Custom, Excise & Service Tax Tribunal
Cce Pune I vs M/S Pefco Foundry on 4 April, 2014
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL, WEST ZONAL BENCH AT MUMBAI
COURT NO. II
APPEAL NO. E/785 to 796/07 Mum
E/CO-206, 204, 205/07
(Arising out of Order-in-Original No. 23/CEX/2003 dated 30.09.2003/17.10.2003 passed by the Commissioner of Central Excise, Pune)
For approval and signature:
Honble Shri Ashok Jindal, 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 :
CESTAT (Procedure) Rules, 1982 for publication
in any authoritative report or not?
3. Whether Their Lordships wish to see the fair copy : Yes
of the Order?
4. Whether Order is to be circulated to the Departmental : Yes
authorities?
CCE Pune I
:
Appellant
Versus
M/s Pefco Foundry
R.K. Saboo
J.H. Kale
Mamta Steel Traders
Vishal Enterprises
Mahalaxmi Steel Corporation
M/s. Steelcom
Shaima Iron & Scrap Traders
J.N. Traders
Naim Suleman Choudhary
Ashish Gupta
Respondent
Appearance Shri V.C. Khole, Jt. Commissioner (A.R.) For appellants Shri Vipin Kumar Jain, Advocate with Shri Vishal Agarwal, Advocate For Respondents CORAM:
Shri Ashok Jindal, Member (Judicial) Date of Hearing : 04.04.2014 Date of Decision :.
ORDER NO.
Per Ashok Jindal The Revenue is in appeal against the impugned order. Extracts of the Order portion are given below:-
(1) I drop the demand of MODVAT credit of Rs.49,89,412/-.
(2) I do not impose any penalty under clause (ii) of sub Rule (4) of Rule 57 I and under clause (bb) of Sub Rule 173Q of the Central Excise Rules, 1944. (3) I order confiscation of goods i.e. scrap seized on 22.01.99 valued at Rs.34,651/_ under erstwhile Rule 173Q of Central Excise Rules, 1944 read with Section 38A of the Central Excise Rules, 1944. As the goods have been provisionally released on execution of B11 Bond for Rs.34,651/- and cash security of Rs.8,500/- and as the same are not available for confiscation, I order adjustment of cash security of Rs.15,000/- towards redemption fine. (4) I impose penalty of Rs.50,000/- on Ms. Shamia Iron and Scrap Trader, Bhosari, Pune under the provisions of Rule 209A of the Central Excise Rules, 1944 as applicable during the relevant period. (5) I refrain from imposing penalty on
(a) M/s Steelcom
(b) M/s Mahalaxmi Steel Corporation, Pune
(c) M/s Vishal Enterprises, Pune
(d) M/s. Mamta Steel Traders, Pune
(e) M/s. J.N. Traders
(f) Shri R.K. Saboo,
(g) Shri J.H. Kale,
(h) Shri Naim Suleman Choudhary
(i) Shri Ashish Gupta The respondents have also filed the cross-objections to the appeals of Revenue.
2. Heard both sides.
3. The learned A.R appearing for the Revenue submits that in the impugned order, the learned Commissioner has allowed CENVAT credit to the tune of Rs.49,89,412/- which was to be recovered by the department on the ground that such credit has been availed by the main respondent M/s Pefco Foundry against the invoices indicating supply of MS Off cuts, whereas the material which was actually supplied under the cover of invoices was CRCA scrap. Therefore, the impugned order has been challenged on the following grounds:-
(a) CENVAT credit could not have been availed against invoices where the description of the goods mentioned in the invoice does not match with the description of the goods physically received.
(b) The price at which the scrap was sold by M/s Bajaj Auto Ltd. Pune/Aurangabad and M/s Telco, Pimpri to the 1st stage dealers was excessively higher than the price at which dealer sold such goods to the respondent.
(c) Various statements recorded during the course of investigation under Section 14 of the Central Excise Act, 1944 wherein it was an admitted fact that the goods supplied to the main respondent are not the same goods as sold by the manufacturer of scrap.
Therefore, the impugned order is required to be set aside and the matter be remanded back to the adjudicating authority for fresh consideration to confirm the duty demand along with interest and penalties on the co-respondents.
4. On the other hand, the learned Counsel appearing on behalf of the respondents submits that the CENVAT credit sought to be denied on the ground that the invoices under cover of which the scrap was procured by the respondent shows as CRCA Punching Scrap but the manufacturer of scrap has described the scrap as Scrap MS Offcuts. In fact, to clarify the terms MS Offcuts, the statement of Shri K Shivdasan, Operational Manager of M/s Bajaj Auto Ltd., Pune was recorded and who submitted that till 1997 they were describing the goods as M.S. Scrap but after the decision in the case of LML, they revised the classification list and classifying the same material as MS Off cuts. These MS Off cuts were categorized into three categories viz. MS Offcuts Type A, MS Offcuts Type B, MS Offcuts Type C which were auctioned and sold to the highest bidder who in turn further sold these goods to either to the dealer or to the actual user of the scrap. In fact, the description of the goods have been clarified by Shri K. Shivadasan and after procuring the goods from the manufacturer of the scrap, the first stage dealer used to segregate the scrap and thereafter they were selling the scrap to the main respondent. This fact has been confirmed by various statements of the dealers recorded during the course of investigation. In the circumstances, it cannot be held on the basis of the description of the goods that goods are not same which have been sold by the manufacturer of the scrap to the main respondent.
