Custom, Excise & Service Tax Tribunal
M/S.Sheel Auto Industries Pvt.Ltd vs Cce, Ludhiana on 23 August, 2016
?CUSTOMS, EXCISE & SERVICE TAXAPPELLATE TRIBUNAL SCO 147-148, SECTOR 17-C, CHANDIGARH-160017 DIVISION BENCH COURT NO.1 Appeal No.E/2275-2276/2009-Ex(DB) [Arising out of OIO No.01/Ldh/09 dt.15.5.2009 passed by the CCE Ludhiana) Date of Hearing: 11.07.2016 Date of Decision: 23.08.2016 For Approval &signature: HonbleMr.Ashok Jindal, Member (Judicial) Honble Mr. V.Padmanabhan, Member (Technical) 1. Whether Press Reporter may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? No 2. Whether it would be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? No 3. Whether their Lordships wish to see the fair copy of the order? seen 4. Whether order is to be circulated to the Department Authorities? Yes M/s.Sheel Auto Industries Pvt.Ltd. Appellant Mr.Ravi Sharda,MD Vs. CCE, Ludhiana Respondent
Appearance Shri P.K.Mittal, Advocate- for the appellant Shri Vijay Gupta, AR for the respondent CORAM: HonbleMr.Ashok Jindal, Member (Judicial) Honble Mr.V.Padmanabhan, Member (Technical) FINAL ORDER NO 61202-61203/2016 Per Ashok Jindal:
The appellants are in appeals against the impugned order.
1.1 M/s Sheel Auto Industries Pvt. Ltd. (hereinafter referred to as SAIPL) having their factories at E-472-473, phase VI, Focal Point, Ludhiana and at Delhi-Jaipur Highway, Rampur, Gurgaon, are manufacturer of Motor Vehicle parts and Steel forging etc. chargeable to Central Excise Duty under Chapters 87, 72 &73 of the Central Excise Tariff Act, 1985. Sh. Ravi Sharda is the managing Director of M/s SAIPL. M/s Krishna Agro Implements, Ludhiana (hererinafter referred to as M/s Krishna Agro), M/s Allied Agro Implements Ltd., Ludhiana (hereinafter referred to as M/s Allied Agro) and M/s Allied Steel, Ludhiana are registered dealers who claimed to have supplied HR/CR coils to M/s SAIPL, Ludhiana under Central Excise invoices on the basis of which Cenvat Credit has been taken by M/s SAIPL and similarly M/s Rajeev Steels and Golden Steel are the registered dealers who claim to have supplied HR/CR coils to M/s SAIPL, Gurgaon.
1.2 On 19.05.2006, on receipt of an information that M/s SAIPL are taking Cenvat Credit on the basis of invoices for HR/CR coils claimed to have been received by them, without actually receiving any such goods, while actually they were purchasing HR strips from unregistered dealers without any invoices, the factory premises of M/s SAIPL at Ludhiana and Gurgaon were searched in the course of which a number of documents and records were recovered, which being relevant for enquiry were resumed. During search, the physical stock of the raw material was also checked and it was found that in M/s SAIPL unit at Ludhiana, there was shortage of 82.235 MT of HR/CR sheets as compared to the stock shown in the statutory record and cenvat credit involved on this quantity was 3,62,447/-. This shortage was admitted and cenvat credit was reversed on that day itself. The officers also seized certain records including two pocket diaries from the drawer of Sh. Surinder Singh, Security Supervisor at Ludhiana unit. The diary recovered from Sh. Surinder Singh contained date wise details of the receipt of raw materials HR/CR sheets and also details of clearance/sale of the finished goods and scrap. Although both the units of M/s SAIPL were showing the receipt of HR/CR coils, in none of the units any facility for cutting/sitting of the CR/HR coils was found. Statement of Sh. Surinder Singh was recorded on 19.05.06 wherein he said that the two diaries recovered from his drawer had been written by him; that the same contained the details regarding the receipt of HR/CR sheets and also the dispatch of scrap as well as some finished goods. Though Sh. Surinder Singh retracted his statement on 21.05.06, he was