2009 (10) TMI 373 - AT - Central Excise

Penalty- Cenvat Credit- The issue in the instant case relates to the irregular availment of the Cenvat Credit by the appellants on the basis of the eight Central Excise invoices issued by M/s. Nagpal Steels, a second stage dealer on the basis of the Central Excise invoices issued by the first stage dealers on the strength of the Central Excise invoices issued by M/s. I.I.L. Kamleshwar, Nagpur and M/s. I.I.L., Dolvi. Held that- the appellants avail Cenvat credit to the tune of Rs.1.50 crores to Rs.2.50 crores every year. Once the irregularity regarding the availment of the Cenvat credit of Rs.1,31,340/- was brought to their notice, they paid the same along with the interest. This establishes the bona fide of the appellants. In the facts and circumstances of the case, the imposition of penalty is not warranted on the appellants. The same is set aside. The appeal filed by the appellants against the imposition of penalty is allowed.

Summary

Issues involved:
Irregular availment of Cenvat Credit based on disputed invoices.

Analysis:
The case involved a challenge against a penalty imposed on the appellants under Section 11 of the Central Excise Act, 1944, read with Rule 13(1) of the Cenvat Credit Rules, 2002. The appellants, engaged in manufacturing casting and cast articles of steel, were accused of irregularly availing Cenvat Credit based on Central Excise invoices issued by second-stage dealers. The show-cause notice alleged fraudulent availment of credit without actual receipt of high-quality scrap. The Assistant Commissioner denied the credit and imposed penalties, which were upheld in the Order-in-Appeal by the Commissioner.

The tribunal observed that the appellants had paid for the scrap, received it (though not HR Trimmings as claimed), and provided documentary evidence of transactions. No incriminating material implicated the appellants in the alleged fraud chain. Statements of involved parties did not implicate the appellants, and the second-stage dealer's statement was not recorded. The appellants' Deputy Manager confirmed placing orders for M.S. Scrap, including HR Trimmings, without specific verification of the latter. The appellants promptly paid the disputed amount upon realizing irregularities, demonstrating good faith. The tribunal found no evidence of connivance or collusion by the appellants.

Additionally, the appellants regularly availed substantial Cenvat Credit amounts annually. Upon discovering the irregularity, they promptly paid the disputed amount and interest, indicating their bona fide intention. Considering the facts and circumstances, the tribunal deemed the penalty imposition unwarranted and set it aside. The appeal against the penalty imposition was allowed in favor of the appellants.

In conclusion, the tribunal ruled in favor of the appellants, setting aside the penalty imposed on them for irregularly availing Cenvat Credit based on disputed invoices. The judgment highlighted the appellants' good faith actions, lack of evidence implicating them in the alleged fraud chain, and their prompt payment upon discovering irregularities as key factors in overturning the penalty decision.