2013 (8) TMI 878 - HC - Central Excise

Validity of Tribunal s order - Whether the Tribunal is justified to reverse the findings of lower authorities regarding imposition of penalty on respondent(second-stage dealer) for passing Cenvat credit on the basis of invoices issued by first-stage dealer when the first stage dealer who supplied the goods to second-stage dealer himself admitted that he has done the paper transactions only - Held that - Absence of enquiry against the respondent or further verification of statement made by Shri Sachin Aggarvanshi, the respondent has been wrongly penalised. The Tribunal has also held that the revenue did not conduct any further enquiry from any transporter or actual manufacturer of goods to verify whether goods were not received by the respondent or that Shri Sachin Aggarvanshi s statement applies to the respondent s goods. This apart, the learned Tribunal has also held that the respondent was not associated with the enquiry conducted against Shri Sachin Aggarvanshi. - findings recorded by the Tribunal do not suffer from any error of fact, jurisdiction or of law that would invite interference. The revenue was required to hold an independent enquiry against the respondent and only, thereafter, could an order be passed imposing penalty. The fundamental errors pointed out by the Tribunal are sufficient to hold against the revenue - Decided against Revenue.

Summary

Issues:
Challenge to the correctness of order setting aside penalty based on statement implicating respondent without further inquiry.

Analysis:
The High Court addressed the challenge to the correctness of the order dated 17-7-2012 passed by the Customs, Excise & Service Tax Appellate Tribunal, New Delhi, Principal Bench. The counsel for the revenue argued that the respondent was implicated based on a statement by Shri Sachin Aggarvanshi, who admitted to not receiving goods but supplying invoices. The substantial question of law raised was whether the Tribunal was justified in reversing the findings regarding the imposition of penalty on the respondent for passing Cenvat credit based on invoices from a first-stage dealer who admitted to paper transactions only.

The High Court examined the impugned order, along with the orders of the Assessing Officer and the Commissioner of Appeals. It found no reason to hold that any question of law, especially the one framed, required adjudication. The Tribunal's decision was upheld as it correctly determined that the absence of further inquiry or verification of Shri Sachin Aggarvanshi's statement led to the wrongful penalization of the respondent. The Tribunal highlighted the lack of investigation by the revenue from transporters or actual manufacturers to verify whether goods were received by the respondent or if Shri Sachin Aggarvanshi's statement applied. The Tribunal also noted that the respondent was not involved in the inquiry against Shri Sachin Aggarvanshi.

The High Court emphasized that the findings of the Tribunal did not contain any errors of fact, jurisdiction, or law warranting interference. It was established that the revenue should have conducted an independent inquiry against the respondent before imposing a penalty. The failure to do so constituted fundamental errors that favored the respondent. Consequently, the appeal was dismissed, upholding the Tribunal's decision to set aside the penalty imposed on the respondent.