2018 (5) TMI 1355 - AT - Central Excise

CENVAT credit - fake invoices - it is alleged that appellants have not received the duty paid inputs in their factory, but wrongly availed the credit of the duty paid against respective input invoices - whether the appellants had correctly availed the CENVAT credit of ₹ 45,66,544/-, against the input invoices issued by two registered dealers namely, M/s Goodluck Empire and M/s Jenil Empire during the relevant period i.e. 2006-07 and 2007-08? Held that - In the present case, there is no dispute about the first condition of eligibility of payment of specified duty shown on the invoices, whereas the dispute centres round the second condition of eligibility i.e. receipt and use in the manufacture of finished goods. The Revenue has discharged its burden when it claimed that goods had not been received in the factory by pointing out the discrepancy in the input invoice, that is, wrong entry of vehicle number, now it is the turn of the Appellant to explain the discrepancy to establish the fact that the quantity of inputs mentioned in the invoices have been received in the factory and utilized in the manufacture of finished goods by adducing positive evidence - in the present circumstance a prudent inference that could be arrived at is that the quantity of inputs mentioned in the 12 invoices involving a total credit of ₹ 5,89,667/- had not been received in the factory and the credit was availed only on the input invoices. The allegation of the department is that even though the vehicles mentioned in the respective invoices were not Auto Rickshaws, Chakdas etc., but in the statements of respective owners of the vehicles, it has been stated that they had never visited the route used for transferring/transporting the inputs from the premises of the dealers to the factory or the vehicles were not in good condition - Except few statements of vehicle owners/representatives, the competence of the said persons to furnish such statement also being in dispute, and in absence of other corroborative evidence placed by the Revenue, to substantiate the allegation that the quantity of inputs mentioned in the invoices, where the capability of the vehicle mentioned in these invoices are not disputed, it is difficult to sustain the allegation of non receipt of the inputs against these set of input invoices. Also, the vehicles mentioned in the respective invoices are capable of carrying the quantity of goods and there is no other corroborative evidence on record produced by the Revenue to establish that the goods have not been received except the contradictory oral evidence of the proprietor of the weigh Bridge. Consequently, the demand on this count cannot also be sustained. Penalty u/r 26(2) of Central Excise Rules, 2002 - Held that - appellant have actively participated/involved in the issuance of invoices, without movement of inputs, and some of the period involved is also after 01.3.2007, accordingly, liable for penalty under Rule 26(2) of Central Excise Rules, 2002. Appeal disposed off.

Summary

Issues Involved:
1. Whether the appellants correctly availed CENVAT credit of ?45,66,544/- against input invoices issued by two registered dealers.
2. Validity of the RTO report indicating vehicle incapability.
3. Reliability of statements from vehicle owners and weighbridge operators.
4. Justification for denial of CENVAT credit based on handwritten weighment slips.
5. Appropriateness of personal penalties imposed on individuals involved.

Detailed Analysis:

1. Correct Availment of CENVAT Credit:
The core issue was whether M/s Mangalam Alloys Limited correctly availed CENVAT credit of ?45,66,544/- against input invoices from M/s Goodluck Empire and M/s Jenil Empire during 2006-07 and 2007-08. The Department alleged that the appellants availed credit without actually receiving the inputs, based on fraudulent invoices.

2. Validity of the RTO Report:
The Department's investigation revealed that the vehicle numbers mentioned in 12 invoices, corresponding to a credit of ?5,89,667/-, were incapable of carrying the inputs. The vehicles were identified as three-wheelers, auto-rickshaws, etc., which could not transport the specified quantities. The appellants did not dispute this RTO report. The Tribunal upheld the denial of credit for these invoices, referencing the Gujarat High Court's decision in Gyscoal Alloys Ltd. vs CCE Ahmedabad-III, which supported adverse inferences based on such discrepancies.

3. Reliability of Statements from Vehicle Owners and Weighbridge Operators:
For 39 invoices totaling ?13,60,821/-, the Department relied on statements from vehicle owners who claimed they did not transport the goods. The Tribunal found that many statements were from unauthorized persons and lacked corroborative evidence. Thus, the denial of credit based solely on these statements was not sustained.

4. Justification for Denial Based on Handwritten Weighment Slips:
Regarding 37 invoices totaling ?26,16,101/-, the Department challenged the handwritten weighment slips, asserting that the weighbridge only issued computerized slips. However, during cross-examination, the weighbridge proprietor admitted that manual slips were also issued by employees. Given the lack of additional corroborative evidence, the Tribunal found the denial of credit on this ground unjustified.

5. Appropriateness of Personal Penalties:
Penalties were imposed on individuals for their involvement in issuing fraudulent invoices. Considering the reduced demand, the Tribunal deemed the penalties disproportionate and reduced them. Penalties on Shri Devilal Bherulal Rathi were reduced to ?50,000/-, and on Shri Gulamabbas Ali Nurani and Shri Sunil Parikh to ?25,000/- each.

Conclusion:
The Tribunal confirmed the denial of CENVAT credit of ?5,89,667/- with interest and penalty but allowed credit for ?13,60,821/- and ?26,16,101/-, setting aside the corresponding demands. Personal penalties were reduced considering the overall circumstances. Appeals were disposed of accordingly.