Custom, Excise & Service Tax Tribunal
Shri Kashinath Das (Prop. Shiv Trading ... vs Commissioner Of Central Excise, Mumbai on 26 November, 2013
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT NO. I Application No. E/S/1670/10 in Appeal No. E/1519/10 (Arising out of Order-in-Appeal No. SB/127/Th-II/10 dated 24.5.2010 passed by the Commissioner of Central Excise (Appeals), Mumbai-II). For approval and signature: Honble Shri P.R. Chandrasekharan, Member (Technical) Honble Shri Anil Choudhary, Member (Judicial) ======================================================
1. Whether Press Reporters may be allowed to see : No the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? 2. Whether it should be released under Rule 27 of the : Yes CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? 3. Whether their Lordships wish to see the fair copy : Seen of the order? 4. Whether order is to be circulated to the Departmental : Yes authorities? ====================================================== Shri Kashinath Das (Prop. Shiv Trading Co.) Appellant Vs. Commissioner of Central Excise, Mumbai Respondent Appearance: Shri V.N. Ansurkar, Advocate for Appellant Shri Navneet, Addl. Commissioner (AR) for Respondent CORAM: SHRI P.R. CHANDRASEKHARAN, MEMBER (TECHNICAL) SHRI ANIL CHOUDHARY, MEMBER (JUDICIAL) Date of Hearing: 26.11.2013 Date of Decision: .2014 ORDER NO. Per: Anil Choudhary Heard the parties.
2. The brief facts lying in a narrow compass are that the appellant Shri Kashinath Das, obtained registration as Central Excise dealer (First Stage) in the firm name M/s Shiv Trading Company in January, 2004. Thereafter, he filed Nil return for the quarter ending March, 2004 and June, 2004 and upto 20.7.2004. Thereafter, he surrendered the Registration on 21.7.2004, that no business has been transacted during the registration period in the firm by its proprietor.
2.1 That the Revenue came to learn that one M/s Metro Industries have availed CENVAT Credit amounting to Rs.60,12,635/- on the basis of 39 invoices purportedly issued by the appellant. Similarly, it was revealed that one M/s Mansa Traders, Bhiwandi has availed CENVAT Credit to the tune of Rs.3,00,75,719/- and one M/s Accelerated Synthetics Pvt. Ltd. have availed CENVAT Credit to the tune of about Rs.41 lakhs on the strength of 24 invoices purportedly issued by the appellant. On cross-check made by the different department of the Revenue from the range officers, whether the appellant was registered, the Revenue learnt about the fraudulent nature of the credit availed as aforesaid.
2.2 That in the course of investigation, the Revenue learnt that the premise for which registration was sought by appellant was wrong and is fake. From the scrutiny of Bank account of the appellant firm, it was found that no transaction have taken place. The residential premises of the proprietor/appellant was searched and in the course of search the documents like copy of registration certificate, copy of the return filed, evidence of surrender of the registration certificate and rubber stamp of the firm was found. No other documents like, counterfoil of any invoice book and other documents in support of purchase and sale of any goods etc. was found. In the statement recorded on 6.4.2005, the appellant has stated/admitted the following facts: -
(i) He had registered a firm M/s Shiv Trading Company as its proprietor on the advice of one Shri Chandubhai Patel.
(ii) The address stated in the application form being B-204, Rishikesh Apartment, 100 Feet Road, Evershine Complex, Vasai (W), Dist. Thane is fictitious.
(iii) The said firm was supposed to do trading activity in grey fabrics. However, no activity took place in the said firm.
(iv) The bank account No. 3088 was opened in Bassein Catholic Co-operative Bank Ltd. and to the best of knowledge of the appellant, no business transaction took place.
(v) The bank account No. shown in the application for registration is a personal account with Punjab & Maharashtra Bank.
(vi) Registration of Shiv Trading Company was surrendered on 21.7.2004, as no activity had taken place, only return for the period of registration was filed.
(vii) As regards two rubber stamps found in the course of search in the name of J.P. Textiles, it was stated that it was a proposed firm, which was never opened.
