2019 (6) TMI 10 - AT - Central Excise

CENVAT credit - capital goods - pre-fabricated structure - pre-ponderance of probabilities proved - HELD THAT - The investigation conducted by the department and the material evidences brought on record were not disputed by the appellants at any point of time, either at the adjudication or the first appeal stage. The law in this context in well settled by the Hon ble Supreme Court in the case of D.Bhoormal 1974 (4) TMI 33 - SUPREME COURT that the department is not required to prove a case of mathematical precision and is required to prove a case with the pre-ponderance of probabilities. The Learned Commissioner (Appeals) has thoroughly examined the case and concluded that the Cenvat demand has been correctly disallowed to the appellant. Penalty - HELD THAT - The vehicle nos. were incorrectly entered by it in the invoices, facilitating the Appellant No.1 to avail the fraudulent Cenvat Credit. Further, it is also evident that the vehicles were not used for transportation of the subject goods for delivery at the factory of the Appellant No.1 - penalty under Rule 26 of the Central Excise Rules, 2002 upheld. Penalty on the Appellant No.2, Shri Owais Shakir Nuri, Director of Appellant No.1 company - HELD THAT - Neither the original nor the impugned orders have specifically discussed about the role played by the said appellant in the clandestine activities indulged into by the other appellants. Thus, in absence of proper substantiation of the case, the impositions of penalty on the Appellant No.2 cannot be legally sustained. Appeal allowed in part.

Summary

Issues: Alleged fraudulent activities leading to imposition of Cenvat demand, interest, and penalties on multiple appellants.

Analysis:
1. Background and Allegations: M/s Sarvom Steel Pvt. Ltd. (Appellant No.1) was involved in manufacturing M.S. Ingots and faced allegations of purchasing scrap from unregistered suppliers, camouflaging purchases with invoices from M/s Novelty Power & Infratech Ltd. (Appellant No.3), and availing Cenvat Credit on non-eligible items like pre-fabricated structures. The investigation by DGCEI led to show cause proceedings and subsequent orders confirming Cenvat demand, interest, and penalties on the appellants.

2. Appellant's Defense: The advocate for the appellants argued that Appellant No.3 had paid duty on specified items, denying diversion of goods, and refuting allegations of receiving goods from unregistered dealers. The defense also highlighted discrepancies in evidence regarding vehicle capacities and lack of concrete evidence against the appellants' involvement in fraudulent activities.

3. Revenue's Position: The Revenue's representative supported the findings in the impugned order, emphasizing the thorough investigation that led to confirming the demands based on non-receipt of duty-paid goods by Appellant No.1, justifying the penalties imposed.

4. Judicial Review: The Tribunal considered material evidence, including transporter statements denying involvement, discrepancies in vehicle capacities, and lack of retraction of earlier statements. The Tribunal noted that the appellants did not dispute the evidence during adjudication or appeal stages, citing the standard of proof required by law as preponderance of probabilities, not mathematical precision.

5. Decision on Cenvat Demand: The Tribunal upheld the impugned order's findings on Cenvat demand, emphasizing that the investigation and evidence presented were not adequately challenged by the appellants, leading to the rejection of their appeals.

6. Penalties Imposed: The Tribunal upheld the penalty on Appellant No.1 due to their involvement in fraudulent activities. However, it found the penalty on Appellant No.3 justified for facilitating fraudulent Cenvat Credit but overturned the penalty on Appellant No.2 due to insufficient evidence of their direct involvement in the fraudulent activities.

7. Final Ruling: The Tribunal dismissed the appeals of Appellants No.1 & 3 while allowing the appeal in favor of Appellant No.2. The decision was based on the evidence, lack of challenge to findings, and the varying degrees of involvement of each appellant in the alleged fraudulent activities.

This detailed analysis of the legal judgment outlines the issues, arguments presented, evidence considered, and the Tribunal's decision on each aspect of the case involving alleged fraudulent activities and imposition of Cenvat demand and penalties on the appellants.