Custom, Excise & Service Tax Tribunal
Commissioner Of Central Excise vs M/S Jay Iron & Steel Industries Ltd on 28 August, 2014
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT NO. IV Appeal No. E/1554/07 & E/59/08 (Arising out of Order-in-Appeal No. SRK/337-340/RGD/2007 dated 8.9.2007 passed by the Commissioner of Central Excise (Appeals), Mumbai-II). For approval and signature: Honble Shri Anil Choudhary, Member (Judicial) ======================================================
1. Whether Press Reporters may be allowed to see : No 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 : Yes CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? 3. Whether their Lordships wish to see the fair copy : Seen of the order? 4. Whether order is to be circulated to the Departmental : Yes authorities? ====================================================== Commissioner of Central Excise, Appellant Vs. M/s Jay Iron & Steel Industries Ltd. M/s Jayashree Concast Pvt. Ltd. Respondent (E/1554/07) Respondent (E/59/08) Appearance: Shri Rakesh Goyal, Addl. Commissioner (AR) for Appellant Shri Rajiv Agarwal, Advocate for Respondents CORAM: SHRI ANIL CHOUDHARY, MEMBER (JUDICIAL) Date of Hearing: 26.08.2014 Date of Decision: .2014 ORDER NO. Per: Shri Anil Choudhary
The Revenue is in appeal against the common Order-in-Appeal Nos. SRK/337-340/RGD/2007 dated 8.9.2007 passed by the Commissioner of Central Excise (Appeals), Mumbai-II. As the appellate order in dispute is common and also the facts are similar and also in view of the fact that the respondent company in both the appeals have some common Directors and/or under the same management, the appeals have been heard together and are being taken up together for disposal. For the sake of convenience, the respondent M/s Jay Iron & Steel Industries Ltd. is hereinafter referred to as Jay Iron or the assessee no. 1 and respondent M/s Jayashree Concast Pvt. Ltd. is hereinafter referred to as JCPL or assessee no. 2.
2. The brief facts are that Jay Iron has its factory at village Kharsundi, Dist. Raigad and is registered with the Central Excise department and engaged in manufacture of steel ingots falling under Chapter Heading 7206.00 and Runner and Riser falling under Chapter Heading no. 7204.00 of the first schedule to the Central Excise Tariff Act, 1985, whereas the respondent JCPL is situated at Vill. Dheku, Dist. Raigad and also registered with the Central Excise department and engaged in the manufacture of non-alloy/steel ingots falling under Chapter Heading 7206.00 and Runner and Riser falling under Chapter Heading no. 7204.00 of the first schedule to the Central Excise Tariff Act, 1985. The respondents during the period of dispute have availed CENVAT Credit on various inputs including MS scrap purchased from dealers/suppliers including M/s Simandhar Steel Movers (I) Pvt. Ltd.(SSMPL for short) and M/s Simandhar Enterprises (S.Ent. in short). Both are first stage dealers under the Central Excise Act and Rules thereunder. The show-cause notices dated 2.11.2005 to Jay Iron and 22.2.2006 to JCPL (for the extended period) were issued on the respondent/assessees asking them to show cause as to why CENVAT Credit availed on the invoices of the aforementioned suppliers should not be disallowed and tax demanded and recovered under the provisions of Rule 57I of Central Excise Rules, 1944/Rules 12 of Cenvat Credit Rules, 2001/02 read with Section 11A of the Act along with interest and further why penalty should not be imposed under Rule 173Q and/or Rule 57I of Central Excise Rules, 1944/Rule 13(2) of Cenvat Credit Rules, 2001/02 read with Section 11 AC of the Act.
2.1 The respondents appeared and contested the show-cause notice, but vide Order-in-Original, the Revenue confirmed the demands with interest and also penalty were imposed of amount equal to tax under Rule 13(2) of Cenvat Credit Rules. Further penalty of Rs.5 lakhs was imposed under Rule 57I read with Rule 13(2) on Mr. G.K. Sharma, director of JCPL. Further penalty of Rs.5 lakhs was imposed each on M/s Simandhar Steel Movers Pvt. Ltd. and on Mr. Hitesh Shah, Director/partner in both the supplier company and the firm. Being aggrieved the assessee and their Director/partner preferred appeal before the Commissioner (Appeals), who vide the impugned order, was pleased to allow the appeal of the respondent assessees setting aside the Order-in-Original and also holding that no penalties are sustainable on the respondent assessee as well as its Director and the director/partner 0f supplier.
