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2017 (9) TMI 911 - AT - Central ExciseCENVAT credit - duty paying invoices - fake invoices - receipt of invoices only without receipt of goods - Penalty u/r 26 - Held that - it is case of fraudulent Cenvat credit availed on the invoices issued by M/s. Ispat Industries Ltd and M/s. JSW Steel Ltd. - On the identical facts and under same investigation in many other cases, demands were confirmed. Reliance placed in the case of Amar Ispat Pvt. Ltd., Sandeep Garg, Mohammad A. Master, Mohsin Hajibhai Memon, Harikrishna B. Soneji, Ram Awatar Agarwal & Diamond Roadways Versus Commissioner of Central Excise, Thane-I 2015 (11) TMI 373 - CESTAT MUMBAI , where it was held that Since the invoices of such HR trimmings were of no use to them, they were trading the invoices through brokers based in Mumbai who in turn were locating the furnace units who could fraudulently avail the credit based on such invoices. The cash amount of HR trimmings being sent through angadia or other services from Viramgam and nearby area and were being converted into Bank Draft etc. through banking channels either by such. brokers or by manufacturers of ingots or was used in cash to purchase bazaari scrap/scavenger scrap, the demand upheld. The supplier M/s. Ispat Industries Ltd and M/s. JSW Steel Ltd have cleared the HR Trimming on payment of duty by issuing invoices in favor of person whose name were given by the auctioneer. The goods were sold at factory gate therefore act of fraudulent availment of credit which has taken place after removal of goods from factory, the appellant M/s. Ispat Industries Ltd and M/s. JSW Steel Ltd had no control therefore penalties imposed under Rule 26 on these appellant is not proper. Appeal allowed - decided in favor of appellant.
Issues Involved:
1. Fraudulent availment of Cenvat credit by M/s. Chandra Ispat Limited. 2. Imposition of penalties under Rule 26 on M/s. Ispat Industries Ltd and M/s. JSW Steel Ltd. 3. Appeals by Shri. Harikishan B. Sonejai, Shri. Manish Ramavatar Agarwal, and Shri. Chandrakant Nathwani. Detailed Analysis: 1. Fraudulent Availment of Cenvat Credit by M/s. Chandra Ispat Limited: The case revolves around M/s. Chandra Ispat Limited, who were engaged in manufacturing excisable goods and availing Cenvat credit on invoices issued by M/s. Ispat Industries Ltd and M/s. Jindal Iron & Steel Company Limited. The investigation revealed that the goods purchased in auction were invoiced to M/s. Chandra Ispat Limited but were actually transported to a different dealer in Viramgam. Payments were made through cheques, but cash was sent to brokers via angadia services. The company procured commercial scrap instead of HR trimmings for manufacturing, which did not incur excise duty. Consequently, Cenvat credit was proposed to be denied, and penalties were imposed under Rule 26. The adjudicating authority confirmed these demands, leading to appeals before the Commissioner (Appeals), who also rejected the appeals, prompting the current appeal. 2. Imposition of Penalties under Rule 26 on M/s. Ispat Industries Ltd and M/s. JSW Steel Ltd: The counsels for M/s. JSW Steel Ltd and M/s. Ispat Industries Ltd argued that their clients sold the scrap on payment of duty through e-auction and had no involvement in the fraudulent availment of Cenvat credit by M/s. Chandra Ispat Limited. They contended that once the goods were cleared on payment of duty at the factory gate, they bore no responsibility for subsequent misuse. They cited the judgment in Commissioner of C. Ex. Aurangabad Vs. Ispat Industries Ltd [2010(261) ELT 1059(Tri. Mumbai)], which supported their stance that duty-paid goods are not liable for confiscation and thus, penalties under Rule 26 were not applicable. 3. Appeals by Shri. Harikishan B. Sonejai, Shri. Manish Ramavatar Agarwal, and Shri. Chandrakant Nathwani: Shri. Nikhil Rungta, representing Chandrakant Nathwani, argued that his client was not involved in issuing any fraudulent invoices and thus should not be penalized under Rule 26(2). He emphasized that the goods dealt with were duty-paid and not liable for confiscation. The Revenue, represented by Shri. Ajay Kumar, reiterated the findings of the impugned order, highlighting that various persons availed fraudulent Cenvat credit without receiving the actual input, as confirmed in multiple tribunal cases. Tribunal's Findings: The tribunal reviewed the facts and found that the case involved fraudulent Cenvat credit availed on invoices issued by M/s. Ispat Industries Ltd and M/s. JSW Steel Ltd. It noted that similar cases had been decided by the tribunal, confirming the fraudulent nature of the transactions. The tribunal referred to the case of Amar Ispat Pvt Ltd, where it was established that goods were not received by the appellant, and payments through banking channels were part of the manipulation. Judgment: The tribunal concluded that M/s. Chandra Ispat Limited fraudulently availed Cenvat credit without receiving the goods. However, it found that M/s. Ispat Industries Ltd and M/s. JSW Steel Ltd cleared the goods on payment of duty and had no control over the fraudulent credit availed post-clearance. Therefore, penalties under Rule 26 were not applicable to them, and their appeals were allowed. Conversely, the appeals by Shri. Harikishan B. Sonejai, Shri. Manish Ramavatar Agarwal, and Shri. Chandrakant Nathwani were dismissed. Pronouncement: The judgment was pronounced in court on 27/07/2017.
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