2015 (5) TMI 288 - AT - Central Excise

Denial of CENVAT Credit - Bogus transactions - Imposition of penalty - Held that - Burden of proof on M/s Kisco Casting cannot be treated as discharged by them on the basis of the news paper's report reporting that a number of vehicles are running in the State of Punjab & Haryana under fake registration, and therefore, the Commissioner (Appeals) relying upon such newspaper reports is totally wrong - returns have been assessed finally by the range officer which contain all the details including the details of the invoices under dispute on the basis of which credit have been availed and utilized, is , not correct, as when the burden of proving that the material covered under the invoices issued by the respondent firm had actually been received by M/s Kisco Casting is on them, it is M/s Kisco Casting who has to lead the evidence of having actually received the goods covered under the invoices issued by the respondent firm, and they cannot do so by picking the holes in the Department's case or shifting the burden of proof to the Department. The burden of proof will shift to the Department only when M/s Kisco Casting have produced credible evidence in support of their claim of receipt of the goods covered under the invoices issued by the Respondent. - impugned order is not sustainable - Matter remanded back - Decided in favour of Respondent. As regards penalty on Rajesh Kumar Gupta & Sons - Held that - penalty had been imposed on the respondent firm, there is no justification for imposition of separate penalty on its proprietor. In this regard, Hon'ble P&H High Court in the case of Vinod Kumar Gupta vs CCE reported in 2012 (5) TMI 173 - PUNJAB AND HARYANA HIGH COURT has held that the proprietorship firm and its proprietor cannot be treated as two different legal entities and in that view, the second penalty on the proprietor in addition to the penalty on the proprietorship firm would amount to imposition of penalty twice over, which is not sustainable in the eyes of law. - Decided against Revenue.

Summary

Issues:
1. Allegation of bogus transactions and issuance of bogus invoices without supply of material.
2. Burden of proof on the recipient of goods covered under invoices.
3. Imposition of penalties on the respondent firm and its proprietor.

Issue 1: Allegation of Bogus Transactions and Issuance of Bogus Invoices without Supply of Material:

The case involved M/s B. D. Gupta and Sons, a second stage dealer of iron and steel items, accused of issuing bogus invoices to M/s Kisco Casting without supplying any material, allowing the latter to fraudulently avail cenvat credit. The Department alleged that the transactions were bogus as the vehicles mentioned in the invoices were not suitable for transporting the goods. The Joint Commissioner confirmed the cenvat credit demand and imposed penalties on both M/s Kisco Casting and M/s B. D. Gupta and Sons. On appeal, the Commissioner (Appeals) allowed the appeal, leading to the Revenue filing two appeals against this decision.

Issue 2: Burden of Proof on the Recipient of Goods Covered under Invoices:

During the hearing, the Revenue argued that the burden of proving receipt of goods covered under the invoices issued by M/s B. D. Gupta and Sons should lie with M/s Kisco Casting. The Revenue contended that since Kisco Casting failed to provide evidence supporting their claim of receiving the material, the transactions should be deemed as bogus. The Revenue also challenged the Commissioner (Appeals)'s reliance on news reports and Kisco Casting's payment methods as insufficient evidence. The Tribunal agreed that the burden of proof rested on Kisco Casting, and their failure to substantiate the receipt of goods rendered the transactions questionable. The Tribunal deemed the Commissioner (Appeals)'s reliance on news reports and Kisco Casting's claims as inadequate, leading to the order being set aside and remanded for further adjudication.

Issue 3: Imposition of Penalties on the Respondent Firm and its Proprietor:

Regarding the penalties imposed on the respondent firm and its proprietor, the Tribunal referenced a previous judgment by the Hon'ble Punjab & Haryana High Court, stating that a proprietorship firm and its proprietor cannot be considered as separate legal entities. Therefore, imposing a penalty on both the firm and the proprietor would amount to double jeopardy, which is not permissible under the law. Consequently, the appeal against the penalty on the proprietor was dismissed, upholding the decision to set aside the penalty.

In conclusion, the Tribunal found that the burden of proof regarding the receipt of goods covered under the invoices rested with the recipient, M/s Kisco Casting, and their failure to provide substantial evidence led to the remand of the case for further adjudication. Additionally, the Tribunal clarified the legal position regarding penalties on a proprietorship firm and its proprietor, ensuring that no double jeopardy was imposed.