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2013 (4) TMI 5 - AT - Central ExciseCenvat Credit - deemed reversal of credit - fraudulent invoices - Issued invoices for final products without manufacturing anything and filed returns- - Appellant paid a small amount through cash also - Held that - the credit availed by them was reversed by utilizing for payment of duty, which even according to the Revenue, they were not required to pay. Inasmuch as the entire credit was reversed by making debit entry used for payment of duty on final products, any direction to deposit the credit against them would not be fair. By adopting the above modus operandi, the appellant have indulged in the passing of fraudulent modvat credit to their buyers. This is a serious allegation. Keeping in view the fact that a lot of evidence has come on record to uphold the above activity of M/s.Satvik Industries, in the form of various statements, machine installed in the factory so as to manufacture such huge quantum of final products - the appellant directed to deposit part of penalty. - appellant directed to deposit an amount of Rs.30 lakhs towards penalty.
Issues Involved:
1. Confirmation of duty and imposition of penalty against M/s. Satvik Industries and M/s. Genius Electrical & Electronics (P) Ltd. 2. Legitimacy of availing and utilizing Modvat credit based on fraudulent invoices. 3. Reversal of credit and its implications. 4. Compliance with Section 11D of the Central Excise Act. Detailed Analysis: Issue 1: Confirmation of Duty and Imposition of Penalty The duty of Rs. 1,06,01,497/- was confirmed against M/s. Satvik Industries along with an identical penalty. Similarly, a duty of Rs. 16,07,133/- was confirmed against M/s. Genius Electrical & Electronics (P) Ltd. with an identical penalty. The central excise officers found that M/s. Satvik Industries had been availing Modvat credit based on fake invoices issued by M/s. Aggarwal Plastic (India), which had ceased manufacturing activities since January 2002. Consequently, M/s. Satvik Industries was accused of showing the purchase of raw materials without actual receipt and clearing final products without actual manufacture, thus facilitating their buyers to avail of non-admissible credit. Issue 2: Legitimacy of Availing and Utilizing Modvat Credit The appellants argued that the illegal credit availed was reversed by debiting it for payment of duty on final products, which according to the Revenue, were not manufactured. The Revenue contended that the credit availed based on fraudulent invoices was not available to M/s. Satvik Industries and should be deposited. The Tribunal noted that since the final products were not manufactured, there was no liability to pay excise duty, and the utilization of the credit for payment of duty on non-manufactured products could be considered a reversal of the credit. Issue 3: Reversal of Credit and Its Implications The Tribunal relied on decisions such as Crompton Greaves Ltd. vs. CCE and Vickers System International Ltd. vs. CCE, which held that Modvat credit availed and used for payment of duty, even if no excise duty was leviable, could be considered a reversal of credit. The Tribunal concluded that the credit availed by M/s. Satvik Industries was reversed by utilizing it for payment of duty on final products, and further recovery of inadmissible credit was not sustainable. Issue 4: Compliance with Section 11D of the Central Excise Act A separate order by Member (Technical) disagreed with the notion that issuing invoices showing utilization of wrong Cenvat credit is equivalent to reversal of wrong Cenvat credit. It was emphasized that fraudulent credit passed on to buyers causes a loss to the Revenue. The provisions of Section 11D require any amount collected as representing excise duty to be deposited with the exchequer. The Member (Technical) highlighted that the situation at hand involved fraudulent credit and issuance of invoices to enable buyers to take credit, which is different from legitimate reversal of credit. Conclusion: 1. M/s. Satvik Industries: Directed to deposit Rs. 30 lakhs towards penalty within eight weeks. The balance amount of pre-deposit was waived, and compliance was to be reported on 11.5.2012. 2. M/s. Genius Electrical & Electronics (P) Ltd.: The deposit of Rs. 16 lakhs was deemed sufficient for the admission of the appeal, and the pre-deposit of the balance amount was waived. There shall be a stay on the collection of the balance amounts during the pendency of the appeals.
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