2011 (2) TMI 1169 - AT - Central Excise

Cenvat credit of central excise duty/additional customs duty paid - Bogus invoices used to claim credit - Held that - The statement of Shri Sunil Mittal, Proprietor of Sulabh Impex Corporation alleged to have issued bogus invoices to assessee has been recorded under Section 14 of the Central Excise Act, 1944, which has not been retracted by him and the same is an inculpatry statement acceptiong issuing of bigus invoices - there is ring of truth in the statement of Shri Mittal - Decided against the assessee Peanlty - As when penalty under Rule 15(2) Cenvat Credit Rules, 2004 read with Section 11AC of Central Excise Act, 1944 has been imposed on the Appellant firm, there is no justification for separate penalty of Rs. 50,000/- on the appellant firm under Rule 25 of the Central Excise Rules, 2002 Reduced penalty - since in this case the entire amount of wrongly taken cenvat credit along with interest had been paid even prior to the issue of show cause notice, they should get the benefit of reduced penalty under first proviso to Section 11AC based on the judgement of the Hon ble Delhi High Court in the case of K.P. Pouches reported in 2008 (1) TMI 296 - HIGH COURT OF DELHI and accordingly, penalty imposable would be 25% of the wrongly taken cenvat credit

Summary

Issues:
1. Confirmation of cenvat credit demand against the Appellant.
2. Imposition of penalties on the Appellant, Shri Sunil Dutt, and M/s. Sulabh Impex Corporation.
3. Reduction of penalties based on payment of cenvat credit before the show cause notice.

Analysis:

1. The Appellant, a manufacturer of bathroom fittings, availed Cenvat credit of central excise duty based on invoices issued by M/s. Sulabh Impex Corporation. The central excise officers found discrepancies and issued a show cause notice for confirmation of cenvat credit demand, penalties under various rules, and imposition of penalties on involved parties. The Deputy Commissioner upheld the demand and penalties, which was affirmed by the Commissioner of Central Excise (Appeals), leading to the appeal.

2. The Appellant argued that the allegations were solely based on the statement of Shri Sunil Mittal, who admitted to issuing fake invoices without supplying goods. However, the Appellant contended that evidence such as transport documents, bank statements, and stamps indicated the supply of goods. The Departmental Representative maintained that all invoices were fake, emphasizing Mittal's statement and the quantity mismatch in invoices issued. The Tribunal noted Mittal's unretracted inculpatory statement and the clear indication of bogus invoices, upholding the duty demand against the Appellant.

3. The Appellant further challenged the separate penalty imposed under Rule 25 of the Central Excise Rules, 2002, in addition to the penalty under Cenvat Credit Rules. The Tribunal agreed that Rule 25 was not applicable in this case and set aside the additional penalty. Additionally, the Appellant sought reduced penalties based on early payment of cenvat credit, citing a relevant court judgment. The Tribunal acknowledged the early payment and reduced the penalty to 25% of the cenvat credit demand, in line with the legal precedent.

4. In conclusion, the Tribunal upheld the impugned order, except for setting aside the penalty under Rule 25 and reducing the penalty under Section 11AC to 25% of the cenvat credit demand. The decision considered the evidence, statements, and legal provisions to determine the liability of the parties involved and the appropriate penalties based on the circumstances of the case.