2010 (2) TMI 552 - HC - Central Excise

Cenvat credit - Supplier of assessee is fraudulently passing on Cenvat credit by issuing invoices, which are not accompanied by goods It was found that assessee was involved in only one fictitious transaction assessee voluntarily debited the amount - of Cenvat credit had been wrongly availed - no corroboration by the Revenue during the investigation - part of the statement is in favour of the Revenue and part of it not - to be believed then it has to be believed in entirety Held that - Tribunal was right in coming to the conclusion that even as per the statement the transaction of purchase of goods and its receipt in the factory are genuine.

Summary

Issues:
Appeal against order under Central Excise Act, 1944 regarding Cenvat credit fraud; Entertaining additional grounds at appellate stage.

Analysis:
The case involved an appeal by the Revenue against an order passed by the Customs, Excise and Service Tax Appellate Tribunal under the Central Excise Act, 1944, regarding fraudulent passing of Cenvat credit. The respondent, a manufacturer of electrical wires and cables, was found to have wrongly availed Cenvat credit through a fictitious transaction involving the purchase of copper rods. The adjudicating authority confirmed the demand of Cenvat credit and imposed penalties, which were upheld by the Commissioner (Appeals). However, the Tribunal set aside the Commissioner's orders, leading to the Revenue challenging the decision. The substantial question of law considered was whether the Tribunal was justified in entertaining and appreciating additional grounds raised by the respondents for the first time at the appellate stage.

Upon reviewing the records and orders of the authorities, the High Court found that the Tribunal's decision to set aside the Commissioner's orders was justified. The Tribunal correctly emphasized the need to consider the entire statement of Shri R.K. Gupta, the proprietor of the entity involved in the fraudulent transactions, rather than selectively relying on parts of it. The Court noted that while a person's statement may contain both truth and falsehood, in this case, there was no corroboration by the Revenue beyond Shri R.K. Gupta's statement. The High Court highlighted that if Shri R.K. Gupta's statement was to be believed, it had to be accepted in its entirety. The scrutiny of the statement revealed distinctions between genuine and bogus transactions based on specific criteria.

The Court further observed that the respondent was only involved in one transaction meeting the criteria of a genuine transaction as per Shri R.K. Gupta's statement. The Tribunal's finding that the transaction was genuine was deemed plausible and based on the material on record. Consequently, the High Court ruled against the Revenue, upholding the Tribunal's decision and dismissing the appeal in favor of the assessee. The judgment emphasized the importance of considering all relevant evidence and statements in their entirety to arrive at a just decision in matters involving tax fraud and Cenvat credit misuse under the Central Excise Act, 1944.