Custom, Excise & Service Tax Tribunal
Deccan Alloys Pvt. Ltd vs Commissioner Of Central Excise, ... on 26 December, 2017
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL SOUTH ZONAL BENCH CHENNAI Appeal Nos.E/584/2009, E/582/2009 & E/637/2009 [Arising out of Order-in-Original No.17/2009 dt. 30.06.2009 passed by the Commissioner of Central Excise, Chennai-III] 1. Deccan Alloys Pvt. Ltd. 2. Bhuwalka Alloys Pvt. Ltd. 3. Shanthi Alloys Pvt. Ltd. Appellant Versus Commissioner of Central Excise, Chennai-III Respondent
Appearance:
Shri J. Surender Reddy, Advocate For the Appellant Shri S. Govindarajan, AC (AR) For the Respondent CORAM :
Honble Ms. Sulekha Beevi C.S. Member (Judicial) Honble Shri Madhu Mohan Damodhar, Member (Technical) Date of hearing : 12.12.2017 Date of Pronouncement : 26.12.2017 FINAL ORDER No. 43229-43231 / 2017 Per Bench All these appeals since emanate out of same impugned order they are taken up together for common disposal.
2. The facts of the case are that M/s.Shanti Alloys Pvt. Ltd. (hereinafter referred to as SAPL), appellants in Appeal E/637/2009, were holding dealer registration and were suppliers of MS ingots. They supplied such MS ingots from invoices issued from allegedly non-existent depot address shown as No.27, 1st Floor, MRR Lane, Bangalore-560 018 to M/s.Deccan Alloys (P) Ltd. (herein after referred to as DAPL), appellants in E/584/2009. It appeared to the department that (i) invoices issued by SAPL from the said address had been issued with fraudulent intention to pass on cenvat credit to DAPL, although there was no movement of MS ingots. (ii) that no lorry weigh bills were issued for above transaction of manufacture of raw materials and finished goods as well. (iii) three-wheeled vehicles and vehicle of lesser laden weight among other vehicles were indicated as vehicles used for the transportation, hence transactions were dummy and were only paper transactions for fraudulently availing cenvat credit. Similarly, it appeared that SAPL had sent the goods to M/s. Bhulwalka Alloy Steel Industries Ltd. (herein after referred to as BAPL, appellant in E/582/2009) for conversion into re-rolled products of such MS channels and MS angles. However, SAPL had directed BAPL to deliver the goods to DAPL apparently citing pressure of immediate supply and supply then back to SAPL to meet their immediate demand. Here also, it appeared to the department that assessee, DAPL had only procured cenvatable invoices without movement of goods and hence cenvat credit availed on the basis of those documents was inadmissible. Accordingly, show cause notice dt. 16.4.2008 was issued on all these assessees, inter alia proposing denial of cenvat credit of Rs.61,92,083/- availed by DAPL along with interest thereon and imposition of penalties on DAPL under Section 11AC and Rule 13 of the Cenvat Credit Rules, 2002 / Rule 15 of the Cenvat Credit Rules, 2004. The show cause notice also proposed imposition of penalties on SAPL and BAPL under Rule 13 of the CER 2002 / Rule 15 of the CCR 2004. On adjudication, the Commissioner of Central Excise, vide the impugned order dt. 30-06-2009 confirmed the proposals made in the SCN for demand of Rs.61,92,083/- from DAPL along with interest. He also imposed following penalties :
(1) Penalty of Rs.61,92,083/- under Section 11AC on DAPL (2) Penalty of Rs.30 lakhs under Rule 13 of CER 2002 / Rule 15 of CCR 2004 on DAPL.
(3) Penalty of Rs.15 lakhs each on SAPL and BAPL under Rule 13 of CER 2002 / Rule 15 of CCR 2004.
Aggrieved, all these three assessees are before this forum.
3. On 12.12.2017,when the matter came up for hearing on behalf of appellant Ld. Advocate Shri J. Surender Reddy made oral and written submission which can be broadly summarized as under :
(i) DAPL had availed cenvat credit on the basis of the invoices issued by M/s.SAPL and BSIL containing all the required particulars for passing on the cenvat credit and which is a valid documents for availment of cenvat credit under Rule 9(1) of the Cenvat Credit Rules, 2004.
