Custom, Excise & Service Tax Tribunal
Panchmahal Steel Ltd vs Vadodara-Ii on 8 December, 2023
Customs, Excise & Service Tax Appellate Tribunal
West Zonal Bench at Ahmedabad
REGIONAL BENCH-COURT NO. 3
Excise Appeal No. 10523 of 2016- DB
(Arising out of OIO-VAD-EXCUS-002-COM-010-15-16 dated 24/11/2015 passed by
Commissioner of Central Excise, Customs and Service Tax-VADODARA-II)
Panchmahal Steel Ltd ........Appellant
Gidc Industrial Estate,
Kalol,
Panchmahals, Gujarat
VERSUS
C.C.E. & S.T.-Vadodara-ii ......Respondent
1st Floor... Room No.101, New Central Excise Building, Vadodara, Gujarat- 390023 WITH
(i) Excise Appeal No. 10520 of 2016- DB (Ashok Malhotra)
(ii) Excise Appeal No. 10593 of 2016- DB (Jankilal & Nandlal Metal Pvt Ltd)
(iii) Excise Appeal No. 10917 of 2016- DB (Keyur Impex)
(iv) Excise Appeal No. 12275 of 2019- DB (Panchmahal Steel Ltd)
(v) Excise Appeal No. 12306 of 2019- DB (Shri Satyanarayan S Shah)
(vi) Excise Appeal No. 12307 of 2019- DB (Jankilala & Nandlal Metal Pvt Ltd)
(vii) Excise Appeal No. 12308 of 2019- DB (Yuvraj Enterprise)
(viii) Excise Appeal No. 12429 of 2019- DB (Shri Prabhakaran M C)
(ix) Excise Appeal No. 12431 of 2019- DB (Shri Pradeep Sharma) [(Arising out of OIO-VAD-EXCUS-002-COM-010-15-16 dated 24/11/2015 passed by Commissioner of Central Excise, Customs and Service Tax-VADODARA-II), (Arising out of OIO-VAD-EXCUS-002-COM-010-15-16 dated 24/11/2015 passed by Commissioner of Central Excise, Customs and Service Tax-VADODARA-II), (Arising out of OIO-VAD-EXCUS- 002-COM-010-15-16 dated 24/11/2015 passed by Commissioner of Central Excise, Customs and Service Tax-VADODARA-II), (Arising out of OIO-VAD-EXCUS-002-COM-008- 19-20 dated 09/07/2019 passed by Commissioner of Central Excise, Customs and Service Tax-VADODARA-II), (Arising out of OIO-VAD-EXCUS-002-COM-008-19-20 dated 09/07/2019 passed by Commissioner of Central Excise, Customs and Service Tax- VADODARA-II), (Arising out of OIO-VAD-EXCUS-002-COM-008-19-20 dated 09/07/2019 passed by Commissioner of Central Excise, Customs and Service Tax-VADODARA-II), (Arising out of OIO-VAD-EXCUS-002-COM-008-19-20 dated 09/07/2019 passed by Commissioner of Central Excise, Customs and Service Tax-VADODARA-II), (Arising out of OIO-VAD-EXCUS-002-COM-008-19-20 dated 09/07/2019 passed by Commissioner of Central Excise, Customs and Service Tax-VADODARA-II), (Arising out of OIO-VAD-EXCUS- 002-COM-008-19-20 dated 09/07/2019 passed by Commissioner of Central Excise, Customs and Service Tax-VADODARA-II)] APPEARANCE:
Shri Saurabh Dixit, Advocate for the Appellant Shri Rajesh K Agarwal Superintendnet (AR) for the Respondent 2 E/12520,10523,10593,10917/2016 E/12275,12306-12308,12429,12431/2019 CORAM: HON'BLE MEMBER (JUDICIAL), MR. RAMESH NAIR HON'BLE MEMBER (TECHNICAL), MR. RAJU Final Order No.12724-12733/2023 DATE OF HEARING: 25.09.2023 DATE OF DECISION: 08.12.2023 RAMESH NAIR The issue involved in the first lot of appeal Nos. E/10523/2016, E/10520/2016, E/10593/2016, E/10917/2016 is that whether M/s. Panchmahal Steel Ltd. has correctly availed the Cenvat Credit on the inputs viz waste/seconds of SS Patta/Patti, SS Circle, SS Flat, SS sheet etc., which were allegedly not received by the Appellant in their factory. The prime reason to deny credit is on the basis that the Appellant melts its inputs and produces SS Billets/Wires/rods/bars etc. and there is no proof that the Appellant uses SS Patta/Patti, SS Circle, SS Flat, SS Sheet (assuming it to be virgin material) whereas the claim of the Appellant all along before lower authority was that what they had received was off cuts pieces/defective/seconds/waste SS articles, and very much used by them in manufacturing process. The impugned order confirmed the demand on the basis that Cenvat Credit was availed without receipt of SS articles as such and also imposed personal penalty on the Managing Director Shri. Ashok Malhotra as well as on M/s. Jankilal & Nandlal Metal Pvt Ltd as also M/s. Keyur Impex, who were the registered dealers who had supplied the goods to the Appellant. In addition, penalties are imposed on M/s. Manohar Manak Alloys P. Ltd. as also other suppliers of SS Patta/Patti, SS Circle, SS Flat, SS sheet etc. as well. Personal penalties are also imposed on the various suppliers of SS articles to the Appellant, who had purportedly raised invoices to show supply being made to the Appellant Company.
