Denial of Cenvat credit on the basis of fake invoices.

PJ/CASE LAW/2015-16/2700

Case:- NEELKANTH STEEL & AGRO INDUSTRIES VERSUS COMMR. OF C. EX., CHANDIGARH

Citation:-2015(317) E.L.T. 322(Tri. –Del.)

Issue:- Denial of Cenvat credit on the basis of fake invoices.

Brief facts:- The appellant are manufacturers of round and squares from MS ingots. They took CENVAT credit of Rs. 2,88,289/- during November 2005 on the basis of seven invoices regarding supply of steel ingots issued by a registered dealer M/s. Sidh Balak Enterprises, Mandi Govindgarh. The invoices issued by M/s. Sidh Balak Enterprises show the manufacturer of the goods as M/s. JAS Casting Pvt. Ltd., Rajpura. The Department had earlier conducted investigation in respect of M/s. Sidh Balak Enterprises, Mandi Govindgarh, vis-à-vis their transaction with M/s. Jay Aay Alloys, Kala Amb and in course of investigation it had come out that the Proprietor of M/s. Sidh Balak Enterprises is one Shri Sachin, that he had obtained Central Excise registration as registered dealer in the name of two other firms also and that he had neither any office premises nor any godown premises, and that he had taken godown on rent sometime in May 2004 but had surrendered the same in July 2004 and as such during the period of dispute, he had neither any office nor any godown. Since the invoices issued by M/s. Sidh Balak Enterprises to the appellant showed the manufacturer of the goods as M/s. JAS Castings, Rajpura and there was substantial time gap between the date on which the goods were supplied by M/s. JAS Casting to M/s. Sidh Balak Enterprises and the date on which the invoice was issued by M/s. Sidh Balak Enterprises to the appellant and since M/s. Sidh Balak Enterprises had no godown premises, it appeared that the transaction of M/s. Sidh Balak Enterprises with M/s. JAS Casting and also the transaction between M/s. Sidh Balak Enterprises with and the appellant were bogus transactions and, as such, no goods had been supplied by M/s. Sidh Balak Enterprises to the Appellant under the seven invoices, in question, on the basis of which the Cenvat credit had been taken by the appellant company. Accordingly, on this basis, the Jurisdictional Assistant Commissioner vide order-in-original dated 30th April 2010 confirmed the Cenvat credit demand of the amount as mentioned above, alongwith interest and imposed penalty of equal amount on the appellant. On appeal being filed to Commissioner (Appeals), this order of the Assistant Commissioner was upheld vide order-in-appeal dated 12-10-2011 against which this appeal has been filed.

Appellant’s contention:-Ms. Sukriti Das, Advocate, the learned Counsel for the appellant, pleaded that the appellant had received MS Ingots, in question, under seven invoices from a registered dealer M/s. Sidh Balak Enterprises, Mandi Govindgarh who, in turn, had received the goods from M/s. JAS Casting Pvt. Ltd., Rajpura, that no inquiry has been conducted by the Department with M/s. Sidh Balak Enterprises, that the entire case of the Department is based on the investigation in respect of the transactions between M/s. Jay Aay Alloys Pvt. Ltd., Kala Amb and M/s. Sidh Balak Enterprises, that just because the transactions between M/s. Jay Aay Alloys & Kala Amb and M/s. Sidh Balak Enterprises, Mandi Gobindgarh were bogus transactions, it cannot be presumed that the transaction between JAS Casting Pvt. Ltd., Rajpura and M/s. Sidh Balak Enterprises were also Bogus transaction, that the goods supplied by M/s. Sidh Balak Enterprises to the appellant had been procured by them from M/s. JAS Casting Pvt. Ltd., that in absence of any evidence to the contrary, it cannot be presumed that M/s. JAS Casting Pvt. Ltd. had issued only bogus invoice without supply of any goods when there is no evidence in support of this allegation and that in view of this, the impugned order is not sustainable. Ms. Sukriti Das also cited the judgment of the Tribunal in the case of Talson Mill Store v. CCE, Ludhianareported in 2012 - TIOL - 1267 - CESTAT - DEL. wherein the Tribunal has held that when the Revenue has not conducted inquiry either from the assessee or from the transporter or the actual manufacturer of the goods or from the recipient of the goods, in absence of such investigation reliance, on the sole statement of one dealer, which in any case does not apply to the goods dealt with by the assessee, cannot be appreciated.

Respondent’s contention:-Shri R.K. Mishra, the learned DR, defended the impugned order by reiterating the findings of the Commissioner (Appeals) and pleaded that the Proprietor of the M/s. Sidh Balak Enterprises is Shri Sachin who in his statement has clearly admitted that he has obtained Central Excise registration as registered dealer in the name of several firms including M/s. Sidh Balak Enterprises, that he had rented godown sometime in May, 2004 but the same was surrendered in July, 2004 and as such, there was neither any office nor any godown at Mandi Govindgarh and he was operating through his mobile phone which he also kept changing frequently, that though no specific inquiry in respect of the transactions of M/s. Sidh Balak Enterprises with M/s. JAS Casting Pvt. Ltd., Rajpura has not been conducted, there is big gap between the time when M/s. JAS Castings issued invoices for ingots to M/s. Sidh Balak and the time when M/s. Sidh Balak issued invoices to the appellant and since M/s. Sidh Balak Enterprises had no godown during that period, it is unconceivable that the ingots supplied to the appellant company were purchased by M/s. Sidh Balak from M/s. JAS Casting Pvt. Ltd., that from the circumstances of the case, it is clear no goods have been supplied by M/s. Sidh Balak Enterprises to the appellant and as such only the invoices have been issued and that in view of this, there is no infirmity in the impugned order.

Reasoning of judgement:- The Cenvat credit, in question, has been taken by the appellant on the basis of seven invoices issued by M/s. Sidh Balak Enterprises, Mandi Gobindgarh to the appellant during November 2004 and December 2004. All these invoices mention, name of the manufacturer from whom the goods supplied to the appellant had been procured as “M/s. JAS Casting Pvt. Ltd.” and also details of the invoices issued by M/s. JAS Casting to M/s. Sidh Balak Enterprises. From the details of the invoices issued by M/s. JAS Casting, Rajpura to M/s. Sidh Balak Enterprises it is clear in each case there is big time gap of more than two weeks between the date which the invoices had been issued by M/s. JAS Casting to M/s. Sidh Balak Enterprises and the date on which the invoices had been issued by M/s. Sidh Balak to the appellant. When the appellant had no office or godown, it is difficult to believe as to how and where the goods had been stored. In view of this, the burden of proof that the goods had actually been received by the appellant company would shift to them. The appellant company in this regard has not produced any evidence. In view of this, they hold that the transactions of the appellant company with M/s. Sidh Balak Enterprises are bogus and as such no goods had been received by them and hence the Cenvat credit has been rightly denied. Therefore, in view of this, there is no infirmity in the impugned order. The appeal is dismissed.

Decision:- Appeal dismissed.

Comment:- The analogy of the case is that when the facts of the case indicate that fake cenvat credit has been passed on, the burden to prove that the credit was availed legitimately shifts on to the assessee. In this case, fake invoices were issued by dealer without supply of goods. Dealer was not having any office or godown for storing goods supplied to appellant and operating through mobile phone only. There was also big time gap of more than two weeks between date of issuance of invoices by manufacturer to dealer and invoices issued to appellant by dealer. Therefore, due to lack of evidence of genuineness of the transactions, they will be treated as bogus and credit will be deniable.

Prepared by:- Monika Tak

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PJ/CASE LAW/2015-16/2700

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