2018 (5) TMI 873 - AT - Central Excise

Tribunal confirms denial of CENVAT credit, reduces personal penalties.

The Tribunal confirmed the denial of CENVAT credit of Rs. 18,27,413/- with interest and penalty, while allowing the credit of Rs. 9,21,624/-. Personal ... CENVAT credit - receipt of invoices without receipt of inputs - whether the appellants had correctly availed the CENVAT credit of ₹ 27,49,037/-, against the input invoices issued by two registered dealers namely, M/s Goodluck Empire and M/s Jenil Empire during the relevant period i.e. 2006-07 and 2007-08? Held that: - to avail CENVAT credit on the inputs under CENVAT Credit Rules, 2004, as laid down under Rule 3 of the said Rules, the inputs not only to be duty paid, but also must have been received and utilized in or in relation to the manufacture of final products in the factory premises. In absence of reasonable explanation on the discrepancy of the entry relating to the particular vehicles mentioned in the invoices adverse inference could be drawn in this regard - similar view was expressed in the case of Gyscoal Alloys Ltd. vs CCE Ahmedabad-III [2014 (2) TMI 449 - GUJARAT HIGH COURT]. The Revenue has discharged its burden when it claimed that goods had not been received in the factory by pointing out the discrepancy in the input invoice, that is, wrong entry of vehicle number, now it is the turn of the Appellant to explain the discrepancy to establish the fact that the quantity of inputs mentioned in the invoices have been received in the factory and utilized in the manufacture of finished goods by adducing positive evidence - the quantity of inputs mentioned in the 58 invoices involving a total credit of ₹ 18,26,413/- had not been received in the factory and the credit was availed only on the input invoices - demand with interest and penalty upheld. Credit of ₹ 9,21,624/- availed against 27 invoices - Held that: - Except few statements of vehicle owners/representatives, the competence of the said persons to furnish such statement also being in dispute, and in absence of other corroborative evidence placed by the Revenue, to substantiate the allegation that the quantity of inputs mentioned in the invoices, where the capability of the vehicle mentioned in these invoices are not disputed, it is difficult to sustain the allegation of non receipt of the inputs against these set of input invoices - credit allowed - demand with interest and penalty set aside. Personal penalty imposed on other appellants - Held that: - they have actively participated/involved in the issuance of invoices, without movement of inputs, and some of the period involved is also after 01.3.2007, accordingly, liable for penalty u/r 26(2) of CER 2002 - quantum of penalty not reduced. Appeal allowed in part. Issues Involved:1. Whether the appellants correctly availed CENVAT credit of Rs. 27,49,037/- against input invoices issued by two registered dealers.2. Validity of the denial of CENVAT credit based on the alleged non-receipt of inputs.3. Imposition and quantum of personal penalties on the appellants.Issue-wise Detailed Analysis:1. Correct Availment of CENVAT Credit:The primary issue revolves around whether M/s Universal Metals Company Limited correctly availed CENVAT credit of Rs. 27,49,037/- on invoices issued by M/s Goodluck Empire and M/s Jenil Empire during 2006-07 and 2007-08. The Department alleged that the inputs were not actually received in the factory, making it a paper transaction. The appellants contended that the inputs were duly received, accounted for, and utilized in the manufacture of final products, which were cleared on payment of duty. They argued that the duty-paid nature of the inputs was not questioned, and the input-output ratio justified the receipt and consumption of inputs.2. Denial of CENVAT Credit:The Department's investigation revealed discrepancies in the vehicle numbers mentioned in the invoices, indicating that the vehicles were incapable of transporting the inputs. The appellants did not dispute the RTO report, which showed that vehicles like three-wheelers and auto-rickshaws were listed as transporting heavy inputs. The Tribunal held that the burden of proof shifted to the appellants to explain these discrepancies. The Tribunal found that the appellants failed to provide a reasonable explanation, confirming the denial of credit for Rs. 18,27,413/- based on 58 invoices. However, for the remaining Rs. 9,21,624/- availed against 27 invoices, the Tribunal found the Department's evidence insufficient, as most statements were from unauthorized persons, and there was no corroborative evidence.3. Imposition and Quantum of Personal Penalties:The Tribunal considered the involvement of Shri Nareshbhai V. Changrani, Director of M/s Universal Metals Company Limited, and others in the issuance of invoices without the actual movement of inputs. The penalties were imposed under Rule 26(2) of Central Excise Rules, 2002. The Tribunal found the penalties too harsh and reduced them. The penalty on Shri Nareshbhai V. Changrani was reduced to Rs. 2.00 lakhs, and the penalties on Shri Gulamabbas Ali Nurani and Shri Sunil Parikh were reduced to Rs. 50,000/- each.Conclusion:The Tribunal confirmed the denial of CENVAT credit of Rs. 18,27,413/- with interest and penalty, while allowing the credit of Rs. 9,21,624/-. The personal penalties were reduced considering the gravity of the offense and the overall circumstances. The appeals were disposed of accordingly.