2015 (8) TMI 345 - AT - Central Excise

Denial of SSI Exemption - Manipulation of invoices - Availment of fraudulent CENVAT Credit - Held that - Appellant No. 3 and 4 are based in and around Viramgam and are trading in HR trimmings. They have been bidding for the same on the online auction. From the investigation it is very clear that the HR trimmings so bidded were transported to Viramgam. It is obvious that the HR trimmings covered by the invoices was purchased by them and thereafter sold by them. They have definitely involved in the sale, purchase and transportation of HR trimmings there can be no doubt that they actively handled the consignments. Rule 26 of the Central Excise Rules are applicable to any person who acquires possession of or in any way concerned in transporting, removed, depositing, keeping, concealing, selling or purchasing or in any other manner deals with any excisable goods which he knows or has reason to believe are liable to confiscation. H.R. trimmings so diverted to Viramgam were undoubtedly liable to confiscation and the appellants No. 3 and 4 have dealt with such H.R. trimmings and were concerned with such goods and were in the knowledge that such goods are liable to confiscation. Under the circumstances, the penalty imposed on them is correct. Penalty imposed is also not on the higher side. - goods were being transported in the Gujarat registered vehicle while the consignee name and address is that of Maharashtra, and such vehicles cannot take such freight. We also note that from the documents recovered from the premises of appellant No. 7 that they were fully aware that the HR trimmings were consigned to Viramgam based bidder and are being used by SSI units there. Under these circumstances, it was incorrect on their part to indicate the name and address of the M/s. Silver Ispat Pvt. Ltd., as consignee who were based in Mumbai. Since they have changed the name of the consignee in spite of the fact that the goods were being transported to Viramgam or nearby area in different State, the HR trimmings cleared have therefore become liable for confiscation as discussed earlier and they are liable to penalty. - Decided partly in favour of assessees.

Issues Involved:
1. Fraudulent availment of CENVAT credit by M/s. Silver Ispat Pvt. Ltd.
2. Penalty on various appellants under Rule 26 of the Central Excise Rules.
3. Role of brokers, transport commission agents, and other intermediaries in the fraudulent scheme.
4. Confiscation of goods and imposition of penalties.

Issue-wise Detailed Analysis:

1. Fraudulent Availment of CENVAT Credit by M/s. Silver Ispat Pvt. Ltd.:
The primary issue revolves around M/s. Silver Ispat Pvt. Ltd. fraudulently availing CENVAT credit based on duty-paying invoices for HR trimmings without actually receiving the goods. The HR trimmings were sold to small-scale units around Viramgam, while the invoices were manipulated to show that the goods were received by M/s. Silver Ispat Pvt. Ltd. The investigation revealed that no HR trimmings were received by M/s. Silver Ispat Pvt. Ltd., and the credit was taken based on fraudulent invoices, making the act fraudulent in nature.

2. Penalty on Various Appellants under Rule 26 of the Central Excise Rules:
The Tribunal considered the roles of various appellants in the fraudulent scheme and imposed penalties accordingly:
- Appellant No. 1 (General Manager of M/s. Silver Ispat Pvt. Ltd.): The appeal was dismissed as he was found to be a main beneficiary and actively involved in the fraudulent credit scheme.
- Appellant No. 2 (Broker): His penalty was reduced from Rs. 5 lakhs to Rs. 1 lakh due to lack of specific confessional statements but was still held liable under Rule 26 for facilitating the fraudulent transactions.
- Appellants No. 3 and 4 (Viramgam-based Traders): Their appeals were dismissed as they were actively involved in the sale, purchase, and transportation of HR trimmings, knowing the goods were liable to confiscation.
- Appellant No. 5 (Transport Commission Agent): His appeal was dismissed as he facilitated the transportation of goods with knowledge of the fraudulent invoices and prepared fictitious documents for safe passage.
- Appellants No. 6 and 7 (Manufacturers of HR Trimmings): Their penalties were reduced to Rs. 1 lakh each as they were aware of the fraudulent scheme and facilitated it by changing consignee names and using Gujarat-registered vehicles for transportation within Maharashtra.

3. Role of Brokers, Transport Commission Agents, and Other Intermediaries:
The brokers, such as appellant No. 2, played a crucial role in finding customers for the fraudulent invoices. Transport commission agents like appellant No. 5 ensured the transportation of goods to the actual buyers while the invoices were sent to M/s. Silver Ispat Pvt. Ltd. The involvement of these intermediaries was critical in executing the fraudulent scheme, and they were penalized for their roles.

4. Confiscation of Goods and Imposition of Penalties:
The Tribunal upheld the penalties imposed on the appellants under Rule 26, even if the goods were not physically confiscated. The judgment referenced the Gujarat High Court's ruling in the case of Sanjay Vimalbhai Deora, which held that penalties could be imposed under Rule 26 even if goods are not confiscated. The Tribunal found that the appellants had full knowledge and actively participated in the fraudulent scheme, making them liable for penalties.

Conclusion:
The appeals were disposed of as follows:
- Ajay Kumar G. Baheti (Appellant No. 1): Appeal dismissed.
- Manish Agarwal (Appellant No. 2): Penalty reduced to Rs. 1 lakh.
- Harshadbhai R. Desai (Appellant No. 3) and Chandrakant Nathwani (Appellant No. 4): Appeals dismissed.
- Ispat Industries Ltd. (Appellant No. 7) and JSW Steel Ltd. (Appellant No. 6): Penalties reduced to Rs. 1 lakh each.
- Sampatraj Ladha (Appellant No. 8): Appeal abated due to his death.

The judgment emphasized the active participation and knowledge of the appellants in the fraudulent scheme, justifying the penalties imposed under Rule 26 of the Central Excise Rules.

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