2017 (1) TMI 219 - AT - Central Excise

CENVAT credit - fraudulent availment of Cenvat credit on invoices obtained from a registered dealer, without actual receipt of goods - case entirely based on recordings of a third party, Sh. Prabhakar who was an employee of dealer, M/s Karnataka Metal Corporation - whether demand justified based on such evidences? - Held that - The said Prabhakar has not been made a party to the proceedings. Apart from such third party evidences there is nothing on record to establish that the appellant has indulged in the activities of availing fraudulent credit - The Tribunal in the case of M/s Adhikasri Electromech Ltd., & Others Vs CCE, ST, Hyderabad-I 2016 (6) TMI 912 - CESTAT HYDERABAD had analysed the very same pattern of evidence, and set aside the demand, interest and penalties - demand set aside - appeal allowed - decided in favor of assessee.

Summary

Issues: Alleged irregular credit availed on invoices without receiving material, penalties imposed, evidence based on private records, retracted statements, modus operandi of diverting materials.

In this case, the appellants, engaged in the manufacture of electrical fans, were accused of irregularly availing CENVAT Credit on invoices from a dealer without receiving the material. The original authority confirmed a demand of ?25,76,136 along with interest, penalties, and a redemption fine. Personal penalties were imposed on the Managing Director. The Commissioner (Appeals) upheld most of the penalties but reduced the amounts imposed. The main arguments revolved around the evidence, particularly entries in private records, statements by an employee of the dealer, and the alleged modus operandi of diverting materials. The appellant's counsel argued that there was no concrete evidence of irregular credit availed. The department, however, reiterated the findings based on the entries in private records and statements made.

Upon analysis, the Tribunal noted that similar cases involving other assesses had been considered previously. The evidence mainly relied on entries in private records of an employee of the dealer. However, the employee stated that he acted on his own behalf, not on behalf of the dealer. Additionally, statutory records and stocks did not show any discrepancies. The Tribunal referred to previous cases where similar evidence was analyzed, leading to the dismissal of demands, interests, and penalties. The Tribunal found that apart from third-party evidence, there was insufficient proof that the appellants engaged in fraudulent activities.

The Tribunal cited cases such as M/s Adhikasri Electromech Ltd., M/s Kedia Electrical Ltd., and M/s Prism Airtech & KMC, where demands, interests, and penalties were set aside based on similar sets of evidence. Consequently, the Tribunal deemed the demand, interest, and penalties imposed on the appellants as unsustainable and set aside the impugned order. The appeals were allowed with any consequential reliefs deemed necessary.