Chartered Accountant
Bookmark and Share
click here to subscribe our newsletter
 
 
Corporate News *  The GSTN has issued an Advisory dated 21.04.2026 about the introduction of an Offline Tool for the Invoice Management System (IMS)  *  CBIC extends due dates for filing of FORM GSTR 3B  for the month of April 2026 *  Interest cannot be imposed in adjudication order, if not demanded/quantified in show cause notice : Allahabad HC *  Wheelchairs with toileting facility eligible for exemption: CESTAT affirms customs duty exemption to importer *  Industries urge GST council to allow inverted duty refunds on input services *  Tamil Nadu GST dept introduced virtual hearing facility for GST appeals under under section 107 of the TNGST act: detailed guidelines  *  CIC urges authorities to implement GST evasion complaint tracking system *  Even if the assessee opts "NO" for personal hearing in form DRC-06 ,The mandatory requirement under section 75(4) to grant opportunity of hearing cannot be waived:Gujarat High Court  *  Glufosinate imports curbs imposed by govt *  Government extends Re-import period for exported cut & polished diamonds *  CIC flags lack of tracking system for tax evasion complaints,urges GST authorities to improve transparency *  No Custodial Interrogation needed in GST fraud case based on documentary evidence already in Department's Possession : Chattisgarh HC *  Orders under section cannot be sustained if passed without considering the taxpayer's objections and without granting a personal hearing:Gujarat High Court *  Mere cancellation of supplier's registration cannot,by itself,justify denial of ITC or cancellation of the recipient's registration:Bombay High Court *  High Court sets aside GST notice citing factual errors and natural justice violations *  Provisional Bank Attachment under Section. 110 of Customs Act Unsustainable Beyond Statutory period without Extension order: Bombay HC orders to defreeze accounts *  Post Clearance MRP Alteration by Distributor Does not attract Differential Customs Duty: CESTAT *  DGFT Expands scope of 'Screws' classification under RoDTEP Scheme  *  E-way bills surze to all time high of 140.6 million in March *  GST Exemption Allowed on Pure Labour Services for Standalone Houses: AAR  *  GST Payable Only on Margin in Second-Hand Car Sales, Subject to Strict Conditions and No ITC Claim: AAR *  DGFT rolls out procedure for allocation of calcined coke *  GST portal update : Pre-deposit amount now editable in Appeals *  J&K HC declared TMT scrap a 'Specified Good' eligibile for GST refunds under Support Scheme  *  Pigmy agents are employees of banks; no GST can be levied on commission  paid to them : Karnataka HC *  DGFT Revises HS Code Description for Screws Under RoDTEP *  GST Registration Cancellation Invalid Without Proper Service of Notice: Allahabad High Court. *  Bengaluru CGST | GST Backlog Appeals Deadline Fixed at June 30, 2026 *  No Time Bar on Refund of Service Tax for Services Not Rendered: CESTAT  Remands Indiabulls Case for Unjust Enrichment Check. *  Supreme Court Holds Renewable Energy Incentive Must Benefit Generators, Not Be Adjusted in Tariff
Subject News *   Delhi HC Quashes Order, Says Reminder Cannot Validate Improperly Served GST SCN *  KARNATAKA HIGH COURT REMANDS GST SHORTFALL MATTER DUE TO ABSENCE OF PERSONAL HEARING   *  CESTAT cancels confiscation and penalties on imported computer cabinet cases: Custom duty restricted to 111 surplus units *  Deposit of tax during search or investigation cannot be treated as 'Voluntary Payment' : Bombay High Court *  Section 76 of the CGST cannot be invoked where the tax has already been duly deposited, even if through another registration of the same entity: Madras High Court *  Sec 74 allows use of material regardless of source; illegality or flaws in section 67 search do not vitiate valid adjudication: HC *  Inter-State transfer of ITC on Amalgamation permissible as given under section 18(3) read with rule 41 of the CGST rules, 2017: Gujarat High Court *  HC: No GST on commisson paid to Pigmy Agents *  IGST refund denial on illegible bill of lading invalid absent chance to furnish docs; merit reconsideration in appeals directed: HC *  ITC is not admissible on GST paid on leasehold rights of land used fpr setting up an air seperation plant: AAAR,Tamil Nadu *  GST: No penalty under Section 74 after voluntary ITC reversal due to non-existent supplier : High Court *  TN AAAR denies GST ITC on Land Lease under Sec. 17(5)(d) for setting up plant and machinery *  GST proceedings quashed as notices sent to old address, despite updated address in registration *  Importer Can’t Be Penalised for Alleged IGCR Procedural Lapses Without Evidence of Departmental Error: CESTAT *  Structured Healthcare Training Not ‘Charitable Activity’, 18% GST Payable: AAR  *  CESTAT As The Appellate Authority For Central Sales Tax Disputes: A Paradigm Shift Under Finance Act, 2023 *   Rs. 25K Cost Imposed On SGST Joint Commissioner for Attaching Bank  Accounts Without Forming Mandatory “Opinion”: Bombay HC *   Ex-Parte GST Order Without Hearing Violates Natural Justice: Karnataka  High Court Quashes Adjudication and Bank Attachment.  *   Retrospective GST Cancellation Can’t Invalidate Genuine Transactions:  Jaipur Commissioner (Appeals) Quashes Rs. 95,670 ITC Demand. *   GST Pre-Deposit Non-Compliance: Allahabad High Court Allows Appeal  Subject to Rs. 30 Lakh Balance Deposit, Recognises Offline Filing. *  Documentary Nature of Evidence: Allahabad High Court Grants Bail in Rs. 32.66 Crore Fake ITC Fraud Case *  Supreme Court Flags Systemic Bias in Army’s Permanent Commission Process for Women Officers *  Re-Determination of Land Compensation Can Be Based on Appellate Court Awards, Clarifies Scope of S. 28-A: Supreme Court. *  Supreme Court Imposes Rs. 5 Lakh Costs On Rent Authority Officer For Acting Beyond Jurisdiction. *  DGGI Meerut | Court Denies Bail to Accused in Claiming Fake ITC And Export Refunds *  Denial of GST Rate Revision Benefit to Contractor Violates Article 14: Rajasthan HC *  GST Registration Cancellation for Non-Filing of Returns: Gauhati High Court Directs Restoration on Compliance. *   Supreme Court Quashes FEMA Adjudication Orders, Revives Proceedings at  Show Cause Stage. *   Higher Rank, Harsher Punishment Justified: Supreme Court Restores Dismissal  of Bank Manager in Misappropriation Case. *   Limitation for Export Refund to Be Counted from Foreign Exchange Realisation,  Not From Export Invoices Issuance: CESTAT  

