2024 (2) TMI 1302 - AT - Central Excise

CENVAT credit denied for sandalwood oil purchases after sealed containers found containing only water

Mr. Bharat Shetty Proprietor of M/s. Aditi International Versus Commissioner of CGST And Central Excise, Belapur

CESTAT Mumbai dismissed the appeal in a CENVAT credit case involving fraudulent transactions. The appellant claimed credit for sandalwood oil purchases, ... CENVAT Credit - duty paying documents - fraudulent transactions - eligibility of the credits availed by the Appellant on the basis of invoices issued towards purchase of sandalwood oil - HELD THAT:- Receipt of inputs as such by the Appellant and duty paying documents in conformity to Section 9 of the CENVAT Credit Rules are material for the purpose of determination of its eligibility to avail the credits. The inputs were supposed to be sandalwood oil but what was being transported/supplied were actually nothing but “plain water”, as noted by learned Commissioner in para 2.4 of his order describing content of search report for the 1475 kg of crude sandalwood oil, which were found in sealed condition and bound in wooden crates with airport security seal intact but when broke open and verified was found to be plain water only. The sandalwood oil imported by him were of pure variety and there is nothing in trade known as crude sandalwood oil but for the purpose of certain rectification, method of distillation is applied so also in the case of Patchuli Oil. M/s J.G. Spices Ltd. was one of his customer to whom he supplied imported sandalwood oil and Patchuli oils in containers in the same sealed condition without any further processing. Being confronted with the fact that during search and seizure made by DGCEI of the stock of raw materials and finished group available at M/s J.G. Spices Ltd. premises representative sample were drawn from each container and Directorate of Forensic Science report was called for vide letter dated 29.09.2010 and it conformed the material content was nothing but “water” to which the Appellant’s reply was that they used to open the container, upon receipt and even Customs Officer do so before clearance but the cap of the drums were only put back without re-sealing. There are no hesitation to come to the conclusion that goods were imported in sealed condition, taken to M/s. J.G. Spices Ltd., Meghalaya and kept therein also in sealed conditions and again returned back to different traders including the Appellant in sealed conditions affixing transit permit, railway freight invoices and in the process additional Excise Duty which was VAT component of State’s tax collected by Union and Central Excise duty both were realized at both the points by the supplier and purchasers respectively causing loss to the State exchequer. The Appellant had not purchased sandalwood oil from M/s J.G. Spices Ltd. through those invoices and the goods transportation documents would not absolve the Appellant from its liability that the inputs against which credits availed were in fact not valid inputs namely sandalwood oil - Appeal dismissed. Issues involved: Confirmation of demand against the Assessee with penalty and interest for irregular availment of CENVAT Credit without actual receipt of excisable inputs.Summary:1. The case involved the confirmation of a demand against the Assessee for irregular availment of CENVAT Credit without actual receipt of excisable inputs, leading to penalties and interest under relevant sections of the Central Excise Act. 2. The Appellant, an importer and trader of sandalwood oil, procured products from M/s. J.G. Spices Ltd. under suspicious circumstances. Investigations revealed misutilization of exemption notifications and profit-sharing arrangements between the Appellant and the supplier, leading to demands raised by the Commissioner, Shillong.3. The Appellant argued that it had provided all necessary documentation to prove the transportation of goods, citing judicial decisions to support the claim that the burden of verification should not solely fall on the buyer. The Appellant contended that the order passed was incorrect and should be set aside.4. The Respondent highlighted the organized nature of the scheme to evade taxes and syphon public money, presenting evidence of profit-sharing arrangements between the supplier and the Appellant. The Respondent emphasized the need to address such fraudulent activities.5. The Tribunal examined the case records, Commissioner's order, and relevant laws. It was observed that the goods received by the Appellant were not as described, with containers found to contain plain water instead of sandalwood oil. The investigation uncovered fake invoices and stamps, indicating a potential fraudulent operation.6. The Appellant's statement under Section 14 of the Central Excise Act revealed discrepancies in the nature of the imported goods and the actual contents of the containers received, raising suspicions of fraudulent activities.7. Despite the Appellant's denial of profit-sharing, the evidence suggested the Appellant's direct involvement in importing and supplying plain water instead of sandalwood oil. The Tribunal concluded that the Appellant had not purchased valid inputs, confirming the Commissioner's order against the Appellant.Judgment: The appeal was dismissed, and the order passed by the Commissioner of Central Excise, Shillong against the Appellant was confirmed.