Chattisgarh High Court
Ms Simplex Castings Limited vs Union Of India & Others on 16 February, 2010
Author: Satish K. Agnihotri
Bench: Satish K. Agnihotri
HIGH COURT OF CHATTISGARH BILASPUR
Tax Case No 43 of 2007
Ms Simplex Castings Limited
...Petitioners
Versus
Union of India & Others
...Respondents
! Ms Ritu Mishra counsel for the petitioner
^ Shri Bhishma Kinger standing counsel for the respondents
CORAM: Honble Shri Satish K Agnihotri & Honble Shri Manindra Mohan Shrivastava J
Dated: 16/02/2010
: Judgement
ORDER ORAL
Passed on this 16th day of February 2010
Appeal under Section 35 G of the Central Excise Act 1944
Per Satish K. Agnihotri, J.
1. This appeal under section 35G of the Central Excise Act, 1944 (for short `the Act, 1944') arises from the final order No.258-261/ 07-SM (BR) dated 27.12.2006 passed by the Customs, Excise & Service Tax Appellate Tribunal, Principal Bench, New Delhi in Appeal No.E/513-516/2005-SM.
2. The facts, in nutshell, are that the appellant- company is engaged in the manufacture of excisable goods. The appellant-company was also availing Duty credit on the input used in or in relation to manufacture of the aforesaid finished goods in terms of Rule 57-A of the Central Excise Rules, 1944 (for short `the Rules, 1944"). The appellant availed irregular Duty credit of Rs.2,67,364/-, Rs.71,024/- and Rs.1,00,878/- against certain invoices issued by M/s.Jain Udyog, and M/s.Tara Re- Rolling Mills, Tedesara. Three show-cause-notices being C.No.V (72) 15-63/Off/98/Adj/21351-56 dated 9.9.1999 involving Modvat credit of Rs.2,67,364/- availed during the period September, 1994 to August, 1995; C.No.V (Ch:
72) 15-73/ Off/JC/2000/Adj/5123 dated 7.3.2000 involving Modvat credit of Rs.71,024/- availed during the period March, 1995 to April, 1995; and C.No.V (MOD) 15-
03/R/RJN/BHI/2000/Adj/16470 dated 9.8.2000 involving Modvat credit of Rs.1,00,878/- availed during the period August, 1995 to October, 1995 were issued to the appellant proposing disallowing and recovery of aforesaid Modvat Credit from the appellant under Rule 57(I)(II) of the Rules, 1944 read with section 11-A of the Central Excise Act, 1944 (for short `the Act, 1944') by invoking the extended period of five years. The show-cause-notice also proposed penalty against the appellant under Rule 173 Q of the Rules, 1944 along with mandatory penalty equivalent to the amount disallowed under Rule 57I[4] of the Rules, 1944 read with section 11AC of the Act, 1944. The appellant filed detailed reply to the show-cause-notices. According to the appellant, it produced documentary evidence in its support.
3. The adjudicating authority i.e. the Assistant Commissioner, Customs & Central Excise, Division-II, Bhilai, after going through the evidences on record, came to the conclusion that the appellant has received no inputs and there was only paper transaction between the appellant and the supplier. It was also recorded that the unit of the supplier was closed during the relevant period. However, Modvat invoice was issued in favour of the appellant to facilitate the appellant to avail Modvat credit.
4. Thereagainst the appellant preferred an appeal before the Commissioner of Central Excise (Appeals), Raipur, being appeal No.219-222/RPR.II/2004. The Commissioner of Central Excise (Appeals), Raipur, by its order dated 25.11.2004 confirmed the demands after denying the credit taken in respect of inputs received by the appellant and upheld the findings recorded by the adjudicating authority i.e. the Assistant Commissioner, Customs & Central Excise, Division-II, Bhilai.