3 Being aggrieved, the Revenue is in appeal before this Tribunal on among others the following grounds: -
(i) (a) In the referred case i.e. Commissioner of Central Excise Vs. Dashmesh Castings (P) Ltd. 2001 (130) ELT 658 (Tri-Del), the charge of clandestine removal appear to be solely based on the non-production of Octroi receipts whereas in this case the investigations have been conducted covering various aspect such as (1) types of vehicles stated to be used for transportation were not found to be applicable for transportation of goods, and (2) Transporters/Truck drivers were also interrogated and in all the cases who appeared, have stated for non-transportation of the goods. The confirmation from the Octroi posts was an additional part of investigation and that too has established/proved that the goods were not transported.
(b) The judgment in the case of Lloyds Metal Engineering 2004 (175) ELT 132 (Tri-Mum) is also not applicable in this case because the vehicles used in the said case were for transportation of goods whereas in this case the vehicles used are for transportation of passengers. Further, the transport agencies in the case of Lloyds Metal (supra) have come forward and claimed the receipt of an amount on account of transportation of goods. Also, the Cost Audit appointed by the Commissioner also show physical receipt of inputs. But in this case there is no such evidence to prove that the goods have actually been transported.
(c) The issue in the case of Saina Industries Vs. CCE 2005 (186) ELT 423 (Tri-Mum) were (i) receipt of sheets and not coils, (ii) non-production of LRs, (iii)non-production of Octori receipts and (iv) movement of goods weighing 31 MTs through a vehicles of 16 MTs capacity. All these issues were suitably replied by the party as described in the order. Moreover, the department in the said case had interrogated only one dealer/supplier out of 21 different dealers/suppliers and who had also replied that he had supplied the goods and received the payment for transportation of goods. But, in these cases under consideration, Shri Hitesh Shah, director/partner of both the dealership firm i.e. SSMPL and S.Ent. gave evasive and vague replies to the queries raised by the officers. He was neither able to support his statements with authentic documents nor was he able to provide the details of the transporters or the brokers involved in the transportation of the scrap. In short, he could not produce a single document or person involved in the transaction pertaining to receipt, storage and clearance of the scrap from his godown. This clearly confirms that he had merely issued modvatable/cenvatable dealers invoices without actually dispatching/ sending the goods covered under the said invoices.
(ii) As regards onus to produce the proof, it is stated that the department had clearly proved the non-receipt of inputs by the assessees as per the show-cause notice and as explained herein above. In the light of this, it becomes the duty and responsibility of the assessees to prove that they had actually received the goods as in the case of Lloyds Metal (supra), where the transporter had come forward and confirmed the transportation of goods and the receipt of amount on this account and receipt of goods was also proved by the party in view of the Cost Audit appointed by the Commissioner. Whereas in the present case, all transporters had denied the transportation of the scrap to the assesses. Similarly, in the case of Saina Industries, the department had admitted that the sheets were received and there was only confusion with regard to sheets and coils.
(iii) Regarding applicability of statements made by 6 vehicle owners covering 8 invoices out of 146 invoices in respect of appellant no. 1 and statement of 1 vehicle owner and communication from 2 vehcile owner out of 129 invoices in respect of appellant no. 3, it is stated that the investigation was required to be completed within specified time to ensure that the show-cause notice is issued within specified period prescribed by the law. In the investigation of such big magnitude the statements of 6 & 3 vehicle owners could be taken as they had come forward in view of the summons issued by the department. In other cases though the summons were issued but the same have come back in view of the incomplete addresses and or bogus addresses. The analogy applied for consignments not related to the consignment pertaining to 9 vehicle owners referred above is not with reference to these 9 vehicle owners but in view of the bogus transporters proved as the summons issued to them have come back due to incomplete and/or bogus addresses. Also, the vehicle owners who had deposed have confirmed that the goods under reference are not transported by them.
(iv) As regards relevance statement of Shri Bhaktiani, owner of truck no. MH04 F9302, it is stated that the said vehicle no. is appearing on invoice no. 1407 dated 20.12.2003 issued by SSMPL and the same is appearing at Sr. No. 72 in annexure B to the show-cause notice.
(v) As regards confirmation of payment by the dealers to vehicle owners it is not proper to say that the investigating officer did not confirm from the records of the dealers whether the payment was made to the vehicle owners by the dealers. The statements of dealers were recorded but the dealers could not produce a single document or person involved in the transaction pertaining to receipt, storage and clearance of goods from his godown. As neither the dealers have pointed out that the vehicle nos. mentioned in the invoices were not correct nor the assessees have pointed out that the vehicle nos. were incorrect. If the vehicle nos. were incorrect, it was the duty and responsibility of the assessees not only to point it out but also to prove that the same were incorrect as the invoices issued by the dealers are statutory documents and in the absence of any contrary observation the same are required to be accepted to be authentic.
