2024 (9) TMI 1592 - AT - Central Excise

CENAVT Credit - refund of of accumulated Cenvat Credit - it is alleged that appellant has not received the inputs and has taken the Cenvat Credit as well as the refund on the basis of fake invoices - extended period of limitation - Penalties on the partner and the Manager. HELD THAT - On going through the various decisions arising out of the same investigation conducted by the Commissionerate, C.E., Meerut-II, on the basis of which, SCN was issued. Further, it is found that the issuance of SCN is based on assumptions and presumptions and no investigation was made at the end the consigners who have issued the invoices on the basis of which, the appellant had taken the Cenvat Credit. It is also found that the appellant had produced a number of evidences in respect of all 53 consignments such as copies of toll-receipts evidencing crossing of J K border and the report of Excise Taxation Authority, Patiala (Punjab) evidencing the entry of all vehicles carrying consignments at Madhopur Check Post etc., but the same were completely ignored by the Adjudicating Authority to confirm the demand. This issue is no more res integra and the Tribunal has already decided a number of cases arising out of the same investigation and evidence put forth by Meerut-II, Commissionerate and all the appeals have been allowed by the Tribunal in favour of the assessees. Extended period of limitation - HELD THAT - It is found that substantial demand is barred by limitation because the appellants have not concealed any facts from the department and have been regularly filing ER-2 Returns. The copies of all the returns have also been produced on record. The appellants have also produced a number of documentary evidences to show that they had exercised due diligence in following all the prescribed procedures and also declared all requisite information in their ER-2 Returns. Penalties on the partner and the Manager - HELD THAT - There is nothing on record to show that they have violated the provisions of Rule 26 of the Central Excise Rules, 2002 because the said rule does not talk about any offending goods, instead it talks about dealing etc with goods which are liable to confiscation; therefore, we hold that penalties under Rule 26 ibid on the partner and manager are incorrect in law. The impugned order is not sustainable in law and is liable to be set aside - Appeal allowed.

Issues Involved:
1. Legitimacy of Cenvat Credit availed by the appellant.
2. Validity of the refund claim of accumulated Cenvat Credit.
3. Allegations of fraudulent activities based on fake invoices.
4. Adherence to procedural requirements and due diligence by the appellant.
5. Timeliness of the demand and penalties imposed.
6. Penalties imposed on the partner and manager under Rule 26 of the Central Excise Rules, 2002.

Issue-wise Detailed Analysis:

1. Legitimacy of Cenvat Credit availed by the appellant:
The appellant, a 100% EOU, availed Cenvat Credit on inputs purchased from units in J&K and Assam. The Revenue alleged that the appellant fraudulently availed Cenvat Credit based on fake invoices. However, the appellant provided documentary evidence such as RG23A (Part-1) Register entries, intimation letters to the jurisdictional Range Superintendent, and verification by the Inspector. The Tribunal found that the appellant had produced substantial evidence, including toll receipts and reports from Excise & Taxation Authorities, to support the legitimacy of the Cenvat Credit availed.

2. Validity of the refund claim of accumulated Cenvat Credit:
The appellant claimed and was sanctioned a refund of accumulated Cenvat Credit under Rule 5 of the Cenvat Credit Rules, 2004. The Revenue challenged the refund, alleging it was based on fake invoices. The Tribunal noted that the refund claims were sanctioned after due verification by the Assistant Commissioner and upheld by the Commissioner (Appeals). The Tribunal found no evidence to contradict the appellant's claim and upheld the validity of the refund.

3. Allegations of fraudulent activities based on fake invoices:
The Revenue's allegations were based on the assumption that the appellant did not receive the inputs and that the invoices were fake. The Tribunal found that the investigation was based on assumptions and lacked concrete evidence. The Tribunal referred to several decisions arising from the same investigation, where similar allegations were dismissed due to lack of evidence. The Tribunal concluded that the allegations against the appellant were not substantiated by any concrete evidence.

4. Adherence to procedural requirements and due diligence by the appellant:
The appellant followed the prescribed procedures, including making entries in the RG23A (Part-1) Register, sending intimation letters, and obtaining verification from the jurisdictional Range Superintendent. The Tribunal found that the appellant exercised due diligence and provided incontrovertible documentary evidence to support their claim. The Tribunal criticized the Adjudicating Authority for ignoring this evidence and confirming the demand based on assumptions.

5. Timeliness of the demand and penalties imposed:
The Tribunal found that the demands of Cenvat Credit and alleged erroneous refund were time-barred. The appellant had informed the jurisdictional Range and Divisional officers of all relevant facts and followed all prescribed procedures. The Tribunal held that fraud, collusion, suppression, or contravention of the Act or Rules with intent to evade payment of tax could not be invoked for recovery beyond the normal period of one year. Consequently, the demands for the entire period were hit by limitation.

6. Penalties imposed on the partner and manager under Rule 26 of the Central Excise Rules, 2002:
Penalties were imposed on the partner and manager of the appellant on the grounds of dealing with offending goods. The Tribunal found that the case against the appellants was based on the assumption that no goods accompanied the invoices. Since the goods were not found to be non-existent, the question of dealing with offending goods did not arise. The Tribunal noted that Rule 26 talks about dealing with goods liable to confiscation, not offending goods. Therefore, the penalties imposed under Rule 26 were deemed erroneous and incorrect.

Conclusion:
The Tribunal set aside the impugned order, allowing all three appeals with consequential relief, if any, as per law. The Tribunal found that the allegations were based on assumptions and lacked concrete evidence, the demands were time-barred, and the penalties imposed were incorrect in law. The Tribunal upheld the legitimacy of the Cenvat Credit availed and the refund claimed by the appellant.

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