2006 (7) TMI 686 - AT - Central Excise

MODVAT credit - fraudulent availment of credit on invalid documents - Rule 4 of the Cenvat Credit Rules 2002 - waiver of pre-deposit - Held that - after waiving pre-deposit we set aside the impugned order and allow the appeals filed by the appellants with consequential relief if any.

Summary

Issues: Fraudulent availment of modvat credit on invalid documents and imposition of penalty.

Analysis:
The judgment revolves around the fraudulent availment of modvat credit on invalid documents and the imposition of penalties on the main appellant and co-noticees. The Commissioner's order disallowed the modvat credit based solely on oral statements without substantial documentary evidence. The case involved M/s. Classic Strips Pvt. Ltd., a manufacturer of Printed self-adhesive PVC stickers/strips, availing modvat/Cenvat facility under the Central Excise Rules. The impugned order lacked discussion on corroborative evidence supporting the disallowance of modvat credit.

The appellants, a non SSI unit, were availing Cenvat credit on duty paid inputs like printing inks, dyes, and pigments. Allegations were made that they fraudulently availed modvat credit based on dealer invoices without receiving goods. The investigation lacked proper inquiry despite requests from the appellants. The appellant argued that the UDCT opinion favored them, highlighting the Department's willful suppression of evidence. The failure of a thorough investigation was emphasized, pointing out discrepancies in the Commissioner's reliance on transporters' statements over documentary evidence.

The Tribunal found reasons to waive pre-deposit and allow the appeals at the stay stage. The Commissioner failed to follow Tribunal directions, consider appellants' documentary evidence, and address contradictions in transporters' statements. The judgment highlighted the importance of documentary evidence over oral statements, citing legal precedents. The Commissioner's reliance on assumptions and presumptions without concrete evidence was criticized. Since the demand was deemed unsustainable, the question of penalty was dismissed.

Ultimately, the impugned order was set aside, and the appeals by the appellants were allowed after waiving pre-deposit. The judgment emphasized the significance of proper investigation, reliance on documentary evidence, and adherence to legal principles in deciding cases of fraudulent availment of credits.