2019 (5) TMI 1995 - AT - Central Excise

Denial of CENVAT Credit - levy of penalty - fake invoices - diversion of goods. Main allegation is that M/s Lok Nath Varinder Kumar Impex Limited has received the goods from the manufacturers, the said goods have been diverted to Himachal Pradesh units who are not required to take Cenvat credit and another invoice has been issued to the appellant namely, National Soap Mills to avail inadmissible Cenvat credit without accompanying the goods. HELD THAT - In this case, investigation was conducted at the end of M/s National Soap Mills and no discrepancy in the stock was found, moreover, sample of inputs were drawn and sent to the laboratory for test but there is no wisper about the same in the show cause notice, allegation was made merely on the basis of the statement of the dealer that they have diverted the goods to Himachal Pradesh units but no evidence has been brought for record to show that the goods in question has not received by National Soap Mills. As no evidence on record to show that National Soap Mills have not received the goods or if goods were not received against the invoices in question from where National Soap Mills received the inputs to manufacture the goods which has been cleared on payment of duty. In that circumstances, Cenvat credit cannot be denied to M/s National Soap Mills, therefore, the case against National Soap mills is not sustainable. Accordingly, the impugned order qua National Soap mills is set aside. Penalty on M/s Lok Nath Varinder Kumar Impex Limited - HELD THAT - The penalty has been imposed on a company which is jurisdic person on which penalty cannot be Imposed as held by this Tribunal in the case of C.C.E., ROHTAK, C.C.E., DELHI-III VERSUS NOVICE POLYMERS, AIRVISION INDIA PVT LTD, DR POLYMERS 2019 (1) TMI 1159 - CESTAT CHANDIGARH relying on the decision of the Larger Bench of this Tribunal in the case of STEEL TUBES OF INDIA LTD. VERSUS COMMISSIONER OF C. EX., INDORE 2006 (10) TMI 146 - CESTAT, NEW DELHI LB , therefore, no penalty can be imposed on M/s Lok Nath Varinder Kumar Impex Limited. Appeal allowed.

Summary

Issues:
- Denial of Cenvat credit to M/s National Soap Mills
- Imposition of penalty on M/s Lok Nath Varinder Kumar Impex Limited

Analysis:

Denial of Cenvat credit to M/s National Soap Mills:
The appeal was against the denial of Cenvat credit to M/s National Soap Mills and the imposition of a penalty on M/s Lok Nath Varinder Kumar Impex Limited. The investigation alleged that Palm Fatty Acid meant for M/s National Soap Mills was diverted to Himachal Pradesh units, with invoices issued to avail inadmissible Cenvat credit. However, upon review, it was found that no discrepancies were found in the stock of M/s National Soap Mills. The show cause notice lacked evidence to prove that the goods were not received by the appellant. As no proof existed that National Soap Mills did not receive the goods or how they acquired inputs for goods cleared on duty payment, the denial of Cenvat credit was deemed unsustainable. Consequently, the impugned order against National Soap Mills was set aside.

Imposition of penalty on M/s Lok Nath Varinder Kumar Impex Limited:
Regarding the penalty on M/s Lok Nath Varinder Kumar Impex Limited, it was noted that the penalty was imposed on a juristic person, which was not permissible as per precedent. Citing a prior Tribunal decision and a Larger Bench ruling, it was established that penalties cannot be imposed on juristic entities. Therefore, the penalty on M/s Lok Nath Varinder Kumar Impex Limited was deemed invalid. Consequently, the appeals were allowed with consequential relief, leading to the setting aside of the penalty on M/s Lok Nath Varinder Kumar Impex Limited.