2017 (3) TMI 592 - AT - Central Excise

Tribunal Modifies Penalties in Tax Case: Interest Demand Set Aside, Fraudulent Credit Upheld

The Tribunal set aside the demand for interest on the confirmed shortage of inputs other than DMS, citing lack of established removal date. The demand for ... CENVAT credit - fake invoices - non-existent and fictitious firm - interest on demand - shortage of inputs - Held that: - in the case of shortage of inputs when no firm date of removal is established by the department the demand of interest cannot be sustained. In the case on handy the appellants reverse the credit and the same has been already appropriated - the demand of interest on ₹ 8,71,399/- requires to be set aside. Fake invoices - Held that: - Though it is argued by the Ld. Counsel that they have received the goods and that department has not conducted any investigation at the end of the lorry driver/owner who transported the goods to the appellant, consider that in the case of fraudulent availment of credit, the preponderance of probabilities would be sufficient. On appreciation of the documents placed, it can safely concluded that the two invoices Nos. 59 & 60 dated 15.12.2008 are fake invoices and that appellant availed the credit without actual receipt of goods - demand of ₹ 3,70,800/- and interest upheld. Imposition of penalty - Held that: - the penalty imposed by the Commissioner (Appeals) requires to be set aside in its entirety as it is not in order with the proposal in the SCN - penalty set aside. Appeal disposed off - decided partly in favor of appellant. Issues Involved:1. Liability to pay interest on the demand of Rs. 8,71,399/- confirmed for shortage of inputs other than DMS.2. Demand of Rs. 3,70,800/- for alleged fraudulent credit availed on invoices without actual receipt of goods.3. Imposition of composite penalty of Rs. 12,42,199/- and its reduction to Rs. 4,36,000/- by the Commissioner (Appeals).4. Penalty imposed on Shri S.S.N. Varma, Senior Manager (Stores) of the appellant company.Detailed Analysis:1. Liability to Pay Interest on the Demand of Rs. 8,71,399/-:The appellant contested the interest on the demand of Rs. 8,71,399/- confirmed for the shortage of inputs other than DMS, arguing that there was no clandestine removal of goods and the date of removal was not determined by the department. The counsel relied on judgments in the cases of CCE, Ahmedabad Vs Kamal Steel Re-Rolling Mills and H.M. Pipes Pvt. Ltd. Vs Jaipur, which held that interest cannot be demanded when no firm date of removal is established. The Tribunal agreed with this argument, noting that the appellant had reversed the credit, and set aside the demand for interest on Rs. 8,71,399/-.2. Demand of Rs. 3,70,800/- for Alleged Fraudulent Credit:The appellant argued that they had actually received the inputs (Di-Methyl Sulphoxide) and that the department did not find any shortage of inputs during the inspection. The department, however, established through investigation that M/s. Aerochem Impex Pvt. Ltd. and M/s. YM Drugs were involved in issuing fake invoices without actual supply of goods. The Tribunal noted discrepancies in the records and concluded that the invoices were fake, thus upholding the demand of Rs. 3,70,800/- along with interest.3. Imposition of Composite Penalty:The original authority imposed a composite penalty of Rs. 12,42,199/- on both counts (fraudulent credit and shortage of inputs), which the Commissioner (Appeals) reduced to Rs. 4,36,000/-. The Tribunal observed that the penalty imposed by the Commissioner (Appeals) was not in line with the proposal in the Show Cause Notice, which suggested a penalty under Rule 15 read with Section 11AC of the Central Excise Act, 1944. The Tribunal cited a similar case where it was held that the adjudicating authority cannot impose a penalty selectively under Rule 15(1) when the Show Cause Notice proposed under Rule 15 read with Section 11AC. Consequently, the Tribunal set aside the penalty imposed by the Commissioner (Appeals).4. Penalty on Shri S.S.N. Varma:The appellant argued that there was no evidence to establish that Shri S.S.N. Varma had abetted in availing fraudulent credit. The Tribunal acknowledged that while Varma was in charge of receipt of materials, the penalty of Rs. 1,50,000/- imposed on him was excessive. The Tribunal reduced the penalty to Rs. 30,000/-.Conclusion:1. The demand of Rs. 3,70,800/- is confirmed along with interest.2. The demand of Rs. 8,71,399/- is sustained as the appellant did not contest it.3. The demand for interest on Rs. 8,71,399/- is set aside.4. The penalties imposed are entirely set aside.5. The penalty on Shri S.S.N. Varma is reduced to Rs. 30,000/-.The impugned order is modified accordingly, and the appeal is partly allowed with consequential reliefs, if any.