(vi) As regards tracing out other vehicles the investigating officer has taken utmost pain to find out the truth and accordingly has issued summons to the vehicle owners involved in the case but since either the summons have come back on account of bogus/incomplete addresses or the vehicles owners who came forward to depose in this regard have confirmed the non-transportation of the goods covered by the invoice under reference.
(vii) It is not just a technical mistake but the non-movement of goods covered under the invoices. Also, neither any duty has been debited in respect of said invoices nor any goods have been transported. This is evident from the statements of vehicle owners who confirmed non-transportation of goods and the returning of remaining summons issued to the (so-called) vehicle owners of the vehicles, whose nos. were mentioned in the invoices. It is, thus, a clear case of fraud committed by the assessee in connivance with the dealers for the issuance of modvatable dealers invoices wherein no goods mentioned in the said invoices have been issued/transported and no duty has been debited to the Govt. account but the credit has been taken by the assessees. The charge of non-transportation of the goods and non-payment of duty on these goods has clearly been established by the investigation as detailed out in SCNs and connivance is also proved as the credit has been taken on the invoices under which no goods have been received.
Also, the Order-in-Appeal has termed the statement of Shri Nikam, owner of vehicle no. MH04 AL 5402 as a qualified statement. This statement is relied upon against appellant No. 1 and reads as under: -
Statement of Shri Nikam, owner of vehicle no. MH04 AL 5402 relied upon against appellant no. 1 is a qualified statement. This also proves that bogus vehicle nos. were mentioned in the invoices covered in this case.
3.1 Further, the Revenue relies on the ruling of this Tribunal in the case of Steel India Company and others Vs. Commissioner of Central Excise, Pune-III, being Final Order no. A/517-523/14/EB/C-II dated 14.7.2014, where in case of purchase of inputs being MS scrap supplied by registered dealers through brokers, by claiming it to be manufactured scrap, on which excise duty was paid and the CENVAT Credit was availed, it was alleged by the Revenue pursuant to its inquiry that Steel India have actually been supplied with bazaar scrap and not industry generated scrap. It was held that the Revenue need not prove its case with mathematical accuracy and it is sufficient if the Revenue, as regards the presumption as to the existence of a fact raised against the assessee, that an input have not been transported to its factory, it is reasonable to say the Revenue has discharged its onus in the case with substantial accuracy, and the Tribunal upheld the disallowance of CENVAT Credit. The Revenue further relies on the third Member ruling of this Tribunal in the case of Bhagwati Steel Cast Ltd. Vs. Commissioner of Central Excise 2013 (293) ELT 417 (Tri-Mum), wherein CENVAT Credit was availed on the basis of duty paying document originated from the ship breakers in Gujarat. By majority view, in view of the facts that some of the vehicle numbers, used for transport of the inputs were found to be non-transport vehicles, further the assessee did not produce signature copy or consignment copy and further non maintenance of stock register/material register, which can show entry of transport vehicles in the factory premises, in support of return of material. It was held, in view of evidence on record, the assessee has failed to discharge onus on it to prove the receipt of material. The same was further corroborated by the statement of the employees of the assessee stating that invoice did not accompany goods always, but was delivered separately. Accordingly, the disallowance of the CENVAT Credit was upheld.
3.2 The Revenue further relies on the ruling of the Hon'ble Supreme Court in the case of Commissioner of Central Excise, Mumbai Vs. D. Bhoormal 1983 (13) ELT 1546 (SC), wherein the matter of dispute was under Sea Customs Act, where goods were alleged to be smuggled goods, in respect of burden to proof, it was observed that prosecution or the department is not required to prove its case with mathematical precision but what is required is the establishment of such a probability that a prudent man may on its basis believe in the existence of the facts in issue. Accordingly, the appellant Revenue prays for allowing its appeals by setting aside the impugned Order-in-Appeal and restoring the Order-in-Original.
4. The learned Counsel for the respondent assessee, Mr. Rajeev Agarwal, Advocate made submissions at length and took me through the various documents and evidence on record and among others has made the following submissions: -
4.1 During the period from October, 2000 to February, 2004, the Respondents-Jaishree Iron availed a total credit of Rs.40,18,367/- on the basis of 146 invoices (138 issued by the SSMPL and 8 invoices of S. Ent.). Transport copies of the invoices were received by the Assessee along with Steel Scrap as indicated in the invoices.
