2017 (12) TMI 1088 - AT - Central Excise

Penalties - CENVAT credit - fictitious supplier - job-work - Held that - the supplier on record did not exist and that appellant had availed credit on receipt of goods that were not supported by documents prescribed as evidence of payment of duty - At the same time, while the invoices may have been found to fake, there is no evidence that goods have not been received or that they have in anyway infringed the law to render them liable for confiscation. The appellant has also made good the credit wrongly availed. Their contention that there is no evidence of any attempt on their part to evade duty cannot be disregarded - Penalties set aside - appeal allowed.

Summary

Issues:
1. Denial of CENVAT credit on raw materials purportedly procured from a fictitious supplier.
2. Allegations of conspiracy to avail ineligible CENVAT credit.
3. Imposition of penalties under section 11AC of Central Excise Act, 1944 and rule 26 of Central Excise Rules, 2002.

Analysis:
1. The Commissioner of Central Excise (Appeals) upheld the denial of CENVAT credit of ?1,35,398 availed by the appellant on raw materials from a fictitious supplier, M/s Noor Tex. The appellant claimed to be job-workers for processing fabrics and dyeing yarn, obtaining goods from M/s Prime Exports. They argued that they deposited the disputed amount during the investigation and contended no evidence of intent to evade duty was presented. However, the supplier was found non-existent, and the appellant availed credit without supporting documents. The appellant deposited the disputed amount, but the statements were not contested. Legal precedents cited did not support their case.

2. The Authorized Representative alleged a conspiracy to avail ineligible CENVAT credit, supported by statements. The Tribunal found the supplier to be fake, but there was no evidence of non-receipt of goods or infringement of the law. The appellant rectified the wrongly availed credit, and there was no proof of an attempt to evade duty. Consequently, the penalties imposed under section 11AC of Central Excise Act, 1944, and rule 26 of Central Excise Rules, 2002 were deemed unsustainable.

3. The impugned order was modified to set aside the penalties imposed on both appellants, concluding that there was no evidence of an attempt to evade duty. The judgment was pronounced in court on 13/11/2017.