2015 (4) TMI 933 - HC - Central Excise

Denial of Cenvat credit - Contravention of Rule 57 AB, 57 AC and 57 AE of the Central Excise Rules, 1944 - Availment of Cenvat credit without receiving goods - Held that - The respondent, unearthed a fraudulent availing of MODVAT/CENVAT credit based upon fraudulent GR receipts and other documents issued by Shri R.K.Gupta, Proprietor of R.K.Enterprises. The respondent recovered fraudulent stamps, documents, GR receipts, books and other material from the premises of Shri R.K.Gupta, who thereafter made a statement admitting to the bogus transactions. It would also be appropriate to point out that Shri R.K.Gupta did not possess any manufacturing facility or any godown from where he could supply goods. The appellant has admittedly availed CENVAT credit on goods received from Shri R.K.Gupta. It was held by tribunal that there is no dispute about the fact that GRs under which the goods had been dispatched by the registered dealer M/s R.K.Enterprises are bogus and had been fabricated by him. In fact, the owner of one of the truck which was used for transportation of the goods covered under invoice No.241 & 258 in her statement has clearly stated that she is not aware of the transportation of any goods of M/s R.K.Enterprises. I also find that appellant has not challenged this order of the Tribunal. Commissioner (Appeal) has held that burden of proof that goods were received and used for manufacture of final product lies on the appellant and same has not been discharged by them. In view of the fact that the order of the Tribunal was not challenged and also the fact that appellant did not prove receipt and use of the goods in the manufacture of find products, there is no infirmity in the order passed by the Commissioner (Appeal). Accordingly I uphold the order in appeal and reject the appeal of the appellant. The appellant having failed to prove to the satisfaction of the authorities receipt and consumption of goods received from Shri R.K.Gupta, we have no hesitation in holding that no question of law much less the question of law framed by the appellant arises for adjudication. - Decided against the assessee.

Summary

Issues:
Challenge to disallowance of CENVAT credit and penalty by Customs, Excise & Service Tax Appellate Tribunal (CESTAT).

Analysis:
The appellant contested the order disallowing CENVAT credit and imposing a penalty, based on a statement by Shri R.K.Gupta regarding passing MODVAT/CENVAT credit without supplying goods. The appellant sought to prove receipt and consumption of goods through cross-examination and production of documents. Despite retraction of his statement, Shri R.K.Gupta's initial statement led to disallowance of credit and penalty. The CESTAT remitted the matter for fresh adjudication, where the disallowance and penalty were maintained. The appellant argued that the onus to prove the case lay with the respondents, emphasizing proper record-keeping and retraction of Shri R.K.Gupta's statement. However, the revenue contended that the appellant failed to meet the burden of proof, as evidenced by the fraudulent nature of GR receipts and lack of evidence on goods receipt and consumption.

The High Court examined the fraudulent availing of credit based on fabricated documents by Shri R.K.Gupta, who admitted to bogus transactions. Despite remand for the appellant to prove transaction genuineness, they failed to establish receipt and consumption of goods. The court noted the absence of manufacturing facilities at Shri R.K.Gupta's premises and upheld the onus placed on the appellant to prove transaction legitimacy. The court highlighted the earlier CESTAT order emphasizing the burden of proof on the appellant, leading to the dismissal of the appeal due to the appellant's failure to demonstrate receipt and use of goods. The court concluded that no legal question arose for adjudication, resulting in the dismissal of the appeal challenging the disallowance of CENVAT credit and penalty.

This detailed analysis of the judgment highlights the legal intricacies involved in the challenge to the disallowance of CENVAT credit and penalty, emphasizing the burden of proof, reliance on statements, and the importance of demonstrating transaction legitimacy in such cases.