DIWAN BROTHERS Vs. UNION OF INDIA

JUDGEMENT

(1.) Petitioner is an exporter-manufacturer. During the course of its activities, the petitioner purchased certain raw materials for manufacturing of cloth. The petitioner claimed rebate. Since the adjudicating authority was of the opinion that rebate could not be granted, he issued show cause notice dated 18th July, 2006. In the notice, it was pointed out that there was a large scam unearthed in Surat regarding fraudulent rebate claims where the exporters had submitted bogus bills and documents. It was stated that during the investigation of fraudulent rebate claim cases, other modus operandi was also detected. It was noticed that number of persons who had obtained registrations as manufacturers had issued various central excise duty paying invoices without any movement of goods and in fact no goods were sold by them. It was, therefore, stated that as per the Department, the petitioner had purchased the goods from various firms which were either declared fake or had purchased the goods from fake, bogus or non-existent firms. The petitioner was, therefore, put to notice why the rebate claim of Rs. 14,49,000/- should not be rejected and penalty under Rule 15(2) of the Cenvat Credit Rules should not be imposed. The petitioner opposed the show cause notice and raised several contentions. A detailed reply through the petitioner's advocate was sent on 16th May 2007. It was primarily contended that proper documents for claiming rebate were filed and actual export was made and rebate therefore in any case cannot be denied.

(2.) The adjudicating authority repelled the contentions of the petitioner and passed order on 22nd June, 2007 rejecting the rebate claim. It was held that the petitioner had taken Cenvat credit, namely on the inputs, viz. grey fabrics received from M/s. Gajanand Textiles located at Plot No. 7301 in GIDC Sachin and one M/s. Jagruti Textiles located at Ajanta Park Society, Surat and one Poonam Dyeing & Printing Mills, Pandesara, Surat. It was held that M/s. Gajanand Textiles was already declared as fake/bogus/non-existing firm. It was so declared in alert Circular dated 22-9-2005. With respect to Poonam Dyeing and Printing Mills, he held that the goods were purchased from M/s. Shree Hari Enterprises which in turn was declared fake and non-existing. With respect to Jagruti Textiles, it was held that upon verification, the report was negative. He, therefore, concluded that the petitioner should have taken reasonable steps to ensure correctness of the goods being duty paid and the burden lied on the petitioner to demonstrate that he had taken such care. In the present case, the petitioner had not taken any reasonable steps before taking credit. It was noticed that the invoice issued by Gajanand Textiles, Jagruti Textiles and Poonam Dyeing & Printing Mills and Qaswa Textiles were fake and fictitious and simply paper transactions to facilitate the petitioner to avail Cenvat credit for the duty described in the invoices which was not at all paid previously. It was, in short, held that the credit was claimed on the strength of fake invoices of the above suppliers.

(3.) Aggrieved by the order of the adjudicating authority, the petitioner approached the appellate authority. The Appellate Commissioner, dismissed the appeal and confirmed the order of the adjudicating authority making following observations: