TaxTMI 
TaxTMI 
2026 (6) TMI 174
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.... 1.1 As per the facts, appellant is engaged in processing of man-made fabrics falling under CTH 5406 for which they procured grey fabrics from various suppliers, namely M/s. Paraswanath Impex, Surat; M/s. G. Shaan Enterprise; M/s. James Faiz Fabrics, Surat; M/s. R. R. Textiles, Surat; M/s. M. K. Textiles, Surat; and M/s. M. M. Textiles. In the month of December 2003, January 2004, May 2004, and June 2004, appellant availed Cenvat Credit of Rs. 15,64,330/- on invoices issued by above-mentioned suppliers, which upon inquiry, were found to be fake/bogus/non-existing units. The officers recorded the statement of Shri Deepak Bimalprasad Jain, Director of the appellant company, on 10.11.2008, wherein he stated to have received grey fabrics through brokers and not directly from the dealers/manufacturers; that they have correctly availed the Cenvat Credit on the strength of valid duty-paid documents, after furnishing registration certificate issued to the said dealers/manufacturers. 1.2 The show cause notice was decided by the Commissioner vide order dated 14.07.2021, wherein he confirmed recovery of above Cenvat Credit along with interest by invoking extended period of limitation. He ....
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.... shows existence of suppliers at some point of time. * The show cause notice for disallowing Cenvat Credit on purchase of grey fabrics purchased in 2003-2004, was issued in 2008. Therefore, it cannot be assumed that the suppliers never existed. In the case of CCE & ST Ludhiana Vs. Vallabh Steel (Appeal No. E/2308/2012), CESTAT, New Delhi held that "CENVAT credit cannot be denied merely on the ground that at the time of Investigation, the dealer was non-existent. When the goods were procured from them, they were registered with the department." They also rely on the decision of CESTAT, New Delhi in Fortune Metaliks Ltd. and Ors. Vs. Commissioner of Central Excise, Raipur (Appeal No. 510455 of 2019), wherein it was held that, "Merely because the company issuing invoice was found non-existent, the appellant could not be denied availment of Cenvat Credit thereupon unless and until his involvement in terms of his knowledge about such non-existence and about the invoice to be bogus is not proved on record." * Hon'ble Supreme Court in CCE Vs. Chemphar Drugs & Liniments reported at 1989 (40) ELT 276 (SC) held that "it is cardinal postulate of law that burden of proving an....
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....e arguments, learned AR submitted that the authorities have conclusively proved in this case that it was intentional fraud involving fake/ fictitious identities for availment of Cenvat Credit; that when the purported persons who issued invoices of grey fabrics are untraceable/ non-existent, the whole transaction gets vitiated; that the appellant knew that they were procuring grey fabrics from non-existent suppliers on fake papers; that the appellant has not submitted any documentary evidences in the form of affidavit of the suppliers, certifying genuineness of the transaction. He refers to the statement dated 10.11.2008 of Shri Deepak B. Jain, Director of the company wherein, he admitted to be not knowing the identity/ address of the persons who supplied them grey fabrics. Relying on the decision of this Tribunal in the case of Chintan Processors P Ltd. reported at 2008 (232) ELT 663 (Tri-Ahmd), he pleads that, "once the supplier is proved non-existent, it has to be held that goods have not been received." He also relies on Final Order No. A/10956/2019 dated 03.06.2019 of this Tribunal in the case of Palav Synthetics Vs. CCE, Surat-I and the judgment of Hon'ble Gujarat High Court i....
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....ep the path to justice clear of obstructions which could impede it." He prayed for dismissing the party's appeal by upholding the impugned order. 5. Heard both the sides. I find that the appellant availed Cenvat Credit of Rs.15,64,330/- on the strength of invoices issued by suppliers, which on verification by the jurisdictional range, were found to be fake/ non-existent. Also, there was an alert Circular issued by the Directorate General of Central Excise Intelligence intimating above modus operandi adopted by various fabric processors in and around Surat. 5.1 In first round of litigation before this Tribunal, the matter was remanded vide Final Order No. A/773/WZB/AHD/2011 dated 09.05.2011 to the original Adjudicating Authority for fresh decision, by taking into account the observations made in the case of M/s. Bhagwati Silk Mills. In remand proceedings, the Adjudicating Authority after considering various decisions including decisions of Hon'ble Gujarat High Court in the case of M/s. Prayagraj Dyeing and Printing Mills Pvt. Ltd. and M/s. Kirtida Silk Mills came to conclusion that appellant is not entitled to Cenvat Credit on invoices issued by non-existent manufacturers/ ....
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....ed a manufacturer or producer taking Cenvat Credit on inputs or capital goods to take all reasonable steps to ensure that the inputs or capital goods in respect of which, he has taken Cenvat Credit are goods on which appropriate duty of excise as indicated in the documents accompanying the goods, has been paid. The said Rule 7(2) is reproduced below:- "(2) The manufacturer or producer taking CENVAT credit on inputs or capital goods shall take all reasonable steps to ensure that the inputs or capital goods 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. 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 gi....