(viii) As regards M/s Sofina Fashion, all the acitivites etc. were looked after by Shri Chandubhai Patel and his associate namely, Shri Pandey and Mukesh, who all belong to Surat.
(ix) In his further statement recorded on 17.1.2006, the following statements were made: -
On being shown invoices issued by M/s Shiv Trading Company in favour of M/s Accelerated Synthetics Pvt. Ltd., Bhiwandi, being 24 in number, it was categorically stated that the said invoices were not issued by him or by his firm to the best of his knowledge. It was further categorically stated that the signature appearing on the 24 invoices purportedly issued in favour of M/s Accelerated Synthetics Pvt. Ltd. are not the signature of Shri Kashinath Das and the same appear to be forged. It was further stated that Shri Kashinath Das does not know any person by the name of Sudhir Bhimrajka or Tulsidas Goyal or Leo Fernando.
2.3 The statement of Shri Tulsidas Goyal, Director of Accelerated Synthetics Pvt. Ltd. was recorded under Section 14 of the Act, wherein it was stated that all the transactions, which the appellant firm were arranged through Textile Broker, Shri Sudhir Bhimrajka, Surat having his office at Perfect Textile, New Textile Market, Ring Road, Surat and the transactions are usually done over telephone with him. And he has never personally known the person by the name of Shri Kashinath Das. It was further submitted that the payments were made through cheques in favour of Shiv Trading Company against the purchase of yarn for the value as per the 24 invoices in the question and these cheques where handed over to the said Sudhir Bhimrajka.
2.4 The other Director of M/s Accelerated Synthetics Pvt. Ltd., Shri Leo Fernando also stated that the transactions are through the broker, Shri Sudhir Bhimrajka. They have never known personally M/s Shiv Trading Company or its proprietor Shri Kashinath Das.
2.5 Pursuant to the investigations made by the Revenue, show-cause notice was issued to the appellant Shiv Trading Company asking to show cause as to why not penalty be imposed under the provisions of Rule 27 of the Central Excise Rules, 2002 for obtaining registration and issue of fake/bogus invoices without any movement of goods to facilitate others in availing illegitimate CENVAT Credit.
3. Vide Order-in-Original dated 31.3.2009, the show-cause notice was adjudicated, imposing the penalty of Rs.4,05,93,445/- on Shri Kashinath Das under Rule 26(2) of Central Excise Rules, 2002 by recording the following findings by the Assistant Commissioner: -
(i) The appellant in his statement dated 6.4.2005 has admitted that he obtained Central Excise Registration in the name of Shiv Trading Company as its proprietor, by giving fictitious address.
(ii) So far Bank account is concerned, in the application for registration filed in January, 2004, the A/c No. was shown as 3088 whereas as per the Bank statement, the account was opened on 12.5.2004. Thus, they are aware of the manipulation in maintenance of records in such manner to show that no transaction took place during the period of registration.
(iii) Although the appellant had denied issue of invoices to any of the alleged buyers and more particularly to M/s Accelerated Synthetics Pvt. Ltd., the signature on the invoices was also categorically denied by the appellant as being not made by him. The adjudicating authority found that rubber stamp for Shiv Trading Company ., Proprietor affixed on the invoices is same as that bearing on the Central Excise Returns filed by the appellant at Range Office. It cannot be a mere coincidence, more so because the appellant had not employed any person for looking after day-to-day work, who might have done in mischief and forgery etc. Further, when the invoice of Shiv Trading Company with bogus address as per the registration certificate as well as rubber stamp were found in the custody of the appellant in the course of search, no one else can issue the invoice in question as because who else can be benefited by the issue of bogus invoices in question.
(iv) The appellant is silent about the invoice book brought into use and rubber stamp affixed on the invoices.
(v) It cannot be a mere coincidence that all these invoices were issued for availing bogus CENVAT Credit and issued during the same period for which the appellant was holding Central Excise Registration for the period of about six months.