1.1 A somewhat similar dispute is involved in the second lot of appeal Nos. E/12275/2019, E/12431/2019, E/12429/2019, E/12307/2019, E/12306/2019, E/12308/2019, is that whether M/s. Panchmahal Steel Ltd.
has correctly availed the Cenvat Credit on the duty paid inputs viz MS scrap, which were allegedly not received by the Appellant in their factory. The prime reason to deny credit is on the basis that at the time of visit in factory, only household / domestic non industrial MS scrap was found (which would not Cenvattable) and the presumption associated thereto that 3 E/12520,10523,10593,10917/2016 E/12275,12306-12308,12429,12431/2019 the Appellant invariably receives only non cenvattable domestic non industrial MS scrap, whereas the accompanying invoice is for MS scrap with duty payment (supplied by CEX registered dealer). The impugned order confirmed the demand on the basis that Cenvat Credit was availed without receipt of MS scrap as such and also imposed personal penalty on the Director Shri. Pradip Sharma, Shri. Prabhakaran MC (Asst. Store Manager) as well as on M/s. Jankilal & Nandlal Metal Pvt Ltd. and its Director Shri. Satyanarayan Shah and M/s. Yuvraj Enterprise, who were the registered dealers who had supplied the goods to the Appellant. In addition, penalties are imposed on various suppliers of MS Scrap who had purportedly raised invoices to show supply being made to the Appellant Company.
1.2 Since an identical issue is involved in both the above sets of appeals, and since most of the submissions also remain common in this regard, the same are being taken up together and decided vide this single common order.
2. Shri. Saurabh Dixit, learned Counsel appearing on behalf of M/s. Panchmahal Steel Ltd. submits that insofar as first lot of appeals are concerned, the demand of Cenvat Credit of Rs.2,90,19,567/- is confirmed towards Credit availed on invoices raised by manufacturers, who had supplied off cuts pieces/defective/seconds/waste SS articles to the Appellant as a consignee, while the sale was made to dealers viz. M/s. Jankilal and Nandlal and M/s. Keyur Impex (co-Appellants), who had in turn sold the goods to the Appellant.
2.1 The demand of Rs.1,46,87,853/- is confirmed on basis of invoices raised by one M/s. Manohar Manak Metal, Mumbai(dealer), who had supplied invoices to the Appellant, showing duty paid goods supplied, whereas they had procured waste/scrap from open market/traders in cash and substituted the same in the consignment.
2.2 He further submits that various statements were obtained during the course of investigation however, since the revenue department tacitly denied cross-examination of witnesses, such statements loose the evidentiary value and cannot be used against the Appellants, as held in the following cases:
Synergy Steels Ltd. Vs CCEx, Always [2020 (372) ELT 129] 4 E/12520,10523,10593,10917/2016 E/12275,12306-12308,12429,12431/2019 Andaman Timber Industries Vs. CCE, Kolkata, 2015(324) ELT 641(SC) Gujarat Victory Forgings P. Ltd. 2019 (7) TMI 5 - CESTAT AHMEDABAD (Para 13) Gobinda Das 2023 (7) Centax 201(Tri- Cal) Motabhai Iron and Steel Industries 2015(316) ELT 374 (Guj.) Jindal Drugs Pvt. Ltd 2016(340) ELT 67 (P & H) Prakash Raghunath Autade 2022(380)ELT 264 (Bom) 2.3 It is his submission that the documentary evidences anyway supersede oral evidences. In the present case, there is ample evidence in form of receipt of goods and its usage in factory premises. The Appellant had always stated that the goods received were seconds/off cut pieces/defective material and never prime grade material anyway, whereas the revenue has assumed it to be so, suo motu, which cannot be the basis to allege non receipt of goods per se. The Appellant had even prepared GRN and entered stock as "scrap" of SS, as a matter of semantics, since such second /defective grade goods received for melting was only scrap for them anyway. The allegations at Para 62.6 of the SCN (running page no.181) and Para 65.1 of the impugned order (running page no. 90) are baseless and contrary to documentary evidences adduced and also contrary to description mentioned in Annexure A and Annexure B to the SCN itself.
2.4 He further submits that the statement dated 17.12.13 of Shri. Mahesh Kanugo of M/s. Kanugo Steel (India) at Answer No.2 clearly states that they had cleared seconds/defective and cut size/off cuts of SS circle/ patta etc to the Appellant, which has been summarily ignored in the present proceedings.
2.5 He submitted that the presumption that SS prime grade material was shown as procured under invoices and Credit is taken thereon, whereas the goods were substituted with "scrap" procured from open market, is not substantiated at all. There is no allegation or proof of flow back of amounts by anyone to the Appellant as well. There is no evidence of procurement of scrap in cash from open market as well. The factum of duty paid goods being cleared by manufacturers and receipt of proper invoice by the Appellant are not in dispute as well. Even the valuation of goods (prime v/s. scrap material) is not questioned, meaning thereby that the entire 5 E/12520,10523,10593,10917/2016 E/12275,12306-12308,12429,12431/2019 theory of goods being prima grade whereas the Appellant requires only scrap material, is baseless.