Comments

Print   |    |  Comment

PJ/Case Laws/2011-12/1383

Admissibility of Cenvat Credit taken on Bogus/Fake Invoices

Case: HAVELLS INDIA LTD. Versus COMMISSIONER OF CENTRAL EXCISE, JAIPUR-I
 
Citation: 2011 (271) E.L.T. 582 (Tri. - Del.)
 
Issue:- Cenvat credit on Bogus invoices – admission by dealer that fake invoices issued – credit not admissible.
 
Penalty under Section 11AC – reduced to 25% as credit taken was deposited before issuance of SCN and no option given in Order-in-Original to pay 25% of amount of penalty. 
 
Brief Facts:- Appellant are manufacturers of bathroom fittings and parts thereof. They were availing Cenvat credit of cen­tral excise duty/additional customs duty paid on the inputs used in or in relation to the manufacture of finished products. On receiving intelligence that M/s. Sulabh Impex Incorporation, Sector-16, Rohini, Delhi, a registered dealer, issued fake Cenvatable invoices to fraudulently enable various manufacturers including the Appellant, to avail of inadmissible cenvat credit, the Central Ex­cise officers, Jaipur-I paid a surprise visit to the factory premises of appellant on 18-1- 2006 and it was found that a total Cenvat credit of Rs. 1,96,782/- in respect of brass scrap received under four invoices issued by M/s. Sulabh Impex Corpora­tion had been taken. The invoices were No. 207 dated 15-12-2004, No. 208 dated 18-12-2004, No. 209 dated 21-12-2004 and No. 210 dated 24-12-2004 for a total quantity of 14.93 M.T. These four invoices were having reference of bill of entry No. 378492 dated 16-3-04 in respect of 21.008 M.T. of mixed brass scrap imported by Manager of the appellant company. The Manager in his statements dated 18-1-2006 and 19-1-2006 and 23-1-2006 stated that the goods, in question, had been purchased directly from M/s. Sulabh Impex Corporation, that during the relevant period, Shri Neeraj Agarwal was the head of the Purchase Department during the rele­vant time and he was no longer working in the company. However, Shri Sunil Mittal, Proprietor of M/s. Sulabh Impex Corporation in his statement tendered under Section 14 of the Central Excise Act, 1944, stated that though he was hav­ing a IEC Code No., he was too poor to make any imports, that often persons were importing brass scrap in the name of his firm using his IEC Code No., that he is not aware as to what happened to the goods imported in the name of his firm, and that he was only issuing invoices on commission to various persons without supplying any goods.
 
