2007 (9) TMI 247 - AT - Central Excise

Recovery of wrongly availed cenvat credit invoices It is not in dispute that the credit has been taken on the basis of invoices issued by dealer M/s.N.K. Rayon and M/s. Massom Creation - They did not exist in the address given by them. The registration certificates given to them were provisional - documents cannot be held to be valid for the purpose of taking credit demand of duty and interest is upheld penalty is set aside

Summary

Issues:
Appeal against order upholding recovery of wrongly availed cenvat credit, existence of weavers/dealers, validity of invoices, duty liability, penalty imposition.

Analysis:

1. Existence of Weavers/Dealers:
The appellant claimed to have received goods under invoices from two weavers/dealers, but an enquiry by the Department revealed that these dealers did not exist at the addresses mentioned in the registration application. This discrepancy raised doubts about the authenticity of the transactions.

2. Validity of Invoices and Cenvat Credit:
The Original Authority ordered the recovery of wrongly availed cenvat credit along with interest and imposed a penalty, based on the finding that the invoices from the non-existent dealers were fake/fictitious. The appellant argued that they procured goods from dealers registered with the Central Excise Department, but the Tribunal held that any fraud in the transaction would invalidate the documents for claiming credit.

3. Duty Liability and Obligation:
The Tribunal emphasized that the duty liability and obligation to follow Central Excise laws and procedures lie with the manufacturer, in this case, the appellant. It was likened to a situation where a buyer of stolen goods cannot claim ownership, even if purchased unknowingly. The appellant, being aware of the fraud, was held responsible for the consequences.

4. Decision and Penalty Imposition:
The Tribunal concluded that the invoices from the non-existent dealers were not valid for claiming credit. While upholding the duty and interest payment as demanded by the Original Authority and Commissioner (Appeals), the Tribunal deemed the penalty imposed as unsustainable. The appeal was disposed of based on these findings.

Overall, the judgment highlights the importance of verifying the authenticity of transactions and the consequences of claiming credit based on fraudulent documents. The duty liability ultimately rests with the manufacturer, emphasizing the need for due diligence in compliance with excise laws to avoid penalties and recoveries.