(vi) As per the statement recorded of Shri Tulsidas Goyal, Director of M/s Accelerated Synthetics Pvt. Ltd. (one of the buyers) who has stated that the purchase were made through the broker and payments were also made by cheque through the broker and had filed the list of 120 cheques issued against the 24 invoices in question in favour of the appellant firm. The question arises as to whether these cheques have been encashed, in absence of any transaction in the appellants account. There are numerous possibilities for non appearance/non-credit of the cheques issued by buyers of goods from the appellant. The account would have been opened with the same account number earlier also and was closed prior to 12.5.2004 and are opened with the same account number. Secondly, it is not uncommon in textile market to issue cross-bearer cheques, which are not credited directly in the account of the payee whose names appear on the cheque, but it can be issued/given to any broker/person to whom the payment is due and it is very difficult to trace out as to who has finally enacashed the said cross-bearer cheques.
(vii) Third possibility is that the appellant might be having one or more bank account, which was not disclosed to the Revenue, nor could be traced. Thus, non-appearance of transaction in the declared bank account of the appellant does not vitiate the case of the Revenue.
(viii) The appellant has never denied the facts that invoices found from the premises of one of the buyers M/s Accelerated Synthetics Pvt. Ltd. does not belong to him although he has stated in statement that the signature on the invoices are not his and are forged.
(ix) That certain documents appeared to be not personally prepared by the appellant and/or were not personally signed by him can become no reason to exonerate him of his guilt. It appears from the whole gamut of things that the appellant have personally refrained from preparing or signing the documents in question. The same is evident that he was involved into the conspiracy from day one by giving the false address in the application for registration. It was further observed that Rule 27 in the show-cause notice is a typing mistake and it should have been Rule 26 and the same does not vitiate the show-cause notice as the charges are clearly made out from the facts on record. As per Rule 26(2) of Central Excise Rules, 2002, any person, who issues (i) an excise duty invoice without delivery of the goods specified therein or abets in making such invoice; or (ii) any other document or abets in making such document, on the basis of which the user of said invoice or documents is likely to take or has taken any ineligible benefit under the Act or the Rules made thereunder like claiming of CENVAT Credit or refund, shall be liable to penalty not exceeding the amount of such benefit or five thousand rupees, whichever is greater.
4. Being aggrieved, the appellant had moved in appeal before the Commissioner (Appeals), who vide his order dated 24.5.2010 has been pleased to dismiss the appeal agreeing with the findings of the adjudicating authority.
5. Being aggrieved, the appellant has filed the present appeal and has raised the following grounds before this Tribunal: -
A) At the outset, the appellant submits that the Ld. Commissioner passed the impugned order without application of mind and seriously erred in upholding the Order of the lower authority imposing penalty under Rule 26 (2) of the Central Excise Rules, 2002 which is against the settled law and therefore the impugned order is bad in law and deserves to be set aside on this ground alone.
B) While passing the impugned order, the Ld. Commissioner, erred in holding that the Appellant knowingly issued invalid invoices to facilitate other manufactures to avail CENVAT Credit fraudulently and is liable for heavy penal action. In this context the Ld. Commissioner failed to appreciate the submission of the Appellant that when he had denied having issued any invoices form M/s STC and it is an admitted fact in the show-cause notice that the signatures on the bogus invoices have not matching with his signatures the allegation was baseless and not legally sustainable in absence of any documentary evidence.
C) The Ld. Commissioner has recorded a contrary finding as against the findings at para 27 of the Order-in-Original wherein it is held that even though certain documents were not personally prepared by the Appellant or that such documents were not personally signed by him it cannot be a reason to exonerate the Appellant of his guilt. In other words, the lower adjudicating authority had held that the Appellant did not sign the invoices whereas the Ld. Commissioner in his findings at page 9 holds that who else will issue the invoices. Such a findings of the Ld. Commissioner is contrary to the facts of the case and beyond he show-cause notice.