summoned by investigation officer again on 24.05.06 and at that time he withdrew his retraction and again he reiterated the facts stated by him in his statement dt. 19.05.06. In his subsequent statement dated 21.09.2007, Sh. Surinder Singh stated that the pocket diary contained the details of only those raw materials HR/CR sheets which had been received under Kachcha Challans without proper bills. Since the entries in the diary maintained by sh. Surinder Singh also mentioned the names raw-material suppliers M/s. Salig Ram Manik Chand, M/s. Neelkanth Steel and they confirmed having supplied the HR sheets as mentioned in his diary. On inquiry with Shri Amarjit Bajaj of M/s. Bajaj Steel mentioned in Shri Surinder Singhs diary as the buyer of scrap, he confirmed purchasing the same. Enquiry was made with Sh. A.K Mishra, Dy. General Manager (production), Ludhiana unit of SAIPL, Sh. Pramod Kumar, Purchase officer of M/s SAIPL, Ludhiana, Sh. Ashok Khanna, Accounts Officer of M/s SAIPL and all of them confirmed that it is only the HR/CR sheets which were purchased by them and which were being used in the manufacture of auto parts. They also confirmed that the raw-materials were being purchased from M/s Neelkanth Steel, M/s Salig Ram Manik Chand, Ludhiana etc. and that the HR/CR sheets were being purchased in strip only and not coil form and they do not have and facility of cutting or slitting of the coils. Shri Khanna also stated the cenvatable invoices regarding purchase of HR/CR coils were being obtained from M/s Allied Agro and M/s Krishna Agro without actually receiving any material, that such bogus invoices had been obtained through M/s Salig Ram Manik Chand and that they are ready to reverse Cenvat Credit amounting to Rs. 37,74,000/- availed on the basis of such bogus invoices. Though the proprietors of M/s Krishna Agro and M/s Allied Agro claimed that they have supplied HR/CR coils to M/s SAIPL, they could not produce any bilties or GRs in support of this claim. M/s SAIPL reversed the Cenvat Credit amounting to Rs. 37,74,000/- on 19.05.2006.
1.3 On examination of the entries in the diary regarding dispatch. Sale of scrap and finished goods, it appeared that there were no Central Excise invoices in respect of those clearances.
1.4 As regards Gurgaon unit of M/s SAIPL, it was found that while this unit had taken Cenvat Credit on the basis of the invoices for HR/CR coils issued by M/s Golden Steel Co. And Rajeev Steel, Faridabad, on enquiry with the store keeper and Sh. Bir singh yadav, works Manager of the unit, it was found that only the HR/CR sheets had been received, not coils, as there was no facility for slitting of the coils in the factory. On enquiry with M/s Golden Steel Co. as well as M/s Rajeev Steel, the proprietors of these suppliers disclosed that they have sold only CR/HR sheets/ Strips to M/s SAIPL, Gurgaon though the invoice had been issued for coils and that they are not in a position to produce any bilties/GRs for transportation of the goods supplied by them 1.5 Statement of Sh. Ravi Sharda was also recorded on 20.05.2006 wherein he was asked about the entries in the diaries recovered from the drawer of Sh. Surinder Singh and he accepted that the details of the raw-materials received, as mentioned in the diaries are not reflected in the statutory records.
1.6 On the basis of the above investigation, a show cause notice dated 23.10.2007 was issued to M/s SAIPL, Ludhiana and Gurgaon, Shri Ravi Shards, M.D. of M/s SAIPL, M/s Krishna Agro, Ludhiana, M/s Allied Agro, Ludhiana, M/s Golden Steel Co., Faridabad, M/s Rajeev Steel, Faridabad and M/s Allied Steel, Ludhiana-for
