2010 (1) TMI 441 - AT - Customs

Cenvat credit - The dispute relates to credit taken on the basis of invoices issued by one M/s. Swastik Industries. The original authority disallowed the credit taken on the basis of invoices issued by M/s. Swastik Industries on the finding that the said party has only given invoices without actually supplying the goods and confirmed demand of duty along with interest and imposed penalties. Commissioner (Appeals), on appeal by the party set aside the demand and penalty and held that the entire demand was time barred. Held that - the finding of the Commissioner that extended period of five years for demanding Cenvat credit cannot be invoked is erroneous as M/s. Swastik Industries has not supplied the material, and therefore, the question of recipient receiving the material does not arise and fraud is writ large on the face of the transaction. The appeal by the Department is allowed by setting aside the order of the Commissioner (Appeals) and by restoring the order of the original authority.

Summary

Issues:
Appeal against disallowance of credit based on invoices without actual supply of goods; Commissioner (Appeals) setting aside demand and penalty as time-barred.

Analysis:
The appeal before the Appellate Tribunal CESTAT, New Delhi involved a dispute regarding the admissibility of Modvat/Cenvat credit by a manufacturer of switchgears, Luminaries, and home appliances based on invoices issued by M/s. Swastik Industries without actual supply of goods. The original authority disallowed the credit, leading to the imposition of duty, interest, and penalties. However, the Commissioner (Appeals) set aside the demand and penalties, citing the claim as time-barred.

The Department, through the learned SDR, argued that M/s. Swastik Industries only issued invoices without supplying goods, as confirmed by their authorized representative and investigations with transporters. They contended that the recipient's claim of receiving goods and making payment by cheque should not have been accepted due to lack of valid documents, invoking the extended period of limitation for raising the demand. The Department sought to set aside the Commissioner (Appeals) order and reinstate the original authority's decision.

Upon careful consideration of submissions and records, the Tribunal found that M/s. Swastik Industries had indeed only issued invoices without actual supply of goods. The investigation revealed discrepancies in the transportation of goods mentioned in the invoices. The Tribunal emphasized that mere receipt of invoices without actual supply did not entitle the recipient to claim Cenvat credit. The Tribunal referenced a relevant decision upheld by the High Court in a similar case to support its findings.

The Tribunal concluded that the Commissioner's ruling on the inapplicability of the extended period for demanding Cenvat credit was erroneous, given the lack of actual supply by M/s. Swastik Industries, indicating fraudulent transactions. Consequently, the Tribunal allowed the Department's appeal, setting aside the Commissioner (Appeals) order and reinstating the original authority's decision. The Tribunal found the decisions cited in the respondent's submissions irrelevant to the case's facts, ultimately ruling in favor of the Department.