2015 (9) TMI 247 - AT - Central Excise

Denial of CENVAT Credit - Fraudulent availment of modvat credit of duty paid on inputs and capital goods on the strength of duty paying documents procured by them without actual receipt of inputs/capital goods - Shortage of goods - Seizure of goods - Held that - Department raised a presumption against the appellants by establishing that the inputs could not have been received in the factory in vehicles mentioned in the invoices. This allegation itself is based on the reports by RTOs, who certified that the registration numbers belonged to vehicles other than goods transport vehicles with 10 tons capacity. It is for the appellants thereupon establish that indeed such vehicles as mentioned in the invoice did bring the input to their factory. They have failed to do so. Their gate register was burnt in some fire accident and the bills/vouchers indicating payment of cash to the drivers/owners of the trucks were also, destroyed in fire. One could understand that bills/vouchers, getting destroyed in fire or lost. But one cannot understand as to what has happened to the ledgers and registers to which the transactions done in cash are ultimately transferred. It is not the appellant s case that even such ledger and registers were destroyed in the fire. The fact that the inputs in the form of ship-breaking scrap was entered in RG 23A, Part-I does not establish that the goods were received in the factory. At least two truck owners have categorically denied having transported any goods to the appellant. The fact that out of the list of vehicles which were shown to be tankers, according to RTOs Office, two vehicles turned out to be regular carriers of goods does not establish that the case of other vehicles also it was true. An exception cannot make a rule. Once it is established that the input has not been transported in the vehicle mentioned in the invoice it is but reasonable to say that the inputs were not received in the factory as required under Rule 57G . - The entire transaction was vitiated by fraud coupled with misstatement and suppression of facts with intent to evade payment of duty and, therefore, extended period was rightly applied. The act being fraudulent, imposition of penalty also does not suffer from any illegality, particularly, in view of the systematic manner in which the fraud was committed; however, taking a lenient view, the penalty is reduced to Rs. 10,000. It clearly comes out that M/s BISCO has manipulated and created fictitious units so that invoices could be procured without movement of goods and subsequently credit is availed. - confessional statements by not one but by almost everyone including M.D., Directors, DGM clearly proved non-production, issue of fake invoices and subsequent non-transportation confirming scam of paper transactions. This proves clear intent to defraud revenue. - confessional statements by not one but by almost everyone including M.D., Directors, DGM clearly proved non-production, issue of fake invoices and subsequent non-transportation confirming scam of paper transactions. This proves clear intent to defraud revenue. - no infirmity in the findings recorded by adjudicating authority. Accordingly we uphold the findings in respect of appellants - Decided against the assessee.

Issues Involved:
1. Fraudulent Availment of Modvat Credit
2. Non-Receipt of Inputs and Capital Goods
3. Seizure of Excess Stock
4. Non-Supply of Non-Relied Upon Documents
5. Invocation of Extended Period of Limitation
6. Penalties and Confiscation

Detailed Analysis:

1. Fraudulent Availment of Modvat Credit:
The appellants, M/s. Bhanu Iron and Steel Co. Ltd., were accused of fraudulently availing Modvat credit on inputs and capital goods without actual receipt of the goods. The investigation revealed that the company procured duty-paying documents without the actual receipt of inputs/capital goods. The Central Excise authorities conducted searches and found significant discrepancies in stock records. The investigation confirmed that the company availed credit on the strength of fake invoices and documents, as corroborated by the statements of various suppliers, transporters, and company officials.

2. Non-Receipt of Inputs and Capital Goods:
The investigation revealed that the goods purportedly received by the appellants were never actually transported. The vehicles mentioned in the invoices were found to be incapable of carrying the goods, as they were two-wheelers, buses, cars, tractors, and other non-commercial vehicles. Statements from transporters and Regional Transport Authorities confirmed that no goods were transported to the appellants' factory. Additionally, the suppliers were found to have no manufacturing facilities to produce the inputs in question.

3. Seizure of Excess Stock:
During the physical verification of stock, the authorities found a shortage of 2620.800 MT of M.S. Slabs and an excess of 76.628 MT of M.S. Plates, which were seized. Further verification revealed an excess of 86.120 MT of waste/scrap, which was also seized. The appellants admitted the discrepancies and paid a total of Rs. 68 lakhs towards the duty evaded.

4. Non-Supply of Non-Relied Upon Documents:
The appellants contended that they were not provided with non-relied upon documents, which hindered their defense. However, the adjudicating authority made several attempts to provide these documents, and the appellants were found to be delaying the proceedings. The Tribunal observed that the appellants' plea lacked substance and noted that serious fraudulent irregularities were causing subterfuge to the Revenue.

5. Invocation of Extended Period of Limitation:
The appellants argued against the invocation of the extended period of limitation, contending that the demand should be restricted to the normal period of six months. However, the Tribunal found that the fraudulent nature of the transactions, coupled with misstatements and suppression of facts, justified the invocation of the extended period. The Tribunal cited relevant case law to support this position.

6. Penalties and Confiscation:
The adjudicating authority imposed penalties and ordered the confiscation of goods, land, building, plant, and machinery. The appellants were given the option to redeem the confiscated goods on payment of a redemption fine. Penalties were also imposed on various company officials and co-noticees. The Tribunal upheld these penalties, noting the overwhelming evidence of fraud and the appellants' intent to defraud the Revenue.

Conclusion:
The Tribunal dismissed the appeals, upholding the findings of the adjudicating authority. The detailed investigation and confessional statements confirmed the fraudulent nature of the transactions, leading to the denial of Modvat credit and the imposition of penalties. The Tribunal emphasized that the appellants' actions were premeditated and aimed at defrauding the Revenue, and thus, the penalties and confiscations were justified.

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