2015 (11) TMI 373 - AT - Central Excise

Availment of fraudulent CENVAT Credit - Bogus invoices - Non receipt of physical goods - the case of the Revenue is that the main appellant has purchased/procured duty paid invoices of Jindals and credit of duty paid indicated in such invoices was taken without receiving the HR trimmings covered by the said invoices and the HR trimmings covered by the said invoices were diverted to Viramgam and nearby areas and there HR trimmings were used by hundreds of small scale units manufacturing nails etc - Imposition of penalty. Held that - Invoices are pertaining to HR trimmings. During the investigation, the main appellant and their officials including appellant No.2 were specifically asked whether they have any evidence whatsoever to prove that the goods viz. HR trimmings covered by the said invoices were transported to their factory and received in their factory. The appellants could not produce copy of the Gate register, goods receipt note or LR or even any document evidencing payment of freight charges to the driver/transporter in respect of each invoice (whether paid in cash or by any other means). It is a common knowledge that the persons who are familiar with the excise laws and are aware about the violations of excise law, they are indulging in them they do not disclose proper and true facts at the first instance and they tend to give at times misleading explanations. In the present case also, generally the co-noticees have said in the statements after assessing the information already available with the investigating officers. In the later statements when they were shown more details, they came out with correct facts. - Since the invoices of such HR trimmings were of no use to them, they were trading the invoices through brokers based in Mumbai who in turn were locating the furnace units who could fraudulently avail the credit based on such invoices. The cash amount of HR trimmings being sent through angadia or other services from Viramgam and nearby area and were being converted into Bank Draft etc. through banking channels either by such brokers or by manufacturers of ingots or was used in cash to purchase bazaari scrap/scavenger scrap. In view of the above position, we have no hesitation in holding that the demand and penalty imposed on the main appellant is correct and the appeal of the main appellant is, therefore, dismissed. HR trimmings in the coil form is very distinct commodity compared to the bazaari/scavenger scrap and if they were receiving invoices for the HR trimmings, there was no reason for them to accept the bazaari scrap. In any case, HR trimmings is more expensive than bazaari/scavenger scrap. We, therefore, hold that the penalty imposed on him under Rule 13 of the Cenvat Credit Rules, 2002 is in order and the quantum of penalty imposed is also not on the higher side. Penalty imposed on Appellant 6 & 7 is sustained - Decided partly in favour of assessee.

Summary

Issues Involved:
1. Allegation of fraudulent availing of Cenvat credit.
2. Denial of cross-examination request.
3. Reliability of statements and evidence.
4. Applicability of penalties under Rule 26 of the Cenvat Credit Rules, 2002.

Detailed Analysis:

1. Allegation of Fraudulent Availing of Cenvat Credit:
The Revenue's case is that the main appellant availed of Cenvat credit on the basis of invoices for HR trimmings without actually receiving the goods. The HR trimmings were allegedly diverted to small-scale units in Viramgam, while the main appellant only received the invoices. The investigation revealed that the main appellant could not produce any evidence such as gate registers, goods receipt notes, or lorry receipts to prove the receipt of HR trimmings. The Tribunal noted that the payment through banking channels in manipulated transactions does not prove the genuineness of the transaction. The evidence presented by the Revenue included records from transporters and statements from various individuals, which indicated that the HR trimmings were transported to Gujarat and not to the appellant's factory. The Tribunal concluded that the HR trimmings were not received by the appellant and the credit was fraudulently availed.

2. Denial of Cross-Examination Request:
The main appellant's grievance was the denial of cross-examination of various persons whose statements were relied upon by the Revenue. The Tribunal held that the appellant wanted to cross-examine mainly the co-noticees, and as per the Tribunal's precedent, summoning co-noticees for cross-examination is not proper unless they wish to be examined. The Tribunal found that no prejudice was caused to the appellant by the denial of cross-examination, especially since the appellant did not produce any evidence to contradict the Revenue's claims. The Tribunal cited the case of Jagdish Shanker Trivedi vs. CC, Kanpur, which supports the view that no right to cross-examination is specified under Section 124(c) of the Act.

3. Reliability of Statements and Evidence:
The appellants contended that the statements relied upon by the Revenue were self-contradictory and unreliable. The Tribunal acknowledged some variations in the statements but found them not fatal to the case. It observed that individuals familiar with excise laws often provide misleading explanations initially and disclose true facts later. The Tribunal emphasized that the modus operandi of diverting HR trimmings and trading invoices was common among steel furnace units and supported by multiple statements and evidence from brokers and transporters. The Tribunal held that the evidence presented by the Revenue was overwhelming and the demand and penalties imposed were justified.

4. Applicability of Penalties under Rule 26:
The appellants argued that penalties under Rule 26 could not be imposed as the goods were not confiscated. The Tribunal rejected this contention, stating that Rule 26 applies to any person who deals with excisable goods liable to confiscation. The Tribunal noted that the main appellant and other appellants were actively involved in the fraudulent scheme and were liable for penalties. The Tribunal cited the case of Sanjay Vimalbhai Deora vs. CESTAT, where the Gujarat High Court held that penalties under Rule 26 can be imposed even if goods are not confiscated. The penalties imposed on the appellants were found to be appropriate and not excessive.

Conclusion:
The Tribunal dismissed all seven appeals, upholding the demand and penalties imposed by the Commissioner. The Tribunal found that the main appellant fraudulently availed of Cenvat credit without receiving the goods and that the denial of cross-examination did not prejudice the appellant's case. The evidence presented by the Revenue was deemed sufficient to support the demand and penalties. The Tribunal also upheld the penalties imposed on other appellants under Rule 26 for their involvement in the fraudulent scheme.