4.2 During the period August 2003 to February, 2004, respondent-JCPL availed a total credit of Rs.38,92,588/- on the basis of 129 invoices issued by Simandhar SPL (dealer). Show Cause Notice dated 22/02/2006 (to JCPL) issued by the department, was confirmed by the learned Additional Commissioner. The Order in Original has been set aside by the learned Commissioner of Central Excise (Appeal). It is the order of the Appellate Authority that is challenged by the Revenue by filing this Appeal before the Tribunal. Based on a letter dated 27th Nov 2003, of Asstt. Comm. of Central Excise Mulund, that the two dealers (suppliers) have committed some fraud, Central Excise officers attached to Raigarh Commissionerate investigated the case. During investigation the Assessee submitted Cenvat Invoices, Goods Receipt Notes, L R copies and Balance Sheets (Para 10 of the Show Cause Notice) .
4.3 There was no doubt about the genuiness of the invoices as the said 146 invoices are duly issued by the supplying dealers and supplied along with the scrap material which was duly received in the factory. The transport was arranged by the Dealers and the material was taken delivery by the Respondent at the factory gate and Goods Receipt Note (GRN) prepared. The payments for the purchase of material and the duty amount indicated on the invoices issued by the two dealers, were made through a/c payee cheques to the two dealers.
4.3 That Show Cause Notice dated 31/10/2005 (to Jaishree iron) issued by the Department was confirmed by the Learned Additional Commissioner of Central Excise. The Order in Original has been set aside by the learned Commissioner of Central Excise (Appeal).
4.4 That in the case of M/s. Bhagawati Steel Cast Ltd 2013 (293) E.L.T. 417 (Tri-Mum), relied upon by the Revenue, it was held that the credit is not admissible to the parties who purchased materials from SSMPL and S.Ent., the two supplying dealers. On going through the facts of above said case law, the respondent submits that the facts in case of respondent are different from the case of M/s. Bhagawati Steel Cast Ltd, in which the credit is held to be not admissible on various grounds. The present case of the respondents is totally different from the case of M/s. Bhagawati Steel Cast Ltd for the following reasons: -
(i) The first ground for denial of the cenvat credit in case of Bhagawati Steel is on the ground that the assessee (manufacturers) in the appeal have not maintained the Goods Receipt Note (GRN) to show that the goods are actually received in the factory. In the present case, respondents have received the material in the factory and for that they have maintained the Goods Receipt Notes (GRNs) and other records/ documents which were produced before both the adjudicating authority as well as to the first appellate authority. Considering the evidences of material receipt, the learned Commissioner (Appeals) has set aside the Order in Original.
(ii) The next ground for denial of credit in Bhagawati Steel Cast Ltd is that manufacturers have not maintained any material inward records. However, in respondents case they have maintained all the statutory records including the R.G.23A Part I & II, Stock Register, Good Receipt Note (GRNs) which shows that the scrap material purchased was received in the factory.
(iii) The respondent have taken all the reasonable steps to ensure that the registered dealer had issued an invoice duly complying with the cenvat credit provisions and the same was tallied with the material description, rate of duty, etc. The respondents have received the material Iron & Steel Scrap, for which they had placed order on the registered dealer (supplier).
(iv) In the case of Bhagawati Steel, the credit is also denied on the grounds that the scrap has not crossed the border of Gujarat in to Maharashtra and hence, not proved to be ship breaking scrap. In the case of respondent, the credit is allowed by the Ld Commissioner of Appeals after satisfying and going through the details of the documents filed with him. The credit was denied by the original authority only on the grounds that summons issued to transporters could not be served.
4.5 The respondent submits that one of the reason, in M/s. Bhagwati case, for denial of credit is that the employees have stated that no such credit is received. Whereas in the respondents case, the Director Mr B.B. Singh and one Mr. Kishan Daga, Employee, have stated that they placed order for steel scrap and also received steel scrap. This fact has been discussed by the Ld Commissioner in the impugned order.
4.6 In the case of the respondents, the summons were issued to the transporters and only six attended and denied the transport of scrap to the respondents factory. Respondent submits that they have received the material at factory gate as per the contract and also it was established by the statement recorded, whereas in the respondents representative had stated that the transport was arranged by the supplier and that they have taken care that the goods were supplied as described in the invoice and that transport copy of invoice accompanies the goods.
4.7 In the Bhagwati case, the vehicles shown in some invoices are found to be non transport vehicles like passenger vehicle etc. In the respondents case, the transport vehicles are Commercial vehicles capable of transporting the capacity of the scrap shown in the invoices. Out of 146 invoices, only in one invoice the vehicle number is stated to be mini bus, which is a clerical mistake.
