2015 (8) TMI 22 - AT - Central Excise

Disallowance of CENVAT Credit - Duty paying documents - whether the Cenvatable invoices issued by M/s. SSMIPL o the appellant are genuine or fake/fraudulent invoices - Confiscation of goods - Imposition of penalty - Held that - Appellant could not give any explanation on the report submitted by sales tax authority therefore same attained finality and this report clearly shows that no transaction has been taken place from Gujarat to Maharashtra therefore subsequent passing of Cenvat credit of transaction which has never taken place is out of question. In the various statement of the transporters they have denied having transported the goods of the dealer from Bhivandi to end user i.e. M/s. VCL. In the investigation, it was clearly found that invoices issued by ship breakers in the name of the dealer M/s. SSMIPL the vehicle numbers found to be motor cycle, light delivery vans etc. which are incapable of transporting scrap declared in the Central Excise invoices. In the several cases registration numbers borne by the vehicles in which goods were shown to have been transported were reported to be not in existence by concerned RTO authority. In some of the invoices issued by the said dealer to end users vehicles found to be tanker, which are incapable of transporting iron steel scrap. Once the concerned Government authority i.e RTO has given report wherein it was found that vehicle number mentioned on the invoices are not capable of being transporting the goods in question, purchaser if could not give any contrary evidence or he did not discard the evidence provided by RTO with appropriate counter evidences the RTO report has to be taken as correct and the lower authority has rightly used as evidence to hold that there was no transportation of the inputs either from Gujarat to dealer M/s. SSMIPL nor from said dealer to the appellant. It was found that despite all the opportunity given to the director of the appellant by way of recording the statement he could not give a single contrary material/evidence to demolish the evidences gathered by the investigation and relied upon for confirming the demand. It was also observed that on the basis of the investigation that there is no record to show that transportation charges either paid by the dealer or by the appellant in respect of purported transportation of the input. It was found that huge transaction was shown to have been made between M/s. SSMIPL and M/s. VCL, however there was not a piece of evidence of any of the participant/parties to the transaction to have ever interacted with each other directly and is aware of the other. It is beyond the imagination that plates are used for melting purpose therefore it is very clear that appellant even as per the statement of their director used melting scrap which cannot be ship breaking scrap which clearly established that the invoices received by the appellant is in respect of ship breaking scrap and the scrap used by the appellant in their manufacturing process is other than ship breaking scrap. This established that whatever scrap the appellant used but they have neither received ship breaking scrap nor used the same in the manufacture of their final product. Therefore Cenvat Credit of duty shown to have been paid on the ship breaking scrap can not be allowed to the appellant. If any genuineness in the whole transaction is there, the Director of M/s. SSMIPL would have presented himself before the investigation agency however right from the initiation of the investigation the person of M/s. SSMIPL got absconded despite court s notices and never made any presence before the investigation agency. This act of absconding of the person further reinforce the charges of fraudulent passing of the Cenvat credit and availment thereof by the appellant. In view of our above discussion we are of the view that M/s. SSMIPL have issued fake invoices without receipt and supply of any material to the appellant and accordingly passed on the fraudulent Cenvat credit to the appellant. Therefore the appellant has fraudulently taken the Cenvat credit on the invoices issued by M/s. SSMIPL. - Decided against the assessee. If the penalty under Section 11AC which is equal to the Cenvat amount has been imposed, separate penalty of similar amount imposed under Section Rule 13(1) of Cenvat Credit Rules, 2002 was not warranted. Moreover penalty of ₹ 1,29,51,948/- was imposed under Rule 13(1) towards confiscation of the 3826.790 MT on which fraudulent Cenvat credit was availed. First of all, the case of the Revenue is that that Cenvat Credit to the appellant is not admissible on the ground that they have not received the input. Secondly no goods were seized and therefore confiscation of the goods not available for seizer cannot be made, on these observations, we are of the view that penalty of ₹ 1,29,51,948/- under Rule 13(1) (correct Rule 15(1)) of Cenvat Credit Rules, 2002 was wrongly imposed. - Decided partly in favour of assessees.

