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TMI Blog2021 (4) TMI 77X X X X Extracts X X X X X X X X Extracts X X X X ..... ated. While there cannot be any two opinion that fraud vitiates everything and should be strongly dealt with particularly in a judicial or a quasi-judicial proceeding, Supreme Court in HARJAS RAI MAKHIJA (D) THR. L. RS. VERSUS PUSHPARANI JAIN AND ORS. [ 2017 (1) TMI 1736 - SUPREME COURT] had sounded a note of caution. Firstly, there must be a specific allegation of fraud being played by a party to the proceeding. When such an allegation is made, it must be enquired into. The party against whom the allegation of fraud is made has to be put on notice and heard. Evidence must be led wherefrom a conclusion can be drawn that there was intent to deceive by the party who is alleged to have committed fraud - CESTAT was not justified in rejecting the application filed by the petitioner for recalling the finding of fraud and additionally in imposing cost. Petition allowed. - WRIT PETITION NO.2958 OF 2020 - - - Dated:- 25-3-2021 - UJJAL BHUYAN MILIND N. JADHAV, JJ. Mr. Prasad Paranjape a/w. Mr. Mihir Mehta and Mr. Jas Sanghavi i/b. PDS Legal for Petitioner. Mr. Swapnil Bangur a/w. Mr. J. B. Mishra and Ms. Maya Majumdar for Respondents. Judgment and Order : (Per Ujj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 011 to July, 2012 in respect of labour services used for civil work, shifting of machinery, etc. It was alleged that as the services for which CENVAT credit was availed of was not connected with manufacturing activities of the petitioner, the same could not be termed as input service and hence not admissible. 5. Petitioner replied to the show cause-cum-demand notice on 16.03.2016. In so far the above allegation was concerned, petitioner contended that the credit taken by the petitioner on the disputed labour charges was correctly availed of by the petitioner. A personal hearing was also granted to the petitioner on 16.02.2017. 6. By the order-in-original dated 24.03.2017 passed by the Assistant Commissioner of Central Excise, out of ₹ 36,224.00 allegedly wrongly availed of by the petitioner as service tax credit in respect of labour services, adjudicating authority held that petitioner was eligible for CENVAT credit of service tax in respect of three payments i.e., ₹ 494.00, ₹ 968.00 and ₹ 5212.00. Thus, it was held that an amount of ₹ 6674.00 was the admissible CENVAT credit out of the claim of the petitioner of ₹ 36,224.00 making ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hereinafter) and thereafter the tax dispute has been settled. Grievance of the petitioner was limited to the finding recorded by CESTAT that petitioner had played fraud. When the petitioner had filed rectification application for expunging such remark, the same was dismissed with cost. This Court vide the order dated 17.09.2020 thereafter took the view that since the tax liability of the petitioner stood settled under the amnesty scheme, Court would confine its examination to the finding of fraud recorded by CESTAT and the rejection of the rectification application on this point. Relevant portion of the order dated 17.09.2020 reads as under:- 2. This writ petition has been filed assailing the order dated 28th August, 2019 passed by the Customs, Excise and Service Tax Appellate Tribunal, Mumbai ( CESTAT for short) rejecting the rectification application filed by the petitioner. 3. Petitioner had sought for rectification of the order dated 27th September, 2018 passed by CESTAT in Appeal No.E/85319/2018 filed by the petitioner wherein a finding was recorded by CESTAT that Ex.A, B and C filed by the appellant i.e., the petitioner should be considered as mis-statement or frau ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y settled under the scheme and to that extent, petitioner has no grievance. Petitioner is only aggrieved by the finding recorded by CESTAT that it had not only made a misstatement before it, but had practised fraud. He submits that it was never the case of the department that petitioner had fraudulently inserted the words labour charges in the invoices under consideration at any stage. Claim of the petitioner to avail CENVAT credit on account of labour services was disallowed in part on merit by the adjudicating authority and not on the ground that there was interpolation in the invoices or that fraud was practised by the petitioner. Right from the show cause notice till the order of the Commissioner (Appeals), the related claim of the petitioner was contested and denied by the respondents on merit. As a matter of fact during the hearing before CESTAT it was the counsel for the petitioner who had produced the two invoices to highlight the contention of the petitioner. It was then that the authorized representative made an off the cuff remark that the said two documents were manufactured by the petitioner and acting on such submission, CESTAT held that petitioner had relied upon m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er detriment; a misrepresentation made recklessly without belief in its truth to induce another person to act. 17.2. Section 25 of the Indian Penal Code, 1860 has defined the word fraudulently . It says that a person is said to do a thing fraudulently if he does that thing with intent to defraud but not otherwise. 