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2017 (5) TMI 331 - AT - Central ExciseCENVAT credit - duty paying invoice - the investigation revealed that M/s.Wind Industries admitted that they have issued manufacturer s invoice without manufacture of the goods and showing payment of duty, whereas they neither manufactured the goods nor paid the duty - Held that - The investigation has clearly revealed that the invoice which originated from Wind Industries is without manufacturing of the goods and without payment of duty. The very same invoice was the basis for issuance of the first stage dealer invoice by J.K. Metal Feeders. Therefore, under this investigation, it is established that the invoice which was received by RMIL, the duty shown therein was not paid. Therefore, under any circumstances, the duty which was not paid, credit of same cannot be allowed - credit not allowed. Penalties u/s 11AC and Rule 25 - Held that - since RMIL was not aware about the wrong doing by collusion between Wind Industries and J.K. Metal Feeders. They had a bonafide belief that the invoice is valid and the duty shown in the invoice stood paid. Therefore, there is no malafide on the part of RMIL - penalties set aside. As regards the penalty imposed on J.K. Metal Feeders, it is very clear that there was a fraud committed by J.K. Metal Feeders, colluded with Wind Industries. Therefore, the penalties imposed on J.K. Metal Feeders is sustained. Appeal allowed - decided partly in favor of assessee.
Issues:
1. Wrong availment of Cenvat credit based on fraudulent invoices. 2. Imposition of penalties under Section 11AC and Rule 25 on the involved parties. Analysis: Issue 1: Wrong availment of Cenvat credit based on fraudulent invoices The case involved an investigation where it was found that M/s. Wind Industries issued manufacturer's invoices without actually manufacturing the goods or paying the duty. These invoices were then passed on to J.K. Metal Feeders, who further issued invoices to M/s. Rashtriya Metal Industries Ltd. (RMIL). RMIL availed Cenvat credit based on these fraudulent invoices. The tribunal confirmed a demand against RMIL for wrong availment of credit, along with penalties. The appellant argued that they received inputs under the cover of dealer's invoice, which was not disputed, and therefore, the Cenvat credit should not be denied. However, the tribunal held that since the investigation revealed that the duty shown in the invoices was not paid, the credit based on such invoices was not admissible. The tribunal upheld the demand against RMIL for the wrong availment of Cenvat credit. Issue 2: Imposition of penalties under Section 11AC and Rule 25 Regarding the penalties imposed on RMIL and its Dy. General Manager, the tribunal considered that RMIL had a bona fide belief in the validity of the invoices and the duty payment. As they were not aware of the collusion between Wind Industries and J.K. Metal Feeders, the penalties under Section 11AC and Rule 25 were set aside. Similarly, the penalty on the Dy. General Manager was also deemed unsustainable and set aside. However, the penalty on J.K. Metal Feeders was upheld due to their involvement in the fraudulent activities. Consequently, the tribunal partly allowed RMIL's appeal, allowed the appeal of the Dy. General Manager, and dismissed the appeal filed by J.K. Metal Feeders. This judgment highlights the importance of due diligence in verifying the authenticity of invoices and the payment of duties to avoid wrongful availment of credits and penalties.
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