CESTAT reduces Penalty for wrongly availing CENVAT Credit on Invoices without Actual Receipt of Inputs [Read Order]

The Ahmedabad Bench of Customs, Excise and Service Tax Appellate Tribunal has reduced the penalty for wrongly availing CENVAT credit on invoices without actual receipt of inputs.

Based on the intelligence, an investigation was undertaken against M/s Nisha Industries which revealed that the appellant had wrongly availed CENVAT credit on invoices without actual receipt of inputs; that the finished goods were found at both the manufacturing and dealer’s premises which were not accounted for; that the finished goods were also removed without payment of duty. 

The appellant herein is one of the suppliers of the said Cenvatable inputs on which M/s Nisha Industries had availed Cenvat Credit allegedly without actual receipt of goods. A show cause notice was issued to M/s Nisha Industries along with other notices including the present appellant. The said Show Cause Notice in addition to proposing the demand of wrongly availing of Cenvat Credit from M/s Nisha Industries, also proposed penalty on the appellant. The adjudicating authority vide order dated 07.03.2011 imposed a penalty of Rs. 12.96 lacs under Rule 26(2) of the Central Excise Rules, 2002 on the appellant.

The entire case was made out on the basis that the vehicles which were shown to have transported the goods were not capable of transporting such bulky goods. 

The appellant’s defense on this is that there is a clerical error in mentioning the vehicle no.; that instead of GJ 2V 5889, dispatch clerk wrote the vehicle no. as GJ 2Y 5889. Similarly, instead of GJ 18U 1999, it should be GJ 8U 1999.

The coram of Judicial Member, Ramesh Nair found that there is no corroboration to this submission of the appellant that whether the goods were transported through the vehicle claimed by them. Therefore, this defense of the appellant is of no help to them. It is also a fact on record that M/s Nisha Industries who had availed the Cenvat Credit against the demand of Cenvat Credit amount, had opted for the Sabka Vishwas (Legacy & Dispute Resolution) Scheme, 2019. Though the opting of SVLDRS should not have any bearing on the other cases who are contesting before this Tribunal, it shows that M/s Nisha Industries has accepted the demand of fraudulent Cenvat Credit. Accordingly, the appellant is liable for penalty under Rule 26 (2) for wrongly passing of the credit. 

However, the CESTAT held that the penalty imposed is the maximum amount which is provided in the Rule 26 (2) (ii). The appellant deserves some leniency on the quantum of penalty. Accordingly, the penalty was reduced from Rs. 12,94,547/- to Rs. 5,00,000/-.

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