The Bombay High Court upheld the penalty against importer for availing inadmissible cenvat credit.
The bench of Justice M. S. Sonak and Justice Jitendra Jain has observed that the Appellant cleared the said Vinyl Acetate Monomer to their customers directly from the said Custom BondedWarehouse but maintained the records in such a manner that the said raw material was received in the factory and subsequently cleared from the factory without bringing the said goods into the factory. It was done to take Cenvat Credit of the admissible duties and issue a central excise invoice to clear the same to their customers by debiting the Cenvat Credit account and passing on the credit to their customers.
The Appellant is engaged in the manufacture of polymer emulsions, which are used in paint, textiles and adhesive industries. For the product’s manufacture, the primary raw material, i.e., Vinyl Acetate Monomer, is imported by the Appellant and stored in Customs Bonded Warehouses.
The Appellant cleared the said Vinyl Acetate Monomer to their customers directly from the said Custom Bonded Warehouse but maintained the records in such a manner that the said raw material was received in the factory and subsequently cleared from the factory without bringing the goods into the factory.
This was done to take Cenvat Credit of the admissible duties and issue a central excise invoice to clear the same to their customers by debiting the Cenvat Credit account and passing on the creditto their customers. This modus operandi was unearthed by the Respondent-Revenue.
After a detailed investigation, a show cause notice was issued by invoking a larger period of limitation since, according to the Respondent-Revenue, there was suppression, fraud etc. on the part of the Appellant-Assessee in doing so.The show cause notice and the statement recorded of the Appellant’s representative and its customers were also enclosed.
The show cause notice came to be adjudicated by the Commissioner of Central Excise, Thane, who passed an order disallowing the Cenvat Credit wrongly availed and utilised by the Appellant during the period August 2009 to September 2012 and ordered the recovery of the said amount. By this order, a penalty of Rs.6,82,11,154 was also imposed on the Appellant under Rule 15(2) of the Cenvat Credit Rules, 2004,read with Section 11AC of the Central Excise Act, 1944.Â
The Commissioner also imposed a penalty on theManaging Director and ordered the reversal of other Cenvat Credit with which we are not concerned in the present appeal since the relief on the other issues has been granted by the Tribunal.
The Appellant appealed to the Tribunal. The Tribunal, confirmed that the Order, whereby Cenvat Credit of Rs.5,63,66,047 was disallowed and ordered to be recovered along with interest and penalty, was set aside. Insofar as other demands and penalties are concerned, the same were set aside.
The court noted that Appellant used to clear the imported goods directly from the customs bonded warehouse and send them to its customers. Still, the records were maintained in such a manner that they reflect that the goods entered theAppellant’s factory premises and left the factory premises for the customer’s destination. Based on the excise invoices raised by the Appellant, the customers used to take Cenvat credit. There is no dispute that unless the goods enter the factory premises and leave the factory premises, Cenvat Credit cannot be taken.
The court while dismissing the appeal of the importer held that the basis of confirming the penalty is in paragraph 5 wherein the modus operandi of the Appellant for availing and passing on Cenvat Credit to its customers which was exposed by the investigation team and confirmed by the adjudicating officer also got reconfirmation by the Tribunal. The invocation of a larger period of limitation on account of suppression, fraud etc. has become final since ground not having been argued as per theTribunal’s order which does not mention so, there does not seem to be any infirmity in Tribunal’s order on confirming penalty.
Case Details
Case Title: M/s. Visen Industries Limited Versus Commissioner of Central Excise, Thane
Case No.: Central Excise Appeal No.35 Of 2024
Date: 14 December 2024
Counsel For Appellant: Vikram Nankani
Counsel For Respondent: Ram Ochani
