Appeal Success: Penalties Overturned for CENVAT Credit Denial

The Commissioner of Central Excise (Appeals) upheld the denial of CENVAT credit availed by the appellant on raw materials from a fictitious supplier. The Tribunal found no evidence of intent to evade duty and deemed the penalties imposed under the Central Excise Act and Rules unsustainable. The penalties were set aside for both appellants, with the court judgment pronounced on 13/11/2017.

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Issues:
1. Denial of CENVAT credit on raw materials purportedly procured from a fictitious supplier.
2. Allegations of conspiracy to avail ineligible CENVAT credit.
3. Imposition of penalties under section 11AC of Central Excise Act, 1944 and rule 26 of Central Excise Rules, 2002.

Analysis:
1. The Commissioner of Central Excise (Appeals) upheld the denial of CENVAT credit of Rs. 1,35,398 availed by the appellant on raw materials from a fictitious supplier, M/s Noor Tex. The appellant claimed to be job-workers for processing fabrics and dyeing yarn, obtaining goods from M/s Prime Exports. They argued that they deposited the disputed amount during the investigation and contended no evidence of intent to evade duty was presented. However, the supplier was found non-existent, and the appellant availed credit without supporting documents. The appellant deposited the disputed amount, but the statements were not contested. Legal precedents cited did not support their case.

2. The Authorized Representative alleged a conspiracy to avail ineligible CENVAT credit, supported by statements. The Tribunal found the supplier to be fake, but there was no evidence of non-receipt of goods or infringement of the law. The appellant rectified the wrongly availed credit, and there was no proof of an attempt to evade duty. Consequently, the penalties imposed under section 11AC of Central Excise Act, 1944, and rule 26 of Central Excise Rules, 2002 were deemed unsustainable.

3. The impugned order was modified to set aside the penalties imposed on both appellants, concluding that there was no evidence of an attempt to evade duty. The judgment was pronounced in court on 13/11/2017.

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