(ii) DAPL had entered into an agreement with SAPL for conversion of MS Ingots into rolled products such as MS Channel, MS Angle etc. in consideration of fixed conversion charges per mt. The said MS Ingots were received from SAPL under cover of valid dealer invoice issued by its depot / branch in Bangalore on payment of appropriate excise duty by SAPL.
(iii) On one hand, the appellant had availed cenvat credit on MS Ingots and on the other hand had discharged the excise duty on the value of MS Ingots plus the conversion charges on clearance of final rolled product back to SAPL. Therefore, the allegation that the appellant had taken cenvat credit without actually receiving the goods is untenable and illogical as the appellant would not be benefitted from this transaction.
(iv) The department had failed to establish or substantiate the modus-operandi behind carrying out such a transaction as none of the parties will be benefitted by carrying out the transaction on papers only; without causing actual movement of goods being M.S.Ingot to the appellant and clearance of rolled product back to SAPL after conversion.
(v) Department had not disputed the removal of goods on payment of duty to SAPL and subsequent treatment by SAPL of such goods. Without causing pre-judice to any of the submissions made by the appellant even if it is presumed for sake of argument that the appellant had not received any goods from SAPL then the department should have disputed the clearance rolled product by the appellant company to SAPL on payment of duty. The department is disputing only one leg of the transaction which pertains to receipt of material and availment of credit but not disputing the second leg of the transaction of clearance of goods on payment of duty.
(vi) The department investigation is silent on the aspect that if the appellant had not received the MS Ingots then from where the re-rolled products which were cleared to SAPL were manufactured from. There is not an iota of evidence against the appellant as to how the goods cleared got manufactured by the appellant if he had not received MS Ingots from M/s.SAPL.
(vii) In all cases freight had been paid by the supplier SAPL. DAPL had neither paid any freight for inward supply of MS Ingots nor for outward supply of rolled product after conversion.
(viii) The department had failed to investigate any of the transporters to prove that they had not transported MS Ingots to DAPL. The department had not been able to record statement of any of the transporters denying delivery of goods to the appellant company.
(ix) The appellant had already proved with its records and documents that it had received MS Ingots from SAPL and BSIL and subsequently cleared it after conversion to rolled products such as MS Angle & Channel subsequently on payment of duty. The department had not recovered any incriminating material from the premises of the appellant company which proves non-receipt of goods by the appellant.
(x) The appellant had duly recorded all the transactions in the books of accounts and inventory records. There is n discrepancy being pointed out by the department either in the books of accounts or the stock / inventory records of the appellant. Appellant having reflected the raw material in their cenvat credit account and having shown the utilization of the same, heavy duty is casted on Revenue to establish that such raw material was not the one which was covered by invoice in question and stands procured by assesse from any other source.
(xi) CESTAT in the case of Bhuwalka Steel Industries Ltd. VS CC [2010 (261) ELT (564 (Tri-Bang.)] have allowed the cenvat credit availed by BSIL on invoices issued by SAPL. The credit in that case was disallowed on the same ground on which the credit has been denied to the appellant in the instant case. In the case of BSIL also the supplier was SAPL and in the case of DAPL also (appellant) the supplier is SAPL. The ground on which cenvat credit was denied in that case was due to the fact that the appellant had availed cenvat credit on the basis of dealer invoice raised by SAPL containing address as 27, 1st Floor, MRR Lane, Bangalore whereas on visit of departmental officers SAPL was found non-existing at the said premises. The appellant M/s.BSIL explained that they were bonafides purchasers and availed cenvat credit on valid duty paying documents. If the supplier is found non-existent at the said premises the appellant cannot be denied cenvat credit unless there is valid evidence that the goods have not been received. On the same lines the appellant DAPL had been denied cenvat credit on the ground that SAPL was not found existent 27, 1st Floor, MRR Lane, Bangalore on visit of departmental officers instead M/s.Milange Footware was found. Director of SAPL had already explained that they have shifted their depot office from 27, 1st Floor, MRR Lane, Bangalore to 480, 1st Floor, K.H.B.Colony, 5th Block, Koramangala, Bangalore 560 095 on account of ownership dispute. Since, BSIL had been allowed cenvat credit by the Honble CESTAT, Bangalore and the said order had been upheld by the Karnataka High Court as reported in 2012 (277) ELT 153 (Kar), therefore, there is no ground for denial of cenvat credit to the appellant when the supplier is same in that case and in the case of appellant and the reason for denial is also same.
