2015 (8) TMI 345 - AT - Central Excise

Tribunal Upholds Penalties for Central Excise Fraudulent Scheme

Ajay kumar G. Baheti, Manish Agarwal, Mohammad A. Master, Harshadbhai R. Desai, Chandrakanth Nathwani, JSW Steel Ltd, Ispat Industries Ltd, Sampatraj Ladha Versus Commissioner of Central Excise And Customs, Nashik

Ajay kumar G. Baheti, Manish Agarwal, Mohammad A. Master, Harshadbhai R. Desai, Chandrakanth Nathwani, JSW Steel Ltd, Ispat Industries Ltd, Sampatraj ... Issues Involved:1. Fraudulent availment of CENVAT credit by M/s. Silver Ispat Pvt. Ltd.2. Penalty on various appellants under Rule 26 of the Central Excise Rules.3. Role of brokers, transport commission agents, and other intermediaries in the fraudulent scheme.4. Confiscation of goods and imposition of penalties.Issue-wise Detailed Analysis:1. Fraudulent Availment of CENVAT Credit by M/s. Silver Ispat Pvt. Ltd.:The primary issue revolves around M/s. Silver Ispat Pvt. Ltd. fraudulently availing CENVAT credit based on duty-paying invoices for HR trimmings without actually receiving the goods. The HR trimmings were sold to small-scale units around Viramgam, while the invoices were manipulated to show that the goods were received by M/s. Silver Ispat Pvt. Ltd. The investigation revealed that no HR trimmings were received by M/s. Silver Ispat Pvt. Ltd., and the credit was taken based on fraudulent invoices, making the act fraudulent in nature.2. Penalty on Various Appellants under Rule 26 of the Central Excise Rules:The Tribunal considered the roles of various appellants in the fraudulent scheme and imposed penalties accordingly:- Appellant No. 1 (General Manager of M/s. Silver Ispat Pvt. Ltd.): The appeal was dismissed as he was found to be a main beneficiary and actively involved in the fraudulent credit scheme.- Appellant No. 2 (Broker): His penalty was reduced from Rs. 5 lakhs to Rs. 1 lakh due to lack of specific confessional statements but was still held liable under Rule 26 for facilitating the fraudulent transactions.- Appellants No. 3 and 4 (Viramgam-based Traders): Their appeals were dismissed as they were actively involved in the sale, purchase, and transportation of HR trimmings, knowing the goods were liable to confiscation.- Appellant No. 5 (Transport Commission Agent): His appeal was dismissed as he facilitated the transportation of goods with knowledge of the fraudulent invoices and prepared fictitious documents for safe passage.- Appellants No. 6 and 7 (Manufacturers of HR Trimmings): Their penalties were reduced to Rs. 1 lakh each as they were aware of the fraudulent scheme and facilitated it by changing consignee names and using Gujarat-registered vehicles for transportation within Maharashtra.3. Role of Brokers, Transport Commission Agents, and Other Intermediaries:The brokers, such as appellant No. 2, played a crucial role in finding customers for the fraudulent invoices. Transport commission agents like appellant No. 5 ensured the transportation of goods to the actual buyers while the invoices were sent to M/s. Silver Ispat Pvt. Ltd. The involvement of these intermediaries was critical in executing the fraudulent scheme, and they were penalized for their roles.4. Confiscation of Goods and Imposition of Penalties:The Tribunal upheld the penalties imposed on the appellants under Rule 26, even if the goods were not physically confiscated. The judgment referenced the Gujarat High Court's ruling in the case of Sanjay Vimalbhai Deora, which held that penalties could be imposed under Rule 26 even if goods are not confiscated. The Tribunal found that the appellants had full knowledge and actively participated in the fraudulent scheme, making them liable for penalties.Conclusion:The appeals were disposed of as follows:- Ajay Kumar G. Baheti (Appellant No. 1): Appeal dismissed.- Manish Agarwal (Appellant No. 2): Penalty reduced to Rs. 1 lakh.- Harshadbhai R. Desai (Appellant No. 3) and Chandrakant Nathwani (Appellant No. 4): Appeals dismissed.- Ispat Industries Ltd. (Appellant No. 7) and JSW Steel Ltd. (Appellant No. 6): Penalties reduced to Rs. 1 lakh each.- Sampatraj Ladha (Appellant No. 8): Appeal abated due to his death.The judgment emphasized the active participation and knowledge of the appellants in the fraudulent scheme, justifying the penalties imposed under Rule 26 of the Central Excise Rules.