2013 (1) TMI 123 - AT - Central Excise

Rule 11 of the Central Excise Rules 2002 Eligibility to CENVAT credit on the basis of invoices issued by dealers - Rule 7 of CENVAT Credit Rules 2002 Ineligible CENVAT credit Credit on the basis of forged invoice Bogus purchase Duty paying document - Whether the appellants have correctly availed CENVAT credit of duty on the basis of invoices issued by the dealers - demand on the ground that the appellants have availed credit on the invoices issued by Simandhar which do not find mention in the RG-23D register maintained by Simandhar alleged that when the duty paid goods supplied by the ship breakers did not cross the Gujarat Border the dealers at Bhiwandi/Mumbai could not have received the said duty paid goods physically and consequently they could not have delivered the same to the appellants There is a difference of opinion arose between the Members therefore the matter is placed before the Hon ble Vice President/HOD for appointing a 3rd Member to decide the issue - Whether the appellants have correctly availed CENVAT credit of duty on the basis of invoices issued by the dealers in the facts and circumstances of the case as held by the Member - Whether the demands are barred by limitation in the facts and circumstances or not. Decision of 3rd member Vehicles were found to be non-transport vehicles as per RTO s report - Incapable of transporting huge quantities of iron and steel scrap which was the input on which CENVAT credit of excise duty was taken - Appellants contended that the delivery in these cases were arranged by the dealers themselves and the freight was pre-paid - Discrepancy occurred due to entering of incorrect numbers of the transport vehicles by the dealer as admitted by the dealer Held that - Following the decision in case of RANJEEV ALLOYS LIMITED (2008 (9) TMI 223 - CESTAT NEW DELHI) that CENVAT credit involved in 306 invoices where the vehicles were found to be non-transport vehicles as per the RTO s reports and where the appellants have not been able to produce any reliable evidence with respect to the receipt of the goods in the factory the appellant are not entitled for the CENVAT credit. In favour of revenue CENVAT credit on the basis of invoices issued by dealers based on ship breakers invoices - Ship breakers supplied were steel plates and re-rollable scrap which are not generally used for re-melting and are generally used by rolling mills Some of ship breaking scrap closed down their activities since a long time invoice are not genuine - Vehicles used for transportation were motorcycles tankers cars autorickshaws delivery vans etc. incapable of transporting iron and steel scrap - Statements of a few of the transporters who have denied transporting any goods from Gujarat to Mumbai - Statements from some of the ship breakers they supplied steel plates of various dimensions or re-rollable scrap not steel melting scrap Held that - The department need not prove the case with mathematical accuracy. So long as the department has established the case with such degree of preponderance the existence of a fact it is sufficient. In the instant case the burden to establish eligibility to the credit is on the appellant- assessee and if they fail to establish or explain the facts established by the department and adverse inference arises against them coupled with the presumptive evidence adduced by the department. Once the Revenue discharges the burden that the particulars declared in the documents on the strength of which the credit has been availed are not genuine or are fake then the onus is on the assessee to prove that they have availed the credit correctly and is entitled for the credit. That onus cannot be condoned on the ground of hardship or inconvenience. In the instant case the appellants have not discharged this onus cast on them by the statute. In favour of revenue Whether the appellants are eligible to avail CENVAT credit on account of duplicate/parallel invoices The RG23-D account maintained by the dealers the invoices issued to the appellants are not reflected - Invoices bearing the same number are shown to have been issued to other buyers though for a different quantity and value - the transporters who are said to have transported these goods from the dealers premises to the appellants have denied transporting these goods Held that - Following the decision in case of Mahalaxmi Cotton Ginning Pressing and Oil Industries (2012 (5) TMI 152 - BOMBAY HIGH COURT) that the appellants herein have not made any case for their eligibility to CENVAT credit on the parallel/duplicate invoices received from the dealers. In favour of revenue Extended period of limitation Fraud Collusion - Conspiracy to deprive the exchequer Ineligible CENVAT Credit - Held that - In such a situation extended period of time is rightly invokable and therefore hold that the demand for CENVAT credit wrongly taken invoking the extended period of time is sustainable in law. In favour of revenue Therefore the appellants are not eligible to avail CENVAT credit and that the extended period of time has been rightly invoked in demanding the same.

Summary

Issues Involved:
1. Demand of duty on account of duplicate/parallel invoices.
2. Demand of duty on account of dealers' invoices where vehicles were found to be non-transport vehicles as per RTO's report.
3. Demand of duty in respect of invoices issued by dealers based on ship breakers' invoices.
4. Whether the demands are barred by limitation.
5. Imposition of penalties and interest.

Issue-Wise Detailed Analysis:

1. Demand of Duty on Account of Duplicate/Parallel Invoices:
The department argued that the appellants availed CENVAT credit based on duplicate/parallel invoices issued by dealers, which did not find any entry in the RG-23D register maintained by the dealers. The appellants contended that the invoices issued to them bore the entry number of the RG-23D register and that any error in the serial numbers was due to human error or programming issues. The Tribunal found that the appellants received the goods under proper invoices, which were not disputed by the Revenue. The Tribunal held that the appellants could not be denied credit for the fault of the dealer, and the department should take action against the dealer instead.

2. Demand of Duty on Account of Dealers' Invoices Where Vehicles Were Found to Be Non-Transport Vehicles as Per RTO's Report:
The department argued that the vehicles mentioned in the invoices were incapable of transporting iron and steel scrap, indicating that the goods were not actually received. The appellants contended that human error in mentioning vehicle numbers could not be ruled out and that they had received the scrap physically. The Tribunal found that the appellants did not provide any documentary proof such as transport bills or lorry receipts to support their claim. However, the Tribunal held that the burden of proof lay on the department to prove that the appellants did not receive the goods, and the department failed to provide concrete evidence.

3. Demand of Duty in Respect of Invoices Issued by Dealers Based on Ship Breakers' Invoices:
The department argued that the ship breakers' invoices were not genuine as some suppliers had closed their manufacturing activities, and the goods did not cross the Gujarat border. The appellants contended that re-rollable scrap could be used as melting scrap and that they had taken reasonable steps to verify the authenticity of the invoices. The Tribunal found that the appellants had received the goods and that the department's reliance on the letters from the Sales Tax authorities was not sufficient to deny credit. The Tribunal held that the appellants had taken all reasonable steps as required under the law.

4. Whether the Demands Are Barred by Limitation:
The appellants argued that the extended period of limitation could not be invoked as they were not aware of any fraud committed by the dealers. The department contended that the appellants were working under the Self-Assessment Scheme and were responsible for the correctness of the information furnished. The Tribunal found that the department had initiated investigations against the dealers as early as 2001, and the appellants could not be held responsible for any delay in action by the department. The Tribunal held that the extended period of limitation was not justified.

5. Imposition of Penalties and Interest:
The appellants argued that they had acted in good faith and had not willingly sought to avail credit that was not available to them. The department contended that the appellants had intentionally availed inadmissible CENVAT credit. The Tribunal found that there was no evidence of collusion or fraud on the part of the appellants and that they had taken all reasonable steps to verify the authenticity of the invoices. The Tribunal held that no penalties or interest were imposable on the appellants.

Conclusion:
The Tribunal set aside the impugned orders and allowed the appeals with consequential relief, holding that the appellants had correctly availed CENVAT credit and that the demands were not sustainable on the grounds of discrimination, lack of concrete evidence, and non-fulfillment of the burden of proof by the department. The Tribunal also held that the extended period of limitation was not justified and that no penalties or interest were imposable on the appellants.