2013 (11) TMI 1472 - AT - Central Excise

Rebate claim of Cenvat credit availed on issue of bogus invoices Burden to prove Waiver of Pre-deposit - Held that - When the inquiry at the supplier s end shows that there was no supply and only cenvatable invoices had been issued, the burden would be on who had taken cenvat credit on the basis of such invoices, to prove that the goods covered under those invoices had actually been received - No evidence to discharge this burden of proof has been produced by M/s CIPL - Similarly when M/s CIPL have taken cenvat credit in respect of certain goods imported by them and claim to have sent those goods to job workers for processing or manufacture of finished products and inquiry with job workers reveals them either to be bogus entities or having indulged in fictitious transaction of job work, the burden would be on M/s CIPL to prove that the cenvat credit availed material had actually been used by them in manufacture of finished products - No evidence has been produced by M/s CIPL for discharging this burden of proof. There is evidence on record showing that in order to encash the cenvat credit, M/S. CIPL had purchased the cheap goods from the market and exported the same under rebate claim or under draw back claim - they had over declared the value of their export consignment to the tune of 50 to 40 times - M/S. CIPL have committed a huge fraud by availing cenvat credit on the basis of bogus invoices without actually receiving any materials or have availed cenvat credit in respect of certain goods imported by them which were illicitly diverted and were never used for manufacture of the goods for export - substantial amount of fraudulently taken cenvat credit has been encashed in form of rebate claims in respect of the exports made under the rebate claims - A countrywide web of dummy companies has been woven for defrauding the Revenue and this case is only a tip of the iceberg of a much bigger cenvat credit fraud - The main Appellants and their Directors are not eligible for waiver from the requirement of pre-deposit Pre-deposits were ordered to be submitted - Thus, goods are liable for confiscation and the Penalty also needs to be imposed - Partial stay granted.

Summary

Issues Involved:
1. Fraudulent availing of Cenvat Credit by M/s. CIPL.
2. Inadequate manufacturing facilities and bogus job work.
3. Evidence of bogus invoices and transactions.
4. Penalties imposed on various parties involved.
5. Requirement of pre-deposit for hearing appeals.

Detailed Analysis:

1. Fraudulent Availing of Cenvat Credit by M/s. CIPL:
The main appellant, M/s. Canon Industries Pvt. Ltd. (CIPL), was alleged to have taken Cenvat credit fraudulently amounting to Rs. 5,59,50,128/- based on invoices from various suppliers. The show cause notice issued on 14.7.2008 alleged that M/s. CIPL availed Cenvat credit without receiving the actual goods. The Commissioner confirmed the demand along with interest and imposed an equivalent penalty under Section 11 AC read with Rule 15(2) of the Cenvat Credit Rules, 2004.

2. Inadequate Manufacturing Facilities and Bogus Job Work:
The department's investigation revealed that M/s. CIPL had inadequate manufacturing facilities and relied on job workers, who either denied manufacturing any goods or lacked the capacity to do so. The Commissioner found that the job workers and raw material suppliers were involved in fabricating documents to show the processing of raw materials that were never actually purchased or processed.

3. Evidence of Bogus Invoices and Transactions:
The judgment detailed several instances where M/s. CIPL availed Cenvat credit based on bogus invoices from fictitious entities or through paper transactions without actual receipt of goods. For example, credit was taken on invoices from non-existent firms like M/s. Jagruti Textile, M/s. Shiv Trading, and others. The investigation also revealed that the transportation of goods was shown using vehicles like mopeds and scooters, which could not transport the claimed quantities.

4. Penalties Imposed on Various Parties Involved:
Penalties were imposed under Rule 26 of the Central Excise Rules, 2002, on various parties, including directors of M/s. CIPL, employees, and associated firms. The penalties ranged from Rs. 10,000/- to Rs. 5,59,50,128/-. The judgment highlighted that the evidence on record indicated the involvement of other appellants in fabricating documents, but penalties could not be imposed on them for the period before the introduction of sub-rule (2) of Rule 26 on 1.3.2007.

5. Requirement of Pre-deposit for Hearing Appeals:
The Tribunal directed M/s. CIPL to deposit Rs. 5 Crores towards the Cenvat credit demand and interest, and 50% of the penalty imposed within eight weeks. The pending rebate claims of Rs. 1,27,94,964/- were to remain withheld. Directors Shri R.K. Goyal and Mrs. Geeta Goyal were directed to deposit 10% of the penalty imposed on each of them. The requirement of pre-deposit of penalty from other appellants was waived for the hearing of their appeals.

Conclusion:
The Tribunal found substantial evidence of fraudulent availing of Cenvat credit by M/s. CIPL through bogus invoices and transactions. The appellants were directed to make pre-deposits to safeguard the Revenue's interests, and the appeals were to be heard together for a comprehensive understanding of the interconnected cases. The judgment emphasized the need for stringent actions to address the widespread Cenvat credit fraud orchestrated by M/s. CIPL and associated entities.