2008 (7) TMI 409 - HC - Central Excise

Appeal/Reference to High Court - Question of fact - MODVAT/CENVAT credit - mere fraudulent paper transactions

Summary

Issues:
Appeals against order setting aside penalties imposed by the adjudicating authority based on fraudulent transportation of raw material for availing Modvat/Cenvat credit.

Analysis:
The appeals were filed by the revenue against a consolidated order passed by the Customs Excise and Service Tax Appellate Tribunal, arising from an order-in-appeal by the Commissioner (Appeals) setting aside penalties imposed on dealers for fraudulent activities related to Modvat/Cenvat credit. The respondents, registered dealers, were accused of using fictitious vehicles for transporting raw materials to fraudulently pass Modvat/Cenvat credit. The Preventive Staff verified transactions where improper vehicles were used, indicating fraudulent paper transactions. The respondents defended themselves by stating that payments were made through legitimate means, inputs were used in final products, and they were not involved in the misrepresentation of vehicle numbers. The Adjudicating Authority found the charges established and imposed penalties, which were later set aside by the Commissioner (Appeals).

The Department then appealed to the Tribunal, which upheld the decision of the Commissioner (Appeals), leading to further appeals before the High Court. The revenue raised questions of law regarding the evidence of fictitious vehicle numbers and the Tribunal's power to set aside proven investigation facts. The Court dismissed the appeals, stating that similar cases had been previously dismissed. It was concluded that no substantial question of law arose from the Tribunal's order, which contained factual findings in favor of the respondents. Therefore, both appeals were dismissed by the High Court.

This judgment highlights the importance of factual findings in cases involving fraudulent activities related to tax credits and the limited scope for appeal based on questions of law when such findings are in favor of the respondents. The Court's decision underscores the need for concrete evidence and the difficulty in challenging established facts in appellate proceedings.