2.6 The findings at Para 80.2.1 and 80.6.1 of the impugned order, regarding profit margin of dealer viz. M/s. Keyur Impex, regarding purchase of goods by them and sale price of goods to the Appellant, hardly proves that the goods were scrap. In fact, the credit is availed on basis of invoice by manufacturer on "sale price to dealer" anyway and hence, there can hardly be any objection in allowing credit in this regard as well.
2.7 The revenue has not identified or established the manufacturers supplying prime grade goods to utensil producers (without duty payment) and raising CEX invoices (through dealers) to the Appellant, for passing on credit without accompanying goods, contrary to the theory concocted in the present proceedings. Neither the alleged actual recipient of goods (utensil producers) are identified nor penalized as well.
2.8 That as held by the Tribunal in the case of Indian Polypipes and others versus Commissioner, Central Excise, Kolkata-1, 2003 (157) E.L.T. 652 (Tri. - Kolkata) and similar view was taken in the case of Rishi Polymach Pvt. Ltd. 2010 (261) E.L.T. 349 (Tri. - Bang.), to the effect that when there is no evidence that the inputs were either sold in the market as such or the assessee had purchased some other inputs which were allegedly used in the assessee's company, then only on assumption and conjectures, credit could not be denied.
2.10 In any case, the records or statement of the transporters could not be proof of any alleged contravention of law by the consignee or the consignor. Reference is made to the Tribunal decision in the case of Raj Petroleum Products Versus Commissioner of Central Excise, Mumbai-I 2005 (192) ELT 806 (Tri. - Mumbai). The transporters merely stated that they did not transport SS prime grade items, whereas the truck owners are not competent to understand the difference between second grade/off cuts/rejects of SS Patta/Patti etc. compared to prime grade goods anyway and nothing turns on their statements as such. Anyway, the drivers were the ones to have transported goods, who were never questioned on actual transport or nature of goods transported.6
E/12520,10523,10593,10917/2016 E/12275,12306-12308,12429,12431/2019 2.11 The transporters never said that no goods were transported to the Appellant, whereas their version is that SS prime grade goods were not transported to the Appellant. This is also the stand of the Appellant, and insofar as duty paid goods are received by them, irrespective of description construed by transporters or the revenue department, the credit of duty paid thereon cannot be denied to the Appellant.
2.12 That as regards the statement of one Shri. Nepal Singh, proprietor of M/s. Rajputana Transport Company, there is no evidence that his vehicle was used to show alleged transportation by M/s. Manohar Manek Alloys P. Ltd. to the Appellant anyway. In any case, the payments made to transporters is not alleged or shown to have flown back to the Appellant as well. In fact, this also contradicts the findings at Para 79.1 that transportation of "bhangaar" from Mumbai to the Appellant premises was done physically in guise of SS seconds/waste/off cuts articles, whereas the revenue in the same Para relies upon statement of Shri. Nepal Singh that only LR was given, while no transportation took place. Such contradicting allegations cannot further the case of the revenue.
2.13 Also, as to the LR showing SS scrap/melting scrap, while invoice shows SS cut/short length / defective etc. is hardly a reason to doubt the transaction.
2.14 That he vehemently submitted that under strikingly similar circumstances, involving identical allegations, similar demands were dropped by the Hon'ble Tribunal in the following cases:
Sri Rangathar Industries P. Ltd. 2018 (3) TMI 179 - CESTAT CHENNAI Coimbotore Super Alloys (P) Ltd. 2019 (5) TMI 213 - CESTAT CHENNAI 2.15 It is his submission that there is no provision to impose personal penalty under Rule 15 on person other than the one availing Credit, since penalty under Rule 26 of CER, 2002 has been specifically dropped. In any case, since no confiscation is ordered or any finding towards this, Rule 26 penalty too cannot be imposed. He also submitted that neither the MD of the Appellant Company nor dealers are liable to any penalty. The statements were obtained under coercion and duress and do not prove 7 E/12520,10523,10593,10917/2016 E/12275,12306-12308,12429,12431/2019 anything to the contrary, in light of the overwhelming judicial pronouncements and evidences on record.
2.16 He made various submissions as regards the second lot of the appeals, in addition to the above submissions most of which are common, wherein it was contended that for the records, the one consignment of 10585 Kg found in the factory premises on date of visit, pertained to non-
industrial scrap, and the confiscation proceedings in this regard proves that the Appellant had not even availed any Cenvat Credit in this regard, and hence, they were exonerated from the proceedings, vide OIO No.03/Jankilal/AC/D-III/Vad-I/17-18 dt.31.5.17 as well. The said consignment pertained to duty paid by the manufacturer one M/s. Apar, for which no credit stands availed since the goods were found to be domestic waste anyway, by the Appellant. In that sense of the matter, since it is proven that in case of receipt of non-industrial MS scrap, the Appellant does not avail any credit anyway, the present proceedings must be dropped/vacated in limine against them.
2.17 Be that as it may, the impugned order has generalized all the past procurements by assuming that since for one instance, the domestic scrap was received in factory of the Appellant (no credit availed by the Appellant anyway), even for all past procurements, industrial cenvatted scrap must not have been received, which is a baseless presumption to hold. This cannot be a basis to confirm demand for over 9000 MT inputs received by the Appellant in the past.
