2008 (6) TMI 151 - AT - Central Excise

Credit invoices supplier unit was not in existence appellants claim that they have received the goods but how they have received from a non-existent supplier is not known - Once the supplier is proved non-existent, it has to be held that the goods have not been received - credit cannot be taken on the basis of a document supplied by a non-existent supplier which has been proved in this case - extended period of limitation is correctly applied penalty imposed is also justified

Summary

Issues:
1. Whether the appellants took reasonable steps to ensure duty payment on goods received.
2. Whether the Show Cause Notice (SCN) issued is time-barred.
3. Whether the appellants failed to take reasonable steps in accordance with Rule 7(2) of Cenvat Credit Rules, 2002.
4. Whether the limitation period for the demand is applicable.
5. Whether the penalty imposed on the appellants is justified.

Analysis:

Issue 1:
The appellants claimed they fulfilled requirements under Rule 7(2) by endorsing invoices from M/s. Karishma Overseas and argued that the SCN was time-barred due to timely filings. The Advocate cited the Supreme Court's decision in M/s. Pushpam Pharmaceuticals Company v. CCE to support their stance.

Issue 2:
The Revenue argued that the goods came directly from M/s. Dhanalaxmi Textiles, not M/s. Karishma Overseas, and the appellants failed to take reasonable steps as per Rule 7(2). The Revenue also cited various legal decisions to support their contention on limitation issues.

Issue 3:
The Tribunal compared the case with M/s. Sheela Dyeing & Printing Mills Pvt. Ltd. and found similarities. It was emphasized that the manufacturer must know the supplier of raw materials. The Tribunal noted that the appellants took credit based on invoices from M/s. Dhanlaxmi Textiles, not M/s. Karishma Overseas, which was deemed insufficient under Rule 7(2).

Issue 4:
Regarding limitation, it was highlighted that the investigation began after an alert circular revealed that Dhanlaxmi Textiles was non-existent. The Tribunal concluded that the credit could not be taken based on documents from a non-existent supplier, justifying the extended limitation period and penalties imposed.

Issue 5:
The penalty imposed on the appellants was deemed justified due to their awareness of the non-existent supplier and lack of evidence to support their claim of receiving goods. The Tribunal rejected the appeals, emphasizing the importance of verifying suppliers and ensuring duty payment compliance.

This detailed analysis of the judgment provides insights into the legal arguments, interpretations of rules, and considerations made by the Tribunal in reaching its decision.