2015 (7) TMI 457 - AT - Central Excise

Credit on the basis of forged invoice Bogus purchase - Imposition of penalty - Held that - as the investigation in the present case was started consequent to the investigation against SSMIPL by the jurisdictional Commissioner. We also note that there are some minor differences which have been highlighted by the learned counsels for the appellants. We have given considerable thought to those differences but in our view, those minor differences will not make any difference in the conclusion - appellant is a very well established company and producers of various steel and alloy steel items and, therefore, they would have far better knowledge about different types of scrap and it also appears that they are placing the order with certain gradation of scrap such as grade I, grade II etc. On receipt of scrap, gradations were analysed and indicated. We note that in respect of the invoices under discussion, none of the standard operating procedures made by the appellant themselves was followed. This itself indicates that there was a tactical support from some people within the organization. There is no explanation whatsoever from the appellant s side why the operating procedures prescribed by themselves were not being followed in these cases It is strange that the appellant has placed order to the three dealers of scrap but all the three dealers of scrap in turn got the invoices of SSMIPL. There are evidences that none of the goods have moved from the godown of SSMIPL and on the contrary there are evidences that the goods have moved from godown of such dealers. Further, while the excise invoices were raised by SSMIPL, the commercial invoices were raised by three dealers or appellant No.3,4 & 5. The main appellant was making payment to appellant No.3,4 & 5 and not to SSMIPL. Even after the issue of the show cause notice, the least that was expected was that the main appellant or appellant No.3,4 & 5 could have produced transporter and the drivers to prove that the goods have moved from the godown of SSMIPL and not from any other place. This has not been done for obvious reason as the goods have not moved from the godown of SSMIPL but from various other places. Goods covered by the invoices of SSMIPL have never moved to the main appellant s factory and some other goods have moved. The appellant cannot take the credit of the duty paid shown in such invoices. - Decided against the assessee. Levy of penalty on dealers / sellers issuing bogus invoice - Held that - The person who purports to sell goods cannot say that he was not a person concerned with the selling of goods and merely issued invoice or that he did not contravene a provision relating to evasion of duty. The appellant issued invoices without delivery of goods with intent to enable evasion of duty to which effect a finding has been recorded and which finding has not been challenged. We are, thus, unable to hold that appellant was not liable to pay any penalty. - Decision in the case of Bhagwati Steelcast Ltd. vs. CCE, Nashik reported in 2013 (1) TMI 123 - CESTAT MUMBAI followed - Decided partly in favour of assessee.

Summary

Issues Involved:
1. Eligibility for CENVAT credit on scrap procured from a registered first stage dealer.
2. Validity of invoices from ship-breaking units.
3. Movement of goods and corresponding documentation.
4. Imposition of penalties on various appellants.
5. Invocation of extended period of limitation.

Detailed Analysis:

1. Eligibility for CENVAT Credit on Scrap Procured from a Registered First Stage Dealer:
The primary issue was whether the appellant No.1 was eligible to avail CENVAT credit on iron and steel scrap purportedly procured from M/s. Simandhar Steel Movers (India) Pvt. Ltd. (SSMIPL). The Revenue argued that the scrap covered by the invoices from SSMIPL was not received by the appellant but some other scrap was received, rendering the credit availed incorrect. The investigation revealed that the ship-breaking units, which were supposed to supply the scrap, were non-existent during the relevant period, indicating that the invoices were bogus and the goods never moved to SSMIPL.

2. Validity of Invoices from Ship-Breaking Units:
The investigation found that the ship-breaking units, such as M/s. Ajay Alloys Casting Pvt. Ltd., M/s. R.K. Steel & Alloys, and M/s. Baldev Ship Breakers Ltd., were not operational during the period when the invoices were issued. This indicated that the invoices were fake, and no actual payment of central excise duty was made. Additionally, the physical stock at SSMIPL's godown was significantly less than the book balance, further supporting the claim of fraudulent transactions.

3. Movement of Goods and Corresponding Documentation:
Enquiries with the sales tax and RTO check posts revealed no record of the consignment of iron and steel scrap crossing into Maharashtra from Gujarat. The vehicle numbers mentioned in the invoices were found to be of vehicles incapable of transporting such scrap. Statements from vehicle owners and transporters confirmed that their vehicles were not used for transporting the scrap from Gujarat to SSMIPL's godown in Mumbai. This evidence collectively indicated that the goods covered by the invoices did not move as claimed.

4. Imposition of Penalties on Various Appellants:
Penalties were imposed on appellant No.1 for availing incorrect credit, on appellant No.2, the Sr. Vice President, for his involvement, and on appellant No.3, 4, and 5, who were dealers in the scrap. The Tribunal upheld the penalties, noting that the transactions were fraudulent and the appellants failed to take reasonable steps to ensure the goods were duty-paid. The Tribunal reduced the penalty on appellant No.2 from Rs. 30,00,000 to Rs. 10,00,000, considering it excessive.

5. Invocation of Extended Period of Limitation:
The Tribunal upheld the invocation of the extended period of limitation, stating that there was no suppression of facts by the appellant with intent to evade duty. The appellants were under a bona fide belief that the credit was admissible. However, the Tribunal found that the evidence of fraudulent transactions justified the extended period.

Conclusion:
The Tribunal concluded that the goods covered by the invoices from SSMIPL never moved to the appellant's factory, and the appellant was not eligible for the CENVAT credit. The penalties imposed on the appellants were largely upheld, with a minor reduction for appellant No.2. The invocation of the extended period of limitation was also upheld due to the fraudulent nature of the transactions. The Tribunal dismissed the appeals except for the modification of the penalty on appellant No.2.