2.18 Further, during Panchnama proceedings at M/s. Jankilal Nandlal, actual MS scrap (not domestic scrap) was found, which also means that they were supplying only duty paid goods to the Appellant, and not domestic scrap, as wrongly presumed in the present proceedings.
2.19 Also, for the above consignment, the cross examination clearly brings out the fact that the Dealer/supplier had already clarified that the said scrap was supplied under genuine mistake.
2.20 Be that as it may, the demand stands confirmed on the presumption that only duty paid invoices were provided for MS scrap whereas what was actually supplied, was locally procured non-industrial domestic MS waste/scrap. The statements of dealers/transporters are forcibly obtained 8 E/12520,10523,10593,10917/2016 E/12275,12306-12308,12429,12431/2019 for this purpose, which anyway, during the course of cross-examination, stand explained and the evidentiary value thereof, completely diminished to bring home the serious charge of the nature alleged in the present proceedings.
2.21 The Credit was availed on duty paid MS scrap received from the following Dealers:
Sr No. Dealer Credit availed Rs.
1 Jankilal& Nandlal Metal P. 2,82,19,810/-
Ltd.
2 Manohar Manek Alloys (P) 28,87,520/-
Ltd.
3 Yuvraj Enterprises 10,33,625/-
2.22 It is submitted that the documentary evidences anyway supersede oral evidences. In the present case, there is ample evidence in form of receipt of cenvatted MS scrap goods and its usage in factory premises. The Appellant had always stated that the goods received were duty paid MS scrap. The Appellant had even prepared GRN and entered stock as "heavy meltingscrap" of MS.
2.23 The presumption that the Appellant never received MS scrap as was shown as procured under invoices and Credit is taken thereon, whereas the goods were substituted with "non-industrial domestic scrap" procured from open market, is not substantiated at all. There is no allegation or proof of flow back of amounts by anyone to the Appellant as well. There is no evidence of procurement of domestic scrap in cash from open market as well. There is no evidence of sale of duty paid scrap by Dealers in question, to any third party in cash as well. The factum of duty paid goods being cleared by manufacturers and receipt of proper invoice by the Appellant are not in dispute as well. Even the valuation of goods (industrial v/s. non- industrial scrap material) is not questioned, meaning thereby that the entire theory of goods being non-industrial grade whereas the Appellant requires only scrap material, is baseless.
2.24 The 9078 MT of MS scrap was procured by the dealers and as involved in the present case, if domestic scrap was procured locally to 9 E/12520,10523,10593,10917/2016 E/12275,12306-12308,12429,12431/2019 substitute this, not a single supplier for domestic scrap (which presumably was sent to the Appellant) is identified by revenue. Such huge quantity of MS scrap if was sold to other buyers by the Dealers, again it is not shown to whom it was sold as well. There is no proof of receipt or payment for domestic scrap by any person to any other person as well.
2.25 That even the yield obtained from scrap cannot be high from domestically sourced scrap, whereas the Appellant, for its own production purposes, would require heavy MS scrap, which is not possible from domestic scrap anyway.
2.26 Para 6.2, 6.5, 6.6, 6.7, 10.2 of the SCN clearly shows that duty paid industrial scrap was sold to the Appellant and not domestic non-cenvatted scrap at all. The cross examination and various Affidavits for retraction of statements on record, show that the statements were obtained under duress and coercion and in any case, mere statements of co-accused or transporters cannot form sole basis to level such serious charges, in absence of any evidence whatsoever. The retractions cannot be discarded as being mere after-thought in absence of a single corroborative evidence to substantiate the case of the revenue.
2.27 For the records, M/s. Manohar Manek Alloys P. Ltd. had in fact supplied silicon metal to the Appellant, whereas they are unnecessarily dragged into the controversy relating to MS scrap credit being availed by the Appellant, whereas there was no such instance anyway. The SS scrap supplies by them to the Appellant is the subject matter of another proceeding and hence, not relevant here. In any case, Shri. Manohar Kanugo (owner of the said supplier) passed away and could not be cross- examined and hence, his statement cannot be pressed into service anyway.
2.28 He further submitted that in light of the decisions in the case of Sri Rangathar Industries P. Ltd. (supra) and Coimbtore Super Alloys (P) Ltd. (supra), the demand proposed cannot survive against them.
3. Learned Senior Counsel Shri. Deven Parikh, appearing on behalf of M/s. Abhinay Steel and Ors., mainly submitted that the manufacturers had supplied patta and patti to M/s. Panchmahal Steel through dealers and any substitution of material with scrap, if any, was 10 E/12520,10523,10593,10917/2016 E/12275,12306-12308,12429,12431/2019 done by M/s. Panchmahal and hence, no penalty can be imposed upon the suppliers of patta and patti. He also submitted that how the replacement took place is also not brought on record by revenue and the demand must be dropped accordingly.
4. Shri. S.J. Vyas, learned Counsel appearing on behalf of M/s. Sunil Product & Ors. submitted that the manufacturer-suppliers are wrongly implicated in the proceedings, in absence of any direct evidence of their involvement in the alleged controversy and hence, they should be exonerated from the proceedings.
5. Shri Rajesh K Agarwal, Learned Superintendent (AR), appearing on behalf of Revenue, reiterates the findings of the impugned order. He submitted that the Appellant Company had availed the Cenvat Credit without receipt of corresponding goods and the demand was rightly confirmed by the lower authority.
