Gujarat High Court
Shiv Enterprises vs The Commissioner Of Central Excise & ... on 13 January, 2015
Author: R.P.Dholaria
Bench: Vijay Manohar Sahai, R.P.Dholaria
O/TAXAP/865/2007 JUDGMENT
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
TAX APPEAL NO. 865 of 2007
FOR APPROVAL AND SIGNATURE:
HONOURABLE THE ACTING CHIEF JUSTICE MR. VIJAY MANOHAR
SAHAI
and
HONOURABLE MR.JUSTICE R.P.DHOLARIA
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1 Whether Reporters of Local Papers may be allowed to see
the judgment ?
2 To be referred to the Reporter or not ?
3 Whether their Lordships wish to see the fair copy of the
judgment ?
4 Whether this case involves a substantial question of law as
to the interpretation of the Constitution of India, 1950 or any
order made thereunder ?
5 Whether it is to be circulated to the civil judge ?
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SHIV ENTERPRISES....Appellant(s)
Versus
THE COMMISSIONER OF CENTRAL EXCISE & CUSTOMS....Opponent(s)
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Appearance:
MR HARDIK P MODH, ADVOCATE for the Appellant(s) No. 1
MR GAURANG H BHATT, ADVOCATE for the Opponent(s) No. 1
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CORAM: HONOURABLE THE ACTING CHIEF JUSTICE MR.
VIJAY MANOHAR SAHAI
Page 1 of 5
O/TAXAP/865/2007 JUDGMENT
and
HONOURABLE MR.JUSTICE R.P.DHOLARIA
Date : 13/01/2015
ORAL JUDGMENT
(PER : HONOURABLE MR.JUSTICE R.P.DHOLARIA)
1. This tax appeal has been preferred under Section 35-G of the Central Excise Act, 1945 being aggrieved by the order passed by the Customs, Excise and Service Tax Appellate Tribunal, West Zone Bench at Mumbai in Appeal No.E/2489/05-Mum. The tax appeal has been admitted on the following two substantial questions.
"a. Whether penalty under Rule 13 can be imposed upon the dealer when he has not dealt with the inputs or capital goods?
b. Whether penalty can be imposed in a situation where order demanding from the appellant credit wrongly availed is set aside."
2. We have heard Mr.Hardik Modh, learned counsel for the appellant and Mr.Gaurang Bhatt, learned counsel for the respondent.
3. Precise facts of the case may be stated that the appellant M/s Shiv Enterprise, proprietary concern is engaged as a dealer of dutiable excisable goods and has been granted provisional registration No.370104/D/145/2003 Page 2 of 5 O/TAXAP/865/2007 JUDGMENT dated 12.6.2003. It was the case of the department that M/s Shiv Enterprise has wrongly availed cenvat credit amounting to Rs.7,36,707/- under Rule 3 of Cenvat Credit Rules 2002 on the invoices issued by M/s Ankit Textiles, a manufacturer with provisional registration No.370104/M/537/2003 dated 16.7.2003. It was further alleged by the department that M/s Ankit Textiles which was supposed to have supplied polyester grey fabric was found to have given fake/fictitious address.
4. The show cause notice was issued narrating contravention of Cenvat Credit Rules 2002 to the present appellant directing to show cause as to why penalty of equivalent amount of availing cenvat credit of Rs.7,36,707/- should not be imposed upon it. Upon the show cause notice, the present appellant gave explanation and claimed that M/s Shiv Enterprise did not know M/s Ankit Textiles or its proprietor and they have transacted through the agent and paid 73 cheques amounting to Rs.81,03,777/-.
5. The authorities below as well as learned Tribunal while considering the aforesaid explanation tendered by the present appellant have recorded the finding that indisputably the present appellant has not denied the fact that registration certificate given by the department to M/s Ankit Textiles is not disputed. It is also Page 3 of 5 O/TAXAP/865/2007 JUDGMENT proved that cheques were being paid to the aforesaid M/s Ankit Textiles. It is also not disputed that the present appellant maintained the record and has passed on the credit taken by them as a dealer. Rule 7(2) clearly provides that reasonable precaution should have been taken by the person who takes credit. When the present appellant has availed cenvat credit without verifying genuineness of his counter part M/s Ankit Textiles itself is indicative of contravention of Cenvat Credit Rules 2002. Rule 13 empowers for imposition of penalty not exceeding on excisable goods in respect of which any contravention has been committed.
6. The authorities below as well as learned Tribunal have considered the factual scenario in its proper perspective and has clearly recorded the finding that availment of cenvat credit on the part of the present appellant is a clear case of fraud committed by M/s Ankit Textiles. The fraud vitiates entire transaction. When M/s Ankit Textiles cannot be held valid to enable credit by the dealer as it itself fictitious because the present dealer has purchased from M/s Ankit Textiles who is no more in existence and fictitious firm and, therefore, the present appellant could not have availed cenvat credit and, therefore, the authorities below as well as learned Tribunal have rightly confirmed ultimately by reducing the amount of penalty from Page 4 of 5 O/TAXAP/865/2007 JUDGMENT Rs.7,36,707/- to Rs.2,00,000/- which, in our view, is in consonance with the allegations levelled against the present appellant and proved fact in view of the clear provisions of the Cenvat Credit Rules, 2002. We answer both the questions against the appellant - assessee and in favour of the respondent department. The appeal is accordingly dismissed. There shall be no order as to costs.
(V.M.SAHAI, ACJ.) (R.P.DHOLARIA,J.) pathan Page 5 of 5