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....jarat High Court in the case of Shiv Enterprises Vs. Commissioner of Central Excise & Customs reported at 2015 (322) E.L.T. 703 (Guj.) has held that Cenvat Credit availed by the appellant dealer on the basis of invoices of a manufacturer who committed fraud and given fictitious/ fake address while obtaining provisional registration. It is not available. It upheld the impugned order holding that the manufacturer's fraud vitiates entire transaction. The appellant could not have availed credit on the basis of invoices issued by a fictitious firm. Para-5 of the said decision is reproduced below:- "5. The authorities below as well as learned Tribunal while considering the aforesaid explanation tendered by the present appellant have recorded the finding that indisputably the present appellant has not denied the fact that registration certificate given by the department to M/s. Ankit Textiles is not disputed. It is also proved that cheques were being paid to the aforesaid M/s. Ankit Textiles. It is also not disputed that the present appellant maintained the record and has passed on the credit taken by them as a dealer. Rule 7(2) clearly provides that reasonable precaution should ....
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.... Central Excise, Surat-I and also Director General Central Excise Intelligence declaring about 500 said units as fictitious, bogus, fake and the circulars were also issued for proper verification of claims of rebate. As observed by the revisional authority it appears that the said alert circulars were duly published and placed on a notice board and nobody challenged the same inclusive of the petitioners. The petitioners did not come forward with any evidence regarding any existence of said supplier of grey fabric. The petitioners also did not deny that the said suppliers are bogus, fake, fictitious and non-existing. It is also observed by the authorities below that the applicant had knowledge that no such suppliers existed, endorsed the fake invoices to the processors for facilitating availment of CENVAT credit and thereafter paying central excise duty therefrom. Considering the aforesaid facts and circumstances, it cannot be said that any error and/or illegality has been committed in denying the rebate claim with respect to those invoices which were found to be bogus, fake, fictitious and non-existent. 6.1 Now, so far as the contention on behalf of the petitioners that co....
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....ow the valid and genuine central excise invoices can be issued by such suppliers. As such, this argument of the applicant fails. 9. Applicants has also contended that the copies of alert circulars a relied upon documents were not supplied to them. In this regard, Government observes that the applicants have not raised this plea either at adjudication stage or at appellate stage. Rather it is noticed that at adjudication stage no defence reply was filed to the show cause notices. There is no justification for raising this plea at revision application stage. Moreover, they have never claimed that said grey fabrics suppliers ever existed. No such supplier was ever produced before either adjudicating authority or appellate authority. Government does not find any force in the said argument." 6.2 Now, so far as the contention on behalf of the petitioners that they made the payment to the suppliers by cheques and the reliance placed upon the documents produced at Pages 159 to 310 is concerned, as such, such a contention came to be considered by the Division Bench of this Court in the decision in Prayagraj Dyeing & Printing Mills Pvt. Ltd. & Ors. v. Union of India & Ors. ....
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....7 Similar issue came up before CESTAT Ahmedabad in the case of M/s. Jai Hanuman Dyg. & Ptg. Mills P. Ltd. (a processor of grey fabric) who had availed Cenvat Credit on non existence/ fake/ bogus invoices. During adjudication proceedings, credit was disallowed to them and equal penalty was imposed. In an appeal against this order, learned Commissioner (Appeal) upheld disallowance of Cenvat Credit but instead of equal penalty under Section 11AC of the Central Excise Act, 1944, he imposed penalty under Rule 15(1) of CCR, 2004. This order was challenged by Revenue before the Tribunal and thereafter before Hon'ble Gujarat High Court for imposition of mandatory penalty, but there was no challenge to disallowance of Cenvat Credit by the appellant. 5.8 Above judicial pronouncements pertain to textile processing industry where a common modus operandi was adopted by various fabric processors by availing Cenvat Credit on the basis of invoices issued by bogus/ fake/ non-existent manufacturer. Hon'ble Gujarat High Court has consistently held in these cases that requirement of Rule 7(2) of the Cenvat Credit Rules, 2002 has not been satisfied by the Credit availers and therefore, Cenvat Credit....
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....ignation/authority. (f) The invoice of M/s. G. Shaan Enterprise do not indicate the lorry No. under which goods were removed. (g) The invoice are signed illegibly without indicating the identity of the person signing and without indicating whether signed by the licensee or his authorized agent. The description of the goods is given vaguely as unprocessed grey cloth. The invoice are issued in favour of merchant M/s. Suraj Exports and M/s. Govinda Overseas. The documents purported to be delivery challans of M/s. Govinda Overseas are signed illegibly in the manner challan of M/s. Night Exports and M/s. Qadri Exports are signed. There is no disclosure of identity or designation of person signing. (h) M/s. Parasnath Impex the sixth supplier of the invoice of grey fabrics has issued the invoice directly in favour of Saiyam Silk Mills Pvt. Ltd (the appellant). The invoice do not indicate the mode of transport and the appellant has issued the invoices of process fabrics in favour of M/s. Parasnath Impex. From the document it is seen that M/s. Parasnath Impex is registered with Excise as a manufacturer. Since M/s. Parasnath Impex is registered with Excise the law ....