2019 (2) TMI 4 - AT - Central Excise

CENVAT Credit - fraudulent availment of CENVAT Credit - the appellants AVCL received non-duty paid MS Scrap without any valid cenvated documents from registered dealers - also it is alleged that the description of goods shown in the invoices differs from the description of goods supplied by the manufacturers to the registered dealer - demand mainly based on statements of the Driver - Held that - It must be stated that other than mere statements, there is no evidence adduced by the department to establish that there has been fraudulent availment of credit. In cross-examination Shri T.K. Sundaram has stated that he has given the statements under force and coercion. It is explained by Shri T.K. Sundaram that they had used gas cutting machines to cut and size the materials received from the manufacturers as required by the clients. All these would go to show that AVCL has received scrap only. The department has not put forward any invoices, which has not included Central Excise duty. The basic allegation is that there is difference in the description of the goods. This has been plausibly explained by AVCL as well as Shri T.K. Sundaram. It is also to be noted that the AVCL uses all the input only after through lab testing. In such a case, the allegation that they have not received inputs or that they have differently described the inputs etc., do not seem to be probable at all. Needless to say that when finished products are exported, AVCL would not be making any gain by indulging in such fraudulent availment of credit, as they cannot use such credit. The department has failed to establish fraudulent availement of credit on the part of AVCL - demand do not sustain - appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Alleged fraudulent availment of Cenvat credit by AVCL.
2. Difference in the description of goods in invoices and actual goods received.
3. Role of A & C and its authorized signatory in the alleged fraud.
4. Validity of penalties imposed on AVCL, A & C, and Shri T.K. Sundaram.

Detailed Analysis:

1. Alleged Fraudulent Availment of Cenvat Credit by AVCL:
The primary issue concerns AVCL allegedly availing Cenvat credit fraudulently based on invoices issued by registered dealers for non-duty paid goods. The department's investigation suggested that AVCL received non-duty paid goods in the guise of duty-paid inputs like MS Ingots and MS Angles. However, AVCL countered that they paid for the inputs through cheques, including Central Excise duty, and maintained that they had no motive to avail wrongful credit due to their substantial unutilized credit balance resulting from exporting finished products.

2. Difference in Description of Goods:
The department noted discrepancies between the goods described in the cenvated invoices and the actual goods received by AVCL. For instance, materials received as MS Scrap were invoiced as MS Ingots (rejected) or MS Angles (rejected). AVCL explained that in commercial parlance, the goods received were known differently and that such variations were plausible. They emphasized that they tested the materials in their lab before accepting them, ensuring the quality and duty-paid status of the inputs.

3. Role of A & C and its Authorized Signatory:
A & C, along with its authorized signatory Shri T.K. Sundaram, was accused of conniving with AVCL to facilitate the fraudulent credit. The department alleged that A & C issued cenvated invoices for non-duty paid goods. However, A & C argued that the department failed to point out specific bogus documents and that the statements given by Shri T.K. Sundaram were coerced and not voluntary. They maintained that they supplied only duty-paid goods to AVCL.

4. Validity of Penalties Imposed:
The penalties imposed on AVCL, A & C, and Shri T.K. Sundaram were challenged. AVCL argued that the department's case was based solely on statements without concrete evidence of fraudulent credit. The Tribunal found that the department did not establish any cash transactions or provide invoices excluding Central Excise duty. The Tribunal noted that AVCL's practice of lab testing inputs and making payments by cheque supported their defense. Consequently, the penalties imposed were deemed unsustainable.

Conclusion:
The Tribunal concluded that the department failed to establish fraudulent availment of Cenvat credit by AVCL. The allegations were based on statements without substantial evidence. The discrepancies in the description of goods were plausibly explained by AVCL and A & C. Given the lack of concrete evidence and the fact that AVCL exported finished products, the Tribunal found no basis for the demand of duty or the penalties imposed. Therefore, the impugned orders were set aside, and the appeals were allowed with consequential reliefs.

(Pronounced in open court on 13.11.2018)