2017 (12) TMI 1375 - AT - Central Excise

CENVAT credit - fake documents - it appeared to the department that assessee, DAPL had only procured cenvatable invoices without movement of goods and hence cenvat credit availed on the basis of those documents was inadmissible - non-existence of depot address shown in the invoices - Held that - it is not the case that SAPL did not have any depot at all in Bangalore, only omission is that though they had changed their depot address, the invoices continued to reflect the earlier address - It is also not in dispute that DAPL had indicated in their books of account and inventory records that they had received the MS ingots against the invoices issued by DAPL. In any allegation that raw material has not been received and there was only paper transaction of invoices for availing cenvat credit, the absence or for that matter, shortage, of raw material in the factory premises is relevant fact to corroborate and support any such allegation. No shortage of inputs is alleged at the time of visit of officers. At the same time, there is also no dispute that DAPL were, in fact, manufacturing and clearing angles and channels after conversion of the MS ingots on payment of duty. When this is so, there has to be some source of supply of raw material. Apart from these unfounded evidences and uncorroborated facts which are the main basis of the SCN, the department has also, to a large extent, relied upon the statements of manufacturers of the appellants - none of these persons whose statements were recorded have been cross examined. The department has not been able to satisfactorily establish the allegations made in the SCN - appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Validity of cenvat credit availed by DAPL based on invoices issued by SAPL from a non-existent address.
2. Alleged fraudulent intention to pass on cenvat credit without actual movement of goods.
3. Time-barred nature of the demand.
4. Imposition of penalties under Section 11AC and Rule 13 of CER 2002 / Rule 15 of CCR 2004.

Issue-wise Detailed Analysis:

1. Validity of cenvat credit availed by DAPL based on invoices issued by SAPL from a non-existent address:
The department alleged that SAPL issued invoices from a non-existent depot address to enable DAPL to avail cenvat credit without actual movement of goods. However, it was established that SAPL had shifted its depot to a new address and continued issuing invoices with the old address due to an administrative oversight. The Tribunal noted that DAPL had recorded the receipt of MS ingots in their books and inventory records, and no shortage of inputs was found during the department's visit. The Tribunal emphasized that the absence of a depot address alone does not invalidate the cenvat credit if the goods were indeed received and used in manufacturing.

2. Alleged fraudulent intention to pass on cenvat credit without actual movement of goods:
The Tribunal observed that the department did not provide sufficient evidence to prove that the MS ingots were not transported to DAPL. The investigation did not establish any alternate source of raw materials for DAPL, nor did it find any discrepancies in DAPL's stock records. The Tribunal also noted that the clearances of MS ingots by SAPL and the finished goods by DAPL were done on payment of duty. The department's reliance on vehicle numbers and the absence of trip sheets or lorry receipts was deemed insufficient to substantiate the allegations of fraudulent transactions.

3. Time-barred nature of the demand:
The Tribunal agreed with the appellant's contention that the demand was time-barred. The show cause notice was issued almost three years after the department's visit to DAPL's premises and two years after the conclusion of the investigation. The Tribunal cited several case laws to support the view that the extended period for issuing a show cause notice is not invokable in the absence of specific allegations of fraud, collusion, or suppression of facts with intent to evade duty.

4. Imposition of penalties under Section 11AC and Rule 13 of CER 2002 / Rule 15 of CCR 2004:
The Tribunal found that the simultaneous imposition of penalties under Section 11AC and Rule 13/15 was not justified. It was noted that the show cause notice did not specify the exact sub-rule under which the penalty was proposed. The Tribunal referenced the Supreme Court's decision in UOI Vs Rajasthan Spinning & Weaving Mills, which held that mandatory penalties are not applicable in every case of non-payment or short-payment of duty unless the conditions specified in Section 11AC are met. Given that the extended period was not invokable, the penalties under Section 11AC and Rule 13/15 were deemed unsustainable.

Conclusion:
The Tribunal concluded that the department failed to satisfactorily establish the allegations made in the show cause notice. Consequently, the impugned order confirming the demand and imposing penalties was set aside. All appeals were allowed with consequential reliefs as per law.