2018 (3) TMI 497 - AT - Central Excise

Penalty - appellant were not having any manufacturing premises and had obtained registration with the sole purpose of enabling to issue ARE-1 for the purpose of claiming rebate by others - CENVAT credit - Held that - it is an admitted position that all the persons involved were aware that there was no manufacture taking place at the premises of M/s Sofina Fashion. Not duty was being paid and no goods were cleared from M/s Sofina Fashion. Documents were being generated to show payment of duty with the intention of claiming fraudulent rebates. The main beneficiary of the entire fraudulent were three exporting firms namely, M/s Karishma Overseas, M/s Krishna Exports and M/s Sheetal Exports, and M/s Sofina Fashion was used as a tool for these purposes - plea of leniency to the three exporters does not merit consideration and the same is rejected. Reversal of CENVAT Credit from M/s Sofina Fashion - Held that - even the show-cause notice clearly mentioned that there was no movement of any goods to or from registered premises of M/s Sofina Fashion. There was no generation and/or maintenance of any documents for M/s Sofina Fashion except ARE-1. Therefore, there was no operation and maintenance of CENVAT account by M/s Sofina Fashion at any stage - the charge of availing or utilizing credit by M/s Sofina Fashion on the ground that they had generated fraudulent ARE-1 cannot be upheld. Penalty on M/s Sofina Fashion under Rule 15(2) of CENVAT Credit Rules, 2002 - Held that - in absence of any wrong availemnt or utilization of CENVAT Credit, penalty under Rule 15(2) of the CENVAT Credit Rules, 2002 cannot be imposed. Appeal allowed in part.

Summary

Issues:
Appeal against penalties imposed by Commissioner on M/s Sofina Fashion, M/s Karishma Overseas, M/s Krishna Exports, and M/s Sheetal Exports for fraudulent activities related to CENVAT Credit utilization and rebate claims.

Analysis:
1. M/s Sofina Fashion's Case:
- M/s Sofina Fashion admitted to not having any manufacturing premises and obtaining registration solely for issuing ARE-1 for others to claim rebates.
- The appellant argued that no CENVAT Credit was availed or utilized by them, as evidenced by filing NIL returns and lack of maintained records.
- The Tribunal found that M/s Sofina Fashion was used as a tool for fraudulent activities by the exporting firms, rejecting any leniency plea.
- The demand for reversal of CENVAT Credit from M/s Sofina Fashion was not upheld due to the absence of any goods movement or maintenance of CENVAT account by them.
- As no wrongful availing or utilization of CENVAT Credit was established, the penalty under Rule 15(2) of CENVAT Credit Rules, 2002 could not be imposed, leading to the appeal being allowed.

2. M/s Karishma Overseas, M/s Krishna Exports, and M/s Sheetal Exports' Cases:
- The three exporting firms were involved in fabric exports and hand processing without power, claiming exemptions for goods exported in ARE-1.
- Despite withdrawing rebate claims, penalties of varying amounts were imposed on them, which they argued were excessive.
- The Revenue contended that these firms were repeat offenders and should not be shown leniency.
- The Tribunal upheld the penalties on these exporters, emphasizing their involvement in similar offenses previously and dismissing the plea for leniency.

3. Overall Conclusion:
- The Tribunal found all involved parties aware of the fraudulent activities, with M/s Sofina Fashion being a key instrument in the scheme.
- While M/s Sofina Fashion's appeal was allowed due to the lack of evidence of CENVAT Credit misuse, the appeals of the exporting firms were dismissed based on their past involvement in similar offenses and the seriousness of the fraudulent activities.

This comprehensive analysis of the judgment highlights the key arguments, findings, and conclusions related to the penalties imposed on the parties involved in the fraudulent utilization of CENVAT Credit and rebate claims.