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2014 (8) TMI 656 - AT - Central ExciseDenial of CENVAT Credit - Whether where only paper invoices are issued without the accompaniment of goods, cenvat credit could be availed by the recipient and whether penalty could be imposed for such fraudulent activity of issue of fake invoices - Held that:- M/s. Khemka Ispat Ltd. have not undertaken any manufacturing activity and therefore, the question of their supplying any goods on the authority of invoices did not arise. Apparently the said party was only a manufacturer on paper. Therefore, the transactions between the said manufacturer and the respondents-dealers, were only paper transactions without actual movement of goods, thus fake in nature. The original authority rightly held that the concerned manufacturers of final products who have taken Cenvat credit based on invoices, were not eligible for Cenvat credit and were liable for imposition of penalties. The invoices issued by M/s Khemka Ispat were not legal invoices for the purpose of availment of cenvat credit and hence all consequent invoices issued on the basis of invoices of M/s Khemka Ispat were also not valid documents for the purpsose of availment of credit irrespective of the fact as to whether the subsequent sale by dealers were with or without material and whether the payment has been recorded as made against the cenvat by these dealers shown on such invoices of M/s Khemka Ispat. Under Rule 26 of Central Excise Rules, penalty can be imposed only on the person who has acquired possession or is in any way concerned in transporting, removing, depositing, keeping, concealing, selling or purchasing or in any other manner dealing with, any excisable goods which he knows or has reason to believe are liable to confiscation - applicants are registered under the Central Excise Rules as registered dealer and by virtue of rules they are authorized to issue cenvatable invoices to their customers in respect of the goods supplied by them. In the present case, the applicants issued invoices without supplying any goods on the strength of which credit has been availed by their customers. The applicants are duty bound to maintain time and correct stock of excisable goods and they are duty bound to issue invoices which shall contain description, classification, time and duty of removal, rate of duty, quantity and value of goods and duty payable thereon. In these circumstances, as the applicant being a registered dealer has not complied with the condition of the Central Excise Rules, prima facie, I find that it is not a fit case for waiver of penalty. Undisputedly, the credit was sought to be passed on without invoices being accompanied by the goods. Such an act is certainly a major violation of the provisions of law. Being so, in such cases, question of imposition of penalty upon the dealer - first stage or second stage - who facilitated such illicit transaction, cannot be faulted with. These dealers have been instrumental in committal of fraud to defraud the revenue. Decided against assessee.
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