(a) Recovery of Cenvat Credit amounting to Rs. 50,23,955/- alleged to have been taken on the basis of invoices for CR/HR coils without receiving any such goods, alongwith interest on the same at the applicable rate, under Rule 14 of Cenvat Credit Rules, 2004 read with Section 11A & 11AB of Central Excise Act, 1944 and appropriation of an amount of Rs. 37,74,000/- already debited by them voluntarily by Cenvat Credit A/c debit entry no. 73 dated 19.05.2006 without this demand;
(b) Recovery of Central Excise Duty amounting to Rs. 32,61,960/- payable on the clearance of scrap alleged to have been made without payment of duty, alongwith interest on the same at the applicable rate;
(c) Recovery of Central Excise Duty amounting to Rs. 13,513/- chargeable on clearance of auto parts alleged to have been made clandestinely without payment of duty alongwith interest on the same under section 11AB and appropriation of an amount of Rs. 13,698/- voluntarily paid by M/s SAIPL;
(d) Recovery of Central excise duty amounting to Rs. 3,62,477/- on the shortage of cenvted CR/HR sheets and appropriation of an amount of Rs. ,3,62,477/- already paid towards this demand;
(e) Imposition of penalty on M/s SAIPL, Ludhiana under Rule 15 of Cenvat Credit Rules, 2004 read with Section 11AC of Central Excise Act, 1944;
(f) Imposition of penalty on Shri Ravi Sharda, M.D. of M/s SAIPL under rule 26 of Central Excise Rules, 2002;
(g) Imposition of penalty of M/s Krishna Agro, M/s Allied Agro and M/s Allied Steel under Rule 25 of Central Excise Rules, 2002;
(h) Recovery of Cenvat Credit amounting to Rs. 17,60,447/- from Gurgaon unit of M/s SAIPL alleged to have been taken on the basis of invoices of HR/CR coils, without receiving such goods; alongwith interest on the same at the applicable rate and appropriation of an amount of Rs. 7,00,000/- lakhs already paid by M/s SAIPL towards this demand;
(i) Imposition of penalty on M/s SAIPL, Gurgaon under Rule 15 of Cenvat Credit Rules, 2004 read with section 11AC of the Central Excise Act for fraudulently taking the wrong Cenvat Credit amounting to Rs. 17,60,447/-; and
(j) Imposition of penalty on M/s Rajeev Steel and M/s Golden Steel Co., Faridabad under Rule 25 of Central Excise Rules, 2002.
1.7 The above show cause notice was adjudicated by the Commissioner Central Excise, Ludhiana vide Order-in-Original dated 15.05.2009 by which-
(i) Cenvat Credit demand of Rs. 50,23,955/- was confirmed alongwith interest against M/s SAIPL, Ludhiana and Cenvat Credit demand of Rs. 17,60,447/- alongwith interest was confirmed against M/s SAIPL, Gurgaon and amounts of Rs. 37,74,000/- and Rs. 7,00,000/- already reversed/paid towards these demands were ordered to be appropriated;
(ii) Central Excise Duty demands of Rs. 32,61,960/- 3,62,447/- and Rs. 13,513/- were confirmed against M/s SAIPL, Ludhiana along with interest and total amount of Rs. 3,76,175/- (3,62,477+13,698) already paid towards these demands was ordered to be appropriated;
(iii) Penalty of Rs. 1,04,22,322/- was imposed on M/s SAIPL under Rule 15 of the Cenvat Credit Rules, 2004 read with Section 11AC of Central Excise Act, 44 and penalty of Rs. 2 lacs was imposed on Ravi Sharda, M.D. under Rule 26 of Central Excise Rules, 2002;
(iv) Penalty of Rs. 2 Lacs each was imposed under Rule 25 of Central Excise Rules, 2002 on M/s Krishna Agro, M/s Allied Agro and M/s Allied Steel; and
(v) Penalty of Rs. One Lakh each was imposed on M/s Golden Steel Co. and Rajeev Steel, Faridabad under Rule 25 of Central Excise rules, 2002.
1.8 It is against the above order of the Commissioner that the present appeals along with stay applications have been filed by M/s SAIPL, Sh. Ravi Sharda, M/s Krishna Agro, and M/s Allied Agro, M/s Golden Steel and M/s Rajeev Steel.
3. Learned Counsel appearing for the appellants submitted that the demands have been confirmed mainly on the following ground:
(a) alleged clandestine clearance of the scrap
(b) disallowance of cenvat credit on the ground that there is no actual receipt of input..
