COMMISSIONER OF CENTRAL EXCISE Vs. SHREE VINAYAK MILLS

JUDGEMENT

(1.) M /s. Shree Vinayak Silk Mills, Surat are engaged in the manufacture of processed manmade fabrics. It was detected that they had availed cenvat credit on the invoices issued by 12 units or suppliers of grey fabrics totally amounting to Rs. 6,89,682/ -. Subsequent enquiries showed that these units or suppliers did not exist. Since the invoices appeared to be fake, the availment of cenvat credit was incorrect and required to be recovered. On adjudication, the original adjudicating authority confirmed the duty and imposed mandatory penalty, penalty on the partner ordering recovery of interest payable. On appeal, the Commissioner (Appeals) confirmed the demand of duty, interest and reduced the penalty imposed on the unit. The penalty imposed on the partner was set aside. The Revenue filed an appeal against this order. It was submitted that considering the gravity of fraud there is no reason to reduce the penalty less than the central excise duty involved even if the provisions of Rule 13(1) of Cenvat Credit Rules, 2004 to be invoked. The Revenue contended that the Commissioner (Appeals) in para 6 of his order found that the complete transaction involving supply of goods were against forged "invoice and an attempt to admit cenvat credit against such documents would perpetuate the fraud, does not permissible in law. Finally, it was contended by the Revenue that the original adjudicating authority has correctly imposed penalty equal to duty demanded/invoking section 11AC and even if penalty is held to be invoked under Rule 13(1) of Cenvat Credit Rules, 2002 it cannot be less than the central excise duty involved applicable in cases of fraud, wilful mis -statement etc. A harmonious ruling of Rule 15(1) and 15(2) is necessary. It was prayed by the Revenue that the Order -in -Appeal may be quashed and the original order may be restored.

(2.) THE defence of the respondents was that they were a bona fide job worker and keep trust on the merchant manufacturers. They had received grey fabrics along with excise invoices with challans of traders and entire transactions duly recorded by them in the records. It was argued that they had taken all reasonable steps as given in Rule 9(3) of Cenvat Credit Rules, 2002.

(3.) COMMISSIONER (Appeals) in para 6 of the Order -in -Appeal also has observed that forged document is null & void ab initio and forgery cannot be ratified, for a forger does not act, and does not purport to act. Further, fraudulent and forged invoice whose writer is fictitious person vitiates the complete transaction involving supply of goods against such forged invoice.