Summary

Issues Involved:
1. Disallowance and recovery of Cenvat Credit.
2. Confiscation of goods and imposition of penalties.
3. Charging of interest on fraudulently availed Cenvat Credit.
4. Imposition of penalties on associated individuals and entities.
5. Examination of the genuineness of Cenvatable invoices.
6. Verification of transportation and receipt of goods.
7. Evaluation of evidence and procedural compliance.
8. Applicability of extended period for demand and penalties.

Detailed Analysis:

1. Disallowance and Recovery of Cenvat Credit:
The Tribunal examined the issue of disallowance and recovery of Cenvat Credit amounting to Rs. 1,29,51,948/- from M/s. Vipras Castings Ltd. under Rule 12 of the Cenvat Credit Rules, 2002 read with Section 11A(1) of the Central Excise Act, 1944. The investigation revealed that M/s. Vipras Castings Ltd. availed Cenvat Credit on invoices issued by M/s. Simandhar Steel Movers (India) Pvt. Ltd. (M/s. SSMIPL) without actual receipt of goods. The modus operandi involved issuing multiple sets of parallel invoices by M/s. SSMIPL, which were found to be fraudulent. The Tribunal upheld the disallowance and recovery of the Cenvat Credit.

2. Confiscation of Goods and Imposition of Penalties:
The Commissioner ordered the confiscation of 3826.790 MT of goods and imposed a penalty of Rs. 1,29,51,948/- on M/s. Vipras Castings Ltd. under Rule 13(1) of the Cenvat Credit Rules, 2002. Additionally, penalties were imposed on associated individuals and entities under various rules and sections. The Tribunal found that the goods were not actually received, and the invoices were bogus. However, it waived the penalty under Rule 13(1) due to the lack of physical seizure of goods but maintained the penalties under Section 11AC of the Central Excise Act, 1944.

3. Charging of Interest on Fraudulently Availed Cenvat Credit:
Interest was charged on the fraudulently availed Cenvat Credit amount under Section 11AB of the Central Excise Act, 1944. The Tribunal upheld this charge, finding that the fraudulent nature of the transactions warranted the imposition of interest.

4. Imposition of Penalties on Associated Individuals and Entities:
Penalties were imposed on Shri Ashish H. Goradia, Director of M/s. Vipras Castings Ltd., and M/s. Simandhar Steel Movers India Pvt. Ltd., Mumbai, along with its Director, Shri Hitesh Shah. The Tribunal maintained the penalties on these individuals, concluding that they were involved in the fraudulent activities and the overall modus operandi to defraud the revenue.

5. Examination of the Genuineness of Cenvatable Invoices:
The Tribunal scrutinized the genuineness of the Cenvatable invoices issued by M/s. SSMIPL. The investigation revealed discrepancies in the RG23D register entries and the invoices, indicating that the invoices were parallel and bogus. The Tribunal found that the invoices were not genuine and upheld the findings of the Commissioner.

6. Verification of Transportation and Receipt of Goods:
The investigation included verification of transportation records, vehicle registration numbers, and statements from transporters and vehicle owners. It was found that the vehicles mentioned in the invoices were incapable of transporting the goods, and no records of transportation were found at the sales tax check posts. The Tribunal concluded that the goods were not transported or received, supporting the case of fraudulent Cenvat Credit.

7. Evaluation of Evidence and Procedural Compliance:
The Tribunal evaluated the evidence, including statements from ship breakers, transporters, and sales tax authorities. It found that the evidence overwhelmingly supported the conclusion of fraudulent activities. The Tribunal also considered the procedural compliance by the appellant and found that they failed to take reasonable steps to ensure the genuineness of the transactions.

8. Applicability of Extended Period for Demand and Penalties:
The Tribunal addressed the issue of the extended period for demand and penalties. It found that the extended period was applicable due to the fraudulent nature of the transactions, collusion, and suppression of facts by the appellant. The Tribunal upheld the demand for the extended period and the imposition of penalties under Section 11AC.

Conclusion:
The Tribunal upheld the disallowance and recovery of Cenvat Credit, the charging of interest, and the imposition of penalties on M/s. Vipras Castings Ltd. and associated individuals. It concluded that the transactions were fraudulent, the invoices were bogus, and the goods were not transported or received. The penalties under Rule 13(1) were waived due to the lack of physical seizure of goods, but other penalties were maintained. The appeals were partly allowed in terms of penalty adjustments but dismissed in other respects.