2017 (12) TMI 698 - AT - Central Excise

CENVAT credit - fake invoices - it was alleged that appellant have not received the goods from M/s V.N. Impex, but availed credit only on the basis of invoices - Held that - the Appellant even though claimed in their letter 12.3.2009, that goods have been utilized, they could not produce investigation report conducted by the Range Supdt. way back in 2006. This aspect should be addressed by the adjudicating authority - The Appellant further claimed that the demand notice was received on 5.2.2010 for the period January 2005 to February 2005, a part of it being more than 5 years, hence, barred by limitation; this aspect also needs to be scrutinized - appeal allowed by way of remand.

Summary

Issues involved:
1. Availing Cenvat credit on input invoices without receiving goods.
2. Imposition of penalty under Rule 15(1) of CCR, 2004.
3. Limitation period for demand exceeding 5 years.
4. Proprietorship firm and proprietor liability.
5. Verification of input receipt and utilization in manufacturing.

Availing Cenvat credit on input invoices without receiving goods:
The case involved appeals against an order confirming the demand for availing Cenvat credit without receiving goods from the supplier. The Appellants claimed to have received and utilized the inputs in their factory, supported by a report obtained through RTI application. However, the report was procured post-adjudication and appellate proceedings, raising concerns about its admissibility. The adjudicating authority was directed to address this aspect and scrutinize the claim of goods utilization. The investigation against the supplier, M/s V.N. Impex, for issuing fake invoices without supplying goods was a crucial factor in determining the validity of the credit availed by the Appellants.

Imposition of penalty under Rule 15(1) of CCR, 2004:
The Appellants contested the imposition of penalties under Rule 15(1) of CCR, 2004 on both the proprietorship firm and the proprietor. The argument presented was that the penalty on the proprietor is not tenable in law, as the firm and proprietor are considered as one entity. Citing a judgment of the Hon’ble Bombay High Court, the Appellants sought to set aside the penalty on the proprietor. The issue of whether the penalty under Rule 15(1) of CCR, 2004 constitutes a personal penalty was raised, emphasizing the need to reevaluate the penalty imposition.

Limitation period for demand exceeding 5 years:
An important contention raised was the demand exceeding the period of 5 years, deemed as untenable in law. The Appellants argued that the demand notice received for the period January 2005 to February 2005, a part of which was more than 5 years old, should be considered barred by limitation. This issue required scrutiny to determine the validity of the demand notice and its compliance with the statutory limitation period.

Proprietorship firm and proprietor liability:
The Appellants challenged the imposition of penalties on both the proprietorship firm and the proprietor, asserting that they should be considered as one entity. Referring to a judgment of the Hon’ble Bombay High Court, the Appellants sought to differentiate between penalties imposed on the firm and the proprietor. The argument aimed to establish that penalties on both entities were legally untenable, thereby necessitating a reevaluation of the penalty imposition.

Verification of input receipt and utilization in manufacturing:
The core issue revolved around determining whether the Appellants had indeed received the inputs against the invoices and utilized them in the manufacturing process. The investigation against the input supplier, M/s V.N. Impex, for issuing fake invoices without supplying goods added complexity to this verification process. The Appellants' claim of having received and utilized the inputs was supported by a report obtained post-proceedings, raising questions about its evidentiary value and the need for further scrutiny by the adjudicating authority. The verification of input receipt and utilization in manufacturing was a critical aspect that required thorough examination to establish the legitimacy of the Cenvat credit availed by the Appellants.