The Kolkata bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has held that a larger period of limitation under section 11A(1) of the Central Excise Act could not proceed unless the holder for valuable consideration shown to be a party to fraud.
M/s.Jai Balaji Industries Limited, the appellant challenged the order passed by the Commissioner of Central Excise, Bolpur wherein he confirmed duty of Rs.1,43,31,998/- under Section 11A(2) of Central Excise Act, 1944 and also imposed penalty under Section 11AC of Central Excise Act, 1944.
The Appellant is an integrated steel plant. As a part of the expansion as well as forward integration, they purchased plant and machinery from one M/s.Saha Industries during the aforementioned period on the strength of duty paid invoices and took Cenvat credit on capital goods. The said M/s.Saha Industries was duly registered with the Central Excise Department and was also registered under the West Bengal Value Added Tax Rules, 2005.
The Officers of the Anti-Evasion Unit visited the premises of M/s.Saha Industries and gathered by the officers that the unit of M/s.Saha Industries was operating from a small factory of about 300 sq. ft and concluded that M/s.Saha Industries had poor infrastructure and auxiliary machinery.
Therefore it was not possible to consume huge quantities of inputs and to manufacture huge quantities of sophisticated and automated machinery shown in their finished goods. The statements of some of the transporters were also recorded to substantiate the said allegation. An expert opinion of a Chartered Engineer from August 2008 was also obtained and relied upon.
As a follow-up, the unit of the Appellant was also visited on 02-04-2008 and a statement of Shri Niranjan Gourisaria, Senior General Manager was recorded wherein he stated that the goods were delivered by M/s.Saha Industries to them and freight was paid by the said M/s.Saha Industries.
A Show Cause Notice (SCN) was issued to the Appellant. It was alleged that the Appellant never received any goods from M/s.Saha Industries but they had availed Cenvat credit wrongly and irregularly on the strength of fake invoice issued by the said M/s.Saha Industries through which capital goods were shown to have been purchased/procured by them.
It was evident from the report of the Chartered Engineer that M/s. Saha Industries had no infrastructural capacity to manufacture the finished goods mentioned in their invoices. It was alleged that the Appellant had utterly failed to verify the antecedents of the supplier manufacturer, M/s.Saha Industries, as the onus of verifying the same to avail Cenvat credit, entirely lies upon the recipient as envisaged in Rule 7(2) of the said CenvatCredit Rules,2002 / Rule 9(3) of the said CenvatCredit Rules,2004.
The assessee worked for nearly two years and made a clearance of whopping Rs.80.11 crores. It cannot be denied that during those two years, the departmental officers would have visited the said unit several times. The Central excise department would not have allowed the said unit to function for nearly two years, the CESTAT held.
It has been held that even if the original document was issued by the supplier of the inputs even by practising fraud, a holder for valuable consideration unless shown to be a party to a fraud, could not be proceeded with by taking the aid of a larger period of limitation as indicated in Section 11A(1) of the Act.
“Since there was no evidence that even if the goods were not manufactured by M/s.Saha Industries the fact remained that the same was duly received by the Appellant and M/s.Saha Industries have duly discharged the central excise duty on the same,” the two-member bench comprising of Shri P.K Choudhary, Member(Judicial) and Shri K Anpazhakan, Member(Technical).
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