2015 (1) TMI 410 - AT - Central Excise

CENVAT Credit - Bogus invoices - Receipt of material from such Company which has no office or storage premises and whose registration certificate has been cancelled - Held that - all the six invoices issued by M/s. Pawan Steels to M/s. I. J. Steels & Castings also mention;, the particulars of the invoices issued by M/s. S. K. Garg & Sons to M/s. Pawan Steels and also the invoices issued by the manufacturers / importers under which M/s. S. K. Garg & Sons had received the materials. It is seen that out of the six invoices issued by M/s. Pawan Steels , only in case of invoice no. 150 dated 15.09.2005, there is no gap between the manufacturer s invoice and invoice issued by M/s. S. K. Garg & Sons to M/s. Pawan Steels. In all other five invoices, there is big gap of more than 20 days between the invoices issued by the manufacturer/importer to M/s. S. K. Garg & Sons and the date of invoice issued by M/s. S. K. Garg & Sons to M/s. Pawan Steels . This big gap between the date on which M/s. S.K. Garg & Sons are supposed to have received the materials from manufacturers/importers, and the date on which they have shown the sales of that material to M/s. Pawan Steels cast very serious doubt about the transactions of M/s. S.K. Garg & sons with M/s. Pawan Steels , as when M/s. S. K. Garg & sons had no godown as no office, they could not have stored the materials received from the manufacturers / importers for 2 to 3 weeks. Therefore, even though no inquiry has been made with M/s. S.K.Garg & Sons, on the basis of the details available in the invoices issued by M/s. Pawan Steels , the transactions of M/s. Pawan Steels with M/s. I.J. Tools and Castings became highly doubtful, the at least, 15 out of 6 invoices. Except for invoice no. 150 dated 15.09.2005 issued by M/s. Pawan Steels , the genuiness of all other 5 invoices is highly doubtful and as such, the impugned order denying the cenvat credit in respect of those invoices has to be upheld. In view of this, the cenvat credit demand of Rs . 1 ,80,204 /- along with interest is upheld. As regards penalty under Section 11 AC on M/s. I.J. Tools , since the entire disputed amount of cenvat credit had been paid during investigation and much before the adjudication since the order-in-original passed by the Dy. Commissioner , no option to pay lower penalty in terms of the provisions of Section 11 AC has been given, in view of the judgement of the Hon ble Delhi High Court in the case of K.P. Pouches reported in 2008 (1) TMI 296 - HIGH COURT OF DELHI , the benefit of lower penalty cannot be denied to M/s. I.J. Steels and accordingly, the penalty under Section 11 AC on them is reduced to 25% of the cenvat credit demand. - Decided partly in favour of assesse. Penalty on issuer of bogus invoices is upheld.

Summary

Issues:
Allegations of bogus invoices and non-supply of goods leading to service tax demand and penalties on M/s. I.J. Tools & Castings and M/s. Pawan Steels.

Analysis:
The case involved allegations against M/s. I.J. Tools & Castings and M/s. Pawan Steels regarding the issuance of bogus invoices without actual supply of goods. The jurisdictional Dy. Commissioner confirmed a service tax demand against M/s. I.J. Tools & Castings and imposed penalties under Rule 15 of the Cenvat Credit Rules, 2004. The Commissioner (Appeals) upheld this order, leading to the filing of appeals.

Representatives of M/s. I.J. Tools & Castings and M/s. Pawan Steels argued that the goods were indeed supplied, emphasizing that payments were made through cheques and the duty paid nature of the goods was not disputed. They contested the allegations based on the lack of inquiry with M/s. S.K. Garg & Sons, the first stage dealer. The defense highlighted the use of M.S. Flats and bars for manufacturing fences and the absence of evidence regarding alternative sources of raw materials.

The Departmental Representative supported the impugned order, emphasizing discrepancies in the invoices and the lack of premises for M/s. S.K. Garg & Sons, raising doubts about the transactions. The Tribunal reviewed the records and invoices, noting significant gaps between the dates of procurement and issuance of invoices by M/s. S.K. Garg & Sons to M/s. Pawan Steels. This raised serious doubts about the transactions, leading to the denial of cenvat credit for most invoices except one. The cenvat credit demand was upheld, but the penalty under Section 11 AC for M/s. I.J. Tools was reduced to 25% of the demand.

Regarding the penalty on M/s. Pawan Steels for issuing bogus invoices, the Tribunal acknowledged the applicability of Rule 26 based on a judgment of the Hon'ble Punjab & Haryana High Court. The penalty was upheld but reduced to Rs. 40,000 considering the quantum of cenvat credit. The appeals were disposed of accordingly.