4.8 The respondents further submit that in their case some of the suppliers invoices numbers are alleged to be used more than once by the supplying dealer. The respondents have received the invoices with pre-printed serial numbers and all the invoices, indicated the Sl No/Page No of the RG23 D record maintained by the two Dealers. The Show Cause Notice alleges that 80 invoices (out of 146) are parallel invoices bearing same serial number issued by SSMPL, to other buyers (Annexure A to the SCN). This allegation is based on the letter of Commissioner of Central Excise III. Neither copy of purported parallel invoices nor copy of RG23D register of Dealer was made available as evidence. No investigations have been carried out with the Consignee (other alleged buyer) appearing in the Parallel invoices. Further in many cases the invoice issued to the respondents is dated earlier than invoice of same number issued to others. There is no legal obligation cast on the respondents to check the RG23D records of the supplying dealer, that the same are maintained correctly. The Respondents have personally verified that all the 146 invoices were issued by persons authorized by the two dealers, that the materials supplied was as per description appearing in the invoices, that the goods were received along with the invoices, that the invoices contained details of the duty paying documents of the manufacturer, that the invoices contained the RG 23 D details of the two Dealers. The goods were duly taken delivery and Goods Receipt Note GRN prepared immediately after unloading of the goods. The payment for purchase is made by account payee cheques for the material and the duty amount reflected in the invoices issued by the supplying dealers. Thus the respondents have done everything which was required or obligated to be done under the Cenvat Credit Rules and have discharged their burden or onus under the law, for availing credit. May be the two supplying dealers have not cooperated in the investigations. There is absolutely no material to show that Respondents have colluded or connived or conspired with the two supplying dealers. Respondents had no knowledge of any alleged wrong doings by the supplying dealers. The respondents have acted in good faith and had no occasion to doubt the duty paid nature of goods (inputs) received.
4.9 In the case of M/s. Bhagawati, the argument of the assessee was that the ship breaking scrap is re-rollable scrap and the same can be used in the manufacture in their factory. However, in respondent case, there is no such ship breaking scrap in dispute. The findings, in the order in original, are with regard to same number of invoices (parallel invoices) being issued by the supplying dealers and that a few transporters (say 5 out 150 approx.) have not confirmed the transaction.
4.10 The respondents submit that they have purchased the material on regular basis during October, 2000 to Feb 2004. It appears from records that a show cause notice No. V/PI/30-29/MDN/01 dt 19/01/2004 had been issued by the Revenue to the supplying dealers and that department was aware of the alleged activities of the two dealers since 2001, but did nothing to prevent the two dealers from the alleged unfair practices, if indeed the two dealers were so engaged.
4.11 The respondents submit that their factory was frequently visited by the CERA audit and C.Ex. Audit and there were no adverse remarks on the respondents. This aspect was not found in the case of M/s. Bhagawati. Therefore, the demands are also not sustainable on grounds of time bar.
4.12 In the case of Bhagwati Steel, the findings were that substituted material was received. In the present case inference of the Original Authority is that no material was received. It is such findings which have been found erroneous and set aside by the Appellate Authority.
4.13 There is no evidence, to prove the allegations that the Respondents fabricated the records or that respondents connived with the two supplying dealers or that respondents availed credit on invoices without actual movement of goods.
4.14 The registered dealer (supplier) has supplied the materials to the factory of the respondents and once the freight is included in the value of the material, and freight is incurred by supplying dealer, the clerical mistake in one or two vehicle no. shown, will not render the receipt of input unbelievable in view of corroborative evidences available, maintained in normal course of business.
4.15 Confirmation of demand is only on the basis of investigation conducted upon the supplier, based on a letter from Asstt. Commissioner of Mulund Division and enquiry in RTO office, without any cogent evidence.
4.16 Respondents refer to the Rule 7 (2) of CER, 2001/02 which prescribes that the manufacture availing the Cenvat Credit shall be liable if such manufacturer has not taken reasonable steps for availing the credit. The explanation clarifies that reasonable steps would mean satisfaction of the identity and address of the dealer by personal knowledge. The identity of the two suppliers has not been disputed in the Show Cause Notice. Besides, these Respondents had paid the purchase consideration through A/c payee cheque. Hence, the Respondents have taken all the reasonable steps to ensure that to follow the procedure prescribed under the law. It has been held by the Hon'ble Patna High Court in Addl. CIT Vs. Bahri Bros (P) Ltd. (1985) 154 ITR 244, that where transaction is through Banking channel, the genuineness of the transaction is prima facie established.