4. He submits that the duty confirmed on account of clandestine clearance of scrap on the basis of scrutiny of entries made in slip pad recovered from one Shri Surinder Singh, Security Supervisor of the appellant. It is his submission that if the said quantity cross checked or verified from the sale invoices of the appellant for the corresponding period. It is alleged that the entries made in the slip pad were not reflected in the invoices. Therefore, no duty has been paid. In the instant case, it is alleged that the said scrap and waste has been cleared without bill/invoice to various party. It is his submission that the said allegation of clandestine clearance of scarp is not sustainable if the cross examination of Shri Amarjeet Singh Bajaj is considered. He further submits that the Revenue was required to examine as to whether the quantity of excisable goods which alleged to have been removed without payment of duty could be produced in the factory or unless manufacture is proved, the allegation of clandestine removal cannot be sustained. He submits that during the impugned period, there has been production 1577.708 MT of scrap as per RG-1 register and there is no allegation any quantity of scrap produced has been shown in the RG-1 register being removed without payment of duty. He further submits that the appellant has cleared 1560.095 MTs of scrap on payment of duty during the impugned period. The Revenue has not produced any positive evidence that given quantity have been manufactured and removed without payment of duty. When a quantity higher than a quantity of 1577.708 Mts which is shown manufactured as pr RG1 register could not be generated during the course of manufacture of auto components then the allegations of clandestine removal without payment of duty is not sustainable. He further submits that if the allegation is taken to be correct then there should be production of 2370.951 MT of scrap be produced in the factory of the appellant to manufacture of such scrap, there should be such quantity of raw material and finished goods to be manufactured during the period the same is considered then the allegation is proved wrongly. He further submits that in the ideal situation is taken then the maximum scrap can be generated only 1612.058 MT. To support this appellant has submitted various charts and diagram and certificate of chartered engineer that the appellant has produced 5911.54 MT as raw material/inputs and cleared 4299.49 of finished goods. Therefore, the maximum waste can be generated to the tune 1612.058 whereas the appellant has recorded waste of 1577.708 in the RG-1 register out of 1560.095 MT has been cleared on payment of duty. This fact has not been disputed by the Revenue. The demand confirmed simply on the basis of statement of Shri Surinder Singh, security supervisor who has noted in the slip pad. The revenue has also relied on the statement of Shri Amarjit Singh Bajaj and during cross examination of Shri Amarjit Singh Bajaj, stated that he has never purchased the scrap from the appellant and he had only supplied tempo to the appellant. He had also confirmed that his statement was a dictated statement and its copy was not supplied to him. He submitted his books of account showing receipt of transportation charges only and Shri Amarjit Singh categorically denied purchase of scrap, in that circumstance, the impugned order quo demanding duty on the allegation of clandestine clearance of scarp is not sustainable in the absence of any corroborate evidence.
5. For demand of duty, on clearance of finished goods of Rs.13,698/-, it is his submission that the appellant have not cleared the parts on payment of duty as later on these parts came back for repairs. Upon repairs, these parts have been cleared and therefore the second time, the duty is not required to be paid. In the circumstances, the demand is not sustainable.
6. With regard to the denial of credit on the ground that the appellant has not received the goods and received only invoices in their units. For this, the contention of the appellant is that the allegation is on the basis that the appellant has purchased the HR Coil not sheet and having no facility of cutting coils into sheets. Therefore, it is alleged that the appellant has not received the goods in their factory. He submits that total 80 invoices in dispute and out of that, 34 invoices, the description shown as HR coil, in six invoices, the description shown as CR sheets and in 40 invoices the description is HR coils slitted but the demand has been against the appellant on all 80 invoices. It is his submission that the appellant has purchased HR coils from the dealers. The said coils were directly sent to the job worker for cutting into HR sheets. These sheets received by the appellant used in the manufacture of their final product. The appellant has produced job work challan and paid for job work to the job worker on the issuance of invoices. These facts have not been disputed by the Revenue during the course of adjudication and supplier of the HR coils has given statement that they have supplied the HR coils to the appellants. In that circumstance, the credit cannot be denied to the appellant. He, therefore, submits that the impugned order is to be set aside and the appeal be allowed.
7. On the other hand, learned AR supported the impugned order and submitted that the demand on account of clearance of scrap is based on the entries made in the diaries of the security supervisor and also confirmed by Shri Amajit Singh Bajaj (a major buyer of scrap). He submits that the material received was HR/CR sheets from various suppliers without any bill and for availing the credit on the invoices procured form M/s.Allied Agro, Allied Steel and Krishna Agro. It is admitted that the appellants were not having the facility to cut HR/CR coils/sheets at their unit Ludhiana/Gurgaon obviously it is not using HR/CR coil into their factory. It is proved that the appellant were not using the goods described in the invoices, therefore, the appellant is not entitled to avail the credit on these invoices.
