Description of Goods in Dealers’ Invoice and Inward Notes Insufficient to Suspect availment of Fraudulent Credit: CESTAT [Read Order]


The Customs, Excise and Service Tax Appellate Tribunal ( CESTAT ), Chennai has held that the allegation of availment of fraudulent credit cannot be made only on the basis of the description of the goods in the invoice and the material inward notes.

The appellants engaged in the manufacture of cast articles of iron and steel and are having Central Excise registration. They purchased inputs from central excise registered dealers under the CENVAT credit scheme and availed the credit of such inputs. After the investigation, the department expressed a view that the appellant had availed fraudulent credit of inputs. Show cause notice was issued for demanding an amount of Rs.2,78,814/- and also proposing to impose an equal penalty under section 11AC of the Central Excise Act, 1944. Both the original and the first appellate authority upheld the demand and penalty.

The issue is with regard to 24 invoices out of the 47 invoices that are related to the transaction by M/s. Kovai Scrap Traders. The appellant has furnished the details of such invoices. The goods are mentioned as waste and scrap. The appellants also submitted that though they had placed a purchase order for CI borings, the supplier/dealer had mentioned the goods in the invoices as ‘waste and scrap’. In common parlance, CI borings would fall under waste and scrap and the Tariff heading 72044900 would apply for CI borings also.

On the second appeal, the Tribunal noted that there is no different central excise duty with regard to CI borings and waste and scrap.

“On such score, I cannot find any reason for the appellant to have any intention to avail fraudulent credit. The very variation in the description of the goods in the dealers’ invoice, as well as the material inward notes, cannot be a ground for alleging that the appellant has availed fraudulent credit. There is no allegation with respect to the difference in the quantity of the goods received. It is only with regard to the variation in the description of the goods in the dealer’s invoice. It is also important to note that though the department has relied upon the statement of Shri Selva Lakshmanan, the said person has not been put to cross-examination even though the appellant had requested for the same. Taking into consideration all these facts, I am of the view that the demand cannot sustain,” the Tribunal said.

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