2024 (8) TMI 8 - AT - Central Excise

CENVAT Credit - issuance of invoices without supply the material - retraction of statements - burden of proof - personal penalty on the partner of the appellant firm - HELD THAT - On perusal of the material on record, and also the statements of the persons recorded during the investigation, it appears that Sh. Varinder Kumar, who is the partner of M/s Blue Star Exports, is the mastermind of issuing invoices without supply the material. Further, it is found that Sh. Varinder Kumar of M/s Blue Star Exports has admitted in his statement that they purchased prime material and sell the same in the local market on cash basis and pass the Cenvat Credit of the same to the manufacturer by changing the description of the goods and the price so as to show as scrap . It is found Sh. Kuldip Singh, the partner of the appellant in his statement dated 07.09.2017 has clearly admitted that they have taken the Cenvat Credit on cuttings which are basically scarp whereas the manufacturer s invoices show the description of the goods as prime finished goods . Regarding the taking of Cenvat Credit whether the same is correct or not, he stated that he cannot say anything. The appellant had voluntarily debited the Cenvat Credit availed on the strength of invoices issued by M/s Blue Star Exports on 14.12.2016 i.e. before the date of statement of Sh. Kuldip Singh, partner of the appellant, recorded on 07.09.2017 and he has not retracted his statement till date which clearly shows that he has accepted his lapse - as for Rule 4 of the Cenvat Credit Rules, 2004 read with Rule 9(5) of the Cenvat Credit Rules, 2004, the burden of proof regarding the admissibility of the Cenvat Credit shall lie upon the manufacturer or provider of output service before taking such credit. There is no infirmity in the impugned order passed by the learned Commissioner (Appeals), accordingly the same is upheld by dismissing the appeal of the appellant - appeal dismissed.

Issues Involved:
1. Admissibility of Cenvat Credit based on invoices issued by M/s Blue Star Exports.
2. Investigation and evidence supporting the claim of fraudulent transactions.
3. Validity of the ICC barrier report in determining the legitimacy of the transactions.
4. Dropping of personal penalty on the partner of the appellant firm.
5. Voluntary debit of Cenvat Credit by the appellant.

Issue-Wise Detailed Analysis:

1. Admissibility of Cenvat Credit Based on Invoices Issued by M/s Blue Star Exports:
The appellant firm was accused of fraudulently availing Cenvat Credit amounting to Rs. 8,50,292/- based on invoices issued by M/s Blue Star Exports without actual receipt of goods. Investigations revealed that M/s Blue Star Exports issued invoices for passing Cenvat Credit without supplying the actual goods. Statements from key individuals, including Sh. Kesar Singh and Sh. Varinder Kumar, confirmed that the invoices were issued only to pass Cenvat Credit, and no goods were actually received or sold. The appellant's claim that the goods were legitimately purchased and delivered was not substantiated by corroborative evidence.

2. Investigation and Evidence Supporting the Claim of Fraudulent Transactions:
The investigation conducted by the DGCEI, Ludhiana Zonal Unit, included searches and recorded statements that indicated fraudulent activities. Sh. Varinder Kumar admitted to purchasing prime material, selling it in the local market for cash, and issuing invoices with altered descriptions to pass Cenvat Credit. The appellant's partner, Sh. Kuldip Singh, admitted to availing Cenvat Credit on cuttings described as scrap, while the manufacturer's invoices showed prime finished goods. The evidence, including invoices and statements, supported the claim of fraudulent transactions.

3. Validity of the ICC Barrier Report in Determining the Legitimacy of the Transactions:
The appellant argued that the ICC barrier report was irrelevant as the goods originated within Punjab. However, the investigation revealed that many goods shown as purchased from other states did not enter Punjab and were sold locally for cash. This practice was admitted by Sh. Varinder Kumar, indicating that the ICC barrier report was relevant in establishing the fraudulent nature of the transactions.

4. Dropping of Personal Penalty on the Partner of the Appellant Firm:
The Commissioner (Appeals) dropped the personal penalty on the partner of the appellant firm but upheld the duty and interest. The appellant argued that this indicated the goods were actually received. However, the Tribunal found that the dropping of the penalty did not affect the merits of the case, as the fraudulent nature of the transactions was clearly established through other evidence.

5. Voluntary Debit of Cenvat Credit by the Appellant:
The appellant had voluntarily debited the Cenvat Credit amount before the statement of Sh. Kuldip Singh was recorded. This action was seen as an acceptance of the lapse, further supporting the claim of fraudulent availing of Cenvat Credit. The Tribunal noted that the appellant did not retract the statement, indicating acknowledgment of the irregularity.

Conclusion:
The Tribunal upheld the impugned order passed by the Commissioner (Appeals), confirming the duty and interest on the appellant. The appeal was dismissed, and the Tribunal found no infirmity in the investigation and conclusions drawn by the lower authorities. The evidence, including statements and invoices, clearly indicated manipulation and fraudulent availing of Cenvat Credit. The decisions cited by the appellant were found inapplicable to the specific facts and circumstances of the case.

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