Invoice Without Actual Supply: CESTAT Sustains Penalty on Director for Facilitating Irregular CENVAT Credit [Read Order]

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has sustained the imposition of penalty on a director for his involvement in facilitating irregular availment of CENVAT credit through issuance of invoices without actual supply of goods while granting partial relief by reducing the quantum of penalty.

The Tribunal upheld the penalty under Rule 26 of the Central Excise Rules, 2002 holding that issuance of invoices without actual movement of goods attracts penal consequences. However, considering the limited role of the appellant, the penalty was reduced from ₹10 lakh to ₹1 lakh.

The appellant, Shri Krishna Gopal Rathi, Director of Rathi Steel Industries Pvt. Ltd. was penalized for allegedly issuing excise invoices describing goods as TMT Bar Cutting/MS Round Cutting without actual delivery. The department alleged that the transactions were fictitious and intended to enable Shyam Sel and Power Ltd. to avail fraudulent CENVAT credit.

Investigation revealed discrepancies in pricing, absence of infrastructure such as electricity for cutting operations, and non-verifiable transport details raising doubts about the genuineness of the transactions.

The appellant had contended that the goods had been properly supplied and accepted by the buyer, and that the department had failed to provide conclusive evidence that the goods had not been supplied. The appellant had also contended that as the buyer had already paid the duty under the VCES the penalty imposed on the co-noticee was not called for.

The revenue department on the other hand had contended that the transactions had been mere paper transactions and the statements and the circumstances had supported the same along with the lack of infrastructure and the dubious nature of the transportation records.

It was noted by the Tribunal that the infrastructure in the appellant’s premises was lacking and the nature of the transactions was dubious and that the statements and the investigation reports indicated that the invoices had been issued without the actual supply of the goods and this had facilitated the giving of wrongful credit.

The Bench comprising R. Muralidhar (Judicial Member) and K. Anpazhakan (Technical Member) concluded that penalty was justified under Rule 26 but warranted reduction in quantum considering the appellant’s limited role.

Accordingly, the appeal was partly allowed.

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates