2015 (1) TMI 29 - AT - Central Excise

Tribunal Upholds Penalties for Bogus Invoices Issued by Second Stage Dealer

The Tribunal upheld the department's findings on the issuance of bogus invoices without actual supply of goods by the appellant, a second stage dealer, ... CENVAT Credit - Bogus invoices - Held that:- goods CR strips which are claimed by the appellant to have been sold to M/s. Rasandik Engineering Industries, had been procured by them from M/s. Ayushi Steel. and also M/s. Ayushi Steel. would have procured the same from M/s. Pasondia Steel Profiles. But the investigation at the end of M/s. Pasondia Steel Profiles clearly shows that there was no manufacturing activity at their end and they have only issued bogus invoices for CR sheets/strips to M/s. Ayushi Steel. without supply of any goods. When the first chain of transaction between the manufacturer M/s. Pasondia Steel Profiles and the first stage dealer M/s. Ayushi Steel is bogus, the subsequent transaction would also be bogus and therefore, it is for the appellant M/s. Nidhi Enterprises to prove as to from where the material (CR strips/sheets)claimed to have been supplied to M/s. Rasandik Engineering Industries had been procured. When the transaction between M/s. Pasondia Steel Profiles and first stage dealer M/s. Ayushi Steel were bogus, and when M/s. Ayushi Steel are supposed to have sold the material procured from M/s. Pasondia Steel Profiles to M/s. Nidhi Enterprises and M/s. Nidhi Enterprises are supposed to have sold the same material to M/s. Rasandik Engineering Industries, the transaction between M/s. Ayushi Steel. and M/s. Nidhi Enterprises and M/s. Nidhi Enterprises and M/s. Rasandik Engineering Industries would also be bogus transaction and the burden to prove that these transactions are not bogus would be on M/s. Nidhi Enterprises and M/s. Rasandik Engineering Industries. No evidence in this regard has been produced by M/s. Nidhi Enterprises that they had indeed received the CR strips from M/s. Ayushi Steel. In view of this, I hold that transaction between the appellant and M/s. Rasandik Engineering Industries are bogus transaction and appellant has issued bogus invoices without supply of any material and not only this, they have also taken Cenvat credit wrongly in a fraudulent manner on the basic of bogus invoices of M/s Ayushi Steels. penalty is imposable on the appellant. However, since the quantum of Cenvat credit involved is ₹ 98,813/-, which has already been reversed, the penalty on the appellant is reduced to ₹ 30,000 - Decided partly in favour of assesse. Issues:- Allegation of issuing bogus invoices without actual supply of goods- Imposition of penalty under Rule 26 of the Central Excise Rules, 2002Analysis:Issue 1: Allegation of issuing bogus invoices without actual supply of goodsThe case involves the appellant, a second stage dealer, issuing 10 invoices to a company for the supply of CR strips. The department alleged that the invoices were bogus without actual supply of goods, leading to the initiation of proceedings for recovery of Cenvat credit and imposition of penalties. The appellant argued that the transactions were genuine as the buyer made payments, and there was no evidence of the transactions being bogus. However, the department contended that the entire chain of transactions was based on bogus invoices issued by the manufacturer to the first stage dealer, which rendered subsequent transactions, including those of the appellant, as bogus. The Tribunal examined the evidence and found that the transactions were indeed bogus. The appellant was held liable for issuing fraudulent invoices and wrongly availing Cenvat credit.Issue 2: Imposition of penalty under Rule 26 of the Central Excise Rules, 2002Regarding the imposition of penalty under Rule 26, the Tribunal referred to precedents and held that although there was no specific provision for imposing penalties on registered dealers for issuing bogus invoices during the period of dispute, penalties could be imposed under Rule 25(1)(d) for contravening provisions related to evasion of duty. The appellant was found guilty of taking credit wrongly and fraudulently based on bogus invoices. Consequently, a penalty was imposed on the appellant, which was reduced considering the reversed Cenvat credit amount. The Tribunal modified the impugned order, reducing the penalty imposed on the appellant to a specific amount.In conclusion, the Tribunal upheld the department's findings regarding the issuance of bogus invoices without actual supply of goods and the imposition of penalties under relevant rules. The appellant's penalty was reduced based on the revised assessment of the Cenvat credit amount.