5. Being aggrieved by the aforesaid order, the appellant preferred an appeal before the Customs, Excise & Service Tax Appellate Tribunal, Principal Bench, New Delhi in Appeal No.E/513-516/ 2005-SM. The Customs, Excise & Service Tax Appellate Tribunal after having heard learned counsel for the appellant as well as departmental representative of the respondent observed as under :
"3. In this case, the allegation is that appellants had not received any inputs and only received the invoices and availed the credit. The Revenue conducted the investigation at the supplier end and it was found that the supplier of inputs received the goods from SAIL and same are sold to some other buyers. In investigation from transporter shows that gods were not transported to appellants place. In the circumstances, I find no infirmity in the impugned order. IN respect of the penalty, I find that Commissioner (Appeals) has set aside the penalty imposed under Section 11AC. However, imposed penalty under Section 173-Q which provides penalty upto three times of value of offending goods. In the present case the penalties were imposed maximum to the value of the goods. Therefore, I find no ground to interfere with the quantum of penalty also. The appeals are dismissed. "
6. The appellant has pleaded the following substantial questions of law in the memo of appeal subsequently by way of amendment, which reads as under :
"SUBSTANTIAL QUESTIONS OF LAW (1) Whether the learned Appellate Tribunal failed to exercise its jurisdiction while granted unconditional stay and confirmed vide stay order No.547-50/05 NB SM dated 26.05.2005 that the Appellant have filed documentary evidence in support of the receipt and use of material and payments made to suppliers, the same facts were not taken into account while passing the Final Order appealed against.
(2) Whether the learned Appellate Tribunal failed to exercise its jurisdiction by ignoring the Additional Grounds of Appeal filed by the appellant vide letter dated 25.10.2004 along with copies of RG 23 A Part-I, Stores Receipt Voucher, Ledger Account with suppliers, weighment slips wherever available in support of the fact that full material was received, accounted for, paid for, & consumed in the manufacture of the final excisable products on the Appellant & 2.
(3) Whether the learned Appellate Tribunal failed to exercise its jurisdiction by not mention the Additional Grounds of Appeal filed by the appellant and appreciate that imposition of Mandatory Penalty under Rule 571(4) read with Section 11AC equivalent to the amount of Central Excise Duty confirmed against the Appellant No.1 & 2 for a period prior to its enactment was not legal. The Appellate Commissioner, therefore, set aside the Order in Original to that extent. However, the Appellate Commissioner failed to give any finding to prove that the impugned goods were not received or consumed in the manufacture of excisable final products of Appellant and arbitrarily upheld the demand of Central Excise Duty & Penalty under Rule 173Q of the Central Excise Rules, 1944 imposed on Appellant vide Order in Appeal No. 219-222/RPR-II/2004 dated 25.11.2004.
(4) Whether the learned Appellate Tribunal failed to exercise its jurisdiction ignoring several documentary evidence filed by the Appellant & 2 in support of receipt of goods, and use in the manufacture of excisable final products.
However, the Appellate Commissioner had failed to appreciate that if the Appellant did not receive the impugned inputs, then how was it possible for the Appellant to manufacture the final excisable goods from inputs not received at all ? Thus, the impugned inputs were not only received and accounted for, and payments made to the supplier by cheque but also the impugned inputs were issued for manufacture of final excisable goods, which were later on cleared on payment of appropriate amount of Central Excise Duty. (5) Whether the learned Appellate Tribunal failed to exercise its jurisdiction by ignoring that, the Appellant had approached to Respondent No.2 for a decision on the limited point that if the Appellant did not receive the impugned inputs, then how was it possible for the Appellant to manufacture the final excisable goods from inputs not received at all ? The Respondent No.2, at the time of personal hearing of stay matter, correctly admitted that prima-facie the facts of the case were in favour of the Appellant, that the Appellant had produced before authorities all documentary evidence to establish receipt of inputs. The Respondent No.2 also correctly admitted that sufficient amount was deposited by the Appealer to safeguard the interest of Revenue. Therefore, the Appellate Tribunal granted unconditional stay to the Appellant vides stay order No.547-50/05 NB/SM dated 26.05.2005. However, in sharp contrast, at the time of final hearing, the learned Appellate Tribunal only went by the records relied upon by the Investigating Officers and not by those documents/arguments put forth on record before the Appellate Tribunal.