D) With regard to findings about the sale proceeds allegedly received by M/s STC from M/s Accelerated Synthetics Pvt. Ltd. against the bogus invoices the Ld. Commissioner erred in holding that the Appellants submission is an after thought. In this context the Ld. Commissioner did not establish by way of a documentary evidence that the payment received in the account of M/s STC was personally withdrawn by the appellant.
E) With regard to the findings that the Appellant is a customary offender the Appellant submits that the penalty under Rule 26(2) can not be imposed on the basis of the past record of a person. In fact while holding so the Ld. Commissioner has traveled beyond the scope of show-cause notice and the Order-in-Original passed by the lower authority.
F) The findings of the Ld. Commissioner that the submission of the Appellant that as per his statement the signatures on the invoices are not his signature but are forged, is an after thought are contrary to the investigation carried on by the Department and against the admitted position in the show-cause notice.
G) The Appellant further submits that it is on record and admitted fact that the Appellant had filed NIL returns with the Department for the quarter ending March 2004, June 2004 and up to 20.07.2004. This itself shows that the Appellant had no fraudulent intent to defraud the Revenue. Moreover, the registration was surrender by him on 21.07.2004. This fact has not been correctly appreciated by the Ld. Commissioner while passing the impugned order and holding that the Appellant is liable for penalty.
H) The Appellant submits that the decisions relied upon by the Ld. Commissioner are not in the context of imposition of penalty under Rule 26(2) of Central Excise Rules, 2002 and therefore are not applicable in the instant case.
I) While passing the impugned order the Ld. Commissioner failed to appreciate the decision of Honble Tribunal in the case of M/s Ispat Industries Ltd. Vs. Commissioner of Central Excise, Aurangabad reported in 2008 (226) ELT 218 (Tri. Mumbai) wherein it is clearly held that provisions of Rule 26(2) of Central Excise Rules, 2002 are not applicable to matter prior to 01.03.2007. The Ld. Commissioner has also not recorded appropriate findings to discard the said decision and invoking penalty with retrospective effect.
6. The learned Addl. Commissioner (AR) relies on the findings of the adjudicating authority and lower appellate authority. Further, reliance is placed on the ruling in the case of Vee Kay Enterprises Vs. CCE 2011 (266) ELT 436 (P&H), wherein invoices were issued without actual delivery of goods, on the charge of abetment, enabling the buyer in wrongly availed CENVAT Credit, it was held that provisions of Rule 26(2) of Central Excise Rules, 2002 introduced w.e.f. 1.3.2007, the same is not applicable in respect of the transactions prior to 1.3.2007. However, penalty is imposable on the appellant concerned in selling or dealing with goods liable to confiscation under other rules being Rule 25(1)(d) and Rule 26(1) of the Central Excise Rules.
7. Having considered the rival contentions, we find that there are no categorical findings against the appellant so as to prove the charges as alleged in the show-cause notice inspite of there being names available of the alleged supplier in the invoices from whom the appellant allegedly purchased, no enquiry appears to have been done. Further, it is seen that the appellant is situated in Mumbai, whereas the invoices recovered from M/s Accelerated Synthetics Pvt. Ltd. allegedly issued by the appellant are printed by one Ambaji Stationery, Surat. No enquiry has been made with the printer as to who got the stationery printed. Further, the appellant had stated that he had obtained the registration under Central Excise on being inspired by one Chandubhai Patel of Surat, who has also admitted in his statement before the Revenue authorities that he had also registered one firm at Surat with the Excise Department in similar name of Shiv Trading Company. The said Chandubhai Patel has been found to be involved in the issue of bogus CENVAT invoices in other names also. It appears that the said Chandubhai Patel has been instrumental in the mischief by using the name of the appellant without his knowledge. Moreover, it is found that the adjudicating authority has imposed penalty without any categorical finding against the appellant. Rather the penalty is imposed on the basis of assumption and presumption which have no legs to stand.
8. In this view of the matter, we set aside the penalty imposed on the appellant and allow the appeal with consequential relief, if any, in accordance with law.
(Pronounced in Court on .)
(P.R. Chandrasekharan) (Anil Choudhary)
Member (Technical) Member (Judicial)
Sinha
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