2007 (10) TMI 215 - AT - Central Excise

Court overturns penalty for issuing modvatable invoices w/o evidence of willful intent. Detailed investigation crucial for penalties.

The Court set aside the penalty imposed on the appellants for alleged issuance of modvatable invoices without supplying material under Rule 173Q(1)(bbb) ... Appellants, registered dealer – penalty u/r 173Q(1)(bbb) imposed on appellant alleging that he issued modvatable invoices to the buyers without supplying the material on ground that vehicle number is mentioned wrongly in invoice - there is no statement by appellant, supplier & recipient of the inputs that the appellant issued modvatable invoice without supplying the material – no material to prove that the appellant willfully entered incorrect particulars in the invoices – penalty not imposable Issues:Alleged issuance of modvatable invoices without supplying material, imposition of penalty under Rule 173Q(1)(bbb) of Central Excise Rules, 1944, appeal against Commissioner (Appeals) decision.Analysis:The case involved the appellants, registered dealers, who were accused of issuing modvatable invoices to buyers without supplying the material, leading to the imposition of a penalty under Rule 173Q(1)(bbb) of the Central Excise Rules, 1944. The Commissioner (Appeals) upheld the adjudication order, prompting an appeal. The appellant's representative claimed that they did supply the material as per their statement before Central Excise Officers and argued that there was no evidence indicating non-delivery of goods. Reference was made to a Tribunal decision in a similar case to support their stance.The authorized representative for the department reiterated the Commissioner (Appeals) findings, stating that thorough investigations revealed discrepancies, such as the vehicles mentioned in the invoices not being used for transporting materials. This led to the conclusion that the appellants fraudulently passed modvat credit without actual supply. Another Tribunal decision was cited to strengthen the department's position. After considering both sides and examining the record, the Court noted the statement of the appellant's authorized signatory, where details of the transactions were explained, including the practice of mentioning vehicle numbers on invoices based on driver information.The Commissioner (Appeals) found that the vehicles mentioned in the invoices were either non-transport vehicles, non-existent, or denied transportation of goods by the owners. However, the appellant's representative clarified the reasons for incorrect vehicle numbers, emphasizing that most transactions were made through cheques. It was highlighted that there was no statement indicating non-supply of goods by the appellant, similar to a precedent where penalty was not imposed on a registered dealer supplying inputs to manufacturers under similar circumstances.The authorized representative for the department heavily relied on another Tribunal decision involving a non-existent transport company and invalid invoices. However, in the present case, there was no evidence that the appellants issued modvatable invoices without supplying material. The Court found no willful intent to facilitate buyers in availing excise duty credit, leading to the setting aside of the penalty and allowing the appeal with consequential relief. The judgment emphasized the importance of detailed investigation and clear evidence in such cases to establish fraudulent practices.