Accordingly, it has been stated in Para No.1 of the Order appealed against "in the impugned order, after going through the evidence on record, the finding is that the appellant have received no inputs and there was only paper transaction between the appellants and supplier. The finding is also that the unit of supplier of input was closed during the relevant period. However, modvatable invoices were issued in favour of the present appellants to facilitate availment of modvat credit. Against this finding, the contention of the appellant is that actually they have received the inputs and entries were made in the statutory record. It is also contended by the appellants that they have sufficient balance in their modvat account as the appellants were also exporting the goods without payment of Duty. The appellants will not get any benefit by availing the wrong modvat credit. The appellants also submitted that in some cases, there are weighment slips, which show that the inputs were received by the appellants".
(6) Whether the learned Appellate Tribunal failed to exercise its jurisdiction by stating in para 3 of Final Order, that "In this case, the allegation is that appellants had not received any input and only received the invoices and availed the credit. The Revenue conducted the investigation at the supplier end and it was found that the supplier of inputs received the goods from SAIL and it was sold to some other buyers. The investigation from transporter shows that goods were not transported to appellant's place. In the circumstance, I find no infirmity in the impugned order".
(7) Whether the learned Appellate Tribunal failed to exercise its jurisdiction by ignoring the complete track record filed by the Appellant showing the following :
a. Receipt of inputs, b. Issue of inputs for manufacture of excisable final products, c. Payments made by cheque to the supplier.
d. Manufacture of excisable final product in the factories of Appellant, and, e. Clearance of final excisable products from respective factories of the Appellant on payment of appropriate amount of Duty.
(8) Whether the learned Appellate Tribunal failed to exercise its jurisdiction by not appreciating that if the Appellant did not receive inputs, then how and from which inputs did they manufacture the excisable final products ? So also, if the supplier was closed, then why the Returns filed by the suppliers showing manufacturing activity within their factory were finally assessed and not objected to by the Revenue ? The learned Appellate Tribunal also failed to appreciate that if the documents show that the inputs were received, used in the manufacture and excisable final products and the goods so manufactured were cleared on payment of Duty by the Appellant, then how could modvat credit be denied to them for any lapse at the end of the supplier manufacturer, if any ? The learned Appellate Tribunal - Respondent No.2 have grossly erred in coming to a decision that the Appellant & 2 have irregularly availed Modvat Credit in the instant case & that the impugned goods were not received by the Appellant & 2 in their factory. The Respondent No.2 has also along discussed the fraud committed by the suppliers but has miserably failed to substantiate the charge of collusion of Appellant & 2 with the supplier with an intention to evade Duty & also has failed to prove any act of omission or commission on the part of the Appellant & 2. The learned Appellate Tribunal has thus, upheld such defective & incomplete findings of the Adjudicating Authority and Appellate Commissioner. The Respondent No.2 failed to appreciate that it has simply been stated in the Order in Original that the Appellant & 2 countered & he could not give any satisfactory explanation to the same. Now this is certainly a debatable issue. Either the Appellant & 2 could not satisfactorily explain or the learned adjudicating authority was not satisfied with his reply. The learned Adjudicating Authority, the Appellate Commissioner as well as the Respondent No.2 also failed to even discussed on the facts that if :
a. M/s Jain Udyog, Tedesara and M/s Tara Re-rolling Mills, Tedesara were closed, b. Did not have power or had no electricity generation, c. Did not receive raw material in the factory premises for 3 full years.
a. How the payment of Duty on goods not manufactured by the supplier manufacturers was being accepted.
b. How was their RT-12
Return showing
manufacture of goods
within their factory
premises being finally
assessed, and,
c. How the concerned
Authority was accepting
their Invoice Book
intimation every time ?
(9) Whether the learned Appellate Tribunal failed to exercise its jurisdiction by ignoring that, the charges against M/s Jain Udyog, Tedesara and M/s Tara Re-rolling Mills, Tedesara have although been confirmed on the serious ground of mis declaration, suppression of facts with intention to evade payment of Central Excise Duty, no Duty or Penalty has been ordered to be recovered from them & the Appellant who has reimbursed the amount of Central Excise Duty charges in the invoices of M/s Jain Udyog, Tedesara has been disallowed Modvat Credit as well as Penalty has been imposed under Rule 173Q.
