Fraudulent Cenvat credit on parallel invoices was sustained, while penalties on individuals were reduced as excessive.

Cenvat credit taken on duplicate invoices issued by sister concerns was held inadmissible because the goods were not received in the factory and the duty shown in the invoices had not been paid when the credit was availed. Subsequent payment by the sister concerns did not cure the earlier violation of Rule 7(1)(b) of the Cenvat Credit Rules, 2002. On that basis, the credit was treated as fraudulently availed, the company's penalty was upheld, and the company's challenge failed. The involvement of the directors and administrative manager was accepted, but the penalties on the individual appellants were reduced as excessive.

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Issues: Whether Cenvat credit was wrongly and fraudulently availed on the strength of parallel invoices without receipt of inputs, and whether the penalties imposed on the company and its directors called for interference.

Analysis: The credit was taken on duplicate sets of invoices issued by sister concerns, while the goods shown in those invoices were not received in the factory and the duty purportedly reflected in the invoices had not in fact been paid. Subsequent payment by the sister concerns did not validate an earlier inadmissible credit, having regard to the prohibition under Rule 7(1)(b) of the Cenvat Credit Rules, 2002. On the evidence, the availment of credit was held to be fraudulent and the company's penalty was upheld. The involvement of the directors and the administrative manager was also accepted, but the penalties imposed on them were considered excessive and were reduced.

Conclusion: The demand of Rs. 3,20,019/- towards wrongly availed Cenvat credit was sustained, the company's appeal was rejected, and the penalties on the individual appellants were reduced.

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