4.17 The respondents have verified the goods received and GRN were prepared along with maintaining the statutory records i.e. RG23 Part I and II. Respondents would like to draw the Tribunals attention to C.B.E.C. Circular No.766/82/2003-CX., dated 15-12-2003, wherein at Para 5 and 6, this aspect is dealt with as below: -
On the issue of availment of credit by the user-manufacturer, it is clarified that action against the consignee to reverse/recover the CENVAT Credit availed of in such cases need not be resorted to as long as bonafide nature of the consignees transaction is not in dispute. In case the manufacturer-supplier has received payment from the buyer (including the amount shown as duty of excise) i.e. the person taking CENVAT Credit has made payment of invoice amount, action should also be taken against the manufacturer-supplier under Section 11D and 11DD of the Central Excise Act, 1944. 4.18 Respondents further submit that when duty paid on its finished product is not questioned by the Revenue, then it leads to inevitable conclusion that the Revenue is accepting the fact of receipt of raw material in the Respondents factory premises out of which finished goods were manufactured. In the absence of any contrary evidence adduced by the department of other materials being replaced by the dealer or respondent. When duty on finished goods is accepted by the Revenue then Cenvat credit is not deniable and to substantiate their say they rely on the decision as follows: -
PSL HOLDINGS LIMITED 2003(153) ELT 602(T) STUMPP SCHEULE & SOMAPPA LTD. 2005(69) RLT 786(T) M.P.TELELINKS LTD 2004(178) ELT 167(T) 4.19 Department has already initiated action against the said supplying dealer for the alleged fraud committed with the department, vide issue of Show Cause Notice No. F.No. V/PI/30-29/MDN/01 dtd. 19th January, 2004. Once again issue of second show cause notice under the same investigation on the Respondents is not sustainable. The respondent rely on the case reported in 2006 (197) ELT 465 (SC) in the case of NIZAM SUGAR FACTORY.
4.20 The respondent further submits that the investigation in general started in February, 2001 and on the Respondents in 2003. The Show Cause Notice is issued in the month of November, 2005 and Feb. 2006. Hence, the demand is not sustainable and the same is time barred and liable to be set aside. In this regard, respondent rely upon the judgment reported in 2011 (264) ELT 14 (SC) in the case of M/s. ORISSA BRIDGE & CONSTRUCTION CORPN. LTD, where in it has been held that the show cause notice issued after 2 years and 4 months is not sustainable under the fact that Demand for Extended period when Manufacture was detected by Revenue on 24-8-1987 but show cause notice was issued on 4-12-1989, Revenue unable to satisfactorily answer as to why SCN issued after two years and four months of inspection by authorities, as file was misplaced and not traceable.- Considering the circumstances, held, Department was not justified in invoking extended period of limitation.
4.21 The VAT provision referred to in the Bhagawati case cannot be made applicable to Central Excise case as under Section 48(5) of MVAT, 2002 specifically brought a provision which reads as under: -
For the removal of doubt it is hereby declared that, in no case the amount of set-off or refund on any purchase of goods shall exceed the amount of tax in respect of the same goods, actually paid, if any, under this Act or any earlier law, into the Government treasury except to the extent where purchase tax is payable by the claimant dealer on the purchase of the said goods effected by him It is relevant to mention that no such provision is there in the Central Excise Act and Rules. In case, the duty recoverable is not paid to the Govt Treasury by the seller, the same is required to be recovered from the seller & not from the purchaser.
2003(153) ELT 114(Tri) R.S.Industries 2006(74) RLT 402 (T) Spic Pharmaceuticals Division 2006(74) RLT 810 (T) Diamond Steel Rolling Mills Ltd.
4.22 Respondents submit that the judgments cited by the Revenue in the Appeal are not relevant to the facts of their Case, and are distinguishable..
4.23 The learned Counsel further relies on the ruling in the case of Motabhai Iron & Ispat Indus. Vs. Commissioner of Central Excise 2014 (302) ELT 69 (Tri-Ahmd-SMB), where in respect of CENVAT Credit availed the Revenue had alleged that the invoices are bogus and there has been no actual delivery of goods. It has been held that credit cannot be disallowed on basis of statements not corroborated by other evidence or goods not received by the assessee. Invoices issued by registered dealer duly recoded in statutory record books and payment made through Banking channel and there is no evidence that the said amount wasa received back by the assessee and that records maintained were not correct. Further, form- 40 (Sales Tax paid by supplier) was produced in support of contention that the goods were actually transported. In view of the fact that no investigation was conducted at consignors place, statement of transporter was held not reliable and accordingly, the disallowance of CENVAT Credit was set aside.