Further, if payment of Central Excise Duty at the end of M/s Jain Udyog, Tedesara and M/s Tara Re-rolling Mills, Tedesara has not been disputed, then how Modvat credit can be denied to the Appellant and how Central Excise Duty can be demanded from Appellant on the same goods twice ?
(10) Whether the learned Appellate Tribunal failed to exercise its jurisdiction by ignoring that, the Respondents have not disputed the following facts :
a. Payments for the purchase of the inputs have been made through cheque;
b. The inputs in question have been used in the manufacture of final products, which have been cleared on payment of Duty;
c. The department has not been able to prove that any other alternative raw material was received and used in the final products;
d. The RT-12 return have been assessed finally by the Range Officers which contents all the documents including (the invoices under disputed) on the basis of which the Modvat Credit has availed and utilized;
e. How the concerned Authority was accepting their Invoice Book intimation every time ? f. How can the same goods suffer Central Excise Duty twice - one at the manufacturer supplier end and two at the Appealer's end ?
(11) Whether the learned Appellate Tribunal failed to exercise its jurisdiction by ignoring the case of Commissioner of Central Excise, Chandigarh vs. Neepaz Steels (India) reported in 2007 (213) E.L.T. 100 (Tri-
Del.) held that :
Penalty on registered dealer - Inputs, non supply of - Vehicle Numbers mentioned in invoices alleged to be not of Good Transport Vehicle - Dealer received payment from various manufacturers through cheques and Demand draft and inputs supplied were duly received by the manufacturers and used goods manufactured which were cleared on payment of duty - No evidence that manufacturers used some alternative raw materials then which was mentioned any invoices - Penalty set aside - Rule 25 of the Central Excise Rules, 2002.
(12) Whether the learned Appellate Tribunal failed to exercise its jurisdiction by ignoring the complete track record filed by the Appellant showing the following :
a. Receipt of inputs, b. Issue of inputs for manufacture of excisable final products, c. Payments made by cheque to the supplier.
d. Manufacture of excisable final product in the factories of Appellant, and, e. Clearance of final excisable products from respective factories of the Appellant on payment of appropriate amount of Duty.
(13) Whether the learned Appellate Tribunal failed to exercise its jurisdiction by not appreciating that if the Appellant did not receive inputs, then how and from which inputs did they manufacture the excisable final products ? So also, if the supplier was closed, then why the Returns filed by the suppliers showing manufacturing activity within their factory were finally assessed and not objected to by the Revenue ?
(14) Whether the learned Appellate Tribunal failed to exercise its jurisdiction by not appreciating that if the documents show that the inputs were received, used in the manufacture and the Appellant cleared excisable final products so manufactured on payment of Duty, then how could modvat credit be denied to them for any lapse at the end of the supplier manufacturer, if any ?"
7. The above-stated substantial questions of law are in the form of grounds. The first question of law (sic) ground is with regard to grant of unconditional stay in favour of the appellant by interim order. Question No. 2 (sic) ground is vague as it does not disclose asto whether these facts were brought into the notice before the adjudicating authority or the Commissioner, Appeals.
Question No. 3 (sic) ground is purely a question of fact.
Question No. 4 (sic) ground is vague as no documentary evidence produced has been detailed. Questions No. 5 to 14 (sic) grounds are pure question of facts and it does not raise any substantial question of law warranting admission under the provisions of section 35G of the Act, 1944 which is a pre-requisite condition before admitting the appeal.
8. It is well settled principle of law that the substantial question of law has to be framed on the findings available on record not on any conjecture or surmises. (See Commissioner of Income Tax v. P. Mohanakala1).
