2010 (3) TMI 832 - CGOVT - Central Excise

Cenvat credit - Revision application - Rebate claim - during investigation by Central Excise Authorities, it was revealed that the manufacturer-supplier of goods M/s. Sofina Fashions had not done any manufacturing at the registered premises and had issued bogus duty paying documents - The Central Board of Excise and Customs has clarified in its Circular No. 766/82/2003-CX., dated 15-12-03 as under Para 5 On the issue of availment of credit by the user manufacturer, it is clarified that action against the consignee to reverse/recover the cenvat credit availed of the such case need not be resorted to as long as bona fide nature of consignee s transaction is not in dispute - The said provision of the circular implies that bona fide nature of transaction between the merchant-exporter and supplier-manufacturer should not be in dispute, the goods were not manufactured by the manufacturer-supplier who issued bogus duty payment documents. So the lower authorities have rightly observed that duty paid character of goods exported was not proved. As such the rebate claim was rightly rejected, Government observes that there is no infirmity in the impugned order-in-appeal upheld, Revision application is rejected being devoid of merit.

Issues Involved:
1. Failure to submit required documents for rebate claims.
2. Alleged issuance of bogus duty-paying documents by the supplier.
3. Adherence to the principles of natural justice.
4. Responsibility and due diligence of the exporter.
5. Condonation of delay in filing the revision application.
6. Bona fide nature of the transaction between the exporter and supplier.

Detailed Analysis:

1. Failure to Submit Required Documents for Rebate Claims:
The applicant, M/s. Sheetal Exports, filed 17 rebate claims amounting to Rs. 38,03,971/- but failed to submit the duplicate copies of central excise invoices and triplicate copies of ARE-Is certified by the Central Excise Officer. The Show Cause Notice dated 8-12-05 was issued, and during the personal hearing on 10-1-06, the applicant's representative expressed his inability to produce these documents.

2. Alleged Issuance of Bogus Duty-Paying Documents by the Supplier:
The Deputy Commissioner of Central Excise, Thane-II, reported that M/s. Sofina Fashions had obtained Central Excise Registration but did not carry out any manufacturing activities at the registered premises. They issued bogus ARE-I and invoices to M/s. Sheetal Exports. Consequently, the adjudicating authority held that the rebate claims were inadmissible as the goods exported were not duty-paid.

3. Adherence to the Principles of Natural Justice:
The applicant contended that the impugned order violated the principles of natural justice as it relied on a communication from the Deputy Commissioner without providing a copy to the applicant. The applicant was not given an opportunity to oppose the said communication.

4. Responsibility and Due Diligence of the Exporter:
The applicant argued that they had taken reasonable steps to ensure the duty-paid character of the goods received from M/s. Sofina Fashions. They relied on the Central Excise Registration Certificate and other documents to prove compliance with Rule 9(3) of the CENVAT Credit Rules. However, the authorities concluded that the applicant failed to verify the existence and identity of the supplier, thus questioning the bona fide nature of the transaction.

5. Condonation of Delay in Filing the Revision Application:
The revision application was filed after a delay of 23 days beyond the initial 3-month period. The applicant provided an affidavit stating that the proprietor was suffering from severe jaundice during the relevant period. The Revisionary Authority, satisfied with the reasons for the delay, condoned it as it was within the condonable limit under Section 35EE(2) of the Central Excise Act, 1944.

6. Bona Fide Nature of the Transaction Between the Exporter and Supplier:
The Government observed that the applicant purchased goods from a manufacturer who did not carry out any manufacturing activities and issued bogus duty-paying documents. The applicant failed to prove the bona fide nature of the transaction. The criteria laid down in previous judgments and CBEC Circular No. 766/82/2003-CX., dated 15-12-03, require that the transaction be transparent and bona fide. Since the duty-paid character of the goods was not established, the rebate claims were rightly denied.

Conclusion:
The Government upheld the order-in-appeal, rejecting the revision application on the grounds that the applicant failed to establish the duty-paid nature of the exported goods and did not take reasonable steps to verify the supplier's authenticity. The rebate claims were denied, and the revision application was rejected as devoid of merit.

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