2013 (11) TMI 486 - HC - Central Excise

Rebate claim Claim rejected as being Fraudulent Penalty imposed under Rule 15 (2) of Cenvat credit Rules - Bogus bills and documents submitted Registration as Manufacturers obtained but no sale or movement of goods happened Whether the petitioner had purchased the inputs which were duty paid Held that - The authorities found that inputs utilized by the petitioner for manufacturing export products were not duty paid - the entire basis for seeking rebate would fall - several suppliers who claimed to have supplied the goods to the petitioner were either fake, bogus or non-existent, the petitioner cannot be claimed rebate merely on the strength of exports made - The petitioner cannot take shelter that it had no knowledge or claim total innocence Relying upon Sheela Dyeing & Printing Mills P. Ltd. v. C.C.E. & C, Surat 2008 (7) TMI 209 - HIGH COURT GUJARAT the statutory provisions pertaining to reasonable steps to be taken by the manufacturer are mandatorily in nature - The goods were purchased from non-existent and fictitious parties and Cenvat credit was wrongly availed Decided against Petitioner.

Issues involved:
Claim of rebate on purchased raw materials for manufacturing cloth, fraudulent rebate claims, fake invoices, rejection of rebate claim, imposition of penalty, appeal against rejection, examination of evidence, duty paid on inputs, existence of suppliers, export of goods, denial of rebate claim, distinguishable judgments.

Detailed Analysis:

1. Claim of Rebate and Fraudulent Rebate Claims:
The petitioner, an exporter-manufacturer, claimed rebate on raw materials purchased for manufacturing cloth. The adjudicating authority issued a show cause notice citing a scam in Surat involving fraudulent rebate claims with bogus bills and documents. The notice alleged that the petitioner purchased goods from firms declared fake or non-existent, leading to a rebate claim rejection and penalty imposition.

2. Rejection of Rebate Claim and Imposition of Penalty:
The adjudicating authority rejected the rebate claim, holding that the petitioner failed to ensure the duty payment on inputs purchased from fake or non-existent firms. The authority found that the petitioner availed Cenvat credit based on fake invoices, leading to the denial of the rebate claim and imposition of penalties under the Cenvat Credit Rules.

3. Appeal and Confirmation of Rejection:
The petitioner appealed the rejection, but the Appellate Commissioner upheld the decision, emphasizing the fictitious nature of the suppliers and the fraudulent transactions. The Appellate Commissioner highlighted that the duty paid on export goods was based on credit earned from fraudulent invoices, making the rebate inadmissible under the Central Excise Rules.

4. Revision and Dismissal of Revision:
Despite filing a revision, the Revisional Authority dismissed the petitioner's claims, reiterating the non-existence of the suppliers and the fraudulent nature of the transactions. The Authority emphasized that the duty paid was not based on actual Cenvat credit, thus rendering the rebate claim inadmissible under the Central Excise Rules.

5. Judicial Review and Distinguishable Judgments:
The High Court reviewed the case and found no grounds for interference, emphasizing the need for duty-paid inputs to claim rebates. The Court distinguished a previous judgment where necessary care was taken by the manufacturer, unlike in the present case where the suppliers were found to be fake or non-existent, leading to the denial of the rebate claim.

6. Statutory Provisions and Final Decision:
The Court referred to statutory provisions requiring manufacturers to take reasonable steps to verify suppliers' authenticity. The Court concluded that the three authorities had correctly assessed the petitioner's rebate claim, highlighting the purchase from non-existent parties and wrongful Cenvat credit availing, leading to the dismissal of the petition.

In conclusion, the judgment upheld the rejection of the rebate claim due to the petitioner's involvement with fake suppliers and fraudulent transactions, emphasizing the necessity of duty-paid inputs for rebate eligibility. The Court's decision was based on a thorough examination of the evidence and statutory provisions, leading to the dismissal of the petitioner's claims.

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