17.3. Under the Indian Contract Act, 1872, fraud has been defined under section 17. As per this definition, fraud means and includes the acts mentioned thereunder committed by a party to a contract or with his connivance or by his agent with the intent to deceive another party thereto or his agent or to induce him to enter into the contract. The acts mentioned in section 17 includes active concealment of a fact by one having knowledge or belief of the fact. While we are in the Contract Act, we may also mention that misrepresentation is separately defined thereunder. As per section 18, representation means and includes- (1) the positive assertion in a manner not warranted by the information of the person making it, of that which is not true, though he believes it to be true; (2) any breach of duty which without an intent to deceive gains an advantage to the person ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tever caused to any person in body, mind, reputation or such others. In short, it is a non-economic or non-pecuniary loss. A benefit or advantage to the deceiver, will almost always call loss or detriment to the deceived. Even in those rare cases where there is a benefit or advantage to the deceiver, but no corresponding loss to the deceived, the second condition is satisfied. 10. A fraud is an act of deliberate deception with the design of securing something by taking unfair advantage of another. It is a deception in order to gain by another's loss. It is a cheating intended to get an advantage. 11. Fraud as is well known vitiates every solemn act. Fraud and justice never dwell together. Fraud is a conduct either by letter or words, which includes the other person or authority to take a definite determinative stand as a response to the conduct of the former either by words or letter. It is also well settled that misrepresentation itself amounts to fraud. Indeed, innocent misrepresentation may also give reason to claim relief against fraud. A fraudulent misrepresentation is called deceit and consists in leading a man into damage by willfully or recklessly ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have already been taken note of. The basic allegation against the petitioner pertaining to availing of CENVAT credit on account of labour services as could be discerned from the notice to show cause-cum-demand dated 23.12.2015 was that the services for which the CENVAT credit was availed of was not connected with the manufacturing activities of the petitioner. Therefore, such claim was held to be inadmissible. Relevant portion of the notice to show causecum- demand is as under:- (b) The assessee availed wrong credit of Service Tax amounting to ₹ 36,224/- (Rupees Thirty Six Thousand Two Hundred Twenty Four Only) for the period October 11 to July 12 in respect of services labour used for civil work, shifting of machinery, etc. As the services for which the Cenvat Credit is availed is not connected with the manufacturing activities of the assessee, the same cannot be termed as input service and is not admissible. The details of availment of wrong credit are shown in Annexure-B attached to the SCN. 24. From the above, it is clearly evident that petitioner s availment of CENVAT credit was being denied by the adjudicating authority on merit and not on the ground that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ific mention in the definition of input service. Therefore, the credit of ₹ 5212/- availed in respect of this service is admissible to the assessee. 25. Thus, we find that even the adjudicating authority did not make any comment or statement about the veracity of the invoices. The CENVAT credit were partly allowed on merit. Same is the position in the order-in-appeal dated 30.10.2017 passed by the Commissioner (Appeals). It was held as under:- 6.2. Service of labour used for civil work, shifting machinery The appellant during the period October, 2011 to July, 2012 availed Cenvat credit on labour services used for civil work of shifting of machinery. The appellant has stated that they availed cenvat credit for shifting of old machinery from its Vasind Unit to Goa Unit i.e. loading of the machinery in the vehicle within the factory premises of the Vasind Unit falls within the definitions of Rule 2(1) Rule 2(qa)(i) of the Cenvat Credit Rules, 2004 which states as (i) a factory or any other place or premises of production or manufacture of the excisable goods. I observe that outward transportation mentioned in the definition of input service is in respect of fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sequences which may follow following a finding of fraud. While there cannot be any two opinion that fraud vitiates everything and should be strongly dealt with particularly in a judicial or a quasi-judicial proceeding, Supreme Court in Harjas Rai Makhija (supra) had sounded a note of caution. Firstly, there must be a specific allegation of fraud being played by a party to the proceeding. When such an allegation is made, it must be enquired into. The party against whom the allegation of fraud is made has to be put on notice and heard. Evidence must be led wherefrom a conclusion can be drawn that there was intent to deceive by the party who is alleged to have committed fraud. It is only thereafter that a finding of fraud can be arrived at. Simply asking counsel for the party alleged to have committed fraud to instantaneously respond to such allegation certainly cannot be approved of. On such a haphazard and hurried basis without any conclusion having been reached as to the intent to deceive, no finding of fraud could have been reached by the CESTAT. Thus, fraud cannot be said to have been proved; it was merely alleged and an inference of fraud was drawn. Therefore, CESTAT was not jus ..... X X X X Extracts X X X X X X X X Extracts X X X X
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