9. The appellant has raised the questions of law, which are not questions of law, but the grounds on facts without, there being any consideration before the authorities below. The appellant has failed to produce any document to demonstrate that the questions (sic) grounds raised hereinabove were raised before the Commissioner of Central Excise (Appeals), Raipur as well as before the Customs, Excise & Service Tax Appellate Tribunal, Principal Bench, New Delhi and thereon, the finding has been recorded. Thus, the above stated questions of law, in our considered opinion, do not constitute questions of law much less the substantial questions of law.
10. Section 35G of the Act, 1944 reads as under :
35G. Appeal to High Court.-(1) An appeal shall lie to the High Court from every order passed in appeal by the Appellate Tribunal on or after the 1st day of July, 2003 (not being an order relating, among other things, to the determination of any question having a relation to the rate of duty of excise or to the value of goods for the purposes of assessment), if the High Court is satisfied that the case involves a substantial question of law.
11. Section 260-A of the Income Tax Act, 1961 (for short `the Act, 1961') reads as under :
"260A. Appeal to High Court.-(1) An appeal shall lie to the High Court from every order passed in appeal by the Appellate Tribunal 2[before the date of establishment of the National Tax Tribunal], if the High Court is satisfied that the case involves a substantial question of law.
12. The provisions of Section 35G of the Act, 1944 and the provisions of the Section 260-A of the Act, 1961 are pari materia. Thus, the Supreme Court in P. Mohanakala (supra) dealing with the provisions of Act, 1961 with regard to question of law observed as under :
"26. Relying on the decisions of this Court in Bejoy Gopal Mukherji v. Pratul Chandra Ghose and Orient Distributors v. Bank of India Ltd. Shri Iyer, learned Senior Counsel contended that issue relating to the propriety of legal conclusion that could be drawn on basis of proved facts gives rise to a question of law and, therefore, the High Court is justified in interfering in the matter since the authorities below failed to draw a proper and logical inference from the proved facts. We are unable to persuade ourselves to accept the submission. The findings of fact arrived at by the authorities below are based on proper appreciation of the facts and the material available on record and surrounding circumstances. The doubtful nature of the transaction and the manner in which the sums were found credited in the books of accounts maintained by the assessee have been duly taken into consideration by the authorities below. The transactions though apparent were held to be not real ones. May be the money came by way of bank cheques and paid through the process of banking transaction but that itself is of no consequence."
13. Further in Paras Ship Breakers Limited v.
Commissioner of Central Excise2, the Supreme Court observed as under:
"16. In terms of Section 35-G of the Central Excise Act, the High Court, thus, could entertain an appeal only if a question of law arose. No question of law having, thus, arisen for consideration before the High Court, we are of the opinion that the impugned judgment does not suffer from any legal infirmity."
14. The Supreme Court, while considering the substantial question of law in Sir Chunilal V. Mehta and Sons Ltd. v.
Century Spinning and Manufacturing Co. Ltd.3, observed as under :
"6. We are in general agreement with the view taken by the Madras High Court and we think that while the view taken by the Bombay High Court is rather narrow the one taken by the former High Court of Nagpur is too wide. The proper test for determining whether a question of law raised in the case is substantial would, in our opinion, be whether it is of general public importance or whether it directly and substantially affects the rights of the parties and if so whether it is either an open question in the sense that it is not finally settled by this Court or by the Privy Council or by the Federal Court or is not free from difficulty or calls for discussion of alternative views. If the question is settled by the highest Court or the general principles to be applied in determining the question are well settled and there is a mere question of applying those principles or that the plea raised is palpably absurd the question would not be a substantial question of law."
15. The ratio laid down in Sir Chunilal V. Mehta (supra) was referred approvingly in Mahindra and Mahindra Ltd. v.
Union of India and Another4.
16. Needless to say if there is no substantial question of law involved, the appeal has to be dismissed. (See Boodireddy Chandraiah and Others v. Arigela Laxmi and Another5).
17. Applying the well-settled principles of law to the facts of the case on hand and for the reasons mentioned hereinabove, the appellant has not raised any question of law much less the substantial questions of law warranting admission under the provisions of Section 35G of the Act, 1944.
18. In the result, the appeal is dismissed for want of substantial question of law.
19. There shall be no order asto costs.
J u d g e