CENVAT Credit was rightly disallowed since Respondent was Beneficiary of Fake Invoices [Read Order]

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Delhi bench has held that the department rightly disallowed the cenvat credit to the Company considering the fact that the company was a beneficiary of fake invoices.

The respondent was engaged in the manufacture of M.S. Ingot and Bars and availed CENVAT credit claiming that the inputs were used for manufacture of the final products. The department rejected the claim stating that the credit had been used fraudulently on fake invoices received without receiving the goods from the so-called manufacturers and dealers.

On appeal, the Commissioner (Appeals) held that the invoices had been issued fraudulently still proceeded to grant relief to the respondent by holding that they were not bogus or fake and, therefore, CENVAT credit taken on the basis of such invoices are admissible.

CESTAT President Justice Dilip Gupta and Technical Member Mr. P V Subba Rao overruled the order of the first appellate authority and observed that “M/s Aditya Enterprises was not in existence; M/s Shree Ram Engineering & Casting was not a manufacturing unit and in fact was engaged in construction of residential apartments; and M/s Ganesh Udyog and M/s L.S. Construction were not found on the mentioned address. It is clearly established that neither these firms were engaged in the manufacture of goods nor they had sold or cleared the goods but had generated invoices only for the purpose of passing CENVAT credit. It is also difficult to accept the finding of the Commissioner (Appeals) that the respondent was not a party to the fake transactions. It is only the respondent who was to gain by adoption of such a mode and, therefore, the conclusion that even though only invoices were received by the respondent without the goods, the respondent had no role to play is perverse. The respondent may have received the raw materials for manufacturing purposes, but there is nothing to link the said purchase of the raw material with the invoices against which CENVAT credit was taken by the respondent. It was imperative for the respondent to establish the purchase of such raw materials with the invoices issued by the aforesaid firms.”

To Read the full text of the Order CLICK HERE

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