(xii) Bonafide purchaser is not liable for irregularity committed by the dealer supplier. In this regard, he relied on the following case laws :
a. CCS VS Juhi Alloys Ltd. [2014 (302) ELT 487 (All.)] b. CCE VS Motabhai Iron and Steel Industries [2015 (316) ELT 374 (Guj.)] c. CCE VS Tata Motors Ltd [2013 (294) ELT 394 (Jhar.])] d. SRF Limited VS CCE [2000 (124) ELT 448 (Tri-Delhi)] e. Super Trading Company VS CCE [2014 (299) E.L.T. 75 (Tri. Del.)] f. CCE VS Neepaz Steels India [2007 (213) ELT 100 (Tri-Del)] Approved in 2008 (230) ELT 219 (Punjab & Haryana High Court) g. Siddhartha Bronze Products Pvt. Ltd. VS CCE [2015 (328) E.L.T.429 (Tri. Ahmd.)]
(xiii) The entire demand is time barred because the show cause notice has not been issued within one year from the date of knowledge of the department or within one year from the date of conclusion of the investigation. The preventive team of the department visited the appellant factory on 25.01.2005. The investigation of the department got over on 10.04.2006 when the last statement was recorded by the investigating officers of Shri Suprakash Dey, Works Manager, BSIL. Whereas the show cause notice has been issued on 16.04.2008; that is after almost three years from the date of visit of the premises of appellant and almost two years after the investigation got over. The appellants place reliance on the following cases in support of their contention :-
a. Indian Petrochem. Corpn. Ltd. v. CCE, Vadodata 2000 (125) E.L.T. 1048 (Tribunal) b. Lovely Food Industries VS CCE [2006 (195) E.L.T. 90 (Tri.-Bang.)] c. JSL Industries Ltd. VS CCE [1999 (109) E.L.T. 316 (Tribunal)] d. Gammon India Ltd. VS CCE [2002 (146) E.L.T.173 (Tri.-Mumbai)] Affirmed in 2002 (146) ELT A313 (Supreme Court) Further, there is no allegation of fraud, collusion, suppression of facts or any contravention of provisions of the Act or Rules with an-intent to evade payment of duty on the appellant in the show cause notice. In the absence of such an allegation extended period is not invokable against the appellant. Limitatation for extended period not invokable unless show cause notice puts assessee to notice specifically as to which of the various commissions or omissions stated in the proviso to Section 11A(1) of Central Excises & Salt Act, 1944 had been committed as held by Supreme Court in the case of CCE VS H.M.M. Limited [1995 (76) E.L.T. 497 (S.C.)]. Further reliance is made on the Hon'ble Supreme Court's decision in the case of Anand Nishikaws Co. Ltd. VS CCE [2005 (188) E.L.T. 149. (S.C)]
(xiv) Simultaneous penalty under Rule 13 of CCR, 2002 / Rule 15 of CCR, 2002 and under Section 11AC of CEA, 1944 is not imposable.