In view of these facts, a show cause notice was issued to the Appellant Company, M/s. Sulabh Impex and Shri Sunil Dutt, Gen­eral Manager of the Appellant Company for recovery of cenvat credit taken with interest and also proposed to impose penalty under Rule 15(2) of Cenvat Credit Rules, 2004 read with Section 11AC of Central Excise Act, 1944 and also under Rule 25(1) of Central Excise Rules, 2002. Imposition of penalty on Shri Su.nil Dutt under Rule 26 of Central Excise Rules, 2002 and imposition of penalty on M/s. Sulabh Impex Corporation under Rule 15 of the Cenvat Credit Rules, 2004 was also proposed.
 
The Adjudicating Authority upheld the demand of cenvat credit with interest. And imposed penalty on the Appellant Company under Section 15(2) of CCR, 2004 read with Section 11AC of the CEA and penalty of Rs. 50,000/- was im­posed under Rule 25(1) of the Central Excise Rules, 1944. Penalty of Rs. 1,00,000/- was imposed on Shri Sunil Dutt, General Manager of Appellant Company under Rule 26 of Central Excise Rules, 2002. And penalty of Rs. 1,96,782/- was imposed on M/s. Sulabh Impex Cor­poration under Rule 15 of the Cenvat Credit Rules, 2004.
 
On appeal to Commissioner (Appeals), the above order was upheld except for reduction of penalty on Shri Sunil Dutt to Rs. 50,000/-.
 
Against the above order, appeal has been filed by the Appellant before the Tribunal .
 
Appellant’s Contention:- Appellants pleaded that the entire case against the appellant is based on the statement of Shri Sunil Mittal, Proprietor of M/s. Sulabh lmpex Corporation, wherein he stated that most of invoices issued by the appellant were having fake bills of entry mentioned on them and that no goods have been supplied, that from the state­ment of Shri Sunil Mittal, it cannot be concluded that all the invoices issued by M/s. Sulabh lmpex Corporation were fake without any goods having been sup­plied, that in this case, cenvat credit of Rs. 1,96,782/- had been taken on the four invoices which had been issued in respect of the bills of entry No. 378492 dated 16-4-2004 covering the import of 21.008 M.T. of Mixed Brass Scrap, that though against this bill of entry, which is in name of the Sulabh Impex Corporation and is in respect of the import of 21.008 M.T., of Mixed Brass Scrap, a total of nine invoices for total quantity of 60 M.T. has been issued, it cannot be presumed that the four invoices, on the basis of which the appellants have taken the cenvat credit are fake without supply of any goods, that the supply of goods along with these invoices is clear from the transport company's GRs, Dharamkanta receipts and also the statement of the bank account of the appel­lant showing payment to M/s. Sulabh Impex, that no inquiry has been con­ducted by the department with the transporters, that it is not the case of the de­partment that the bill of entry No. 378492 dated 16-3-2004 against which the four invoices had been issued is fake, that in view of this evidence, merely on the ba­sis of the statement of Sunil Mittal, it cannot be concluded that no goods had been supplied and that in view of this, the impugned order upholding the cenvat credit demand and penalty on the appellant is not correct.
 
Appellant also emphasized that the statement dated 10-1-2006 of Shri Sunil Mittal is a general statement and it does not mention either the appellant firm or the four invoices issued to the appellant company and, therefore, from the statement of Shri Mit­tal, no adverse conclusion regarding the genuineness of the invoices can be drawn.
 
Respondent’s Contention:- Revenue defended the impugned order by pleading that Shri Mittal in his statement dated 10-1-2006 has explained the modus operandi adopted by him for issue of fake invoices, that in his statement, he has clearly admitted that he had never supplied any goods along with cenvat invoices to the parties, that the parties had taken only bills from him and goods were purchased from elsewhere, and he was not even the actual im­porter of the goods, as the goods were being imported by other persons, that he was not aware as to where the imported goods had gone, that from the statement of Shri Mittal, it is clear that all the invoices issued by him were fake and in no case, any goods had been supplied along with the invoices, that the statement of Shri Mittal stating that he is too poor to import any goods makes it very clear that no goods have been supplied by him and only the invoices had been issued, that the transport documents and the stamp of the sales tax authority stamped on the GR/Invoice did not in any way prove that the goods covered under the in­voices, in question, had actually been supplied by M/s. Sulabh Impex Corpora­tion, that Shri Mittal has not retracted his statement and hence, the same is ad­missible as evidence and that the fact that the bogus invoices had been issued in respect of the Bills of Entry No. 378492 dated 16-3-2004 is clear from the fact that for quantity of 21.008 MTs of mixed Brass Scrap, a total of 9 invoices for total quantity of 60 M.T. had been issued and that in view of this, there is no infirmity in the impugned order.
 
