2008 (7) TMI 364 - AT - Central Excise

Cenvat Credit credit availed without actual receipt of the goods - The applicants have brought no evidence on record to show that the impugned inputs were, in fact, received in their factory. Availing of credit by MMPL without receipt of the inputs is a serious offence. It becomes doubly serious, when the duty alleged to be shown as paid on the invoices issued by KRMPL and KIL, is, on investigations found to have not been paid and in spite of that the credit availed by MMPL. It is, therefore, established beyond doubt that the credit of Rs. 3,20,019/- has been availed by MMPL fraudulently. Demand upheld

Summary

Issues:
1. Confirmation of demand for Central Excise duty and Education Cess for clandestine clearance.
2. Confirmation of demand for fraudulently availed Cenvat credit.
3. Imposition of penalties on the appellants and individuals involved.

Analysis:
1. The appeals were filed against the Order-in-Appeal upholding the Order-in-Original confirming the demand of Central Excise duty and Education Cess for clandestine clearance of MS ingots. The appellants did not contest this demand, which had already been paid. The focus shifted to the demand for fraudulently availed Cenvat credit and the associated penalties. The Tribunal considered the fraudulent Cenvat credit of Rs. 3,20,019/- and the penalties imposed on the appellants.

2. The appellant company, a manufacturer of M.S. Ingots, was part of a group of companies. The key individuals responsible for the affairs of the appellant company were also involved in sister concerns. Duplicate invoices were issued by these individuals in sister concerns for credit availing by the appellant company. However, the Central Excise duty for which the Cenvat credit was taken was not paid by the sister concerns, rendering the credit illegitimate. The Tribunal found that the credit availed without actual receipt of goods was a serious offense, especially when the duty shown as paid was not actually paid. The Tribunal upheld the confirmation of the fraudulently availed Cenvat credit and the associated penalties.

3. The Tribunal detailed the involvement of the individuals in the illegal activities and upheld the penalties imposed on them. However, considering the penalties already imposed on the appellant company, it deemed the individual penalties excessively harsh. Therefore, the penalties on the individuals were reduced significantly. The impugned order was modified accordingly, with the appeal of the appellant company being rejected while the appeals of the individuals were partly allowed.

This judgment highlights the importance of compliance with Cenvat credit rules, the consequences of fraudulent credit availing, and the considerations in imposing penalties on both companies and individuals involved in such offenses.