Custom, Excise & Service Tax Tribunal
M/S. Dhakad Metal Corporation vs Commissioner Of Central Excise & S.T., ... on 16 June, 2015
CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL, West Zonal Bench, Ahmedabad Appeal No. : E/111,112/2012 (Arising out of OIA-CS/89-91/DMN/NDMN/11-12 dated 11.11.2011, Passed by Commissioner (Appeals) Central Excise, & S.T., Daman) M/s. Dhakad Metal Corporation : Appellant (s) M/s. Bhavna Metal Company VERSUS Commissioner of Central Excise & S.T., Daman : Respondent (s)
Represented by :
For Appellant (s) : Shri Vinay Sejpal & Shri S.J. Vyas, Advocates For Respondent (s) : Shri J. Nair, Authorised Representative For approval and signature :
Mr. H.K. Thakur, Honble 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 should be released under Rule 27 of 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 Departmental authorities?
Yes CORAM :
Mr. H.K. Thakur, Honble Member (Technical) Date of Hearing / Decision : 16.06.2015 ORDER No. A/10827-10828/2015 Dated 16.06.2015 Per : Mr. H.K. Thakur;
These appeals have been filed by both the appellants against OIA No. OIA-CS/89-91/DMN/NDMN/11-12 dated 11.11.2011, under which the first appellate authority has upheld the Order-in-Original dated 30.8.2010 passed by the adjudicating authority has confirmed demand by disallowing CENVAT credit of Rs. 17,96,732/- under Rule 14 of Cenvat Credit Rules, 2004, alongwith interest, against M/s. Dhakad Metal Corporation and also imposing equivalent amount of penalty on the appellant M/s. Dhakad Metal Corporation. A penalty of Rs. 8 Lakh was imposed upon a registered dealer M/s. Bhavna Metal Company under Rule 15 of Cenvat Credit Rules, 2004, for issuing cenvatable documents without receipt of goods from M/s. M/s. Prasun Ferro Alloys & Metal Casting Pvt. Limited. Against the said order passed by the adjudicating authority appellants filed appeal before the first appellate authority, which was upheld.
2. Shri Vinay S. Sejpal, (Advocate) and Shri S.J. Vyas, (Advocate) appeared on behalf of the appellants. Shri V.S. Sejpal, (Advocate) on behalf of his client argued that an investigation was carried out by the officers of DGCEI against M/s. Prasun Ferro Alloys & Metal Casting Pvt. Limited revealed that this manufacturer who obtained Central Excise registration was not having any plant and machinery for the manufacture of Copper Rods/ Brass rods/ Copper ingots. M/s. Prasun Ferro Alloys & Metal Casting Pvt. Limited also did not receive any inputs on which CENVAT credit was availed and manufacture was shown only on paper as per the Revenue. That only invoices were alleged to be prepared for Copper Rods/ Brass rods/ Copper ingots and shown to have been cleared to different registered dealers including M/s. Bhavna Metal Company. That at per 8 invoices issued by M/s. Prasun Ferro Alloys & Metal Casting Pvt. Limited in the year 2005-06, the clearances were shown to have been made to the registered dealer M/s. Bhavna Metal Company. That as per the investigation done by DGCEI the vehicles shown to have carried Copper Rods/ Brass rods/ Copper ingots to M/s. Dhakad Metal Corporation and M/s. Bhavna Metal Company were either Auto Rickshaw or transport registration numbers were not existing and that such vehicles never crossed RTO check post at Bhilad. It was the case of the learned Advocate that M/s. Dhakad Metal Corporation actually received the inputs alongwith duty paying documents issued by registered dealer M/s. Bhavna Metal Company. That as per the statement of registered dealer, the documents alongwith goods were sent to M/s. Dhakad Metal Corporation and at the time of receipt of inputs, appellant M/s. Dhakad Metal Corporation were not aware that original manufacturer M/s. Prasun Ferro Alloys & Metal Casting Pvt. Limited had no facility to manufacture such goods. It was his case that extended period can not be invoked while demanding duty as his client was under bonafide belief that the inputs received by him covered by the documents issued by registered dealer.
