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/2010-11/1082

Credit on fake invoices of non-existent supplier- equal penalty when imposable on assessee

Case: C.C.E. & C., Surat-I v/s Chandrakanta Dyeing & Printing Mills
 
Citation: 2011 (263) ELT 331 (Guj.)
 
Issue:- Credit taken on fake invoices of non-existent supplier – no evidence adduced by Revenue showing involvement of assessee – Equal penalty cannot be imposed.
 
Brief Facts:- The respondent-assessee was registered as a manufacturer of man-made fabrics. It had availed of Cenvat credit on grey fabrics during March 2004. Subsequently, investigations revealed that the suppliers of grey fabrics who had issued the invoices, on the basis of which the assessee had availed credit, were found to be non existent/fake/bogus.
 
Accordingly, a show case notice was issued to the assessee wherein the Adjudicating Authority disallowed the credit taken on fake/forged invoices and imposed equal amount of penalty and demanded interest at the appropriate rate.
 
In appeal, the Commissioner (Appeals) partly allowed the appeal insofar as the same related to penalty and confirmed the demand of credit wrongly availed with interest. The Commissioner (Appeals) modified the Order-in-Original by substituting the penalty imposed under Section 13(2) to penalty under Rule 13(1) of CCR, 2002.
 
Being aggrieved, the Revenue has preferred appeal before the Tribunal which came to be dismissed. Hence, Revenue has filed this appeal before the High Court.
 
Reasoning of the Judgment:- The High Court perused the order of the Commissioner (Appeals) wherein a finding of fact was recorded that by failing to verify the writer of the invoices, by its acts and omissions, the assessee had facilitated the fraud. However, the evidence is not sufficient to conclude that the assessee was a party to the fraud. The Commissioner (Appeals) further noted that no investigations had been carried out to bring out that the assessee was party to fraud or that the Cenvat Credit had been availed in contravention of the Rules with intention to evade central excise duty. It was observed that though the Adjudicating Authority has concluded that the acts and contravention were committed by the assessee by suppression of facts with intent to avail inadmissible credit, there was no mention of any specific suppression. According to the Commissioner [Appeals], the conclusion of suppression of facts with intent to avail wrong credit was based on conjunctures and surmises and not on any solid evidence, and as such, the finding of the Adjudicating Authority based on which mandatory penalty had been invoked was not just and proper.
 
The High Court observed that it is in the aforesaid backdrop that the Commissioner had thought it fit to hold that the assessee was more appropriately liable for penalty under Section 13 (1) of the Cenvat Credit Rules, 2002 (the Rules) rather than section 13 (2) thereof.
 
The High Court also perused the order of the Tribunal wherein the Tribunal had confirmed the findings recorded by the Commissioner (Appeals) and had held that the assessee can be found fault with for not taking reasonable steps as contemplated under Rule 7 of the Rules, but it cannot be held liable to pay penalty under Section 11AC of the Act.
 
Thus, the High Court held that both the Commissioner [Appeals] as well as the Tribunal have, upon appreciation of evidence on record, found, as a matter of fact, that the evidence on record was not sufficient to conclude that the assessee was a party to the fraud and that there was nothing to indicate that the assessee had availed or Cenvat credit in contravention of the Rules with intention to evade central excise duty. Based upon the aforesaid finding of fact, the Tribunal has held that the assessee would be liable to penalty under Rule 13 (1) of the Cenvat Credit Rules, 2002 and not under section Rule 13 (2) of the Rules.
 
The High Court then referred to the provisions of Rule 13 of the Cenvat Credit Rules, 2002 and held that from a reading of the said Rule it is apparent that the same can be invoked in a case, where the CENVAT credit has been taken or utilized wrongly on account of fraud, willful mis-statement, collusion or suppression of facts, or contravention of any of the provisions of the Act or the rules made thereunder with intention to evade payment of duty, in which case the manufacturer would be liable to pay penalty in terms of section 11AC of the Act. Thus, a condition precedent for invoking the provisions of sub-rule (2) of rule 13 of the Rules there should be a finding to the effect that the manufacturer has taken or wrongly utilized the CENVAT credit on account of fraud, willful mis-statement, collusion or suppression of facts, or contravention of any of the provisions of the Act or the rules made thereunder with intention to evade payment of duty.
 
Examining the facts of the present case in the light of the aforesaid statutory provision, both the Commissioner (Appeals) as well as the Tribunal have recorded concurrent findings of fact to the effect that evidence on record is not sufficient to conclude that the assessee is a party to the fraud. It has also been recorded that the findings of the Adjudicating Authority that there is suppression of facts with intent to avail wrong credit is based on conjectures and surmise and not on solid evidence. On behalf of the Revenue, nothing has been pointed out to dislodge the concurrent findings of fact recorded by both the appellate authorities. In the light of the aforesaid concurrent findings of fact recorded by both, the Commissioner [Appeals] as well as the Tribunal, it is apparent that the conditions precedent for invoking the provisions of Rule 13 (2) of the Rules are clearly not satisfied. In the circumstances, no infirmity can be found in the impugned order of the Tribunal so as to warrant interference.
 
Decision:- Appeal dismissed.
 
Comments:- This is very good decision wherein it is held that the penalty cannot be imposed on the assessee taking the credit unless it is established that he was also involved in fraud on issuing fake invoices.  
 

***********

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