2006 (9) TMI 83 - AT - Central Excise

Cenvat/Modvat - Department contended that appellant utilised credit by fraudulent means for the payment duty and accordingly demand were made along with penalty - Held that department contention was correct and demand and penalty sustained

Summary

Issues:
- Availment of Modvat credit wrongly on invoices without receipt of inputs
- Cross-examination of a witness
- Applicability of Section 11AC for penalty
- Invocation of Rule 209A for penalty

Analysis:

1. Availment of Modvat credit wrongly on invoices without receipt of inputs:
The case involves M/s. Popular Switchgears Pvt. Ltd. availing Modvat credit on various inputs and machines under erstwhile Central Excise Rules, without actually receiving the goods. The issue arose when it was discovered that a registered dealer, M/s. Rahul Metals, was passing on Modvat credit to customers fraudulently. The appellant, M/s. Popular Switchgears Pvt. Ltd., was found to have availed Modvat credit without receiving the actual goods, as revealed during investigations and statements recorded from relevant individuals. The Joint Commissioner confirmed the demand against the appellants under the Central Excise Rules, imposing penalties on the company and its directors. The Commissioner (Appeals) upheld the decision, leading the appellants to appeal before the Tribunal.

2. Cross-examination of a witness:
The appellants raised concerns about the lack of cross-examination of a key witness, Shri Ajay Kumar Ramasharan Singh, who was considered a crucial witness in the case. The learned Counsel for the appellants argued that without the opportunity for cross-examination, the statements of the witness should not have been considered. Reference was made to a decision by the Apex Court to support this contention. However, the Revenue's representative contended that the witness was granted the opportunity for cross-examination but failed to appear, absolving the inquiry officers of any fault. The authorities found sufficient evidence on record to support the non-receipt of goods by the appellants, dismissing the contention regarding the witness's cross-examination.

3. Applicability of Section 11AC for penalty:
The appellants contested the application of Section 11AC for the penalty related to the wrongful availment of Modvat credit, arguing that it pertains to cases of short-levy or non-levy of duty. The Revenue's representative countered that since the credit availed was used for duty payment upon further clearance of goods, Section 11AC was applicable. Additionally, the invocation of Rule 209A for penalties on the Managing Director and Manager (Accounts & Administration) was challenged by the appellants as being improper without goods confiscation.

4. Invocation of Rule 209A for penalty:
The Tribunal examined the invocation of Rule 209A for imposing penalties on the appellants found to have fraudulently availed credit they were not entitled to. The Tribunal upheld the application of Rule 209A, considering the acts of the appellants as fraudulent in nature. After reviewing the material on record and the submissions made by the appellants, the Tribunal concluded that there were no valid grounds to overturn the decisions of the authorities below, leading to the rejection of the appeals.