2015 (11) TMI 1039 - AT - Central Excise

Tribunal upholds penalties in CENVAT credit fraud case, with modifications for some appellants.

Bhagwati Steel Cast Ltd., Mahendra Kumar Agarwal, K.D. Singh, Pawankumar Agarwal, Surahbhan Rajkumar Pvt. Ltd., Shree Durga Iron & Steel Pvt. Ltd., Manish Steel Corporation, Manish Agarwal, Geeta Metal Pvt. Ltd., Vinay Kumar Kalani, Harkishan B. Soneji, Harshadbhai R. Desai, Mohammad A. Master, Mohsin H. Memon, Mori Chelabhai Devabhai, Daimand Roadways, Chandrakanth Nathwani And Ispat Industries Ltd. Versus Commissioner of Central Excise, Nasik

The Tribunal upheld the findings of the investigation and the penalties imposed on the appellants for their roles in the fraudulent availment of CENVAT ... CENVAT credit - Bogus invoices - No dealing with physical of goods - Fraudulent availement of credit - Imposition of interest and penalty - Held that:- All the five traders/bidders based in Viramgam have admitted that the freight charges were being paid by them or the buyer of the goods when such HR trimmings were being unloaded at Viramgam or nearby area. These statements leads to far more credibility than the bald claim of the main appellant. Further, we find that it is undisputed that consignments were transported through the trucks having Gujarat registration Number. For the transportation of the goods within the State of Maharashtra such trucks cannot undertake this activity. None of the appellants have contradicted this allegation or said anything about this allegation. We also find that the incriminating documents recovered from M/s. SKT i.e. the office of the transport commission agent Shri Chandrakant Nathwani (appellant No. 17) clearly indicates the vehicle number, date, weighment of the goods, the destination where the goods are unloaded and other details. Number of other officers were offered for cross-examination and were cross-examined. We do not find any consequence coming out from such cross-examination. We have also gone through the various case laws submitted by the appellant relating to cross-examination. We find, as mentioned earlier, the two persons who did not turn up for cross-examination are the co-noticees and in view of this Tribunal s decision in the case of Maya Mahal Industries reported in [1995 (3) TMI 260 - CEGAT, NEW DELHI] and also in view of Article 20(3) of the Constitution of India, the two cannot be forced for cross-examination. - purported consignee as per the invoice was different from the actual consignee who were Viramgam based traders. Thus, the manipulation in the name of consignee was done with the sole purpose of evading excise duty by mis-using the credit of duty paid on the HR trimmings. In view of the said position, in our view, the goods are confiscable under Rule 25(1)(d) and penalty is also imposable on the appellants. - Decided against the assessee. Levy of penalty for abetment - That a person would render himself liable for penalty for indulging in activities mentioned in Rule 26 of the Central Excise Rules, 2002, even if goods are not confiscated or had not been rendered liable for confiscation. We also note that as in that case, even in the present case all the appellants have full knowledge about every stage of removing, keeping, selling, concealing the excisable goods and the same would not have been possible without their active participation and connivance with each other. - from the documents recovered from their premises, it was very clear that they were fully aware that the HR trimmings were consigned to Viramgam based bidder and are being used by SSI units there. Under these circumstances, it was incorrect on their part to indicate the name and address of the main appellant in the present case and since they have changed the name of the consignee in spite of the fact that the goods were being transported to Viramgam or nearby area in different State. The goods are therefore liable for confiscation as discussed earlier and they are liable to penalty. - However, Penalty imposed on some appellants are reduced. Issues Involved:1. Fraudulent availment of CENVAT credit without actual receipt of goods.2. Role of various appellants in the fraudulent transactions.3. Evidentiary value of statements not cross-examined.4. Assumption and presumption in the investigation.5. Imposition of penalties under Rule 26 of the Central Excise Rules, 2002.6. Applicability of extended period of limitation.7. Quantum of penalties imposed on appellants.Issue-wise Analysis:1. Fraudulent Availment of CENVAT Credit:The main appellant, a manufacturer of MS ingots, was accused of availing CENVAT credit based on invoices issued by M/s. Ispat Industries Ltd. without receiving the HR trimmings covered by such invoices. The HR trimmings were sold by appellant No. 18 through online auctions and purchased by traders who resold them to small-scale industries (SSI) units. The invoices were used to claim CENVAT credit fraudulently. The Tribunal upheld the investigation's findings that the main appellant did not receive the goods and availed credit fraudulently.2. Role of Various Appellants:Appellant Nos. 9 to 16 purchased HR trimmings and sold them to SSI units while selling the corresponding invoices to MS ingots manufacturers. Appellant Nos. 4 to 8 facilitated the sale of invoices and managed the financial transactions. Appellant No. 17 and 16, as transport commission agents, coordinated the transportation and documentation. The Tribunal found that all appellants were actively involved in the fraudulent transactions and upheld penalties against them.3. Evidentiary Value of Statements Not Cross-examined:The appellants argued that the statements of certain witnesses, including co-noticees, were not cross-examined and should not have evidentiary value. The Tribunal noted that the co-noticees could not be compelled for cross-examination under Article 20(3) of the Constitution. Even without these statements, the case stood on its own merits based on other evidence.4. Assumption and Presumption in the Investigation:The appellants contended that the investigation was based on assumptions and lacked corroboration. The Tribunal rejected this argument, stating that the investigation was thorough and based on incriminating documents. The appellants failed to produce any independent evidence to support their claims of receiving the goods.5. Imposition of Penalties under Rule 26:The Tribunal upheld the penalties imposed on the appellants under Rule 26 of the Central Excise Rules, 2002, for their involvement in the fraudulent transactions. It noted that the penalties were justified given the appellants' active participation in the fraud.6. Applicability of Extended Period of Limitation:The appellants argued against the applicability of the extended period of limitation. The Tribunal rejected this contention, stating that the fraudulent nature of the transactions justified the extended period of five years for the Revenue to recover the dues.7. Quantum of Penalties:The Tribunal considered the quantum of penalties imposed on various appellants. It reduced the penalties for some appellants, considering mitigating factors, while upholding the penalties for others. The penalties were deemed reasonable and proportionate to the appellants' involvement in the fraudulent activities.Conclusion:The Tribunal upheld the findings of the investigation and the penalties imposed on the appellants for their roles in the fraudulent availment of CENVAT credit. The appeals were disposed of with modifications to the penalties for some appellants.