Custom, Excise & Service Tax Tribunal
M/S. Karnataka Metal Company vs Cce, C & St, Hyderabad-I & Iii on 22 November, 2016
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
REGIONAL BENCH AT HYDERABAD
Bench SMB
Court I
Appeal No. E/2770/2010, E/2771/2010, E/293/2011
(Arising out of Order-in-Appeal No. 40/2010 (H-III) (CE), No. 41/2010 (H-III) (CE) dt. 30.09.2010 passed by CC,CE & ST (Appeals-III),Hyderabad)
For approval and signature:
Honble Ms. Sulekha Beevi, C.S., Member(Judicial)
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 Lordship wish to see the fair copy of the Order?
4.
Whether Order is to be circulated to the Departmental authorities?
M/s. Karnataka Metal Company
M/s. Agarvanshi Aluminium Ltd.,
..Appellant(s)
Vs.
CCE, C & ST, Hyderabad-I & III
..Respondent(s)
CCE, C & ST, Hyderabad-III ..Appellant(s) Vs. M/s. Karnataka Metal Company ..Respondent(s) Appearance Shri. B. Venugopal, Advocate for the Assessee.
Shri. Arun Kumar, Deputy Commissioner (AR) for the Department.
Coram:
Honble Ms. Sulekha Beevi, C.S., Member (Judicial) Date of hearing: 22/11/2016 Date of decision: 22/11/2016 FINAL ORDER No._______________________ [Order per: Sulekha Beevi, C.S.] The above three appeals arise out of orders which emanate from the same investigation and involve the similar set of facts and evidence. Hence they are disposed by this common order.
2. Appeal No. E/2770/2010 is filed by Karnataka Metal Corporation (KMC), who is a dealer, Appeal E/2771/2010 is filed by M/s. Agarvanshi Aluminium Ltd., (AAL) who is engaged in manufacture and Appeal E/293/2011 is filed by department in which KMC is the respondent. The parties are hereafter referred to as assessee and department for convenience.
3. The allegation in appeal No. E/2770/2010 are that KMC who is a dealer, issued CENVATable invoices without delivery of goods to M/s. Bhargavi Die-Cast Pvt. Ltd., and thus indulged in availing fraudulent credit by M/s. Bhargavi Die-Cast Pvt. Ltd. The allegation in appeal No. E/2771/2010 are that M/s. AAL, who are manufacturers of aluminium rolled products cleared goods clandestinely and issued invoices to KMC who issued these invoices to M/s. Bhargavi Die-Cast Pvt. Ltd., without actual supply of material and indulged in fraudulent availment of credit. Appeal E/239/2010 is filed by department against impugned order passed where in the Commissioner (Appeals) in the appeal filed by KMC reduced the penalty from Rs. 27,87,019/- to Rs. 15,00,000/-.
4. The DGCEI, Hyderabad on receiving information that M/s. BDCPL (as well as other manufacturers) is indulging in fraudulent availment of credit on invoices issued by registered dealer KMC conducted investigations. The allegation of availing fraudulent CENVAT credit is based upon the evidence inter alia, from the private records recovered from residential premises of Shri. Prabhakar who was employee of KMC. The premises of M/s. BDCPL was also searched. It showed that M/s. BDCPL had availed credit on Aluminium rolled products and wire rods on the basis of invoices received from KMC. Perusal of invoices showed that KMC issued these invoices on the basis of invoices issued by M/s. AAL and M/s. BALCO. In certain cases credit was availed on the invoices issued by M/s. BALCO or M/s. MALCO. In these cases also goods were procured through KMC on invoices issued by KMC. They also availed credit on invoices issued by AAL.
5. On behalf of the appellants/assessee, the Ld. Counsel Shri. B. Venugopal submitted that, Shri. Prabhakar, was not given any instruction oral or written to maintain private records and that whatever records were recovered from Shri. Prabhakar does not have any connection with Karnataka Metal Company. He adverted to the various judgments passed by the Tribunal in the case of the appellant namely Karnataka Metal Company as well as Agarvanshi Aluminium Ltd., and that M/s. Srilaxmi Industries (SLI). In Final Order Nos. A/30267-30269/2016 and A/30028-30029 dated 20.01.2016, the Tribunal had analyzed the evidence unearthed from the said investigation proceedings against various assesses and had reached the conclusion that the evidence recovered from the residential premises of Shri. Prabhakar, as well as the entries therein or his statement are not sufficient to establish that the appellants/assesses were indulging in the activity of fraudulent availment of credit.
6. The Ld. AR, Shri. Arun Kumar appearing on behalf of the Department reiterated the findings in the impugned order. He submitted that the department filed appeal No. E/293/2011 against the order passed by Commissioner(Appeals) by which the penalty imposed was reduced from Rs. 27,87,019/- to Rs. 15,00,000/-. He submitted that the entries in the private records recovered from the residence of Shri. Prabhakar showed the name Bhargavi, which indicates that invoices were issued to M/s. BDCPL. Perusal of invoices issued by KMC to M/s. BDCPL revealed that KMC issued invoices on the basis of Central Excise invoices issued by AAL and BALCO and in some cases by Madras Aluminum Company (MALCO). During search, several documents indicated issuance of Central Excise invoices by KMC to M/s. BDCPL without actual supply of goods. KMC has sold the goods to local market without bills. That M/s. BDCPL made payment by cheque which was paid back by KMC in cash enabling M/s. BDCPL to avail credit on the invoices issued. That the documents recovered from the residential premises of Shri. Prabhakar along with statements and the documents recovered from M/s. BDCPL, KMC and AAL establishes the allegations raised in the Show Cause Notice.
