2019 (1) TMI 1727 - Commission - Central Excise

Maintainability of settlement agreement - Recovery of wrongly availed CENVAT credit - fake invoices - allegation that CENVAT credit availed on the basis of fraudulent invoices and without actual receipt of goods - issuance of fraudulent invoices and fake Lorry Receipts without delivery of the goods - HELD THAT - Essentially the instant case is a case of availment of Cenvat credit and reversal thereof on paper only without receipt of goods. Though in their application the applicant has accepted that the credit was availed wrongly as alleged in the SCN but they have not accepted any amount of the duty demand (as made in the SCN) nor any interest. They contend that the wrong credit was reversed on the same day/month on issuance of invoices so there is neither any duty nor interest payable. During the hearing the Ld. Consultant fairly submitted that these are only paper transactions to inflate the business turnover. At the outset the Bench finds that there are pertinent issues of maintainability of the present application. Since the entire case is a case of availment of Cenvat credit on paper without clearance movement (transportation) and receipt of inputs; and reversal thereof to inflate business turnover (as fairly submitted by the Ld. Consultant during the hearing) the present case does not appear to be a bona fide case for settlement as envisaged under the law; particularly Section 32E and case as defined under Section 31(c) of the Central Excise Act 1944. Without expressing any opinion on the legal validity or otherwise of the duty demanded in the said SCN the Bench finds that the applicant by contesting the duty demanded in the SCN in entirety and not accepting any of it does not meet the eligibility criterion of settlement as set out in Section 32E of the CEA 1944. What the applicant has been seeking in fact is the validation of their action as it existed prior to issuance of the SCN which to our mind is legally outside the ambit of settlement as provided in law. On merits they have been challenging the entire duty demand under the SCN. Even for arguments sake accepting the plea of the applicant that SCN demanding duty in this case is not valid and if we hold so it would in effect negate the mandate of sub-para (b) of Section 32E as above. Thus the application is not maintainable under the law as it fails to meet the eligibility criterion under Section 32E ibid. The applications filed by the applicant M/s. Pet Metals Pvt. Ltd. and the Co-applicant Shri Amit Singla are rejected as not maintainable - It is clarified that the rejection of these applications is without prejudice to any other action that may be taken against the applicants under any other law for the time being in force.

Summary

Issues Involved:
1. Wrongly availed CENVAT credit.
2. Fraudulent invoices and fake transport documents.
3. Reversal of CENVAT credit and its implications.
4. Maintainability of the settlement application.
5. Interest and penalty liabilities.
6. Eligibility criteria under Section 32E of the Central Excise Act, 1944.
7. Bona fide nature of the case for settlement.

Detailed Analysis:

1. Wrongly availed CENVAT credit:
The applicant was engaged in the manufacture of Aluminium Slugs & Circles. An investigation revealed that the applicant availed CENVAT credit amounting to Rs. 4,03,27,593/- based on fraudulent invoices from M/s. DPIL and M/s. DPL without actual receipt of goods. The applicant admitted that the transactions were made to increase sales and that the goods never reached their premises.

2. Fraudulent invoices and fake transport documents:
The investigation found that the applicant, along with M/s. DPIL and M/s. DPL, engaged in fraudulent activities by issuing invoices and transport documents without actual movement of goods. The vehicles mentioned in the invoices were incapable of carrying the described goods, and no records of transportation were found with the transporter M/s. DKR. Statements from various individuals confirmed the fraudulent nature of these transactions.

3. Reversal of CENVAT credit and its implications:
The applicant claimed that they reversed the wrongly availed CENVAT credit on the same day, arguing that there should be no further duty demand or interest liability. However, the Revenue contended that this reversal was not genuine but a deliberate misrepresentation to pass on fraudulent credit to others, thus constituting a fraud.

4. Maintainability of the settlement application:
The Bench found that the case involved only paper transactions without actual movement of goods, intended to inflate business turnover. The applicant did not accept any additional duty liability as required under Section 32E of the Central Excise Act, 1944. The application was deemed not maintainable as it did not meet the eligibility criteria for settlement.

5. Interest and penalty liabilities:
The Revenue argued that the fraudulent credit taken by the applicant was utilized to pass on benefits to others, justifying the demand for duty and interest. The applicant contested this, claiming no interest liability since the credit was reversed immediately. However, the Bench found the applicant's arguments inconsistent and not credible.

6. Eligibility criteria under Section 32E of the Central Excise Act, 1944:
The Bench emphasized that for a settlement application to be maintainable, the applicant must accept and pay the additional duty liability along with interest. Since the applicant contested the entire duty demand and did not accept any liability, the application failed to meet the criteria under Section 32E.

7. Bona fide nature of the case for settlement:
The Bench concluded that the case did not represent a bona fide assessment of levy and collection of duty, as it involved fraudulent transactions. The applicant's varying stands and lack of full disclosure further disqualified the application from being considered for settlement.

Conclusion:
The applications filed by the applicant and the co-applicant were rejected as not maintainable. The Bench clarified that this rejection was without prejudice to any other actions that may be taken against the applicants under any other law. The decision emphasized that the Settlement Commission is not a forum for challenging show cause notices on merits but for making full and true disclosures of duty liabilities.