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2015 (11) TMI 92 - AT - Central ExciseAvailment of fraudulent CENVAT Credit - Bogus invoices - Credit availed on the basis of duty-paying invoices without receiving any HR trimmings covered by such invoices - Violation of principle of natural justice - Opportunity of cross examination not granted - Invocation of extended period of limitation - Held that - during the only statement that could be recorded of the appellant No.2, who was the Director of the main appellant-company, this point was raised and it was pointed out that if MS ingot is manufactured using HR trimmings then the cost of production of MS ingots would be much higher than the selling price and therefore no businessman can afford to use HR trimmings for such purpose. - in the facts and circumstances of the case denial of cross-examination does not prejudicially affected the rights of the main appellant. We also note that even if the statements are ignored and only documents which have been recovered during the searches are analysed the demand in the case will stand on its own feet. Main appellant has not produced any independent evidence so as to support that HR trimmings covered by the invoices were received by them and utilized by them except the copy of the invoices. We are not convinced that any manufacturer will receive goods without any transport documents whatsoever. In fact the appellant has not produced any transportation details to support that he has received the goods. On the contrary, there are enough documentary evidence to support that vehicle number mentioned in the invoices were in fact went to Gujarat Viramgam area with the HR trimmings - goods covered by invoices i.e. HR trimmings were never transported to the main appellant s factory and the invoices based on which CENVAT credit has been taken were the invoices which were purchased without goods covered by such invoices. We also note the appellant s submission about the explanation given in the CENVAT credit Rules. Present case is relating to getting only the invoices without getting the corresponding goods and is a case of fraud which cannot happen without the active connivance of the Director himself. Under the circumstances we hold that the appellant has not only not taken adequate and reasonable care before availing the CENVAT credit but had acted in fraudulent manner to avail the credit. In the facts and circumstances of the case, extended period of 5 years has been correctly invoked. Purported consignee as per the invoice was different from the actual consignee who were Viramgam based traders. Thus, the manipulation in the name of consignee was done with the sole purpose of evading excise duty by mis-using the credit of duty paid on the HR trimmings. In view of the said position, in our view, the goods are confiscable under Rule 25(1)(d) and penalty is also imposable. - proper confiscation of HR trimmings and, therefore, appellants at sr. No. 3 to 8 are liable for penal action under the provisions of Rules 26 of the said Rules. We have no doubt that the HR trimmings so diverted to Viramgam were liable to confiscation and the appellants Nos. 3 to 8 have dealt with the goods 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. Commissioner has not passed any order relating to interest under Section 11AB of the Central Excise Act, 1944. As we have confirmed the duty amount, it goes without saying that the appellant will be required to pay interest as per the provisions of Section 11AB of the Central Excise Act, 1944 - However, penalty on some so-appellants is reduced. - Decided partly in favour of assessee.
Issues Involved:
1. Fraudulent availment of CENVAT credit. 2. Denial of relied upon documents and principles of natural justice. 3. Penalty imposition under Rule 13(1), Rule 13(2), Rule 25, and Rule 26 of the Central Excise Rules, 2002. 4. Limitation period for invoking extended period of 5 years. 5. Confiscation of goods and liability of various appellants. Detailed Analysis: 1. Fraudulent Availment of CENVAT Credit: The main appellant was accused of availing CENVAT credit without receiving the goods covered by the corresponding invoices. The Tribunal found that HR trimmings, which were high-value goods, were not suitable for use in the manufacture of MS ingots due to their higher cost. The investigation revealed that the main appellant purchased only the invoices while the goods were diverted to other locations. The Tribunal upheld the finding that the main appellant fraudulently availed CENVAT credit and was liable to pay back the credit along with interest and penalty. 2. Denial of Relied Upon Documents and Principles of Natural Justice: The main appellant argued that denial of relied upon documents and the opportunity for cross-examination violated principles of natural justice. The Tribunal noted that the appellant did not make any effort to inspect or collect the relied upon documents despite being informed. The Tribunal also held that cross-examination of co-noticees is not mandatory and can only be done if the co-noticee wishes. The Tribunal concluded that there was no violation of principles of natural justice as the appellant had admitted the irregularity and agreed to pay back the CENVAT credit. 3. Penalty Imposition under Rule 13(1), Rule 13(2), Rule 25, and Rule 26: The Tribunal upheld the imposition of penalties under Rule 13(1) and Rule 13(2) of the CENVAT Credit Rules, 2002, stating that the penalties can be imposed under both sub-rules as the circumstances for each are different. The Tribunal also confirmed the penalties under Rule 25 and Rule 26 for various appellants involved in the fraudulent transactions. However, the penalties for some appellants were reduced considering the overall facts and circumstances of the case. 4. Limitation Period for Invoking Extended Period of 5 Years: The Tribunal rejected the main appellant's contention regarding the limitation period, stating that the case involved fraudulent availment of CENVAT credit, and therefore, the extended period of 5 years was correctly invoked. 5. Confiscation of Goods and Liability of Various Appellants: The Tribunal found that the goods were liable for confiscation under Rule 25(1)(d) as the manipulation in the name of the consignee was done with the intent to evade excise duty. The Tribunal confirmed the penalties on various appellants who were involved in the sale, purchase, and transportation of HR trimmings, stating that they were aware that the goods were liable for confiscation. The penalties for some appellants were reduced, but the liability was upheld. Conclusion: The appeals of the main appellant and appellant No. 2 were dismissed. The penalties for appellants No. 3 to 8 were reduced to Rs. 1 lakh each, for appellant No. 9 to Rs. 2 lakhs, and for appellant No. 10 to Rs. 50,000/-. The appeal of the Revenue was allowed, confirming the interest under Section 11AB of the Central Excise Act, 1944.
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