6. We have carefully considered the submissions made by both the sides and perused the records. We find that in the present case, the issue to be addressed by us is whether the Appellant Company has in fact received duty paid MS and SS scrap material and correctly availed Cenvat Credit thereon or otherwise.
6.1 At the outset, it is seen that while the Appellant Company had specifically sought to cross-examine various witnesses, the lower authority has rejected such request and still relied upon the various statements recorded during the course of the investigation. While in light of the various decisions rightly relied upon by the Appellant to the effect that refusal to grant cross-examination renders the statements as inadmissible evidence, especially in light of the judgment by the jurisdictional High Court of Gujarat in the case of Motabhai Iron and Steel Industry (supra), we otherwise find that the documentary evidence otherwise available on record in fact would show that the invoices under which the SS scrap was supplied by the manufacturer / suppliers through the dealers to the Appellant, otherwise shows that the goods supplied are pieces/seconds/rejects/ cutting etc. of SS patta/patti/coils/plates etc. One such sample invoice is reproduced below for reference:
11E/12520,10523,10593,10917/2016 E/12275,12306-12308,12429,12431/2019 6.2 It is the case of the revenue department that the Appellant does not require virgin material but only scrap of SS articles, for its manufacturing operations. The revenue department has made out a case that the suppliers had sent SS patta/patti/circles etc. which is not used by the Appellant but these goods were in fact sent to utensil manufacturers who do not pay Central Excise duty and hence, the invoices were sent to the Appellant to take Cenvat Credit without corresponding goods. All the 12 E/12520,10523,10593,10917/2016 E/12275,12306-12308,12429,12431/2019 Appellants have rightly argued that there is not a single evidence regarding a single utensil manufacturer being identified or made party to the present proceedings for having received SS goods in clandestine manner, while the Central Excise Invoice was instead addressed to the Appellant Company by the suppliers. The present investigation has not identified a single supplier of SS scrap to the Appellant so as to make up for the quantity of goods as replacement. There is no evidence regarding flow back of funds by the Appellant/dealer to the suppliers or flow of fund between the utensil manufacturers to the suppliers for the clandestine nature of transaction alleged. We are in complete agreement with the contention that the demand proposed must fail, which is based on such conjectures and surmises, especially when there is no corroborative evidence except verbal evidence alone, that too without being subjected to cross examination process.
6.3 We also find merit in the contention that as held in the case of Raj Petroleum Products Versus Commissioner of Central Excise, Mumbai-I 2005 (192) ELT 806 (Tri. - Mumbai), the statement of the transporters alone will not further the case of the revenue. The transporters merely stated that they did not transport SS prime grade items, whereas the truck owners are not competent to understand the difference between second grade/off cuts/rejects of SS Patta/Patti etc. compared to prime grade goods anyway and nothing turns on their statements as such. Anyway, the contention of the Appellant that the drivers were the ones to have transported goods, who were never questioned on actual transport or nature of goods transported, also requires to be accepted.
6.4 In light of the above, in the facts and circumstances of the present case, it must be held that the Appellant had in fact received SS waste and scrap supplied to them through dealers, on documents, which otherwise show that it was seconds/defective etc. and had correctly availed Cenvat Credit thereon, in absence of any cogent evidence regarding either diversion of such goods by suppliers or replacement thereof by the Appellant from any other local source.
13E/12520,10523,10593,10917/2016 E/12275,12306-12308,12429,12431/2019 6.5 Also, when it comes to the issue of availing Cenvat Credit on MS scrap, the allegation is that the domestic scrap was received by the Appellant Company on which no Central Excise duty would have been paid, whereas the credit was availed on basis of invoices raised by the dealers. There revenue department has doubted the factum of dealers themselves receiving duty paid MS scrap.
6.6 The stray instance where the domestic scrap of 10585 Kg was found in the premises of the Appellant, it is generalized in the present proceedings that the Appellant invariably receives only domestic (non-duty paid) MS scrap from the dealers. Demand of Cenvat Credit on almost 9000 MT of MS scrap is confirmed on this presumptive basis, assuming that on no occasion such scrap was received by the Appellant. Interestingly, it is already on record that the Appellant Company had not even availed any Cenvat Credit on such domestic MS scrap as per OIO No.03/Jankilal/AC/D- III/Vad-I/17-18 dt.31.5.17, meaning thereby that if one has to generalize in the manner done by revenue department, the Appellant as such never avails any credit on domestic scrap, just like the one instance on record.
6.7 In any case, the cross examination of various witnesses was granted to the Appellant, wherein it transpires that most witnesses have either stated that they do not remember the details of the transaction or that the statements did not correctly bring out the factual matrix involved, leading to the evidentiary value of the oral evidences to be diminished. In certain occasions, the contradicting stand taken by some witnesses in first retracting their statements and then during the course of later proceedings stating that they mistakenly retracted it, leading to strong suspicion on the genuineness of the manner in which the statements were recording and entire investigation was done.
6.8 Just as the above case of SS scrap, even in case of MS scrap, there is no allegation or proof of flow back of amounts by anyone to the Appellant as well. There is no evidence of procurement of domestic scrap in cash from open market as well. There is no evidence of sale of duty paid scrap by Dealers in question, to any third party in cash as well. The factum of duty paid goods being cleared by manufacturers and receipt of proper invoice by the Appellant are not in dispute as well.
