2010 (12) TMI 1030 - HC - Central Excise

Penalty - Cenvat credit denied - suppression of facts/fraud or misdeclaration - investigations revealed that the suppliers of grey fabrics who had issued the invoices on the basis of which the assessee had availed credit were found to be non-existent/fake/bogus - Held that - Examining the facts of the present case both the Commissioner (Appeals) as well as the Tribunal have recorded concurrent findings of fact to the effect that evidence in record is not sufficient to conclude that the assessee is a party to the fraud. On behalf of the revenue nothing has been pointed out to dislodge the concurrent findings of fact recorded by both the appellate authorities it is apparent that the conditions precedent for invoking the provisions of Rule 13(2) of the Rules are clearly not satisfied. In the circumstances no infirmity can be found in the impugned order of the Tribunal so as to warrant interference appeal is dismissed.

Issues:
1. Challenge to Tribunal's order under Section 35G of the Central Excise Act
2. Allegations of connivance with suppliers and availing Cenvat Credit
3. Justification of reduction in penalty by Tribunal
4. Allegations of contravention of CENVAT Credit Rules and suppression of facts

Analysis:

Issue 1: Challenge to Tribunal's order under Section 35G of the Central Excise Act
The appellant revenue challenged the Tribunal's order dated 13th January 2009, contending that the Tribunal erred in various aspects. The appellant raised questions regarding the lack of evidence to establish connivance with suppliers for availing Cenvat Credit, the sufficiency of evidence to prove suppression of facts/fraud, the reduction of penalty by the Tribunal, and the alleged contravention of CENVAT Credit Rules.

Issue 2: Allegations of connivance with suppliers and availing Cenvat Credit
The respondent-assessee, a manufacturer of man-made fabrics, availed Cenvat credit on grey fabrics based on invoices from suppliers later found to be non-existent/fake. The adjudicating authority disallowed the credit and imposed penalties. The Commissioner (Appeals) partly allowed the appeal, modifying the penalty. Both the Commissioner (Appeals) and the Tribunal found that while the assessee failed to verify the authenticity of the invoices, there was insufficient evidence to prove connivance or fraudulent intent on the part of the assessee.

Issue 3: Justification of reduction in penalty by Tribunal
The Commissioner (Appeals) and the Tribunal concurred that there was no conclusive evidence to establish the assessee's involvement in the fraud. The Tribunal upheld the penalty under Rule 13(1) of the Cenvat Credit Rules, 2002, instead of Rule 13(2) which pertains to fraud, willful misstatement, collusion, or suppression of facts with intent to evade duty. The Tribunal held that the assessee was liable for penalty under Rule 13(1) but not under Rule 13(2) due to lack of evidence indicating fraudulent intent.

Issue 4: Allegations of contravention of CENVAT Credit Rules and suppression of facts
The Tribunal confirmed that the assessee did not take reasonable steps as per Rule 7 of the Rules but could not be held liable under Section 11AC of the Act. The Tribunal, as well as the Commissioner (Appeals), found that the evidence did not support the conclusion that the assessee contravened the Rules with intent to evade duty. The absence of concrete evidence of fraud or suppression of facts led to the imposition of a lesser penalty under Rule 13(1) instead of Rule 13(2).

In conclusion, the appeal was dismissed as no substantial question of law was raised, and the concurrent findings of fact by the appellate authorities indicated insufficient evidence to establish fraudulent intent or contravention of rules by the assessee.

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