2013 (3) TMI 604 - AT - Central Excise

Availment of wrongful credit - Bogus invoices - Issue of invoices without actual receipt of goods - Invocation of extended period of limitation - Imposition of penalty - Held that - During the search of the supplier s office and godown viz. M/s. ISC it was found that as per the records a large quantity of closing stock of SS Bright Bars was available but in the godown no such SS Bright bars were found. The explanation given by Shri Arifbhai Adhiya Proprietor of M/s. ISC was that such bright bars has been sold without Cenvat/modvat. However no commercial invoice issued by M/s. ISC was also found. - M/s. ISC used to deal in different variety of scrap including assorted mixed scrap. We also note conduct of M/s. ISC with reference to the bogus Invoices of ship breaking scrap through Simandhar Steel Movers (India) Pvt. Ltd. and also invoices relating to closed down ship breaking units. - M/s. Miland Tijare and other officials of the appellant have stated that in heterogeneous consignments higher number samples are required while in homogenous very few samples would be tested. From the records of the Lab the Officers could not find any case where only one or two sample were tested. One or two samples should have been the case in respect of Invoices relating to S.S. Rods/pipes/bright bars etc. We note that appellant has chosen to keep silent on this allegation in the show cause notice. - goods covered by the impugned invoices have not been received in the factory of manufacturer - Such a thing cannot happen without active connivance of appellant and undoubtedly is a case of fraudulent availment of credit. We therefore reject this contention of the appellant and hold that extended period is rightly invoked. Sub-rule (1) of Rule 13 is applicable to any person while sub-rule (2) of Rule 13 which is applicable to manufacturer alone. The term any person would include appellant Shri Deepak W. Ashtikar who was a senior officer of M/s. FACOR and responsible for the purchase of scrap and therefore dealt with the scrap. He has admitted that sometime scrap received may be different that in the invoice. As a senior officer in the organization such a thing can be permitted by him only if he has active connivance in the fraud. We therefore do not find any merit in the contention of ld. Advocate to appellant Shri Deepak Ashtikar that mens rea is absent. Case here is that goods covered by the invoice never reached the factory. In the circumstances we hold that appellant is liable to penalty under Rule 13 of the Cenvat Credit Rules 2001/2002. Investigations have failed to reveal that the third appellant was aware of the wrong doings in the purchase and conniving with the first appellant or supplier of the scrap. Investigations have not brought out that difference in invoices/final settlement was huge as to justify their knowledge. - Decided partly in favour of assessee.

Issues Involved:

1. Denial of Cenvat credit on the basis of discrepancies in invoices and actual goods received.
2. Fraudulent availment of credit through bogus invoices.
3. Liability of penalties on the appellant and its officials.
4. Applicability of extended period for demand.
5. Justification for penalties on associated parties.

Issue-wise Detailed Analysis:

1. Denial of Cenvat Credit:
The appellant, M/s. Facor Steel Ltd., was found to have discrepancies between the description of scrap in Material Receipt Vouchers (MRV) and Central Excise invoices versus the actual scrap received. For instance, invoices described goods as "S.S. Bright Bar Rejected" or "SS Rods/Bars Rejected," while the actual material found was "assorted mixed scrap." The Tribunal noted that the goods described in the invoices were not received in the factory, and thus, the appellant's contention that the defective/rejected goods were merely scrap was rejected. The Tribunal emphasized that the credit can only be taken on the basis of invoices if the goods described in the invoices are received by the manufacturer.

2. Fraudulent Availment of Credit:
During the investigation, it was found that certain invoices from M/s. International Steel Corporation (ISC) indicated purchases from M/s. Simandhar Steel Movers (India) Pvt. Ltd., who issued invoices based on ship breakers without receiving any goods. It was revealed that no vehicle movement occurred across the Maharashtra and Gujarat border, indicating that the goods described in the invoices were not actually received. The Tribunal concluded that the appellant fraudulently availed credit on invoices without receiving the goods.

3. Liability of Penalties:
The Tribunal upheld the penalties imposed on M/s. Facor Steel Ltd. and its Senior Manager, Shri Deepak W. Ashtikar, under Rule 13 of Cenvat Credit Rules, 2001/2002 read with Section 11AC of the Central Excise Act, 1944. Shri Ashtikar admitted in his statement that sometimes the scrap received differed from the invoice description, indicating his active connivance in the fraud. However, the penalty on M/s. SKM Steels Ltd. was set aside as the investigation did not reveal their knowledge or connivance in the fraudulent activities.

4. Applicability of Extended Period:
The Tribunal held that the extended period for demand was rightly invoked due to the fraudulent nature of the credit availment. The Tribunal rejected the appellant's contention that the extended period should not apply, emphasizing that such fraudulent activities could not occur without the appellant's active involvement.

5. Justification for Penalties on Associated Parties:
The Tribunal found no justification for imposing penalties on M/s. SKM Steels Ltd., as the investigation did not prove their involvement or awareness of the fraudulent activities. The Tribunal noted that M/s. SKM Steels Ltd. was merely financing the purchase of scrap and was not involved in the purchase process or aware of the discrepancies.

Conclusion:
The appeals of M/s. Facor Steel Ltd. and Shri Deepak W. Ashtikar were dismissed, upholding the penalties and the denial of Cenvat credit. However, the appeal of M/s. SKM Steels Ltd. was allowed, and the penalty imposed on them was set aside. The judgment emphasized the importance of receiving goods as described in invoices for availing Cenvat credit and upheld penalties for fraudulent activities.

← Previous Next →