2014 (5) TMI 1015 - AT - Central Excise

CENVAT Credit - allegation of non receipt of goods physically - receipt of goods before the date of removal - Commissioner (appeals) dropped the demand and penalty - Held that - respondents have not been able to answer as to how the goods removed by the Principal manufacturer reached destination on the date prior to the date of its removal - Further, it was also revealed during investigation as pointed out by ld. DR, that goods have been found transported by truck covering a distance of over 1400 Kms. in a single day from Nagothane to Parwanoo. Details are duly reflected in para 5 of the adjudication order. This is impossibility as no such transportation can take place. All these facts arouse suspicion and needs to be answered. Once impossibility creeps into results of investigation, result becomes unassailable pointing toward false transaction. Verification of the records maintained by the Excise & Taxation Department of the Government of Himachal Pradesh at the Parwanoo Barrier also revealed that some of the consignments as detailed in Annexure A have not entered the State of Himachal Pradesh through Parwanoo Check Post/Barrier as evident from the correspondences made with the Sales Tax Authorities of Parwanoo. Ground taken up by Commissioner (Appeals) to drop the demands and penalties has no legs to stand as fraud is clearly manifested. - Demand of duty and penalty confirmed - Decided in favour of Revenue.

Summary

Issues Involved:
1. Validity of Cenvat credit availed by the respondent.
2. Admissibility and validity of evidence gathered by the Revenue.
3. Role of M/s Karan & Co. and M/s Swati Storewell Pvt. Ltd. in the alleged fraudulent transactions.
4. Imposition of penalties on M/s Swati Storewell Pvt. Ltd., M/s Karan & Co., and Shri Ramesh Kumar.

Detailed Analysis:

1. Validity of Cenvat Credit:
The primary issue was whether the consignments listed in Annexures A, B, and C to the show cause notice had actually entered the state of Himachal Pradesh through the Sales Tax Barrier at Parwanoo, and whether the credit on those invoices was available. The investigation revealed discrepancies in the records, showing that some goods were purportedly received before their dispatch from the factory, indicating fraudulent transactions. The Tribunal found that the respondents failed to explain how goods could be received before their dispatch, pointing to paper transactions without physical movement of goods. Thus, the Cenvat credit on these transactions was deemed fraudulent and not maintainable.

2. Admissibility and Validity of Evidence:
The Tribunal noted that the adjudicating authority's order was based on records from the state government, which were deemed authentic and fair. It was legitimate to draw inferences from the attending facts and circumstances, including statutory records maintained under different laws. The Tribunal held that the records of the Excise and Taxation Department of Himachal Pradesh were not extraneous to the adjudication process. The adjudicating authority's conclusions, based on these records and reports from sales tax authorities, were upheld as they were not contrary to the records.

3. Role of M/s Karan & Co. and M/s Swati Storewell Pvt. Ltd.:
The Tribunal found that M/s Karan & Co. issued invoices without actually receiving the goods, enabling M/s Swati Storewell Pvt. Ltd. to fraudulently avail Cenvat credit. The investigation showed that goods purportedly transported over 1400 km in a single day, which was impossible, further indicating fraudulent transactions. The Tribunal held that M/s Karan & Co.'s active connivance facilitated M/s Swati Storewell Pvt. Ltd.'s fraudulent activities, making them liable for penalties.

4. Imposition of Penalties:
The Tribunal modified the penalties on M/s Swati Storewell Pvt. Ltd. and M/s Karan & Co., reducing them to Rs. 12,33,045 each, corresponding to the revised duty confirmation. The penalty on Shri Ramesh Kumar was upheld, as his involvement in the fraudulent activities was clearly manifested. The Tribunal found no merit in the Commissioner (Appeals)'s decision to drop the demands and penalties, as fraud was clearly established.

Conclusion:
The Tribunal set aside the Commissioner (Appeals)'s order, except for the availability of credit on Sl. No. 1 & 2 of Annexure A. The Order-in-Original was restored with modifications, confirming the revised duty and penalties. The fraudulent nature of the transactions was established, justifying the imposition of penalties on the involved parties.