Custom, Excise & Service Tax Tribunal
M/S. I. J. Steels & Castings Pvt. Ltd vs Cce, Ludhiana on 28 October, 2014
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL, NEW DELHI, PRINCIPAL BENCH NEW DELHI Date of hearing/decision:28.10.2014 Excise Appeals Nos. 57148 and 57180 of 2013-EX(SM) [Arising out of Order-in-Appeal No.11-12/CE/Ldh/2013 dated 21.01.2013 passed by the Commissioner of Central Excise (Appeals), Chandigarh]. M/s. I. J. Steels & Castings Pvt. Ltd. Appellants M/s. Pawan Steels Vs. CCE, Ludhiana Respondent
For approval and signature:
Honble Shri Rakesh Kumar, Member (Technical) 1 Whether Press Reporters may be allowed to see 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 CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? 3 Whether Their Lordships wish to see the fair copy of the Order? 4 Whether Order is to be circulated to the Departmental authorities? Appearance: Rep. by Shri Sudhir Malhotra and Shri Ravi Chopra, Advocates for the appellant.
Rep. by Shri M.S. Negi, DR for the respondent.
CORAM: Honble Shri Rakesh Kumar, Member (Technical) Final Orders nos. 54587 54588/ 2014 /Dated:28.10.2014 Per Rakesh Kumar:
M/s. Pawan Steels is a second stage dealer and according to them, during the period Feb., 2005 to Jan. 2007, they supplied M.S. flats and bars to M/s. I.J. Tools & Castings (P) Ltd. The goods supplied by M/s. Pawan Steels as second stage dealer to M/s. I.J. Tools & Castings, in turn, had been received by them from M/s. S.K.Garg & Sons, as first stage dealer. On the basis of the invoices issued by M/s. Pawan Steels, M/s. I.J. Tools and Castings, a manufacturer of fences, had taken cenvat credit of Rs.2,21,820/-. In all the invoices issued by M/s. Pawan Steels to M/s. I.J. Tools & Castings, on the basis of which the above mentioned credit has been taken, the departments allegation is that the second stage dealer, M/s. Pawan Steel has issued invoices without supply of any goods to M/s. I.J. Tools & Castings and this allegation is based on the allegation that M/s. S.K..Garg & Sons as first stage dealer had no storage godown and for this reason, his registration certificate had been cancelled, therefore, the invoices issued by M/s. S. K Garg & Sons to M/s. Pawan Steels were also bogus invoices without supply of any goods. It is on the basis of these facts that the jurisdictional Dy. Commissioner vide order-in-original dated 25.03.2011 confirmed the service tax demand of Rs.2,22,824/- against M/s. I.J. Tools & Castings (P) Ltd. along with interest and imposed penalty of equal amount on them under Rule 15 of the Cenvat Credit Rules, 2004 read with Section 11 AC of the Central Excise Act. Besides this, he also imposed penalty of same amount i.e. Rs.2,21,820/- on M/s. Pawan Steels under Rule 15 of the Cenvat Credit Rules, 2004 read with Section 11 AC of the Central Excise Act. On appeals being filed to the Commissioner (Appeals) against this order of the Dy. Commissioner, the Commissioner (Appeals) vide order-in-appeal dated 4.2.2013 upheld the Dy. Commissioners order. Against this order of the Commissioner (Appeals), these two appeals have been filed.
2. Heard both the sides.
3. Shri Sudhir Malhotra representing M/s. I.J. Tools and Castings Pvt. Ltd. and Shri Ravi Chopra representing M/s. Pawan Steels pleaded that M.S. Flats/bars had been supplied by M/s. Pawan Steels, as second stage dealer to M/s. I.J. Tools and Castings Pvt. Ltd. under invoices, that these goods had been received by M/s.Pawan Steels from the first stage dealer M/s S.K. Garg & Sons, that it is not the allegation of the department that M/s. Pawan Steels did not have any godown, that the only basis of the departments allegation is that M/s.S.K. Garg & Sons had not supplied any M.S. Flats and M.S. Bars to M/s Pawan Steels and had only issued the invoices to M/s. Pawan Steels as M/s. S.K. Garg & Sons did not have any godown and their registration certificate has been cancelled, that it is on this basis only that it is alleged that M/s Pawan Steels could not have supplied any goods to M/s. I. J. Tools, that no inquiry has been conducted with M/s. S.K.Garg & Sons in respect of supply of M.S. and bars to M/s. Pawan Steels, that the appellants at the time of hearing before the Dy. Commissioner had submitted GRs in respect of the transportation of the goods from the premises of M/s.S.K. Garg & Sons to M/s. Pawan Steels, that no inquiry in this regard had been conducted with the transporters, that M/s. I.J. Tools and Castings had made payments to M/s. Pawan Steels by cheque and similarly, M/s. Pawan Steels had made payment to M/s. S.K. Garg & Sons by cheques, that the duty paid nature of the goods is not disputed, that there is no basis for the departments allegation that the transactions between M/s Pawan Steels and M/s. I. J. Tools & Castings are bogus transactions and that in view of the above submissions, the impugned order confirming cenvat credit demand against M/s. I.J. Tools & Castings, imposing penalty on them and also penalty on M/s. Pawan Steels is not sustainable. It was also pleaded on behalf of M/s. Pawan Steels that penalty on them has been imposed under Rule 15 of the Cenvat Credit Rules, 2004, which is not applicable in respect of the registered dealer.
