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2014 (4) TMI 95 - AT - Central ExciseCENVAT Credit - Bogus invoices - Interest - Commissioner set aside interest - Held that - It is evident that fraud has been committed and fake invoices have been issued enabling dealers/buyers to take fraudulent credit. There is clear admittance of fraud as goods received by the respondent were from the open market. There was absolutely no co-relation. I agree with the revenue that goods have not come to the factory under the cover of specified documents evidencing payment of duty thus there could be no availment of credit. Further in the present case, there is issue of fake invoices without receipt of goods by the suppliers involving fraud. No duty was paid and goods were procured from open market. There could be no availment of Cenvat credit on fake invoices as it involves fraud. Fraud nullifies everything. Once it is proved that credit has been fraudulently availed on fake invoices, credit has to be reversed with interest for the period of its utilization. Commissioner (Appeals) s order justifying availment of credit and subsequent holding that interest is not required to charged does not have legs to stand as fraud is clearly manifested. I am also not able to agree with the findings that since goods were admittedly procured from open market, and receipt has not been disputed in the factory there did not arose any questions of charging interest - Decided in favour of Revenue.
Issues:
1. Non-demand of interest and inadmissible credit under Rule 14 of Cenvat Credit Rules 2004. 2. Availment of irregular Cenvat Credit based on bogus invoices. 3. Allegations of fraud and issuance of fake invoices. 4. Disputed procurement of goods and duty paying nature. 5. Reversal of Cenvat credit due to fraudulent activities. Analysis: Issue 1: The Revenue appealed against the Order-in-Appeal regarding non-demand of interest and inadmissible credit under Rule 14 of Cenvat Credit Rules 2004. The Commissioner (Appeals) rejected the departmental appeal, leading to the Revenue contending that the inadmissible Cenvat Credit was recoverable from the party. The investigations revealed that M/s R.S. Industries availed Cenvat Credit based on invoices issued by a registered dealer through bogus invoices from another dealer. Issue 2: The Tribunal examined the records and found that M/s R.S. Industries had irregularly availed Cenvat Credit on inputs by showing goods manufactured by a non-operational entity. Statements from various individuals confirmed the fraudulent activities, including issuance of fake invoices and accommodation entries. The investigation revealed a lack of correlation between the goods received and the invoices presented, indicating fraudulent practices. Issue 3: The Tribunal observed overwhelming evidence of fraud involving the issuance of fake invoices without actual procurement of goods. The fraudulent activities enabled dealers and buyers to take fraudulent credit, leading to the conclusion that no duty was paid on the procured goods from the open market. The Tribunal agreed with the Revenue that the fraudulent availment of credit on fake invoices necessitated the reversal of credit with interest, despite the Commissioner (Appeals) previously justifying the credit availment and waiving the interest charges. Issue 4: The Tribunal emphasized that fraud nullifies any entitlement to credit, especially when credit is fraudulently availed on fake invoices. The Commissioner (Appeals)'s decision to not charge interest was overturned due to the clear manifestation of fraud in the case. The Tribunal highlighted the confessional statements and evidence supporting the fraudulent activities, ultimately accepting the Revenue's appeal for charging interest on the irregularly and illegally availed Cenvat credit. Issue 5: In conclusion, the Tribunal upheld the appeal of the Revenue, emphasizing the need to charge interest on the irregularly availed Cenvat credit due to the fraudulent activities involving fake invoices and non-receipt of goods as per the specified documents. The decision to reverse the credit and impose interest was based on the overwhelming evidence of fraud and the lack of legitimacy in the credit availment process. This detailed analysis of the judgment highlights the key issues, findings, and conclusions reached by the Tribunal in the case.
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