Penalties Overturned for Alleged Fraudulent Cenvat Credit Claim

The Appellate Tribunal CESTAT NEW DELHI set aside penalties imposed on M/s Daga Trading Co. and its director for alleged fraudulent purchase of raw material to avail inadmissible Cenvat credit. The Tribunal found the evidence presented by the appellant credible, confirming legitimate transactions with valid invoices. As the department failed to provide counter evidence, the penalties were deemed unjustified, and the appeals were allowed in favor of the appellants. The judgment was delivered on 12.1.2018 by Mr. S.K. Mohanty, Member (Judicial).

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Issues: Allegations of fraudulent purchase of raw material, imposition of penalties, validity of Cenvat credit, evidence submitted by appellant, department's lack of evidence, merits of impugned order.

In this case, the appellant, M/s Daga Trading Co., was accused of involvement in a scheme where fraudulent purchase of raw material was made to avail inadmissible Cenvat credit. The department alleged that the appellant issued bogus invoices to facilitate this scheme. Penalties were imposed on the appellant and its director based on these allegations. The appellant contended that as a first stage dealer, they purchased goods from Rastriya Ispat Nigam Ltd. and supplied them to another company with valid invoices. They presented delivery challan-cum-invoices, transport documents, and affidavits as evidence to support their claim. The Tribunal examined the case records and found that the goods were indeed received from RINL and sold to the other company under valid Central Excise invoices. The transport documents and affidavits confirmed the physical transportation of goods. As the department failed to provide substantial evidence contradicting the appellant's submissions, the Tribunal concluded that the penalties imposed on the appellant were unjustified. Therefore, the impugned order was set aside, and the appeals were allowed in favor of the appellants. The judgment was pronounced on 12.1.2018 by Mr. S.K. Mohanty, Member (Judicial) at the Appellate Tribunal CESTAT NEW DELHI.

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