2.1 It was further argued by the learned Advocate that as the registered dealer had received inputs as well as finished goods, therefore, extended period can not be invoked against his clients and recipient of goods who took credit on the basis of documents issued by the registered dealer and alongwith inputs mentioned in the invoices. That at the time of receipt of documents/inputs in his clients premises his client is not required to go into the details of original manufacturer from which the registered dealer has obtained the goods. Learned Advocate also relied upon the case law of Basudev Garg vs. Commissioner of Customs [2013 (294) ELT 353 (Del.)] and PMS International Pvt. Limited vs. CCE, Ludhiana [2014-TIOL-1669-CESTAT-DEL.] to argue that cross-examination of the persons whose statements are relied upon was not extended and therefore, their statement are required to excluded as evidence while deciding the case.
3. Shri S.J. Vyas, (Advocate) appearing on behalf of his client M/s. Bhavna Metal Company borrowed arguments of the Advocate appearing on behalf of M/s. Dhakad Metal Corporation and argued that statements of authorised persons of M/s. Prasun Ferro Alloys & Metal Casting Pvt. Limited have been recorded during investigation. That as per these statements no manufacturing activity was undertaken by M/s. Prasun Ferro Alloys & Metal Casting Pvt. Limited, therefore, inputs on which credit is taken and distributed is not admissible according to Revenue. It was his case that cross-examination of the persons belonging to M/s. Prasun Ferro Alloys & Metal Casting Pvt. Limited and transporters was not allowed to them and in view of the settled legal proposition, the statement relied upon by the adjudicating authority and the first appellate authority are not admissible as per Section 9D of the Central Excise Act, 1944. It was also his case that penalty upon M/s. Bhavna Metal Company can not be invoked under Rule 15 of the Cenvat Credit Rules, as the ingredients mentioned therein are not satisfied. It was his case that there is no evidence that his client M/s. Bhavna Metal Company has received inputs from any other source as no cash transaction has been brought into light by the investigation.
4. Learned Advocate appearing on behalf of M/s. Dhakad Metal Corporation also furnished Xerox copies of invoices under which inputs were received, which was available before the lower authorities. It was his case that vehicle numbers on the documents are mentioned and that at the time of receipt of the goods, the vehicle numbers mentioned on the cenvatable invoices were not required to be checked up with vehicles in which inputs were received. He relied upon the following case laws to argue that cenvat credit is admissible even if the manufacturing unit is found to be non-existing:-
(a) CCE, Kanpur vs. Juhi Alloys Limited [2013 (296) ELT 533 (Tri. Delhi)]
(b) CCE & ST, Kanpur vs. Julhi Alloys Limited [2014 (302) ELT 487 (All.)]
(c) CCE, Kanpur vs. R.H.L. Profiles Pvt. Limited - [2013 (292) ELT 313 (Tri. Del.)]
(d) Shakti Steel Rolling Mills vs. CCE, Chandigarh [2014 (304) ELT 109 (Tri. Del.)]
(e) Nidhi Metal Auto Components Pvt. Limited vs. CCE Delhi 2015-TIOL-667-CESTAT-DEL.
5. Shri J. Nair (AR) appearing on behalf of the Revenue argued that as per the investigation undertaken by the officers of DGCEI, the original manufacturer M/s. Prasun Ferro Alloys & Metal Casting Pvt. Limited, Thane was found to be having no facility for the manufacture of inputs shown to be received by registered dealer and M/s. Dhakad Metal Corporation. During investigation, the evidences collected by the department were shown to the appellants who agreed that the inputs received were not the same what were contained in the documents. Learned AR, therefore, strongly defended the orders passed by the lower authorities.