8. Heard the parties and consideration the submission.
9. On careful consideration of the submissions made by both sides, we find that three issues emerge which are as under:
(i) The demand on account of clandestine clearance of scrap by the appellant
(ii) Availability of credit on the allegation that only invoices have been received and no such invoices have been received
(iii) the demand on account of goods received and cleared without cover of invoices Issue No.1
10. To deal with the issue of clandestine clearance of the scrap based on slip pad received from, security supervisor and the statement of Shri Amajit Singh Bajaj who initially stated that he has received the scrap on the basis of entries made in the slip pad recovered from security supervisor. We have seen the statement of Shri Amajit Singh Bajaj and Shri Surinder Singh were recorded on 19.5.2006. Both the statements were retracted on 21.5.2006 but later on retracted statements were withdrawn. Therefore, it is alleged that the scarp has been cleared without payment of duty. The contention of the appellant is that they are not capable of manufacture such huge quantity of scrap. To support his contention, they have produced a certificate issued by chartered engineer certifying that the factory of the appellant is not able to manufacture such huge scrap during the impugned period. We also take note of the fact that during the course of cross examination of Shri Amajit Singh Bajaj has denied of purchasing scrap from the appellant. Moreover he has admitted that he has supplied only tempo for transportation of the scrap and received transportation charges from the appellant. No contrary evidence to this defence has been produced by the Revenue in support of their contention. Moreover, to generate such huge quantity of scrap, there need to be purchased excess raw material an manufacturing thereafter finished goods and clearance of the finished goods without payment of duty and transportation thereof, all these evidence have not been produced by the Revenue. In the absence of such evidence, the evidence produced by the appellant are having evidentiary value and the benefit of doubt goes in favour of the appellant. As contended by the appellant that they are not capable of to manufacture such huge quantity of scrap has been certified by the chartered engineer and no evidence of procurement of excess inputs and clearance of excess finished goods is on record. In these circumstances, the demand on account of clandestine clearance of scrap is not sustainable, therefore the same is set aside.
Issue No.2
11. Denial of credit on the allegation that the appellant has received the invoices and not inputs. To allege that such allegation, the sole ground is that the appellant has procured HR/CR coil having no facility to manufacture the same in their factory, therefore, they have not received such quantity of scrap. We have seen that total 80 invoices are in dispute and out of this in 6 invoices the description shown as CR sheets and in 40 invoices the description is HR coils slitted and 34 invoices, the description shown as HR coil. It is evident from the list only against invoices 34 invoices, the appellant has received HR/CR coils. With regard to these, the appellant has taken the defence that these HR/CR coil has been sent to job work for cutting/slitting. The job charges have been paid and the goods have been received from the job worker against job work challan. These evidences had not been given credence by the adjudicating authority during the course of adjudication. The adjudicating authority has only relied on the statement that the appellant has not received HR/CR coil. It is admitted position that the appellant has not received HR/CR coil in the factory and the same has been sent to the job worker directly for cutting/slitting. These facts have not been considered by the adjudicating authority. We also find that there is statement of supplier of coil that they have supplied these coils to the appellant but no statement of the transporter has been recorded to find out the truth. In the absence of such positive evidence, the evidence produced by the appellants are having evidentiary value. Therefore, the credit on HR/CR coil cannot be denied to the appellant. In the circumstances, we hold that the appellants are entitled to avail credit on HR/CR coils in the absence of any contrary evidence produced by the appellant. Therefore, the demand on account of denial of credit on the allegation that the inputs have not been received only invoices is set aside.
Issue No.3
12. With regard to the small demand of Rs.13,698/-, contention of the appellant is that these parts cleared on payment of duty but later these parts have come back for repairs and further they have been cleared without payment of duty as the second time duty is not required to be paid. The appellant has failed to produce any documentary evidence in support of their contention, therefore, the defence taken by the appellant is not admissible evidence. In that circumstance, the demand of Rs.13,698/- is confirmed.
13. In view of the above observation, the impugned order is modified as under:
(a) The demand of Rs.50,23,955/- on account of wrong availment of credit on inputs by Ludhiana unit is set aside.
(b) The demand of Rs.17,60,447/- on account of wrong availment of credit on coil by Gurgaon unit is set aside.
(c) the demand of Rs.32,61,960/- on account of clandestine clearance of scrap is set aside
(d) The demand of duty of Rs.3,62,447/- confirmed on account of shortage of inputs detected during verification of stock is confirmed.
(e) the demand of duty of Rs.13,698/- confirmed on account of clandestine clearance of auto parts which is appropriated and the same is confirmed.
(f) The demand of interest is confirmed for the amount of duty demanded hereinabove.
(g) No penalty is imposable on the appellants. Therefore, penalties are set aside.
14. With these observations, the appeals are disposed of.
(Pronounced in the open court on ______________)
(V.Padmanabhan) (Ashok Jindal)
Member (Technical) Member (Judicial)
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