TaxTMI 
TaxTMI 
2017 (3) TMI 592
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....urpose of passing on fraudulent credit. The investigations arrived at the conclusion that (i) M/s. Cosmos Sales Corporation, Mumbai is a fictitious firm which is non-existent (it) M/s. Aerochem Impex was Issuing invoices to YM Drugs on the pretext that goods there in are supplied by M/s. Cosmos Sales Corporation: (iii) That M/s. YM Drugs have not received any material against the invoices which are said to be issued by fictitious firm of Cosmos. (iv) That when no material is received, the question of processing the goods not arise, that they neither processed nor supplied material to M/s Aerochem Impex. M/s. YM Drugs issued CENVAT able invoices to M/s. Aerochem without actual supply of material and based on such invoices issued to appellant they indulged in availment of fraudulent credit without actual receipt of material. 2. A Show Cause Notice dated 30.12.2011 was Issued raising the two allegations. i) The investigation team had conducted search in the appellant premises and found shortage of inputs other than the disputed item (DMS). Shortage of inputs other than DMS to the extent of Rs. 8,71,399/- was found. The demand was raised in respect of the same along with interest....
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....nd the Ld. Counsel adverted to the operative portion of the Order-in-Original and submitted that the adjudicating authority has imposed a composite penalty of Rs. 1,2,42,199/- for both counts i.e.; fraudulent availment of credit and shortage of inputs other than DMS. Though in the Show Cause Notice the proposal is to impose penalty under Rule, 15 of CENVAT Credit Rule, 2004 the adjudicating authority has imposed penalty under Rule, 15 (2) of CENVAT Credit Rules, 2004 read with Section 11 AC of Central Excise Act, 1944. That in the impugned order the Commissioner (appeals) ha and modified the composite penalty of Rs. 12,42,199/- to Rs. 4,36,000/-. That this composite penalty on both counts is imposed by Commissioner (Appeals) under Rule, 15(1) of CENVAT Credit Rules, 2004 read with Section 11 AC (1)(b) of Central Excise Act, 1944. It is argued by him that as there is no proposal in the Show Cause Notice to impose penalty under Rule, 15(1) the Commissioner (Appeals) cannot impose penalty under Rule, 15(1). The Ld Counsel relied upon the judgment of the Tribunal in the case of B. Giriajpathi Reddy & Company Vs CCE, Guntur [2016 (344) ELT 923 (Tri - Hyd)]. That therefore the penalty im....
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....s would come to light. The Ld. Counsel therefore pleaded to set aside the demand of Rs. 3,70,800/- interest thereon as well as the penalty on this count. The Ld. Counsel has also argued that Shri. S.S.N. Varma was only Senior Manager of (Stores) of the appellant company. That there is no evidence to establish that he has abetted in any act of availing fraudulent credit. That the penalty imposed upon him may be set aside. 7. Against this, the Ld. AR, Shri. Guna Ranjan reiterated the findings in the impugned order. He submitted that M/s. Aerochem Impex Pvt Ltd colluding with M/s YM Drugs was passing on CENVATable invoices to various manufacturers in regard to the material DMS without actual supply of goods. The department has conducted investigation as well as search of the premises of the appellant company. The period involved is 2008 where as the fraudulent acts came to light and search was conducted in 2011. Therefore, at the time of search no shortage of the input (DMS) was found in the premises of the appellant company. However, by investigation the department has been able to establish with relevant documents the fraudulent availment of credit by appellant on the two invoice....
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....emoval is established by the department the demand of interest cannot be sustained. In the case on handy the appellants reverse the credit and the same has been already appropriated. For these reasons, I find that the demand of interest on Rs. 8,71,399/- requires to be set aside which I hereby do. 10. The second point argued by the Ld. Counsel for appellant is in regard to the demand of Rs. 3,70,800/-. At the time of search, the department has not found any shortage of the input, namely DMS. However, this has been reasonably explained by the L d. AR pointing out that the alleged transaction on fake invoices took place in the year 2008 end the search was conducted in 2011. The dispute is with regard to only two invoices. As per invoices No. 59 &60 issued by Aero Chem Impex Pvt. Ltd., the appellant is said to have received DMS or, 10.12.2008 RG-23 maintained by M/s. Aero Chem Impex Ltd., the entry against Sl. No. 32 it is shown that as per invoice No. 231 dated 10.12.2008 issued by M/s YM Drugs, subject material (DMS) was received by M/s. Aero Chem and by invoice No. 59 dated 10.12.2008 the same has been supplied to the appellant In the invoices issued by YM Drugs to M/s. Aero Che....
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....under Section 11AC or Rule, 15(2) ibid and limited penalty provisions to Rule, 15(1) alone of the Rs. 60,00,000/- on the assessee. We are not able to accept the 'tweaking' of the said proposals in the show cause notice by the adjudicating authority only to his findings and conclusion. Adjudicating authority did not find force in the grounds for proposal for levy of penalty under Rule, 15 read with 11AC, he has held that no suppression, fraud are brought in and that intention to evade payment of tax in cash is not alone sufficient to levy penalties under Section 11AC or Rule, 15(2). In the face of such finding, it would have been more legally appropriate for the adjudicating authority to drop the said proposal and desist from imposition of penalty. When the SCN has proposed imposition of penalty in terms of rule 15 read with 11AC of the Act, (emphasis added), it is not open to the adjudicating authority to selectively impose penalty only under Rule, 15 and that too under the more benign Rule, 15(1). The proposal in the show cause notice for imposition of penalty should have been accepted and confirmed in toto or not at all. The adjudicating authority cannot travel beyond the SCN. Th....