2015 (8) TMI 1383 - AT - Central Excise

CENVAT credit - fake invoices - it was alleged that without supplying the goods, the said dealer was only issuing the Central Excise Invoices, which entitled the manufacturer to avail the fraudulent Cenvat credit - Held that - the manufacturer of the goods from whom the dealer M/s. Sidh Balak Enterprises has purchased the goods for supply to the appellant herein, were not investigated by the Central Excise Officials. Hence, in the absence of any proper investigation to justify the allegation that there was no physical transaction but only paper transaction have been made facilitating the buyer of the goods to avail the Cenvat credit has no evidentiary value - Since, no discrepancies have been observed at the factory of the appellant regarding non-receipt of goods, the allegation of only taking fraudulent Cenvat credit based on the invoices cannot sustain - credit allowed - appeal allowed - decided in favor of assessee.

Summary

Issues:
1. Denial of Cenvat credit due to alleged fraudulent transactions by a dealer.
2. Lack of investigation at the premises of the manufacturer of the goods.
3. Imposition of penalty based on incomplete investigation.

Analysis:

1. The case involved the denial of Cenvat credit amounting to Rs. 1,50,180.00 due to suspected fraudulent transactions by a dealer, M/s. Sidh Balak Enterprises, who was found to issue Central Excise Invoices without physically supplying the goods. The Central Excise Department initiated proceedings against the appellant based on this assumption, alleging that the appellant availed fraudulent Cenvat credit. The appellant, engaged in manufacturing Ingots, contested this denial of credit.

2. The appellant's advocate argued that the Central Excise Department's investigation focused on the transactions at the factory of M/s. Jay Aay Alloys Pvt. Ltd., the manufacturer from whom the dealer purchased the goods. However, the dealer had sourced the goods from various manufacturers like M/s. Ruby Strips and Jagan Industries Ltd., whose premises were not visited by the Central Excise Officers. This lack of investigation at the original manufacturers' sites raised doubts about the validity of the denial of Cenvat credit to the appellant.

3. In the absence of thorough investigation at the premises of the manufacturers supplying goods to the dealer, the Tribunal found the allegations of fraudulent transactions and denial of Cenvat credit unsubstantiated. Since no discrepancies were found at the appellant's factory regarding the receipt and utilization of the goods, the Tribunal concluded that there was no evidence to support the claim of fraudulent Cenvat credit availing. Consequently, the Tribunal set aside the impugned order, ruling in favor of the appellant and allowing the appeal.

In conclusion, the judgment highlighted the importance of conducting comprehensive investigations and providing concrete evidence to substantiate allegations of fraudulent practices before denying Cenvat credit to manufacturers. The lack of direct evidence linking the appellant to any fraudulent activity led to the decision in favor of the appellant, emphasizing the need for due diligence and proper investigation in such cases.