(xv) The impugned order imposes penalty of Rs.61,92,083/- under Section 11AC of the Act and further penalty of Rs.30,00,00/- under Rule 13 if CCR, 2002 Rule 15 of CCR, 2004. The appellant submits that Rule 13/15 contains three / four sub-rules and the show cause notice must state as to under which sub-rule penalty is proposed on the appellant. Since, the impugned period under show cause notice is 15.10.2004 to 31.10.2004 and 15.11.2004 to 10.12.2004, the provisions of Rule 13 of CCR, 2002 are not applicable. Further, Rule 15 contains four clauses and the show cause notice must specify the specific clause to put the appellant on notice as to exact nature of contravention for which the appellant is liable. Reliance is placed on the decision of Supreme Court in the case of Amrit Foods Vs CCE [2005 (190) ELT 433 (SC)]. Moreover, simultaneous penalty under Rule 15 and section 1AC cannot be invoked. Rule 15 should be read in conjunction with Section 11AC for imposition of equivalent penalty. Since, the extended period cannot be invoked there is no question of imposing the penalty under section 11AC. Further, the appellant had availed cenvat credit on the basis of valid duty paying documents. Thus, there is no contravention of any of the provisions of Cenvat Credit Rules, 2004 and therefore, penalty under Rule 15 is not sustainable. The appellant place reliance on the judgement of Honble Supreme Court in case of UOI Vs Rajasthan Sinning & Weaving Mills [2009 (238) ELT-3-SC] wherein it was held that mandatory penalty was not applicable in every case of non-payment or short-payment of duty, condition specified in section 11AC must exist for imposition of penalty under the said section.
4. On behalf of Department, Ld.A.R Shri S. Govindarajan reiterated the findings in the impugned order. The period of dispute is from 15.10.2004 to 31.10.2004 . BAPL who is engaged in manufacture of MS angles, rounds, channels used MS ingots as the main raw material. They procured raw material mainly from SAPL who is a registered dealer. They availed credit on such invoices as well as availed credit on the MS ingots on the strength of invoices issued by BAPL. The invoices showed the address of SAPL as No.27, 1st Floor, MRR Road, Bangalore and on perusal of the invoices raised by BAPL, it was found that it was a manufacturers invoice and in the invoice, it was mentioned that materials sent for conversion on account of Shanti Alloys, M.R.R. Lane, Bangalore. When the officers visited the said address of SAPL on 25.05.2005, it was found that the depot was not existing in the said address. The same was confirmed by the Superintendent of Basavangudi Range, Bangalore. Only after initiation of investigations, SAPL informed the department that they are operating from No.480, 1st floor, KHB Colony, 5th Block, Koramangala, Bangalore-560 095; that they had obtained Central Excise Registration Certificate under this address. Thus, it was very clear that SAPL was issuing invoices from a non-existent dealers premises. It also emerged from verification that some of the vehicles which was shown as used for transportation were found to be actually LMV Maxi Cab Saloon or other vehicles which could not have carried such large quantities and weights of MS ingots shown in the invoices. No evidence has also been found to support the claim that the goods have been transported from either SAPL to DAPL or from BAPL to DAPL. Appellants have neither produced any evidence like trip sheets or lorry receipts to the effect that goods have been physically transported to DAPL. Hence from these facts, it clearly emerges that the issue of invoices by SAPL was only a modus operandi to enable DAPL to avail of cenvat credit on the quantity of MS ingots shown in those invoices, without any actual sale or actual transportation of such raw material.
5. Heard both sides and have gone through the facts.
6.1 One major allegation of the department against the appellants herein is that the depot address shown in the invoices issued by SAPL was actually non-existent and that the entire exercise of issue of invoices was only a sham to show purported movement of raw materials to DAPL for fraudulent availment of cenvat credit. However, on the allegation of non-existent address, it is seen that para 4.2 of the impugned order refers to a letter dt. 29.03.2005 of the Superintendent of Central Excise, Basavangudi Range, Bangalore informing that SAPL Bangalore were not operating from No.27, 1st Floor, MRR Lane Bangalore 560 002 and that following their letter dt. 28.02.2005, SAPL had discontinued issue of cenvatable invoices from that address; that they had obtained new Central Excise Registration on 21.03.2005 in respect of premises at No.480, 1st Floor, KHB Colony, 5TH Block, Koramangala Bangalore 560 095. We thus note that it is not the case that SAPL did not have any depot at all in Bangalore, only omission is that though they had changed their depot address, the invoices continued to reflect the earlier address.
