2013 (8) TMI 648 - AT - Central Excise

CENVAT credit - The assesse had taken Central Excise registration for manufacture of copper ingots, copper wire and insulated copper wire - they had availed huge amount of Cenvat credit - They had neither filed the Cenvat credit returns nor in the ER-1 they have given the invoice details Held that - Prima facie the department s case against the appellant was on their strong footing and the evidence on record clearly indicates that the Cenvat credit had been availed by the assesse in a fraudulent manner without any invoices without actually receiving any goods and this action of the assesse would attract penalty u/s 15 (2) of Cenvat Credit Rules, 2004 readwith Section 11AC. They had without manufacturing any goods passed on the bogus Cenvat credit by issuing bogus invoices to other manufacturers on the basis of which those manufacturers would have taken the Cenvat credit - no TR-6 challans in this regard had been produced and if this payment had been made by debiting the Cenvat credit amount, the same was meaningless, as all the evidence on record, prima facie, shows that the entire Cenvat credit had been availed by them in a fraudulent manner without receiving any goods and without any invoices - the assesse s claim in their remark in the ER-1 return that amount was debited by them for payment of penalty imposed by CESTAT was false. Waiver of Pre-deposit Prima-facie the assesse was not able to make out the case in their favor - Penalty equal to the fraudulently taken Cenvat credit would be attracted under Rule 15 (2) of Cenvat Credit Rules, 2004 read with Section 11AC of Central Excise Act, 1944 2 crores were ordered to be submitted as pre-deposit upon such submission rest of the duty to be waived till the disposal Stay granted.

Issues Involved:

1. Fraudulent availing of Cenvat credit without actual receipt of goods.
2. Non-production of documents and invoices supporting Cenvat credit.
3. Misrepresentation of manufacturing activity and sales.
4. Imposition of penalty and recovery of fraudulently availed Cenvat credit.
5. Validity of payment through Cenvat credit account for penalty.

Issue-wise Detailed Analysis:

1. Fraudulent Availing of Cenvat Credit Without Actual Receipt of Goods:
The appellant, having obtained Central Excise registration, showed production and clearance of goods in their ER-1 return for August 2006. However, during a visit by Central Excise officers, it was found that the factory was not equipped to manufacture the quantity of wire reported. Investigations revealed that the appellant availed Cenvat credit amounting to Rs. 6,52,21,257/- without receiving any goods. The Assistant Excise and Taxation Commissioner confirmed that there were no purchases from outside Punjab nor sales to buyers outside Punjab, indicating fictitious transactions.

2. Non-production of Documents and Invoices Supporting Cenvat Credit:
The appellant failed to produce the required documents and invoices despite multiple requests and summons from the Jurisdictional Central Excise officers. This non-compliance further supported the allegation of fraudulent Cenvat credit availing. The absence of records during factory visits and the appellant's continuous failure to provide documentation reinforced the suspicion of fraudulent activities.

3. Misrepresentation of Manufacturing Activity and Sales:
The investigation revealed discrepancies in the appellant's reported production and power consumption. Suppliers within Punjab denied supplying the claimed goods to the appellant, and inquiries with buyers indicated no purchase of enamelled copper wire. This misrepresentation of manufacturing activities and sales through bogus invoices was a key factor in the fraudulent availing of Cenvat credit.

4. Imposition of Penalty and Recovery of Fraudulently Availed Cenvat Credit:
A show cause notice was issued to the appellant for the recovery of the fraudulently availed Cenvat credit along with interest under Rule 14 of Cenvat Credit Rules, 2004, read with Section 11A (1) of the Central Excise Act, 1944. Penalties were imposed under Rule 15 (2) of Cenvat Credit Rules, 2004, and Rule 25 of Central Excise Rules, 2004. The Commissioner confirmed the Cenvat credit demand and imposed a penalty equal to the fraudulently availed amount. Penal proceedings against the proprietor were dropped.

5. Validity of Payment Through Cenvat Credit Account for Penalty:
The appellant claimed to have paid the penalty amount through the Cenvat credit account. However, the Commissioner did not accept this plea, stating that payment through Cenvat credit was meaningless as the credit itself was fraudulently availed. The Tribunal's order did not impose any penalty, and the appellant's claim of payment through Cenvat credit was deemed false.

Conclusion:
The Tribunal concluded that the appellant fraudulently availed Cenvat credit without actual receipt of goods and misrepresented their manufacturing activities and sales. The appellant's failure to produce supporting documents and invoices further supported the fraudulent nature of the transactions. The Tribunal directed the appellant to deposit Rs. 2,00,00,000/- towards the penalty within eight weeks, failing which the recovery of the balance amount would proceed. The requirement of pre-deposit of the balance amount was waived upon compliance.

Pronouncement:
The order was pronounced in open court on 04/06/2013.

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