2017 (7) TMI 405 - AT - Central Excise

CENVAT credit - fake invoices - the office/godown premises for which registration was granted to M/s.S.K.Garg & Sons was not in control/possession/ under rent by the dealer at the material time and they had issued invoices without having any known office or godown to store the excisable goods - Held that - there was fraud committed right from the day the dealer applied for his registration and false transactions were made repeatedly & systematically to defraud Revenue - the appellant had purchased 28 consignments of plates and bars from the dealer directly and one consignment from second stage dealer. The appellant did not produce any evidence as to when the goods were purchased by the dealer to ascertain whether the storage of the goods required or not and the Commissioner (Appeals) rightly held that the appellant failed to substantiate that the goods purportedly sold to the appellants by the dealers directly to second stage dealer were from stock on which duty has been paid. There is no steps were taken by the appellant to satisfy themselves about the identity and address of the dealer M/s.S.k.Garg & Sons and thus they failed to discharge statutory burden under Rules 7(2) 7(4) and 9(5) of the CCR 2002 - it is very clear that it was the case of fraudulent availment of credit on the basis of fake invoices. Appeal dismissed - decided against appellant.

Summary

Issues:
1. Availment of Cenvat credit based on invoices from dealers with fraudulent transactions.
2. Disputed registration of dealer leading to cancellation and subsequent implications.
3. Failure to verify dealer's existence and lack of proper documentation for credit claims.
4. Lack of evidence for genuine transactions and failure to discharge statutory burden.

Analysis:

Issue 1: Availment of Cenvat credit based on fraudulent transactions
The appellant, a manufacturer, availed Cenvat credit amounting to ?31,05,356 based on invoices from dealers involved in fraudulent transactions. The dealers issued invoices without actual possession of goods or proper storage facilities, engaging in paper transactions. The Revenue discovered this discrepancy during an investigation, leading to the demand for repayment of the credit along with penalties.

Issue 2: Disputed registration of dealer and its implications
The dealer's registration was cancelled retrospectively due to fraudulent practices, including presenting fake rent receipts and deeds to obtain registration. The appellant failed to dispute the cancellation or establish the dealer's possession of a godown, indicating fraudulent registration and transactions. The Tribunal upheld the cancellation of the dealer's registration, rendering the transactions invalid.

Issue 3: Failure to verify dealer's existence and lack of proper documentation
The appellant did not take steps to verify the dealer's identity and address as required by statutory provisions. The lack of due diligence in verifying the dealer's existence and storage facilities led to the fraudulent availment of credit based on fake invoices. The appellant failed to discharge the burden of proof regarding the genuineness of transactions and the legitimacy of the invoices.

Issue 4: Lack of evidence for genuine transactions and statutory burden
The appellant purchased goods from the dealer without providing evidence of the timing of purchases or the duty status of the goods. The Commissioner rightly held that the appellant failed to substantiate the duty payment status of the goods purchased. Additionally, the appellant could not provide documentary evidence for transit sales, leading to the dismissal of their appeal.

In conclusion, the Tribunal found no merit in the appellant's appeal, as it was evident that fraudulent practices were employed to avail credit based on fake invoices. The lack of proper verification, failure to discharge statutory burdens, and reliance on questionable orders led to the dismissal of the appeal, upholding the Commissioner's decision.