2008 (4) TMI 97 - AT - Central Excise

Fraud in availment of credit - fake transport invoices contain fictitious vehicle number -133 cases of transportation were found to be fake - some of the owners of the concerned vehicles were examined on oath - It is clear that the goods were not received by the appellant and, therefore, the availment of credit was patently illegal and fraudulent - order of the adjudicating authority disallowing the Modvat credit and directing reversal thereof did not warrant any interference

Summary

Issues:
1. Disallowance of Modvat credit and recovery of amount under Central Excise Rules.
2. Alleged contravention of Central Excise Rules by wrongly availing Modvat credit.
3. Investigation into the issuance of sham invoices by a specific corporation.
4. Failure to explain transportation of goods by inappropriate vehicles.
5. Plea of limitation regarding the issuance of the show cause notice.
6. Fraudulent means of availing Modvat credit.
7. Denial of benefit due to fake transportation cases.
8. Interference with the order of the adjudicating authority.

Analysis:
1. The appeal by the Revenue challenged the order-in-appeal of the Commissioner (Appeals) disallowing Modvat credit and directing recovery under Central Excise Rules. The Assistant Commissioner disallowed credit of Rs. 1,83,445/- and imposed a penalty under relevant provisions.

2. The respondent, a manufacturer, contravened Central Excise Rules by wrongly availing Modvat credit based on sham invoices. Investigations revealed discrepancies in transportation records and fake invoices issued by M/s. HBR Steel Corporation, leading to the disallowance of credit.

3. The investigation included statements from involved parties, revealing inconsistencies in the transportation of goods and lack of stock verification. The appellant was issued a show cause notice to justify the Modvat credit availed based on questionable invoices.

4. The respondent failed to explain the use of inappropriate vehicles for goods transportation. Despite submissions claiming lack of opportunity for verification, details of vehicles were disclosed, and statements from vehicle owners denied involvement in transporting goods.

5. The plea of limitation regarding the show cause notice issuance was rejected, citing the extended period for cases involving fraud or suppression of facts. The Department was justified in invoking the extended period for issuing the notice.

6. The case involved illegal availing of Modvat credit through fraudulent means, justifying the issuance of the show cause notice within the extended limitation period of five years. The submission that the action was time-barred was dismissed.

7. Denial of benefit due to fake transportation cases was upheld, emphasizing the fraudulent nature of the Modvat credit availed. The Commissioner's observation regarding clerical errors did not outweigh the substantial evidence of fraudulent activities.

8. The order of the Commissioner (Appeals) disallowing the Modvat credit was set aside, restoring the decision of the Assistant Commissioner. The appeal by the Revenue was allowed, affirming the disallowance of credit and recovery of the amount under Central Excise Rules.