7. I have heard both sides and perused of records. At the outset I have to say that this Tribunal in appeal Nos. E/689 & 690/2012 along with E/774/2012 (M/s. Adhikasri Electromech Ltd., Shri. Suresh Tibrewala and KMC) had occasion to analyze the evidence put forward by the department in the investigation conducted alleging fraudulent availment of credit basing upon the private records recovered from residential premises of Shri. Prabhakar. In another appeal No. E/2705 and 2706/2010 in the case of Srilaxmi Industries and others vide Final Order No. 30028-30029/2016 dated 20.01.2016 also, this Tribunal had gone into the details of the very same evidence. The Tribunal in the said cases, concluded on such analysis that the department was not able to establish diversion of material or substantiate the fraudulent availment of credit. One important aspect that has to be looked into is that when department alleges that no raw material was supplied by KMC and AAL to M/s. BDCPL and that only invoices were issued, the department has to prove how M/s. BDCPL could manufacture finished products on which they have paid excise duty during the relevant period. On conduct of inspection the stocks and statutory register of M/s. BDCPL did not show any discrepancy. In the absence of any evidence that M/s. BDCPL has procured raw material from any other source other than KMC/ AAL, and used the same to manufacture finished products, the allegation that KMC/AAL did not supply any goods but only issued invoices is not tenable. Again, the allegation against KMC is that they sold the goods in local market without bills. The evidence of any such buyers and accounts of such purchase by buyers are not put in as evidence. The chain of evidence put forward by department is incomplete as it lacks links in several places. Department has not been able to establish the case in a probable manner. Shri. Prabhakar is not made a party to the said proceedings and no notice is issued to him.
8. It is also to be noted that the Commissioner(Appeals) in the case of M/s. Khaitan Electrical Ltd., and KMC vide Order-in-Appeal No. 99/2009 dated 04.12.2009 and vide another Order-in-Appeal No. 26,27 and 28/2010 dated 26.02.2010 has set aside the demand interest and penalty raised against M/s. Prism Airtech and in the same order also set aside the penalty imposed against KMC who was a co-noticee.
9. In Order-in-Appeal No.99/2009, dated 04-12-2009 in the appeal filed by Khaitan Electrical Ltd and KMC, the Commissioner (Appeals) observed as under:
as discussed, if the desired thickness is not actually supplied by KMC, the basis for production of blades of standard thickness and/or the alternate source of sheets of desired thickness needed to be identified. The implied or implicit meaning of the charge made is that the sheets of thickness 0.25 and 3.00 have actually been invoiced but have been diverted either by KMC or the appellants and in its place; sheets of desired thickness have been substituted. However, except for the presumption, there is no support to the implied charge by any documentary evidence. Also, there is no incentive for such substitution as the price range of the sheets is more or less same and such sheets are manufactured only by reputed manufacturers and clandestine source of procurement from such manufacturers is not possible except that the source can be by way of diversion from other customers who do not need such sheets. But, this probability is also ruled out, as there is no incentive for doing all this exercise either at the appellants end or at the dealers end as in that case, the sheets invoiced would need to be diverted to some other manufacturer or customer on kacha bills. The dealer does not gain anything in diversion and substitution and the manufacturer also does not gain anything. Therefore, the allegation of diversion or non use of sheets, in my view, is not sustained for lack of evidence and the corresponding demand, therefore is liable to be set aside.
10. In Order-in-Appeal No.101/2009, dated 11-12-2009 in the appeal filed by M/s Sri Lakshmi Industries Ltd, the Commissioner (Appeals) observed as below:
The truth or the real face would be known if the stock register and stocks of inputs were verified with corresponding invoices. Moreover, in the absence of any statements recorded from the partners of KMC with reference to the private records maintained by Shri Prabhakar, Manager, the denial of credit in my view, will be based on surmises and presumptions which is not held sustainable. Sh. Prabhakar however is not made a party to the proceedings. It is debatable if incriminating documents recovered from his residence and incriminating statements given in relation to the documents recovered can be relied fully, when he is not a party to the notice and as per his own admission, has been actively engaged in issuing inputs under kacha bills to unidentified manufacturers in and around Hyderabad
11. In Order-in-Appeal No.26, 27, 28/2010, dated 26-02-2010 in the appeals filed by M/s Prism Airtech & KMC, the Commissioner(Appeals) observed as under:
The burden is on the investigation to prove that the appellants have merely received Cenvatable invoices without the accompanying materials. As rightly contended by the Appellants, had there been any non/short receipts, then it would have got reflected in their inventory and there would be negative balances at the end of the financial year, which however is not the case. Hence, I find adequate force in the contention of the appellants in as much as it is not the case of investigation that there was any shortage of physical stocks vis-a-vis the recorded book stock at the time of search. As regards, the reliance placed on various statements by the investigation to sustain the charges, I am to observe that mere statements are not enough to confirm the allegations as held by various judicial fora in several cases. In the absence of corroborative evidence, mere reliance on statements is of no help to the departments case
12. The overall evidence being similar, after perusal of records, I am of the view, that department has failed to establish that appellants are guilty of indulging in activities of fraudulent availment of CENVAT credit as alleged in the notices. In view thereof, the impugned orders in appeals No. E/2770/2010 and E/2771/2010 are side aside. The appeals are allowed with consequential reliefs, if any. Consequently, the appeal filed by the department E/293/2011 is dismissed.
(Pronounced & dictated in open court) (SULEKHA BEEVI C.S.) MEMBER (JUDICIAL) Lakshmi.
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