14E/12520,10523,10593,10917/2016 E/12275,12306-12308,12429,12431/2019 6.9 The 9078 MT of MS scrap was procured by the dealers and as involved in the present case, if domestic scrap was procured locally to substitute this, not a single supplier for domestic scrap (which presumably was sent to the Appellant) is identified by revenue. Such huge quantity of MS scrap if was sold to other buyers by the Dealers, again it is not shown to whom it was sold as well. There is no proof of receipt or payment for domestic scrap by any person to any other person as well.
6.10 At this stage, we also find merit in the submission made by the Appellant that the issue on hand (for both MS and SS scrap appeals) is squarely covered vide the following decisions, wherein under similar circumstances, identical demands were set aside by the Tribunal vide concurrent orders:
6.11 It was held in the case of Sri Rangathar Industries P. Ltd. 2018 (3) TMI 179 - CESTAT CHENNAI that:
"7. The assessees have been at pains to contend that the raw material received by them was very much in the nature of scrap. Though it was mentioned as HR Coils, Sheets etc., in the Cenvat invoices, these are cuttings of HR Coils, Sheets etc., procured from the registered dealers. Such goods were loosely known as scrap in trade. The main allegation is that in the Cenvat invoices the description of goods (raw material) is HR Coils, HR Sheets, MS Rounds, MS Wire Coil etc., whereas in commercial invoices and other documents the goods (raw materials) are described differently as MS scrap. The department thus alleges that assessee has not received any goods in nature of HR coils, MS rounds, Sheets etc., and therefore has availed credit fraudulently.
8. Cenvat credit scheme allows to availcredit on invoices of duty paid on inputs/raw materials supplied by the manufacturers and registered dealers. Only first stage and second stage dealers are permitted to transfer the credit of duty involved in the inputs as the Cenvat credit Rules 2002/2004. In the case before are M/s. Sree Vishnu Steels and M/s. Lakshmi Traders are second stage dealers whereas M/s. R.K. Steel and Alloys and M/s. Ubique Alloys are first stage dealers. Apart from these, department has recorded statement of Shri. Periakaruppan, who is also a first stage dealer.ShriA.Periakaruppan, Proprietor of M/s. Sri RaaghavendraSteels, one of the dealers, on 21.08.2007 deposed that they received HR sheet, CR sheet, HR coil, HR, SR 15 E/12520,10523,10593,10917/2016 E/12275,12306-12308,12429,12431/2019 coils from JSW Steel Ltd. and Salem Steel Plant Ltd., and sold to second stage dealers and few companies. He has unequivocally stated that he used to cut the above goods and sell as per customers requirements. That he had sold goods to second stage dealers such as M/s. Sree Vishnu Steels and M/s. Lakshmi Traders. Department has heavily relied upon the statement of ShriK. Veluswamy of M/s. Sree Vishnu Steels and Shri V. Aananthan of M/s. Lakshmi Traders contending that these two have stated that Shri Periakaruppan had sent only invoices without goods. However, Shri A.Periakaruppan, denied the statement of thesetwo persons and categorically reiterated that he had sent the goods (HR coils and HR sheets) only along with cenvat invoices after having cut them to size as per the requirement of the customers. We find however that while the lower appellate authority in para 4.4 of the impugned order has taken note of the statement of ShriA.Periakaruppan, however, the assertions given by that person has been brushed aside on the ground that it was just an argument after a long time gap to counter the version made earlier. It is also relevant to note that the said Shri K. Velusamy had, through his statement dt. 18.11.2006 read with his cross examination on 07.08.2008, retracted his admissions made earlier. Shri K. Velusamy had stated that officers had visited premises four times earlier and that it was suggested by them that he had to admit that he received only cenvat invoices. So also we find that V. Ananthan in his initial statement dt. 21.11.2006 had given a statement inter alia that he gets only Central Excise invoices and commercial invoices through agents of first stage dealers andmanufacturers and no goods are being received by him. However, at the time of cross examination on 07.08.2008, V. Ananthan stated that he has given such statement because he was threatened by officers. Once the initial admittory statements have been retracted in cross examination, the department s reliance on those statements in support of their allegation will naturally get demolished.
9. Another contention of the appellant is that they received only goods of SS coils, sheets etc. which in commercial parlance is known as scrap which is the reason why in the commercial invoices description is given as scrap . However, as to supplier s invoices only cut to size HR Coils/SS sheets/ plates etc., as purchased from manufacturers like M/s. JSWSteel or Salem Steel Plant were mentioned. The dealers/suppliers prepared the Central Excise invoices on the basis of goods received by them from the said steel plant s. Appellant has consistently asserted that this is the precise reason of calling the goods as scrap and that the test reports have also indicated the same. We find merit in these contentions. Interestingly, the previous case booked against the appellants which resulted in the earlier CESTAT Order No.946-
947/05 dt. 06.07.05,alleging that the dealers had purchased HR steel, coil sheets / 16 E/12520,10523,10593,10917/2016 E/12275,12306-12308,12429,12431/2019 plates etc. from various manufactures and supplying cuttings to SRIPL. While there was no dispute over this factum, the department in that case found fault with the factum of the dealers, even after such cutting having issued invoices with the same description and classification as was described in the invoicesunder which they purchased from manufacturers.