Reasoning of Judgment:- The Tribunal noted that the appellant have taken Cenvat credit on the basis of the four invoices dated 15-12-2004, 18-12-2004, 21-12-2004 and 24-12-2004 issued by M/s. Sulabh Impex Corporation. The allegation of department, which is based mainly on the statement of Shri Sunil Mittal, Proprietor of Sulabh Impex Corporation, is that these are bogus invoices issued by them without supplying any goods. On the other hand, the appellant's plea is that since Shri Sunil Mittal in his statement dated 10-1-2006 has not mentioned that the appel­lant company is a party to whom the bogus invoices had been issued without supplying any goods, and from his statement it cannot be concluded that the in­voices, in question, are bogus, more so, when there is an evidence showing the supply of goods, in form of GRs issued by the transporters, dharamkanta's re­ceipts, the statement of the appellant company's bank showing the payment for the goods to M/s. Sulabh lmpex and also the stamp of the check post on GRs. The statement of Shri Sunil Mittal has been recorded under Section 14 of the Cen­tral Excise Act, 1944, which has not been retracted by him and the same is an in­culpatory statement. There are four admissions made by Shri Mittal in his state­ment (1) invoices issued by him were mostly carrying fake bills of entry numbers and for this reasons only, he was not filing any return to the central excise de­partment, (2) he had never supplied any goods along with invoices to any parties and the parties had taken only the invoices and had purchased the goods from others, (3) though he was receiving the payment by cheque, he was returning the money after deducting his commission and (4) though he was having import export code number (IEC Code No.), he was too poor to make any import and there were other persons who were importing the scrap in his name, using his IEC Code No. and that he was not even aware as to where the imported goods had been gone. From the above statement of Shri Mittal, it is clear that all the in­voices issued by M/s. Sulabh Impex were bogus. The fact that he was issuing the bogus invoices is clear from the fact that against a particular bill of entry 378492 dated 16-3-2004 where the quantity imported is 21.008 M.T., nine invoices for total quantity of 60 M.T. have been issued. In view of this, there is ring of truth in the statement of Shri Mittal. In view of this, the duty demand has been rightly upheld against the Appellant.
 
As regards the plea of appel­lants that when penalty under Rule 15(2) Cenvat Credit Rules, 2004 read with Section 11AC of Central Excise Act, 1944 has been imposed on the Appellant, there is no justification for separate penalty of Rs. 50,000/- on the appellant firm under Rule 25 of the Central Excise Rules, 2002, the Tribunal found that there is merit in this plea, as provision of Rule 25 of Central Excise Rules, 2002 are not attracted in this case. The penalty of Rs. 50,000/- on the appellant under Rule 25 is, therefore, set aside.
 
As regards the other plea of appellant that since in this case the entire amount of wrongly taken cenvat credit along with interest had been paid even prior to the issue of show cause notice, they should get the benefit of reduced penalty under first proviso to Section 11AC based on the judgment of the Delhi High Court in the case of K.P. Pouches [2008 (228) E.L.T. 31 (Delhi)] and accordingly, penalty imposable would be 25% of the wrongly taken cenvat credit, the Tribunal found that in this case the entire amount of cenvat credit along with interest have been paid prior to 10-10-2006, the date of issue of show cause notice and since in the order-in-original passed by the Asstt. Com­missioner, option to pay the reduced penalty under proviso to Section 11AC had not been given, the judgment of the Delhi High Court in the case of

K.P. Poucheswould apply and the appellant cannot be denied the benefit of reduced penalty under proviso to Section 11AC. The penalty is, therefore, re­duced to 25% of the cenvat credit demand. Impugned order is upheld ex­cept for setting aside of penalty.

Decision:- Appeal partly allowed.
 
Comment:- Although the duty has been confirmed but it is held that the penalty under Section 15(2) read with Section 11AC has been imposed then there is no need of separate penalty under Rule 25. Also, Delhi High Court decision in case of K.P. Pouches does not apply in this case. 

Department News


Query

 
PRADEEP JAIN, F.C.A.

Head Office : -

Address :
"SUGYAN", H - 29, SHASTRI NAGAR, JODHPUR (RAJ.) - 342003

Phone No. :
0291 - 2439496, 0291 - 3258496

Mobile No. :
09314722236

Fax No. :0291 - 2439496


Branch Office : -

Address:
1008, 10th FLOOR, SUKH SAGAR COMPLEX,
NEAR FORTUNE LANDMARK HOTEL, USMANPURA,
ASHRAM ROAD, AHMEDABAD-380013

Phone No. :
079-32999496, 27560043

Mobile No. :
093777659496, 09377649496

E-mail :pradeep@capradeepjain.com