TaxTMI 
TaxTMI 
2019 (6) TMI 196
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.... by the Commissioner, Central Excise & Customs, Surat-I and as per verification report of the concerned Range Superintendents. Based upon investigation the Appellant were issued show cause notice dt. 12.08.2008 to disallow the credit wrongly taken and utilized on basis of invoice issued by fake/ bogus/ fictitious firms under Rule 12 of CCR, 2002/ Rule 14 of CCR, 2004 read with Section 11A and to recover interest. Penalty was also proposed under Rule 15. The demand was confirmed by the adjudicating authority. Hence the present appeal. 2. Ld. Counsel Shri S.J. Vyas submits that they had taken credit on the basis of endorsed invoice by various suppliers who had supplied to the Principal manufacturer for whom the appellant had undertaken job work. The fabrics were supplied to them under his delivery challans alongwith invoice of dealers from whom the principal manufacturer had purchased the fabrics. The traders from whom the goods were purchased are registered traders. The copy of Alert notice were not given to the Appellant. The firms had suspended their business and the investigation of firms started later. In such case the department could not find them. The department has not made....
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....ed that the issuing invoice were declared as fake/non-existent/bogus/fictitious as per Alert Circular issued from F. No. IV/12-HPIU-III/09/2004 - 05 Pt - IV dt. 03.05.2005, F. No. IV/12-HPIU-III/9/2004-05 Pt. VI dt. 22.09.2005, F. No. IV/12-HPIU-III/9/04-05 Pt. V dt. 05.07.2005, F. No. IV/12-HPIU-III/9/04-O5 Pt. VIII dt. 25.04.2006 and F. No. IV/12 - HPIU-III/9/04-05 Pt. VII dt. 30.12.2005 by the Commissioner, Central Excise & Customs, Surat - I and as per verification report of the concerned Range Superintendent. Clearly visible to even a layman a massive fraud was orchestrated to cause revenue loss by issue of fraudulent invoice. In all the Appellant has received invoices passing of fraudulent credit from 22 dealers through merchant manufacturer. In their defence the Appellant could not provide testimony from merchant manufacturer that they have purchased goods from genuine party. The Appellant has cited various judgments that in somewhat similar circumstances the Hon'ble High Court has decided in favour of assessee. However we find that in the present case the person issuing the invoice on which credit was availed by the Appellant were found to be non-existent. The Appellant has....
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.... were found to be fake and fictitious. Accordingly, Show Cause Notice came to be issued against the appellant. The Adjudicating Authority vide order dated 14-7-2004 held that the appellant had not cared to verify the existence of the vendor M/s. Muskan Prints and had therefore, not taken proper precautions to ascertain as to whether the supplier of the materials has paid duty of the materials, as required under Rule 7(2) of the CENVAT Credit Rules, 2002 (the Rules). He, accordingly, held that the charges levelled against the appellant were proved and that the appellant was liable to pay duty under Section 11A(2) of the Central Excise Act, 1944 (the Act) as well as interest and penalty. 4. The appellant carried the matter in Appeal before the Commissioner (Appeals), Central Excise and Customs, Surat-1, who vide order dated 16-5-2005 confirmed the amount of duty but reduced the penalty to Rs. 1,00,000/- under Section 11AC of the Act read with Rule 13 of the Rules. The appellant carried the matter in further appeal before the Customs, Excise & Service Tax Appellate Tribunal (the Tribunal). The Tribunal vide the impugned order dated 8-11-2006 confirmed the amount of duty and set asid....
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....o be valid for the purpose of taking credit. The appellant is the manufacturer; the duty liability and obligation to follow the Central Excise law and procedure is on them. They are the party who has taken the credit. It is seen that there is a clear understanding between the appellant as a manufacturer and M/s. Jhanwar International, the merchant manufacturer as to who shall bear the burden in case the credit became ineligible. Did the appellant and the merchant manufacturer had premonition or knowledge about the non-existence of M/s. Muskan Prints? Surprisingly, a copy of the stock declaration said to have been filed by M/s. Muskan Prints was produced by the appellant. As a manufacturer who has taken the credit he is required to know the supplier of raw materials and not merely their merchant manufacturer. It is like a buyer of stolen goods cannot claim ownership of the goods even if he has purchased without knowledge. If he has purchased the stolen goods with the knowledge that they are stolen, then he is liable, in addition, to penal action. Anyway, the appellant, in this case, has taken an undertaking from the merchant manufacturer to compensate him, in the event of credit bei....
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....ovided under the Explanation thereto, which reads as under : "Explanation. - The manufacturer or producer taking CENVAT credit on inputs or capital goods received by him shall he deemed to have taken reasonable steps if he satisfies himself about the identity and address of the manufacturer or supplier, as the case may be, issuing the documents specified in rule 7 evidencing the payment of excise duty or the additional duty of customs, as the case may be, either - (a) from his personal knowledge; or (b) on the strength of a certificate given by a person with whose handwriting or signature he is familiar; or (c) on the strength of a certificate issued to the manufacturer or the supplier, as the case may be, by the Superintendent of Central Excise within whose jurisdiction such manufacturer has his factory or the supplier has his place of business, and where the identity and address of the manufacturer or the supplier is satisfied on the strength of a certificate, the manufacturer or producer taking CENVAT credit shall retain such certificate for production before the Central Excise Officer on demand." 11. Thus, "reasonable steps" as envisaged under the aforesaid provisio....
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....oods in respect of which he has taken the CENVAT credit are goods on which the appropriate duty of excise as indicated in the documents accompanying the goods, has been paid." The explanation to same explain as to what would construe the reasonable steps which is as under : Explanation - "Explanation.- The manufacturer or producer taking CENVAT credit on inputs or capital goods received by him shall be deemed to have taken reasonable steps if he satisfies himself about the identity and address of the manufacturer or supplier, as the case may be, issuing the documents specified in rule 7, evidencing the payment of excise duty or the additional duty of customs, as the case may be, either- (a) from his personal knowledge; or (b) on the strength of a certificate given by a person with whose handwriting or signature he is familiar; or (c) on the strength of a certificate issued to the manufacturer or the supplier, as the case may be, by the Superintendent of Central Excise within whose jurisdiction such manufacturer has his factory or the supplier has his place of business, and where the identity and address of the manufacturer or the supplier is satisfied on the strength of....