3.1. Shri Sudhir Malhotra also pleaded that since the manufacture of fences by M/s I. J. Tools & Castings and their export out of India is not disputed and since for manufacture of fences, M.S. Flats and bars have been used and there is no evidence produced by the department as to from other which sources, the raw materials would have been procured by M/s. I. J. Tools & Castings if they had not received M.S. Flats and bars from M/s. Pawan Steels, the only conclusion which can be drawn is that the M. S. Flats and bars had been received from M/s Pawan Steels It was, therefore, pleaded that the impugned order is sustainable.
4. Shri M.S. Negi, ld. Departmental Representative, defended the impugned order by reiterating the findings of the Commissioner (Appeals) and emphasized that the appellants plea is that while M/s. Pawan Steels had procured the goods supplied by them to M/s. I.J. Steels from M/s. S.K. Garg & Sons, the first stage dealer, the fact is that M/s. S.K. Garg & Sons had no premises, and the records show that there is big time gap between the date on which M/s. S.K. Garg & Sons procured the goods supplied by them to M/s. Pawan Steels from the manufacturers and date on which the invoices were issued by M/s. S.K. Garg & Sons to M/s. Pawan Steels and this shows that M/s. S.K. Garg & Sons had only issued bogus invoices without supply of goods and therefore, M/s. Pawan Steels could not have supplied any materials to M/s. I.J. Steels.
5. I have considered the submissions from both the sides and perused the records.
6. The allegation against M/s. I.J. Steels & Castings is that they have taken the cenvat credit of Rs.2,21,820/- on the basis of those bogus invoices issued by the second stage dealer, M/s. Pawan Steels without actually receiving any materials. The only basis of this allegation is that M/s Pawan Steels, in turn, claimed to have received the material from M/s.S.K. Garg & Sons, while M/s. S.K. Garg & Sons had no office or storage premises and for this reason, the department had cancelled their registration certificate. On going through the records, it is seen that all the six invoices issued by M/s. Pawan Steels to M/s. I. J. Steels & Castings also mention the particulars of the invoices issued by M/s. S. K. Garg & Sons to M/s. Pawan Steels and also the invoices issued by the manufacturers/ importers, under which M/s. S. K. Garg & Sons had received the materials. It is seen that out of the six invoices issued by M/s. Pawan Steels, only in case of invoice no.150 dated 15.09.2005, there is no gap between the manufacturers invoice and invoice issued by M/s. S. K. Garg & Sons to M/s. Pawan Steels. In all other five invoices, there is big gap of more than 20 days between the invoices issued by the manufacturer/importer to M/s. S. K. Garg & Sons and the date of invoice issued by M/s. S. K. Garg & Sons to M/s. Pawan Steels. This big gap between the date on which M/s. S.K. Garg & Sons are supposed to have received the materials from manufacturers/importers, and the date on which they have shown the sales of that material to M/s. Pawan Steels cast very serious doubt about the transactions of M/s. S.K. Garg & sons with M/s. Pawan Steels, as when M/s. S. K. Garg & sons had no godown and no office they could not have stored the materials received from the manufacturers / importers for 2 to 3 weeks. Therefore, even though no inquiry has been made with M/s. S.K.Garg & Sons, on the basis of the details available in the invoices issued by M/s. Pawan Steels, the transactions of M/s. Pawan Steels with M/s. I.J. Tools and Castings became doubtful, and at least, in 5 out of 6 invoices. I, therefore, hold that except for invoice no.150 dated 15.09.2005 issued by M/s. Pawan Steels, the genuineness of all other 5 invoices is highly doubtful and as such, the impugned order denying the cenvat credit in respect of those invoices has to be upheld. In view of this, the cenvat credit demand of Rs.1,80,204/- along with interest is upheld. As regards penalty under Section 11 AC on M/s. I.J. Tools, since the entire disputed amount of cenvat credit had been paid during investigation and much before the adjudication and since in the order-in-original passed by the Dy. Commissioner , no option to pay lower penalty in terms of the provisions of Section 11 AC has been given, in view of the judgement of the Honble Delhi High Court in the case of K.P. Pouches reported in 2008 (228) ELT 31 (Del), the benefit of lower penalty cannot be denied to M/s. I.J. Steels and accordingly, the penalty under Section 11 AC on them is reduced to 25% of the cenvat credit demand.
7. As regards penalty on M/s. Pawan Steels for issuing bogus invoices, it is pleaded that while the same has been imposed by the original adjudicating authority under Rule 15 (2), which is not applicable, the Commissioner (Appeals) has upheld the penalty under Rule 26, which was not applicable during the period of dispute. However, I find that the Commissioner (Appeals) has relied upon the judgement of the Honble Punjab & Haryana High Court in the case of Veekay Enterprises reported in 2011 (266) ELT 436 (P&H), wherein the Honble High Court has held that even during the period prior to 1.3.2007, penalty under Rule 26 is imposable on a registered dealer, who has issued bogus invoices without delivery of the goods with intent to enable the appellant to avail cenvat credit. Since the appellant come under the jurisdiction of Honble Punjab & Haryana High Court, this judgement is binding. Therefore, penalty on M/s. Pawan Steels under Rule 26 is upheld. However, looking to the quantum of cenvat credit the penalty is reduced to Rs.40,000/- (Rupees Forty Thousand only).
8. The appeals disposed of as above.
( Rakesh Kumar ) Member (Technical) Ckp.