2017 (9) TMI 1251 - AT - Central Excise

CENVAT credit - fake invoices - Held that - it is clearly established that no goods accompanied invoices by those two dealers M/s BSC and Steel Centre. Consequently, the CENVAT Credit availed by MCU on the basis of such invoices are irregular and needs to be disallowed - similar issue of fraudulent CENVAT Credit availment on the invoices issued by first stage dealers came up before the Mumbai Bench of the Tribunal in the case of Bhagwati Steel Casts Ltd. Vs. CCE, Nasik 2013 (1) TMI 123 - CESTAT MUMBAI in which Tribunal, vide three Member Bench decision. upheld the order and disallowed the CENVAT Credit on the basis of dealer s invoices which were accompanied by consignment notes in which vehicle numbers were found to be incapable of transporting goods - recovery of CENVAT Credit along with interest as well as penalty of ₹ 1,16,03,673/- imposed against MCU, are upheld. Since penalty has been imposed on M/s. Bhagwati Steel Centre, we feel no separate penalty is required to be imposed on Shri Bimal Kr. Kheria, partner of M/s Bhagwati Steel Centre. Appeal allowed - decided partly in favor of appellant.

Summary

Issues:
Fraudulent CENVAT Credit availment based on invoices, Irregularities in transportation documents, Imposition of penalties on various parties.

Analysis:
1. Fraudulent CENVAT Credit Availment: The case involved allegations of irregular CENVAT Credit against the manufacturer based on evidence gathered during searches at the factory premises and relevant premises of suppliers. The misuse of CENVAT Credit facility was confirmed through discrepancies in accounts, invoices, and transport documents. The Tribunal upheld the disallowance of CENVAT Credit and imposed penalties on the parties involved.

2. Transportation Document Irregularities: The investigation revealed that the consignment notes issued by the transporter were fraudulent, as the goods were never actually transported. Statements from involved parties confirmed that consignment notes were issued only for a commission without actual transportation taking place. Verification of vehicle numbers and examination of bills further supported the fraudulent nature of the transportation documents.

3. Penalties Imposed: The Tribunal upheld the penalties imposed on the parties involved in the fraudulent scheme but considered the penalties to be excessive in some cases. As a result, the Tribunal decided to reduce the penalties imposed on certain individuals and entities, taking into account the peculiar circumstances of the case.

4. Legal Precedents: The Tribunal referred to previous judgments where similar issues of fraudulent CENVAT Credit availment based on fake invoices had been dealt with. The decisions in those cases supported the Tribunal's findings and actions in the present case, reinforcing the disallowance of CENVAT Credit and imposition of penalties.

5. Final Decision: The Tribunal concluded that the fraudulent invoices issued by the suppliers led to irregular CENVAT Credit availment, requiring reversal of the credit along with interest. Penalties were upheld but reduced in certain instances due to the specific circumstances of the case. The appeal was partially allowed, with modified penalties for some parties involved.

This detailed analysis of the judgment highlights the key issues, evidence presented, legal reasoning, and the final decision rendered by the Tribunal in the case.