6. Heard both sides and perused the case records. The issue involved in the present appeals is whether appellant M/s. Dhakad Metal Corporation is eligible to credit on the basis of documents which are claimed to have been received alongwith inputs issued by the registered dealer when original manufacturer M/s. Prasun Ferro Alloys & Metal Casting Pvt. Limited had no facility for manufacturing the goods on which ultimately credit was taken. There is no evidence on record that appellant M/s. Dhakad Metal Corporation did not receive the inputs alongwith cenvatable invoices issued by M/s. Bhavna Metal Company. It is also not on record whether M/s. Dhakad Metal Corporation was aware that the inputs received had been shown manufactured by M/s. Prasun Ferro Alloys & Metal Casting Pvt. Limited which had no facility for manufacturing of such inputs. It is beyond comprehension that a man will get invoices without inputs and separately acquire inputs clandestinely from other sources to manufacture his goods. There is no whisper about M/s. Dhakad Metal Corporation to be indulging in clandestine removal of finished goods in these proceedings. It is now well settled legal position that a case can not be established on the basis of few confessional statements without other corroborative evidences like shortage of raw materials, cash transactions, alternative procurement of raw materials. Appellant requested for cross-examination of the persons whose statements are relied upon but the same was not extended. It is now well settled law that cross-examination of the persons whose witness are relied upon by the Revenue should be extended to the appellant and in the absence of such cross-examination extended, the statements of such persons can not be relied upon as evidence. It is also observed that Revenue has not contested with any documentary evidence to show that M/s. Dhakad Metal had knowledge that the inputs received alongwith invoices, at the time of taking credit, was from M/s. Prasun Ferro Alloys & Metal Casting Pvt. Limited who had no facility for manufacturing such inputs. In the above factual matrix, appellant M/s. Dhakad Metal Corporation can not be held to have any malafide intention to take wrong credit and extended period of demand cannot be invoked in the present case against them. In this case, the demand is for the period 2005-06 whereas the show cause notice was issued on 20.02.2009. As the extended period is not invokable, therefore, the demand is also time barred in addition to credit being admissible on merits. Accordingly appeal filed by M/s. Dhakad Metal Corporation is required to be allowed.
7. So far as imposition of penalty upon M/s. Bhavna Metal Company is concerned, it is observed that the same has been imposed under Rule 15 of Cenvat Credit Rules, 2004. The provisions of Rule 15 are reproduced below:-
Rule 15. Confiscation and penalty. (1) if any person, takes or utilises CENVAT credit in respect of input or capital goods or input services, wrongly or in contravention of any of the provisions of these rules, then, all such goods shall be liable to confiscation and such person, shall be liable to a penalty not exceeding the duty or service tax on such goods or services, as the case may be, or two thousand rupees, whichever is greater.
(2) In a case, where the CENVAT credit in respect of input or capital goods or input services has been taken or utilised wrongly by reason of fraud, collusion or any wilful mis-statement or suppression of facts, or contravention of any of the provisions of the Excise Act, or of the rules made there under with intent to evade payment of duty, then, the manufacturer shall also be liable to pay penalty in terms of the provisions of Section 11AC of the Excise Act.
(3) In a case, where the CENVAT credit in respect of input or capital goods or input services has been taken or utilised wrongly by reason of fraud, collusion or any wilful mis-statement or suppression of facts, or contravention of any of the provisions of these rules or of the Finance Act or of the rules made there under with intent to evade payment of service tax, then, the provider of output service shall also be liable to pay penalty in terms of the provisions of Section 78 of the Finance Act.
(4) Any order under sub-Rule (1), sub-Rule (2) or sub-Rule (3) shall be issued by the Central Excise Officer following the principles of natural justice. It is observed from the above provisions that penalties under Rule 15 of Cenvat Credit Rules, 2004 are required to be imposed upon the persons who has taken or utilised CENVAT credit in respect of inputs or capital goods wrongly in contravention of any of the provisions of Cenvat Credit Rules. Appellant M/s. Bhavna Metal Company has not been shown to have taken any credit wrongly. Further from the case records it is observed that it is not brought out by the Revenue that at the time of issuing cenvatable invoices registered dealer did not receive inputs alongwith duty paying documents. The fact of duty being paid by M/s. Prasun Ferro Alloys & Metal Casting Pvt. Limited has not been denied by the Revenue. Though later investigations done by the department does raise a strong suspicion of not receiving the inputs but the same is not corroborated by any independent evidence, except few statements. In the absence of cross-examination of relied upon witness given the evidentiary value of the relied upon statements is lost. In view of the above observations the appeals filed by the appellants are required to be allowed with consequential relief, if any.
8. Appeals filed by the appellants are allowed.
(Order dictated and pronounced in the Court) (H.K. Thakur) Member (Technical) .KL 2