6.2 It is also not in dispute that DAPL had indicated in their books of account and inventory records that they had received the MS ingots against the invoices issued by DAPL. We note that factory and office premises of DAPL were searched on 25.01.2005 by department officers. New office premises of SAPL at Koramangala, Bangalore had also been searched by officers on 13.04.2005. However, it is not coming out in the SCN or in the impugned order whether any stock-taking of inputs was got done at the factory premises of DAPL and if so, whether any shortage thereof was found vis-`-vis quantity claimed to have been received from SAPL on invoices.
6.3. In any allegation that raw material has not been received and there was only paper transaction of invoices for availing cenvat credit, the absence or for that matter, shortage, of raw material in the factory premises is relevant fact to corroborate and support any such allegation. No shortage of inputs is alleged at the time of visit of officers. At the same time, there is also no dispute that DAPL were, in fact, manufacturing and clearing angles and channels after conversion of the MS ingots on payment of duty. When this is so, there has to be some source of supply of raw material. Consequently, when the department alleges that no raw material was received from SAPL, the department has to indicate what is the alternate source of raw material, obtained by DAPL, in an accounted or unaccounted manner for use in their manufacture. This has certainly not been done. We also do not find any disagreement by the department on the claim made by the appellant that the clearances of MS ingots by SAPL was only done on payment of duty and that likewise, the clearances of the finished goods by DAPL was also done only on payment of duty. The investigation also has not satisfactorily proved that the paper trail purporting movement of material consigned to BAPL and redirected to DAPL for immediate requirements, had actually not happened. True, while the entry of vehicles transporting the raw materials at certain check posts is surely an useful tool to corroborate the fact or otherwise of such transportation, nonetheless, that cannot be the sole evidence which could be relied on, especially, when the department has not been able to establish non-receipt or shortage of raw materials at DAPL during their visit. So also, while it has been alleged that some of the vehicle numbers which pertained to vehicles which may not have been able to carry such quantity and weight of MS ingots, this appears to be only related to few incidents and not for all the vehicle numbers involved. In any case, the appellant has sought to explain that even these discrepancies have arisen due to clerical errors in transcribing the vehicle numbers in the concerned invoices.
7. We also note that apart from these unfounded evidences and uncorroborated facts which are the main basis of the SCN, the department has also, to a large extent, relied upon the statements of manufacturers of the appellants. However, the appellants in their reply to the SCN have clarified that the concerned employees for example, Shri Ataur Rehman, Managing Director of SAPL was not supervising the day-to-day activities of the company and he might not have been fully aware of the facts of each and every dispatch or the said statement might have been obtained by force by the department. We also note that none of these persons whose statements were recorded have been cross examined.
8. In the case of Bhuwalka Steel Industries Ltd. Vs CCE Bangalore - 2010 (261) ELT 564 (Tri.-Bang.) relied upon by the appellants, the Tribunal held that credit is admissible irrespective of the fact that dealers issuing invoices had shifted the premises. This decision was affirmed by the Honble High Court of Karnataka as reported in 2012 (277) ELT 153 (Kar). In the case of Commissioner Vs Motabhai Iron and Steel Industries - 2015 (316) ELT 374 (Guj.), the Honble High Court of Gujarat in respect of demand based on the allegation that vehicles which were shown to transport goods were not capable of carrying such goods, upheld the Tribunal's view that such goods were duly found to have been recorded in the assessees factory and consumed in production and no investigation was made at consignors' end and no error can be found in the Tribunals findings in favour of assessee.
9. Going by the totality of the discussions herein above and also following the ratio of the case laws supra, we are afraid that the department has not been able to satisfactorily establish the allegations made in the SCN. This being so, the impugned order confirming the proposals in the SCN and imposing penalties on the appellants cannot sustain and is therefore required to be set aside, which we hereby do. All these appeals are therefore allowed with consequential reliefs, if any, as per law.
(Order pronounced in court on 26.12.2017)
(Madhu Mohan Damodhar) (Sulekha Beevi C.S)
Member (Technical) Member (Judicial)
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13
Appeal Nos.E/582, 584, 687/2009