4.19 The Counsel further placed reliance on the ruling of this Tribunal in the case of Commissioner of Central Excise, Ludhiana Vs. Nand Mangal Steels Pvt. Ltd. 2013 (298) ELT 105 (Tri-Del), wherein this Tribunal in the case of CENVAT Credit availed on scrap, used in the manufacture of non-alloy steel ingots, and in fact that inputs were used for manufacture was not disputed, wherein there was allegation of non-receipt of goods based on incorrect vehicle no., it was held that it does not mean that the goods procured by appellants are not same. Further, the movement of goods from supplier firms and receipt of the same by the assessee was not disputed, but minor discrepancy in the invoice will not result in denial of credit. The appellant further relies on the ruling of this Tribunal in the case of Luxmi Metal Industries Vs. Commissioner of Central Excise, Delhi II 2013 (287) ELT 487 (Tri-Del), wherein the fact that when the buyer purchased goods from registered dealer under proper invoice, there being no dispute about the credentials of the cenvatable invoices issued by the registered dealer and accompanying goods, it was held that the buyer cannot be expected to go beyond that to verify and find out as to whether the registered dealer had purchased the same legally or not and in such facts, the denial of CENVAT Credit was set aside in favour of the assessee.
Accordingly, the respondent vehemently prays for dismissal of the appeal of the Revenue in view of the facts on record and the categorical findings of the learned Commissioner (Appeals), who have examined the evidences in detail and recorded categorical finding holding that the respondents have rightly availed CENVAT Credit and there is no contumacious conduct on their part and/or any connivance with the said supplying dealers.
5. Having considered the rival contentions and perusing the evidences on record, It is evident that out of 129 invoices relating to JCPL for the purchases in question, 66 invoices bearing same serial. no. (parallel Nos.) had been issued by the supplier SSMPL. Further, summons were issued to all transporters whose vehicle nos. were appearing in the invoices, but only one appeared and denied having transported the scrap, whereas two other transporters informed by letters that on the said date, their vehicle had been engaged for some other work. Other transporters either did not respond or were not served the summons. Relying on the ruling in the case of Dashmesh Casting Pvt. Ltd. (supra), wherein it was held that non-production of octroi receipt by itself cannot be the sufficient basis to conclude that the goods were not actually transported. It is further laid down in the said Ruling that for minor discrepancies or clerical error in the document, it does not justify drawing of adverse inference that no goods were carried or transported. The said principles have also been reiterated in Saina Industries (supra). In the facts of the present case it is observed that the respondents had nothing to do with the transportation of scrap from Bhavnagar etc. to the dealers premises and further to their premises there from, In view of the ground that the transportation of scrap from the supplying dealers premises/godown to their factory was arranged for and paid by the supplying dealers, have not been controverted by the adjudicating authority in the Order-in-Original. Further, there are 146 invoices in question in case of Jay Iron-respondent and only on account of denial of the facts of transportation by 5-6 vehicle owners/drivers, adverse inference has been drawn by the Adjudicating authority. Similarly, in the case of respondent JCPL wherein 129 invoices are in question and only one vehicle owner/driver appeared and denied and two vehicle owners respondent by mail, who were examined in the adjudication proceedings and never produced for cross-examination and it is not clear as to on what grounds the statements or communications of a few can be made applicable to all the supplies received against the remaining majority of the invoices. Further, the statements have been found to be recorded after prolonged time (more than two years) from the date of transaction and the statements were given on the basis of memory without reference of any record. Further, it is found that statement of one vehicle owner no. MH04 AL 5402(Sri Nikam) relied by the Revenue is a qualified statement, wherein it is stated that due to dispute among the partners, the vehicles were lying idle for about 10 months and therefore, to the best of his knowledge, the vehicle would not have been used for transportation. Further, regarding the statement of Shri Bhaktiani (owner of Truck No. MH04 F 9302) relied upon by the Revenue against the respondent JCPL has no relevance as the said vehicle no. nowhere appears in the 129 invoices in question. It is further found that the investigating officers did not obtain any confirmation from the record of the supplying dealers that these were the same vehicle(s) to whom the payment was shown to have been made by them for transportation. It is further observed that in case of large no. of invoices, possibility of clerical error in a few, cannot be completely ruled out and it could have been the case of mistaken identity. Further, the adjudicating authority have failed in exercising the jurisdiction vested in him as he has not tried to ensure appearance and collection of evidence from the majority almost 97% of the vehicle owners, who did not appear on receipt of summons and/or summons could not be served.
5.1 The learned Commissioner (Appeals) further observed that it is settled law that substantial benefit granted by the Cenvat Credit Rules cannot be denied on technical/clerical mistake occurred in few invoices after incomplete investigation. Further, one of the reason for disallowance in the adjudication order of Jay Iron, the adjudicating authority relied upon statement of Mr. Kishan Daga, Purchase Officer, who has stated that neither the order was placed for purchase of ship-breaking scrap nor the material was received. The conclusion is incorrect and it is further observed that in reply to question no. 4 and 5, Mr. Daga stated that they have been purchasing scrap from M/s SSMPL for last two years, and they specify the quality of scrap ordered as not above 3 feet in size and not rusted material. In view of this background the purport of reply given to question no. 16 and 17 was that they had not ordered scrap as ship-breaking scrap or had not ordered specifically for ship braking scrap and the same was not received as ship breaking scrap. This statement was again reiterated in reply to question no. 19, wherein he stated, the size and quality of scrap ordered to SSMPL. Thus, the statement of Mr. Daga does not help the allegation and finding of the Revenue that scrap was not received by the respondent dealers from the stated suppliers.
