2022 (7) TMI 190 - AT - Central Excise

CENVAT Credit - bogus invoices - passing on bogus cenvat credit without delivery of the goods - HELD THAT - The appellant have brought on record cogent evidence in support of their contentions and they have supplied inputs along with cenvatable invoices and have received the payment through banking channels. It is further found that in the investigation at the end of Continental Engines, they have led evidence by way of books of accounts and records, they have actually received the goods. Further, in the statement of Shri Sharma ( of Continental Engines) recorded by Revenue, he has categorically stated that they have received the inputs along with cenvatable invoices and such inputs have been used by them in the manufacture of dutiable outputs, which have been cleared on payment of duty. Further, the payment for such transactions have been done through banking channels. The suspicion however, strong, cannot take place of evidence - appeal allowed - decided in favor of appellant.

Summary

Issues:
Imposition of penalty under Rule 25 of Central Excise Rules based on alleged passing of bogus cenvat credit without actual delivery of goods.

Analysis:
The appellant, a second stage dealer registered under Central Excise Rules, was accused of passing on bogus cenvat credit without delivering goods to a specific company. The investigation revealed a scheme involving importers, dealers, and companies managed by an individual, where goods were passed on without actual delivery, using invoices to transfer duty credit.

The appellant was alleged to have purchased copper scrap from importers and dealers involved in the scheme and further sold these goods to a manufacturer. The investigation uncovered misuse of transport documents and fictitious transactions to show goods movement. Various incriminating documents were seized during the search, revealing the extent of the fraudulent activities.

Statements from individuals involved in the transactions, including the appellant and representatives from the manufacturer, were recorded. Discrepancies were found between statements regarding goods receipt, payment methods, and involvement in the fraudulent scheme. The appellant was issued a show cause notice, leading to disallowance of cenvat claim and imposition of penalties on multiple parties involved.

During the appeal, the appellant presented evidence supporting their contention that goods were supplied with cenvatable invoices and payments were received through banking channels. The appellant also highlighted the retraction of statements by a partner/director of the transporter involved in the scheme. Legal precedents and rulings were cited to strengthen the appellant's case.

After considering the arguments and evidence presented, the Tribunal found that the appellant had provided substantial evidence to support their claims. The appellant demonstrated the supply of goods with proper documentation and receipt of payments through legitimate channels. The Tribunal emphasized the importance of concrete evidence over mere suspicion, leading to the allowance of the appeal and overturning of the penalty imposed.

In conclusion, the Tribunal allowed the appeal, setting aside the impugned order and emphasizing the need for solid evidence to substantiate allegations in cases involving duty credit transfers and fraudulent transactions.