2010 (2) TMI 242 - HC - Central Excise

Strictures against CESTAT- Findings in Tribunal s order perverse and speculative. Bare perusal of records indicating that admission and evidences just ignored with impunity by Tribunal. Tribunal reversed order of commissioner without any basis particularly when fault of assessees noticed. Tribunal fell in grave error and did not deal with reasons recorded by Commissioner. Finding of Tribunal not only devoid of merit and misdirected but perverse and speculative as well. Tribunal did not decide real controversy between parties. Order not sustainable. Cenvat Modvat- credit alleged as availed without receipt of inputs based on false invoices issued by importer dealer. Credit held as admissible by Tribunal. Findings in impugned order perverse, speculative and without any basis or evidence. Tribunal notices fault of assessees that invoices are incorrect for availing credit but fell in legal fault of assessees that invoices are incorrect for availing credit but fell in legal error by observing that receipt in factory not in dispute even if goods assumed as not dispatched from supplier. Tribunal committed grave error by holding respondent not to be penalized for fault of others. Cenvat/Modvat credit can be claimed based on invoices of inputs actually received in factory premises and not otherwise. Tribunal order set aside. Matter remanded for fresh decision. Rule 57-I of erstwhile Cenavt Excise Rule, 1944.

Issues Involved:
1. Validity of Modvat credit claims.
2. Alleged issuance of fake invoices.
3. Compliance with Central Excise Rules.
4. Tribunal's findings versus the Commissioner's findings.
5. Admission of irregularities by the parties.

Detailed Analysis:

1. Validity of Modvat Credit Claims:
The primary issue revolves around whether the assessees rightfully claimed Modvat credit. The Central Excise Officers discovered that M/s. Shobhit Impex issued invoices for copper rods/scrap and brass scrap, which were allegedly not genuine. These invoices enabled manufacturers to avail Modvat credit without the actual receipt of goods. Statements from representatives of M/s. Aman Engineering Works and M/s. Vardhman India Products admitted receiving invoices without goods and wrongly availing Modvat credit.

2. Alleged Issuance of Fake Invoices:
The revenue contended that M/s. Shobhit Impex and other firms issued fake invoices to facilitate the wrongful availment of Modvat credit. For instance, Jaspal Singh of M/s. Samra Transport Traders admitted that the consignment shown in the invoice was not transported by them, and blank copies of consignment receipts (CR) were given to representatives. Sanjeev Kumar from M/s. Gandhi Chem-Fert Industries corroborated this by stating that goods were sent directly to Jalandhar instead of Abohar, and octroi receipts were altered to show false movement.

3. Compliance with Central Excise Rules:
The Commissioner found that the assessees violated Rules 57G and 174 of the Central Excise Rules by not maintaining a registered godown for the imported materials. The goods were never received or stored in the registered premises. Om Parkash of M/s. Makkar Metal Industries could not produce octroi receipts, indicating a lack of evidence for lawful receipt of goods.

4. Tribunal's Findings Versus the Commissioner's Findings:
The Tribunal reversed the Commissioner's order, allowing Modvat credit based on the assumption that goods were received by the assessees despite irregularities in the invoices. The Tribunal's decision was challenged for ignoring admissions and evidence. The High Court found the Tribunal's findings perverse and speculative, lacking basis or evidence, and noted that the Tribunal failed to address the reasons recorded by the Commissioner.

5. Admission of Irregularities by the Parties:
Several parties admitted to irregularities in their statements. Rajinder Mohan of M/s. Krishna Wire Products admitted that goods were dispatched from Ludhiana, not Abohar, and agreed to reverse the wrongly availed Modvat credit. Dinesh Garg of M/s. Pee Dee Wire Pvt. Ltd. admitted the correctness of municipal certificates indicating non-receipt of goods and voluntarily debited the wrongly availed credit. Des Raj of M/s. Friends Wire Industries admitted the inability to substantiate the physical arrival of goods and reversed the wrongly availed credit.

Conclusion:
The High Court set aside the Tribunal's order and remitted the matter back for fresh consideration, emphasizing the need to address the admissions and evidence on record. The Tribunal was directed to determine if the assessees fulfilled all requisite conditions for availing Modvat credit based on the observations and evidence noted by the Commissioner. The parties were instructed to appear before the Tribunal on a specified date for further proceedings.

← Previous Next →