2010 (10) TMI 464 - AT - Central Excise

Cenvat Credit - Penalty - Proof - When the goods have been received from outside the State and are supposed to have passed through sales tax barrier on the border, the entry of the goods on the sales tax barrier is an important evidence regarding the entry of the goods into the state and in absence of such an entry, the burden would be on the assessee to prove that the goods had actually been received - All the consignments reaching Parwanoo, had come through the check post - When the goods are claimed to have been received from IPCL s depot at Ludhiana, Baroda or Nagothane and the record show that the date of entry as per ST-XXVI-A form is prior to the date of despatch of the goods from the depot, the consignee have to explain this discrepancy - Since the respondent have not been able to give any explanation for this, the central excise authorities are justified in drawing adverse conclusion from this that these are only paper transactions and no goods has been received and, therefore, the invoices showing the sales of the goods received under such fictitious invoices to respondent would also be fictitious - Held that the impugned order setting aside the Cenvat credit demand alongwith interest against respondent and also setting aside the imposition of penalty on respondent is not correct.

Summary

Issues Involved:
1. Recovery of fraudulently availed Cenvat credit.
2. Imposition of penalty on the manufacturer (Respondent No. 1).
3. Imposition of penalty on the registered dealer (Respondent No. 3).
4. Imposition of penalty on the partner managing the affairs (Respondent No. 2).

Detailed Analysis:

1. Recovery of fraudulently availed Cenvat credit:
The Department alleged that M/s. Chemiplast Industries (Respondent No. 1) availed Cenvat credit fraudulently by arranging cenvatable invoices without actually receiving any raw materials. During the investigation, discrepancies were found in the ST-XXVI-B register and the corresponding ST-XXVI-A forms, indicating that certain consignments were not actually received. The Additional Commissioner confirmed a demand of Rs. 21,26,832/- out of the total Rs. 45,28,023/- based on these discrepancies, particularly where the entry date at the Parwanoo check post was prior to the date of the depot invoice. The Commissioner (Appeals) later set aside this order, stating that there is no provision under Central Excise Law requiring the production of ST-XXVI-A forms to establish receipt of goods. However, the Tribunal disagreed, emphasizing that the central excise authorities are justified in investigating the actual receipt of goods, and the absence of entries at the sales tax barrier is significant evidence. The Tribunal restored the order-in-original, confirming the demand.

2. Imposition of penalty on the manufacturer (Respondent No. 1):
The Additional Commissioner imposed a penalty of Rs. 21,26,832/- on Respondent No. 1 under Rule 57-I/57AH of the Central Excise Rules, 1944 read with Section 11AC of the Central Excise Act. This penalty was based on the fraudulent availing of Cenvat credit using bogus invoices. The Commissioner (Appeals) set aside this penalty, but the Tribunal reinstated it, holding that the discrepancies in the ST-XXVI-A forms and the failure to explain them justified the penalty.

3. Imposition of penalty on the registered dealer (Respondent No. 3):
Respondent No. 3 was penalized Rs. 21,26,832/- under Rule 173Q(1) of the Central Excise Rules, 1944 for issuing cenvatable invoices without actual receipt of goods. The Commissioner (Appeals) set aside this penalty, but the Tribunal restored it, agreeing with the Adjudicating Authority's findings that the transactions were fictitious.

4. Imposition of penalty on the partner managing the affairs (Respondent No. 2):
A penalty of Rs. 5,00,000/- was imposed on Respondent No. 2 under Rule 209A of the Central Excise Rules, 1944. The Commissioner (Appeals) set aside this penalty, but the Tribunal reinstated it, supporting the Adjudicating Authority's conclusion that Respondent No. 2 was involved in the fraudulent activities.

Conclusion:
The Tribunal allowed the Revenue's appeals, setting aside the Commissioner (Appeals)' order and restoring the order-in-original passed by the Adjudicating Authority. The Tribunal emphasized the importance of verifying the actual receipt of goods and upheld the penalties imposed on all respondents for their involvement in the fraudulent availing of Cenvat credit.