2017 (11) TMI 871 - AT - Central Excise

CENVAT credit - duty paying documents - it was alleged that M/s VKMW, the supplier of Goods (Copper Ingots) to the respondent, had no manufacturing facility at their declared factory premises and were engaged in issuing fraudulent invoices to their customers showing fictitious production of copper ingots in their unit, hence the goods said to be consigned on their invoices to their customers/buyers were actually not covered by such invoices, i.e. the goods covered by these invoices were not actually manufactured by M/s VKMW and only the invoices showing bogus clearance of finished goods had been issued, therefore no CENVAT credit was admissible on these invoices. Held that - the findings of the learned Commissioner (Appeals) have not been assailed by the Revenue except bald allegation - It is an admitted fact that Revenue have taken action against the said M/s VKMW only in the year 2010. Thus, during the period of transactions 2004 05 and 2006 07. The appellant have entered into transaction with the said M/s VKMW bona-fide. It is also admitted fact that neither the Revenue had cancelled the registration certificate of the said M/s VKMW nor given any public notice as to the fraud committed by the said M/s VKMW. Thus, under the scheme of the Act, the respondent-assessee acted and bona-fide have procured the inputs from the said M/s VKMW on payment of duty by making payment for the invoices through the banking channel. The respondent-assessee have discharged their onus as regards genuineness of the transactions in question - appeal dismissed - decided against Revenue.

Summary

Issues:
1. Availing irregular Cenvat Credit based on fraudulent invoices.
2. Allegation of no manufacturing activity by the supplier.
3. Dispute regarding the origin of goods covered by the invoices.
4. Appeal against the Order-in-Appeal by the Revenue.

Issue 1: The respondent availed Cenvat Credit based on invoices issued by M/s VKMW, a supplier alleged to have engaged in fraudulent activities. The Directorate General of Central Excise Intelligence (DGCEI) issued a Show Cause Notice to M/s VKMW for issuing bogus invoices. The respondent, as a buyer, was investigated for irregularly availing Cenvat Credit on goods not actually manufactured by the supplier.

Issue 2: The investigation revealed that M/s VKMW had no manufacturing facility as claimed and issued invoices without supplying the goods. The Anti Evasion Wing discovered that the respondent had availed irregular Cenvat Credit on copper ingots purchased from M/s VKMW, leading to a Show Cause Notice demanding recovery of the credit with penalties under Rule 15 of CCR.

Issue 3: The Commissioner (Appeals) allowed the respondent's appeal, noting that the respondent had engaged in manufacturing activities and received the goods in question. The Commissioner found that the respondent had purchased copper ingots from M/s VKMW, a registered manufacturer, and utilized them in the manufacture of final products. The Revenue appealed, disputing the source of procurement of the ingots.

Issue 4: The Tribunal upheld the Order-in-Appeal, stating that the Revenue's allegations lacked substance and that the respondent had acted bona fide in transactions with M/s VKMW. The Tribunal noted that the Revenue had not taken action against M/s VKMW during the relevant period, indicating the respondent's genuine procurement of inputs. The appeal by the Revenue was dismissed, affirming the respondent's compliance with the Act and entitlement to benefits.

In conclusion, the Tribunal dismissed the Revenue's appeal, affirming the respondent's genuine procurement of inputs and compliance with the Act. The judgment highlighted the importance of bona fide transactions and the responsibility of ensuring inputs have suffered duty at the hands of the manufacturer. The Tribunal's decision emphasized the need for thorough verification and due diligence in assessing allegations of irregular Cenvat Credit availing based on fraudulent invoices.