2022 (10) TMI 1007 - HC - Central Excise

Demand of duty - levy of 100% penalty upon the appellant - manufacture of aluminium ingots and die castings falling under Chapter 76 of the Central Excise Tariff Act 1985 - Section 35G of the Central Excise Act, 1944 - HELD THAT - As per averments on record appellant purchases from first stage dealer and second stage dealer and credit is availed on the basis of invoices issued by both the first stage dealer as also second stage dealer. Apparently, the Directorate General of Central Excise Intelligence conducted an investigation against M/s Bhagwati Trading Company (first Stage dealer) and M/s Jagdamba Metal Store (second stage dealer). On the basis of such investigation an opinion was formed that the first stage dealer and second stage dealer have passed cenvat credit to the appellant without actual delivery of the goods. Accordingly a show cause notice was issued to the appellant alleging that cenvat credit amounting to Rs.8,74,357/- had been availed of without actually receiving goods. The demand was confirmed by the adjudicating authority vide order dated 01.04.2010. Such demand was confirmed by the Appellant Authority. An allegation of fraud must necessarily be proved by the person who levels such an allegation. Where, however, the department succeeds in prima-facie proving its allegation of fraud, the onus would shift to the assessee to prove the genuineness of the transaction. The department relies upon the statement made by Shri R.K. Gupta, the cheque signed by the appellant company recovered from the premises of Shri R.K.Gupta, the alleged discrepancies in description of goods in invoices and purchase invoices, the different mode of transport mentioned in purchase invoices, various documents i.e. fraudulent GR books/receipts, rubber stamps etc. recovered from the office of Shri R.K.Gupta but without a detailed reference to the appellant's transactions, part of the statement by Shri R.K.Gupta exonerating the appellant and without examining for RG 23-A part I, RG 23-A part II, details in cenvat return filed under Rule 57 A(c) of the Central Excise Rules, 1944 and RG 12 submitted to the Central Excise Department, Faridabad. The mere fact that the appellant purchased goods from Shri R.K.Gupta, would not by itself raise an inference of culpability or wrong doing. Matter remanded to the CESTAT for adjudication afresh after examining the statement made by Shri R.K.Gupta, bills, invoices, receipts, cheques and various forms and declarations etc. filed by the appellant before the department - the facts of the present case also warrant and justify a remand to the CESTAT for adjudicating the matter afresh and after examining the entire material in the nature of statutory returns/registers in question as also the declaration etc. that had been filed by the appellant - matter on remand.

Summary

Issues:
1. Quashing of final order upholding duty demand and penalty.
2. Allegations of availing Cenvat credit without actual goods delivery.
3. Appellant's defense of receiving and clearing goods with duty payment.
4. Comparison with a similar case and shift of onus in fraud allegations.
5. Remand for fresh adjudication by CESTAT.

Analysis:
1. The judgment concerns appeals under Section 35G of the Central Excise Act, 1944, seeking to set aside a final order dated 30.08.2013 passed by the Customs, Excise & Service Tax Appellate Tribunal, New Delhi, which upheld the demand of duty and levy of 100% penalty on the appellant.

2. The appellant, engaged in manufacturing aluminum ingots and die castings, availed Cenvat credit on inputs purchased from first and second stage dealers. An investigation alleged that the dealers passed credit without actual goods delivery, leading to a show cause notice and subsequent confirmation of demand by the adjudicating authority.

3. The appellant contended that they received and cleared goods after payment of duty, duly reported in RG-1 register and reflected in statutory returns. The court noted a similar case where the onus shifts to the assessee to prove transaction genuineness if fraud allegations are prima facie proven by the department.

4. Referring to the above case, the court allowed the appeal, set aside the CESTAT's order, and remanded the matter for fresh adjudication after examining all relevant documents and returns filed by the appellant. The court emphasized the need to consider the entire material before reaching a conclusion on the allegations.

5. Consequently, the court set aside the impugned orders of CEA No. 65 and 66 of 2014 and remanded the matter back to the Tribunal for fresh consideration based on the observations made. The court clarified that all submissions from both parties remain open, and CESTAT, New Delhi, will inform the parties about the new hearing date. The appeals were disposed of accordingly.