2015 (9) TMI 1147 - AT - Central Excise

Tribunal rules on CENVAT Credit dispute, remands penalty decision for reconsideration.

M/s Bhakti Alloys Pvt. Ltd. and others Versus Commissioner, Central Excise & Service Tax, Vadodara-I

The Tribunal set aside the demand of CENVAT Credit along with interest and penalties on the Appellant Company, except for the credit availed on invoices ... Availment of CENVAT Credit - fraudulent passing of CENVAT Credit to different buyers - Held that:- Appellant admitted that they have wrongly availed CENVAT credit on the basis of invoices without receipt of the goods, and, therefore, imposition of penalty of equal amount of duty, under Section 11AC of Central Excise Act, 1944 is warranted. Regarding the imposition of penalty on the Appellant No.2, the learned Advocate submitted that the Appellant No.2 appeared before the Central Excise Officers and supplied the documents time to time. They had paid duty at the instance of the officers. There is no material available, he had knowledge of the alleged irregularity. We have already stated above that the denial of CENVAT credit on inputs availed on the basis of invoices showing Auto Rickshaw is justified and therefore, the imposition of penalty on the Appellant No.2 is required to be re-examined. - demand of CENVAT Credit alongwith interest and penalties on the Appellant Company to the extent of CENVAT Credit availed on the basis of invoices as mentioned in the Annexure I to the Show Cause Notice, other than vehicle numbers mentioned Auto Rickshaws, are set aside - Matter remanded back - Decided partly in favour of assessee. Issues Involved:1. Legitimacy of CENVAT Credit availed by the Appellant Company.2. Imposition of penalties under Section 11AC of the Central Excise Act, 1944.3. Validity of invoices and transportation documents.4. Investigation and verification of suppliers and transportation.5. Payment of outstanding amounts to suppliers.Detailed Analysis:1. Legitimacy of CENVAT Credit availed by the Appellant Company:The Appellant Company, engaged in manufacturing S.S. Flats, availed CENVAT Credit on raw materials such as Ferro Alloys and S.S. Scrap under CENVAT Credit Rules, 2004. The Central Excise officers alleged that the Appellant availed CENVAT Credit on invoices from two registered dealers without actual receipt of goods. The Appellant acknowledged erroneously availing credit of Rs. 3,23,338 on Furnace Oil and other issues, which they reversed. They also reversed Rs. 5.49 lakhs based on an RTO report indicating vehicle numbers incapable of carrying heavy loads.2. Imposition of penalties under Section 11AC of the Central Excise Act, 1944:The Adjudicating authority disallowed CENVAT Credit of Rs. 71,09,522 along with interest and imposed an equal amount of penalty on the Appellant Company. Additionally, a penalty of Rs. 5 lakhs was imposed under Rule 25 of the CENVAT Credit Rules, 2004. The Appellant contended that the penalty under Section 11AC was not applicable as the issue involved interpretation of CENVAT Credit Rules. The Tribunal found that the Appellant admitted to wrongly availing credit and upheld the imposition of penalty under Section 11AC.3. Validity of invoices and transportation documents:The Appellant argued that they received goods accompanied by invoices, duly recorded in their factory, and used in manufacturing final products cleared on payment of duty. The Revenue contended that the Appellant failed to produce Lorry Receipts and Consignment Notes, and some vehicle numbers in invoices were of Auto Rickshaws, incapable of carrying heavy cargo. The Tribunal noted that invoices from 18 dealers/manufacturers were verified and found genuine, but invoices from two Bhavnagar-based dealers were not investigated at the suppliers' end.4. Investigation and verification of suppliers and transportation:The Tribunal observed that the entire case was based on statements of the Appellant and RTO reports. No investigation was conducted at the suppliers' end for invoices in Annexure I(i) and I(ii) of the show cause notice. The Tribunal emphasized the need for detailed investigation and evidence collection, criticizing the Adjudicating authority's reliance on assumptions and presumptions without material evidence.5. Payment of outstanding amounts to suppliers:The Appellant explained the reasons for delayed payments to suppliers, citing financial crises and disputes over material quality. The Tribunal found that the delay in payment could not be a reason to conclude non-receipt of goods. The Tribunal cited several case laws supporting the Appellant's position, emphasizing that denial of CENVAT Credit requires positive evidence of non-receipt of goods.Conclusion:The Tribunal set aside the demand of CENVAT Credit along with interest and penalties on the Appellant Company, except for the credit availed on invoices showing Auto Rickshaws. The matter was remanded to the Adjudicating authority to determine the demand and penalty for credit availed on invoices with Auto Rickshaws and the amount of Rs. 3,23,338. The imposition of penalty on the Appellant No.2 was also remanded for reconsideration. The appeal by the Appellant Company was disposed of in these terms, and the appeal by Appellant No.2 was allowed by way of remand.