2012 (2) TMI 328 - AT - Central Excise

Availment of non - existent Cenvat Credit by first stage dealer on goods purchases of iron and steel products - credit claimed on basis of invoices showing payment of duty - investigations conducted at manufacturer showed non-manufacturing & non-payment of duty by manufacturer of goods fraudulent invoices issued - Held that - Prima facie there are evidences appearing to show that the credit that was passed on was not against proper duty payment. The real merit in the matter can be decided only during final hearing. Thereby, appellants are directed to make pre-deposit for admission of appeal. Subject to deposit, collection of penalty is stayed.

Summary

Issues:
- Duty payment on iron and steel products
- Fraudulent invoices issued by manufacturer
- Imposition of penalty on first stage dealer
- Admissibility of appeal and stay on penalty collection

Analysis:

Issue 1: Duty payment on iron and steel products
The case involves a first stage dealer who purchased iron and steel products from a manufacturer. Investigations revealed that the manufacturer did not manufacture the goods and did not pay duty on them. Show cause notices were issued to all parties involved, resulting in the imposition of a penalty equal to the duty amount on disputed invoices issued by the appellants. The key contention was whether excise duty was paid on the goods, regardless of whether the buyer received them.

Issue 2: Fraudulent invoices issued by the manufacturer
It was established that the manufacturer issued fraudulent invoices to various parties, including the appellant. The fraudulent practice involved procuring goods from the non-duty paying sector and covering them with fake invoices. The focus was on the duty payment status of the goods rather than their receipt by the end user who claimed CENVAT credit.

Issue 3: Imposition of penalty on the first stage dealer
The appellant argued that since the buyers received the goods and the invoices showed duty payment, there was no substance in the case against them. However, the Revenue contended that evidence suggested the credit passed on by the appellant was not based on proper duty payment. The Tribunal found prima facie evidence indicating a lack of proper duty payment, leading to the direction for a deposit of 25% of the penalty amount for appeal admission.

Issue 4: Admissibility of appeal and stay on penalty collection
The Tribunal directed the appellant to make a deposit for appeal admission, with a stay on the collection of the remaining penalty amount during the appeal's pendency. Compliance was set to be reported on a specified date, ensuring procedural adherence in the case.

Overall, the judgment highlighted the importance of proper duty payment, the consequences of fraudulent practices in the supply chain, and the procedural steps required for appeal admission and penalty collection stay in such cases.