2014 (5) TMI 333 - AT - Central Excise

Cenvat Credit - fake invoices issued by dealers - demand raised on the ground that no duty stand actually paid by M/s. Sulabh Impex Corpn and the invoices issued by the registered dealer were based upon fake bill of entries. - Held that - when the buyers purchased the goods from the registered dealers under the cover of proper invoices and their being no dispute about the credentials of the cenvatable invoices issued by the registered dealer, denial of credit to the ultimate buyer of the inputs is not called for. Appellants have also availed the credit on the basis of cenvatable invoices having all the details issue by the registered dealer. The statement of the appellants representative recorded during the course of investigation is exculpatory in nature and they have nowhere accepted the fact of having knowledge about non-payment of duty by M/s. Sulabh Impex Corpn. Transporters billty indicating receipt of inputs stand produced by them. In such a case, the declaration of law of Luxmi Metal Industries 2013 (3) TMI 143 - CESTAT NEW DELHI is fully applicable to the facts of the present case. - Even on the ground of period of limitation, the case is in favor of assessee - Demand set aside - Decided in favor of assessee.

Summary

Issues:
1. Denial of Cenvat credit based on fake bill of entries.
2. Applicability of Luxmi Metal Industries case.
3. Denial of credit to the manufacturer due to fraudulent procurement by registered dealer.
4. Barred by limitation - availing credit in 2003-2004, notice issued in 2007.

Analysis:
1. The case involved the denial of Cenvat credit to the appellant due to the discovery that the registered dealer from whom they procured raw materials was passing on credit based on fake bill of entries. The original adjudicating authority confirmed the demand and imposed a penalty, which was upheld by the Commissioner (Appeals).

2. The appellant contended that they had procured goods from registered dealers with proper invoices, paid the entire consideration including duty, and recorded the inputs in their statutory records. The appellant argued that they should not be held liable for any wrongdoing as they had no knowledge of the fraudulent activities of the supplier.

3. The Tribunal referred to the Luxmi Metal Industries case, where it was held that denial of credit to the ultimate buyer of inputs is not justified if the goods were purchased from registered dealers under proper invoices without any dispute about the invoice credentials. In the present case, the appellant had availed credit based on valid invoices, and their representative's statement during the investigation supported their innocence.

4. Additionally, the Tribunal cited the CC & CE Kanpur vs Juhi Alloys case and R S Industries vs. CCE, New Delhi case to support the appellant's position that Cenvat credit cannot be denied to the manufacturer based on fraudulent procurement by the registered dealer. The Tribunal also noted that the credit availed by the appellant was in 2003-2004, while the show cause notice was issued in 2007, making the demand barred by limitation as there was no malafide intent on the appellant's part.

5. Ultimately, the Tribunal set aside the impugned order, allowing the appeal and providing consequential relief to the appellant based on the findings that the denial of credit was unjustified, and the demand was time-barred.