of a director of one of the dealers, admitting the supply of non-duty paid scrap to the appellant. The adjudicating authority found that the appellant deliberately facilitated the availment of ineligible credit by providing invoices without supplying the corresponding goods. The lower appellate authority upheld the penalty imposition due to the appellant's failure to produce documentary evidence and transport details, reducing the quantum of penalties but confirming the imposition.The appellant argued that they recorded transactions in their Books of Accounts, purchased scrap under invoices, made payments through cheques, and sold the scrap to another entity without knowledge of it being non-duty paid scrap. They contended that they were not aware of aiding in availing ineligible CENVAT credit, seeking a waiver of the penalty. The Revenue, represented by the Superintendent, maintained that the penalty imposition was justified.The presiding judge analyzed the case, considering the admissions made by the directors of the supplying dealers and the appellant. It was noted that the appellant had visually examined and verified the quantity of the scrap purchased, indicating awareness of the nature of the goods. The judge concluded that the appellant's claim of ignorance regarding the type of scrap procured was not acceptable, as they should have known the difference between manufactured scrap and bazaar scrap. Consequently, the judge directed the appellant to make a pre-deposit of 25% of the penalty within six weeks, with the balance penalty waived upon compliance, and recovery stayed during the appeal process.In conclusion, the judgment emphasizes the accountability of the appellant in ensuring the legitimacy of transactions and the importance of due diligence in verifying the nature and origin of goods to avoid penalties under Central Excise Rules.