4.1 He further submits that as the various dealer who procured those scrap from the manufacturer of the scrap, segregated the same in their premises. After segregation they sells the scraps which can be reused as such on higher price and which is to be melted at lower prices. In these circumstances, the price of scrap varies as per the quality and use of scrap. The main respondent procured the scrap for melting purposes, therefore, there is variation in price.
4.2 In the last he submits that from the various statements recorded during the course of investigation were considered by the adjudicating authority and thereafter he arrived at a conclusion by holding that the scrap which has been procured by the main respondent is the same scrap which has been sold by the manufacturer of scrap. In the circumstances, the impugned order is required to be upheld.
5. Considered the submissions and perused the records.
6. In this case, basically the denial of credit is based on various statements recorded during the course of investigation, secondly, the descriptions of the goods were not tallying with the invoices issued by the manufacturer of the scrap and the invoices against which the main respondent procured the inputs. Thirdly, the price varies from the invoices issued by the manufacturer and the invoices against which the main respondent procured the goods. In this case, I find that to know about the description of the goods, statement of Shri K Shivdasan of Bajaj Auto Ltd., was recorded. In his statement he categorically stated that they are manufacturing press components from MS Sheets, CRCA MS Off cuts in various forms were generated, and the MS Off cuts are segregated in the shape of MS Off cuts in the area under the press shop. Thereafter they were classified as M.S Offcuts Type A various shapes, squares, Triangles, (2) M.S. Offcuts Type B Circles and (3) M.S. Offcuts Type C Strips of width more than 2 width & of parallel length and any length. It was also described that the Offcuts were different from time to time as MS Scrap, MS Scrap Off cuts, MS Melting Scrap etc. It is further stated that some of the material from MS Off cut Type A can be used for manufacture of components rest can be used as melting scrap. He further submits that till 1997 they were describing the goods as M.S. Scrap and after the decision of Honble Supreme Court in the case of LML, they started classifying these goods as MS Off cuts of various types. It was further submitted by him that M.S. Offcuts of Type A can be used for manufacture of components implying that the remaining MS Offcuts could be used only for melting. From the above deposition of Shri K Shivdasan, it is clear that till 1997, the goods in question are described as M.S. scrap and thereafter they are classified various types of M.S. Offcuts. These Offcuts either can be used for manufacture of components or can be used as melting scrap. Further, the statements of various first stage dealers were also recorded. In those statements, it has been clarified by the dealers that after procuring the goods in question from Bajaj Auto Ltd. or from other manufacturer, they used to segregate these goods and the goods which can be used for manufacture of components or reused were sold on higher price and the remaining were sold at lower price as CRCA melting scrap.
6.1 On perusal of the statements of the dealers as well as manufacturer of the scrap it clearly reveals that the scrap manufacturer sells the scrap at a certain price and the said scrap is segregated wherein the scrap which can be used for manufacturing of components directly is sold at higher price and the scrap which either cannot be used or sold for use of melting under the cover of invoices at a lower price. Therefore, the appeal filed by the Revenue on two grounds i.e. description of goods does not tally and the price at which the manufacturer sold the scrap much higher price at which the main respondent procured the scrap, are not sustainable.
6.2 During the course of investigation it was also found that there are incidence of substitution of scrap with respect to supply of MS Off cuts by M/s Steelcom against invoice of M/s Shaima Traders which was in the process of being offloaded in the premises of the main respondent but the said goods were not accepted by the main respondent. The CENVAT Credit to the respondent was also denied by the learned Commissioner in the impugned order. However, an option was given to redeem the same to M/s Steelcom and there is no allegation that the main respondent had any idea or inclination whatsoever of substitution of the scrap by M/s Steelcom. No other incident of the said type has been noticed by the Revenue during the course of investigation. Further, reliance on the statement of Shri Naim Choudhary of M/s Shaima Iron & Scrap Traders, I find that in this case although there is an admission by Shri Naim Choudhary they used to purchase scrap from the open market and supply the same along with modvatable invoices but the Revenue has not produced any evidence on record that any scrap sold by M/s Shaima Iron & Scrap Traders is procured from the open market and the same has been covered under the modvatable invoices to the main respondent. In these circumstances, the allegation, in the absence of such a correlation being established, the fact of substitution of scrap is not sustainable.
6.3 The other reliance by the Revenue on the statement of Shri Japher Abdul Karim of JN Traders, the said statement has also not relied in full. In fact, Shri Japher Abdul Karim stated that we never supplied MS Offcuts, MS Scrap, Off cut, MS sheets to Pefco or material which can be used for the manufacture of components. It is the case of main respondent who was receiving MS Offcuts which cannot be used for the manufacture of components. In fact, the statement of Shri Japher Abdul Karim support the case of the main respondent. Further, I find that during the period 1996-97, M/s Bajaj Auto Ltd. was clearing the MS scrap by reversing the CENVAT credit availed on MS Sheets (inputs). In that case, the Revenue cannot dispute reversal of credit by Bajaj Auto Ltd., at the end of the recipients of the said goods as credit is taken on the duty paid by Bajaj Auto Ltd., on the said goods. The issue has been settled by the judgement of the Honble Supreme Court in the case of MDS Switchgear Pvt. Ltd. 2008 (229) ELT 485 (S.C.) wherein it was held that credit cannot be denied at the end of the recipients of the said goods on the premise that higher duty has been paid by the manufacturer. In these circumstances, after examining the impugned order, I do not find any infirmity with the impugned order. Therefore, the impugned order is upheld.
7. Appeals filed by the Revenue are dismissed. The Cross objections are also disposed of in the above terms.
(Pronounced in Court on) (Ashok Jindal) Member (Judicial) nsk ??
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