2015 (6) TMI 779 - AT - Central Excise

Availment of fraudulent MODVAT Credit - Commissioner (Appeals) set aside the penalties imposed on the registered dealers and the Authorised Signatory of the unit- Held that - Unit M/s Vipul Steel & Agro Industries had not challenged the Adjudication order in respect of demand of MODVAT Credit. It is seen that the said unit issued Modvatable invoices to various dealers and manufacturers. The registered dealers, the respondents herein, took the stand before the Adjudicating Authority that they supplied the material to M/s DCM Engineering Products. Proceedings were initiated against M/s DCM Engineering Products on the ground that M/s DCM Engineering Product availed the credit without receiving the inputs. The proceedings against M/s DCM Engineering Products was dropped by the Adjudicating Authority. - This fact was not disputed by the Adjudicating Authority.- No reason to interfere with impugned order - Decided against Revenue.

Summary

Issues:
Penalties under Rule 173Q of Central Excise Rules, 1944 set aside by Commissioner (Appeals).

Analysis:
The judgment involved multiple issues arising from penalties imposed under Rule 173Q of the Central Excise Rules, 1944, which were set aside by the Commissioner (Appeals). The case revolved around fraudulent passing of MODVAT Credit by a unit to various dealers and manufacturers through issuing Cenvatable invoices without supplying goods. The Adjudicating Authority disallowed the MODVAT Credit, imposed penalties on the unit, registered dealers, and the authorized signatory. The Commissioner (Appeals) set aside penalties on registered dealers and the authorized signatory, leading to appeals by the Revenue.

The Revenue contended that the unit lacked proper infrastructure for manufacturing the claimed quantity of Iron and Steel items, emphasizing the involvement of the authorized signatory in issuing fraudulent invoices. On the contrary, the Respondents argued that registered dealers supplied goods to manufacturers, and penalties were rightly set aside as proceedings against manufacturers utilizing the credit were dropped. They cited specific orders and judgments supporting their stance, highlighting discrepancies in the Department's case.

Upon review, the Tribunal found that the unit did not challenge the Adjudication order regarding MODVAT Credit demand. It was established that the unit issued invoices to dealers and manufacturers, with the dealers supplying material to a manufacturer against whom proceedings were dropped. The Commissioner (Appeals) acknowledged the dealers' contentions and lack of challenge to crucial facts, ultimately leading to the rejection of Revenue's appeals.

Furthermore, the Tribunal referenced a High Court judgment on a similar penalty issue, emphasizing the legality of setting aside penalties on registered dealers for technical lapses pre-amendment. Regarding the authorized signatory's penalty, it was deemed unnecessary due to existing penalties on the unit. Consequently, the Tribunal upheld the Commissioner (Appeals) decision, rejecting all appeals filed by the Revenue. The judgment provided a detailed analysis of each issue, considering submissions from both sides and legal precedents to reach a comprehensive conclusion.