2017 (12) TMI 603 - AT - Central Excise

CENVAT credit - fake invoices - Department found that the machines installed in the factory premises of M/s. Satvik Industries and the number of employees were insufficient to manufacture the PVC insulated wire and winding wire of copper that is their final product - Held that - The expression reversal of credit is normally used when wrong credit is reversed by debit in the cenvat credit account without issue of any invoice. The expression is also used when any inputs on which credit is taken is cleared as such (without use in further manufacturing) by covering the inputs so cleared by invoice on which duty reversal is shown. These situations are inherently different from the situation where credit is taken fraudulently and then used for issuing invoices showing utilization of cenvat credit because the person issuing the invoices enables the person receiving the invoice to take credit of duty so shown as paid. The Cenvat credit rules provide for availing cenvat credit on inputs subject to the condition that an invoice is issued with all necessary details of the goods and duty paid in favour of the recipient. It is further a necessary condition that the goods should accompany the invoice - In the present case it stands admitted by all concerned persons that only invoices have been issued for transfer of credit and no goods have accompanied such invoices - Verifications have been undertaken with the RTO authorities with reference to the specific registration numbers of vehicles found in the invoices. This evidence conclusively establishes that the invoice indicating the duty amount has covered only paper transactions and cannot be a valid document for transfer of credit. Appeal dismissed - decided against appellant.

Summary

Issues:
1. Validity of duty confirmed against M/s. Satvik Industries and M/s. Genius Electrical.
2. Imposition of penalties against M/s. Satvik Industries, M/s. Genius Electrical, and M/s. Asha Chemicals.
3. Admissibility of Cenvat Credits availed by the appellants based on fraudulent invoices.
4. Reversal of credit and payment of duty by the appellants.

Analysis:
1. The case involved the confirmation of duty against M/s. Satvik Industries and M/s. Genius Electrical, along with penalties imposed on them. The investigation revealed that M/s. Satvik Industries engaged in fraudulent activities by passing on non-admissible credit to buyers without actually receiving raw materials or manufacturing final products. The duty amounts and penalties were confirmed against the respective parties based on these findings.

2. The issue of penalties against M/s. Satvik Industries, M/s. Genius Electrical, and M/s. Asha Chemicals was addressed in the judgment. The penalties were imposed in accordance with the duty amounts confirmed against each party. The penalties were deemed necessary due to the fraudulent activities involving the issuance of fake invoices and passing on non-admissible credit, causing revenue loss.

3. The admissibility of Cenvat Credits availed by the appellants based on fraudulent invoices was a crucial aspect of the judgment. The investigation established that invoices were issued without accompanying goods, leading to fraudulent transfer of credit. Statements from involved parties corroborated the fraudulent practices, highlighting the misuse of Cenvat Credits through the issuance of invalid documents.

4. The judgment discussed the concept of reversal of credit and payment of duty by the appellants. The appellants argued that any illegal credit availed had been debited for payment of duty on final products, thus reversing the credit. However, the tribunal disagreed with this argument, emphasizing that the fraudulent issuance of invoices enabling the transfer of non-admissible credit caused revenue loss. The judgment upheld the impugned orders, dismissing all appeals based on the established fraudulent practices and misuse of Cenvat Credits.

In conclusion, the judgment extensively analyzed the fraudulent activities involving the misuse of Cenvat Credits through the issuance of fake invoices, leading to the confirmation of duty amounts, imposition of penalties, and dismissal of appeals based on the established fraudulent practices.