5.2 As regards the next reason for denial of credit, there being some invoices bearing parallel no. as issued to other consignee/buyers of the said supplier, it is noted by Commissioner (Appeals), as against 146 invoices, 77 invoices had parallel sr. no. and as against 129 invoices in case of JCPL, 66 invoices bear parallel sr. no. As regards finding in the Order-in-Original that the RG-23D numbers given in the invoices received by the assessee are not tallying with the figures in the RG-23D register of the said dealer, the show-cause notice only indicated that the RG-23D (page no.) appearing on the invoices issued to the respondent and the parallel invoices issued to other parties/buyers were different. Thus, it is found that the adjudicating authority have traveled further beyond the allegation in the show-cause notice without any tangible evidence on record. It was further noted that there is no similarity between the two set of invoices. The quantity ,value and duty appearing on the two parallel invoices is completely different. The allegation also contradicts the other allegation that in the first place, the dealers themselves had not brought any material and secondly had not dispatched any material (scrap) to other parties including the respondents. It is further found that the investigation have not come to any definite conclusion. Merely raising doubt and that too are self contradictory in nature, demolishes the case of Revenue. Further, reliance placed on the ruling of the Hon'ble Supreme Court in the case of J.A. Naidu Vs. State of Maharashtra 1983 (13) ELT 1611, wherein it was held that the benefit of CENVAT Credit, being substantial benefit granted by law, it cannot be denied on flimsy ground like, suspicion or presumption, as the same cannot take the place of proof. It is further seen that the adjudicating authority have drawn erroneous conclusion in concluding that the respondent have not received the inputs in their factory, in question, and have therefore taken wrong credit. It is further found that the respondents on receipt of the inputs in question, under the normal course of business, had prepared goods received note and made entries in the statutory records maintained by them. Further, the stock of scrap/physically present in the factory of respondents could have been easily verified with the records which was not done and receipt of the inputs is erroneously being disputed on the basis of the investigation against the supplying dealers, which is found to be wrong and untenable. Further, the investigation is silent as to how the respondent-manufactures, manufactured finished material without receiving the inputs. The law is settled that as long as duty payment is accepted on outputs, the benefit of credit available in law cannot be denied.
5.3 As regards the issue of time bar raised by the respondent, it is observed that the respondent had made full payment of duty indicated in the invoices by cheque, which have been rejected on the ground that it is not established that the payments made to the supplying dealers pertain to the purchase transaction in the question. It is further noted that the respondet-Jay Iron has made payment of more than Rs.2 crores (approx) over nearly three years to the supplying dealers and the respondent JCPL had also made payment of more than Rs.2 crores over nearly 6 months period. Further, the transaction and payments etc. are properly recorded in the Books of Account, ledger etc. Thus it is established that the payments were made against supply of scrap. It is further noted that it is not the case of Revenue that part of the payment was returned to the respondent as a motive or reward for connivance, and accordingly, it is held upholding the finding by the appellate authority that the extended period is not attracted in absence of any fraud, collusion or connivance on part of the respondents. Further, it is observed that the manufacturer/respondent before taking credit on input have discharged onus under Rules 9(2), 9(3), 9(4) & 9(7) of Cenvat Credit Rules to take all reasonable steps to ensure that the inputs in respect of which cenvat credit is taken, are goods on which the appropriate duty of excise has been paid. The Explanation to the sub-rule further clarifies that the manufacturer/respondent shall be deemed to have taken reasonable step, if it has satisfied himself about the identity and address of the manufacturer/suppliers, as the case may be, issuing the documents/invoices evidencing the payment of excise duty, either from his personal knowledge or on the basis of certificate issued by the Superintendent of Central Excise.
5.4 It is noted that in the facts of the present case, both the suppliers being registered dealers with the Department were carrying on the business from their registered premises for a number of years and the identity and address of the suppliers/dealers were never in doubt and the finding of the lower authority that the respondent did not take reasonable step is contrary to the records and accordingly held unsustainable.
6. On a careful consideration of the facts, law and rival contentions, I find myself in agreement with the findings recorded by the learned Commissioner (Appeals). Further, I find that case laws relied upon by the Revenue/appellants are distinguishable in view of the facts in these appeals being at variance. Therefore, both the appeals of the Revenue are dismissed.
(Pronounced in Court on ..) (Anil Choudhary) Member (Judicial) Sinha 23