10. Viewed in this light, there is no reason for us not to give credence to the statement of Shri A.Periakaruppan both in his initial statement and also in a subsequent one, who has asserted that he had supplied only such SS coils / plates etc. received from the manufacturers, after cutting them to size as was required by SRIPL. We are not able to understand how the department, in the present case, has differed with the stand that was taken in the earlier proceeding and further why statements of A.Periakaruppan have not been relied upon or made part of the SCN. At this juncture, it would be worthwhile to reproduce para-3 of CESTAT Final Order No.946-947/2005 dt. 06.07.2005 in the earlier proceedings as under :
"3. The immediate question before me is whether M/s.SRIL are entitled to avail Modvat credit on the cuttings of plates, sheets etc. Supplied by SCPL. It is not in dispute that these are cuttings of plates,sheets etc. falling under heading 72.08. The Revenue has no case that the thickness of the plates, sheets etc. was reduced in the activity of cutting. Obviously, the cutting process resulted in reduction of area only. Though thickness is a parameter relevant to classification of these goods under Chapter 72 of the CETA Schedule, area is irrelevant. Sheets, plates etc. Classifiable under heading 7208 are so classifiable in reduced area also. Hence the cuttings suppliedby SCPL to SRIL cannot be treated differently from the sheets, plates etc. From which they were cut. In selling the cuttings to M/s.SRIL, SCPL were only dealing in sheets, plates etc. hence the cuttings were correctly declared by SRIL. As the department has not case that SRIL took Modvat credit of duty in excess of what was paid on the cuttings by SCPL, there is no dispute in terms of the quantum of credit. In the circumstances, I hold that M/s.SRILwere taking Modvat credit on cuttings of plates, sheets, etc. Classifiable under heading 72.08 as declared by them under Rule 57F and were not taking credit on scrap (Heading 7204) as alleged by the department. They were eligible for the credit. It would follow that no offence can be attributed to SCPL in connection with the regular availment of credit by SRIL."17
E/12520,10523,10593,10917/2016 E/12275,12306-12308,12429,12431/2019
11. We thus find that the main planks of the department s case against the assessee do not stand to scrutiny. There is also no other cogent or compelling evidence which can prop up department s allegation. Further, even the allegation made by the department that assessees have manufactured their final products by procuring locally manufactured scrap , is also not backed up by any corroborative evidence and can at best be termed as an assumption. If the department alleges that appellant has not received any goods as per the Cenvat invoices and has only received scrap which is locally procured then, the department has to establish from where and how appellants have procured such local scrap. There is no evidence of suppliers of local scrap, transporters, payment to such suppliers etc. The case of the department therefore does not sustain on merits.
12. We also find merit in the plea of limitation raised by the appellants. The SCN has been issued on 05.09.2007 against SRIPL Unit I (Impugned order for Appeal No.E/390/2009) for the period August 2002 to October 2006 invoking extended period under proviso to Section 11A (1) of the Central Excise Act on the ground that SRIPL, Unit-I have deliberately taken ineligible cenvat credit on non-duty paid scrap by committing fraud with an intention to evade payment of duty and utilising the said credit during the said period. So also, in respect of Appeal E/219/2010, the period involved is September& October 2006 and the SCN dt. 09.10.2007 has been issued similarly invoking extended period on the same grounds. We find that major part of the periods sought to be covered in the SCN are beyond the normal period of limitation. Although extended period of limitation has been invoked we are not able to appreciate how there can be an intent to evade payment of duty considering that the major chunk of their final products of these appellants were exported. Appellants have stated that they have not benefited otherwise by taking any irregular credit as alleged by the department. The proviso to Section 11 A (1) would be attracted when there is suppression of facts with intent to evade payment of duty. The department has no case that appellants utilized the alleged wrongly availed credit to discharge duty liability. There is no evidence coming forth in this angle. The contention of the Ld. AR that the intention to evade payment of duty need not be proved lacks any legal basis.
13. It would be appropriate to draw inference from the Hon'ble Supreme Court in the case of Cosmic Dye Chemical Vs CCE Bombay - 1995 (75) ELT 721 (SC) holding that it is not correct to say that there can be suppression or mis-statement of fact, which is not wilful and yet constitutes a permissible ground for the purpose of proviso to Section 11A (1) of the Central Excise Act. The relevant paragraphs of above Supreme Court judgment are reproduced as under:
18E/12520,10523,10593,10917/2016 E/12275,12306-12308,12429,12431/2019 "4. In short, the Tribunal was of the opinion that so far as fraud, suppression or mis-statement of fact in the information statutorily required to be supplied to the excise authorities is concerned, question of intent is immaterial.
5. The main limb of Section 11A provides limitation? of six months. In cases, where the duty is not levied or paid or short-levied or short-paid or erroneously refunded, it can be recovered by the appropriate officer within six months from the relevant date.(The expression `relevant date is defined in the Section itself).
But the said period of six months gets extended to five years where such non- levy, short levy, etc., is by reason of fraud, collusion or any wilful mis-statement or suppression of facts or contravention of any of the provisions of this Act or of the rules with intent to evade payment of duty......"
