2018 (2) TMI 556 - AT - Central Excise

Tribunal Upholds Order in Duty Evasion Case with CENVAT Credit Fraud

The Tribunal upheld the impugned order, dismissing the appeals due to a fraudulent scheme involving evasion of duty payments while claiming CENVAT credit. ... CENVAT credit - it was alleged that duty was collected but was never deposited in the exchequer - Held that: - the present case is a part of the fraud where the payment was made through the account payee cheques but duty was never deposited to exchequer but CENVAT credit was claimed on the account which was never deposited in the government exchequer - appeal dismissed - decided against appellant. Issues Involved:- Alleged violation of principle of natural justice- Denial of CENVAT credit by lower authorities- Allegations of fraud and non-existence of ship-breakers- Non-deposit of excise duty in the exchequer by the supplier- Claim of CENVAT credit without excise duty deposition- Availability of vehicles for transportation of goods- Sustaining of impugned order by the TribunalAnalysis:1. Violation of Principle of Natural Justice:The appellant contended that there was a violation of the principle of natural justice as certain crucial documents, including RG-23 of the supplier and RTO reports, were not provided despite demand. The appellant argued that reliance on sales tax authorities' letters with different periods was erroneous. The appellant emphasized the lack of relevant documents for verification, citing the Supreme Court's ruling on the necessity of specific references in show cause notices.2. Denial of CENVAT Credit:The appellant, a steel ingot manufacturer, faced denial of CENVAT credit by the lower authorities due to discrepancies in the transaction with the supplier. The appellant claimed to have paid for raw materials via cheque but never received the goods. The Tribunal noted the appellant's assertion of being unrelated to non-existent ship-breakers and the supplier's license cancellation due to penalties imposed by the Commissioner.3. Allegations of Fraud and Non-Existence of Ship-Breakers:The department's representative alleged fraud, pointing out that the supplier did not deposit excise duty despite claiming CENVAT credit. Investigations revealed discrepancies, such as non-existent ship-breakers and vehicles unsuitable for transporting the claimed quantity of ingots/scrap material. The Tribunal found the case to be part of a fraudulent scheme where duty was not deposited, yet CENVAT credit was claimed.4. Non-Deposit of Excise Duty and Claim of CENVAT Credit:The department confirmed that the supplier failed to deposit excise duty in the exchequer, leading to the ineligibility of the appellant to claim CENVAT credit. The Tribunal upheld this position, emphasizing that the appellant could not benefit from credit based on undeposited duty, supporting the impugned order's decision.5. Availability of Vehicles for Transportation:The department highlighted discrepancies in the transportation of goods, questioning the feasibility of using vehicles like ambulances and cars for transporting substantial quantities of material. The Tribunal considered this aspect while evaluating the overall fraudulent nature of the transactions and the appellant's involvement.6. Sustaining of Impugned Order by the Tribunal:After hearing both parties and reviewing the evidence, the Tribunal concluded that the case was part of a fraudulent scheme where duty payments were evaded while claiming CENVAT credit. Given the lack of deposited duty and the fraudulent nature of the transactions, the Tribunal dismissed the appeals and upheld the impugned order, citing the sustained reasons provided in the decision.This detailed analysis of the judgment from the Appellate Tribunal CESTAT, Mumbai, illustrates the complex legal issues surrounding the denial of CENVAT credit, allegations of fraud, and procedural irregularities in the case.