2004 (8) TMI 291 - AT - Central Excise

Disallowance of MODVAT Credit of duty paid on inputs - sale of copper - bogus modvatable invoices - HELD THAT - The entire case of the Department is mainly based on the statement of Shri R.K. Gupta Proprietor of M/s. R.K. Enterprises as no statement of Shri Deepak Kumar Gupta Proprietor of M/s. Hindustan Metal seems to have been recorded. In his statement Shri R.K. Gupta has deposed that he trades in non-ferrous metals having a staff of four persons. He has given the names of firms whom he purchases the metals from as well as the name of his customers whom the metals are sold to by him. He has also mentioned that both payments are made and received by him through cheques. He has admitted that G.R. books were got printed by him and the transport companies did not exist and he was issuing bogus modvatable invoices about 50 % of all invoices issued by him. He has also stated in his statement that where the quantity delivered on an invoice through a tempo is more than 6 tons the transaction is bogus and that he used to receive back cash from his suppliers and in turn he used to give the said cash to his customers. The statement of Shri R.K. Gupta reveals that besides issuing bogus modvatable invoices he was also issuing genuine invoices where the goods were actually supplied to the customers. The learned Advocate has rightly contended that the said statement is very general and nowhere specifically mentions that the invoices issued in the name of the Appellants were bogus. The Revenue has also not rebutted the submissions made by the Appellants that they had never received any invoice for more than 6 tons and as such even as per the statement of Shri R.K. Gupta the supply to the Appellants were not bogus. The Revenue has also not controverted the contention of the Appellants that they were sending the copper rods to their job workers for conversion and paying the conversion charges to the job worker. The Revenue has thus not succeeded in establishing that the Appellants did not receive the raw materials and received only modvatable invoices. Accordingly we set aside the impugned Order and allow both the appeals.

Summary

Issues involved: Disallowance of MODVAT Credit of duty paid on inputs.

Summary:
The appeals involved the disallowance of MODVAT Credit of duty paid on inputs by M/s. Garima Enterprises Pvt. Ltd. and Shri Sunil Kumar Agarwal. The Department disallowed the credit based on the premise that certain dealers had no place to store goods, transactions were fictitious, and the Appellants had not verified the identity of their dealers.

The Appellants argued that they had correctly taken MODVAT/CENVAT Credit based on valid invoices, received inputs directly from manufacturers and dealers, and had not received any invoices for more than 6 tons. They contended that the Department's allegations were unfounded as the invoices were authenticated, no evidence showed non-receipt of inputs, and payments were made through legitimate channels.

The Department countered by stating that certain dealers were involved in bogus transactions, with fictitious addresses and non-existent transport companies. They argued that the Appellants had availed credit without actually receiving the goods, as evidenced by discrepancies in invoices.

After considering both sides, the Tribunal found that the dealers were registered with the Central Excise Department and had issued invoices to the Appellants. The crucial question was whether the goods were actually sold or if the invoices were provided solely for availing MODVAT credit. The Tribunal noted that the Department's case heavily relied on the statement of one dealer, which was general in nature and did not specifically mention the Appellants' invoices as bogus. The Tribunal also highlighted that the Department failed to refute the Appellants' claims of legitimate transactions, including sending materials for conversion to job workers. Consequently, the Tribunal set aside the impugned order and allowed both appeals.