6. Now so far as fraud and collusion are concerned,? it is evident that the requisite intent, i.e., intent to evade duty is built into these very words. So far as mis-statement or suppression of facts are concerned, they are clearly qualified by the word wilful preceding the words mis-statement or suppression of facts which means with intent to evade duty. The next set of words contravention of any of the provisions of this Act or Rules are again qualified by the immediately following words with intent to evade payment of duty . It is, therefore, not correct to say that there can be a suppression or mis-statement of fact, which is not wilful and yet constitutes a permissible ground for the purpose of the proviso to Section 11A. Mis-statement or suppression of fact must be wilful.
14. In the impugned Order-in-Appeal No. 06/2010 to 10/2010-CE dt.29.01.2010 (Impugned order for Appeal No.E/219/2010, E/189/2010, & E/297/2010) the lower appellate authority therein in para 4.8 of the order has addressed this contention of the appellant and has restricted the demand proposed in the SCN only to the normal period. We therefore find that in the appeals filed by SRIPL unit I & II and other co- noticees, there is no justification for invoking extended period of limitation.
15. In the light of discussions made herein above, we have no hesitation in concluding that the proceedings initiated by the department which have resulted in the appeals filed by SRIPL Unit I & II and other co-noticees are not only hit by limitation for the predominant period covered in the SCN, but more particularly cannot be sustained on merits. This being so, the impugned orders are set aside. Assessee s appeals 19 E/12520,10523,10593,10917/2016 E/12275,12306-12308,12429,12431/2019 No.E/390/2009, E/367/2009, E/368/2009, E/378/2009, E/219/2010, E/205/2010, E/206/2010 & E/216/2010 are allowed with consequential relief, if any, as per law.
16. For these very same reasons, no merit is found in the department appeals No.E/189/2010 &E/297/2010 for which they are dismissed."
6.12 It was held in the case of Coimbtore Super Alloys (P) Ltd. 2019 (5) TMI 213 - CESTAT CHENNAI that:
"5.2 Be that as it may, the allegation is that appellants had received only non-duty paid MS scrap but had taken cenvat credit based on invoices of all the dealers in which supply of actual duty paid inputs like CR, HR, CR sheets etc. had been indicated. These allegations have been concluded primarily based on the statement dated 07.11.2008 of one Shri G. Baskaran, Proprietor of Sri Amman Steels who voluntarily stated that actual goods supplied to appellants were nothing but locally procured non duty paid goods in respect of all the 37 invoices. The SCN also makes a reference to a statement dt. 13.3.2009 of Shri S. Murugappan, Proprietor of Sri Karpagam Steels who inter alia admitted that they had supplied "MS scrap to appellants through Sri Amman Steels; that the original goods procured under cover of cenvat invoices were diverted to some other parties who did not need these cenvat bills.
5.3 However, in the replies dt. 16.08.2010 and also 18.08.2010 to the SCN, Sri Amman Steels and Sri Karpagam Steels had denied the allegations and had also actually submitted that they had received the payment from appellant for the supplies made by them and hence it could not be alleged that they had issued only the invoices.
5.4 As per para-2 of the SCN, officers attached to the Headquarters Preventive Unit, Coimbatore visited the appellant's manufacturing unit on 25.09.2008, based on the intelligence gathered, that appellants are availing irregular cenvat credit on the non- duty paid inputs received fraudulently in the guise of CR, HR, CR sheets, rejected CR etc. When the visit to the factory of the appellant was made with such specific intelligence, the minimal action that even a rookie officer would be expected to do is firstly to conduct a stock taking, at least of the raw material inputs lying in the factory and secondly, take samples of such types of inputs being used by the appellant. In fact, we are at a loss to understand how and why such basic protocols were given the go-by. Drawal of the samples of the inputs received by the appellants and their testing etc. may have revealed their actual nature and composition which would definitely have 20 E/12520,10523,10593,10917/2016 E/12275,12306-12308,12429,12431/2019 helped vindicate, or as the case may be, dispel the suspicion that was created as per the "intelligence". That was not done.
5.5 On the other hand, the investigative action appears to have been restricted to verification of records for the purchase of raw materials cenvat credit account and detecting discrepancy in the records maintained by appellants between description of goods actual received as per material inward register and that furnished in the respective dealer's invoices.
5.6 In any case, during the course of the hearing, Ld. Consultant for the appellants has explained that the discrepancy as to the receipt of material in the inward register was due to the fact that appellants had mentioned commercial invoice number and date in the register whereas the department had compared the same with central excise invoices issued by dealer; that apart from this, in their register, appellants had entered the materials received from all the dealers as MS scrap, whereas dealers had mentioned the description as per their purchase invoices.
5.7 It is not the allegation that appellants had only received "fake invoices" without having made any payment towards the amounts billed in such invoices. Per contra, Ld. Consultant has contended that the appellant had paid the supplier of raw material by way of cheque, including the excise duty element.
5.8 The Ld. Consultant has also raised a very pertinent argument that there is no allegation that materials supplied to the appellants had not suffered central excise duty. In the absence of any samples of the materials drawn at the time of search/investigation, there is no evidence to support the allegation that appellants had only received locally procured scrap instead of CR, HR, CR sheets etc. as indicated in the input invoices. We also find that no investigation have been done at the dealer's end to ascertain whether they had in fact received the impugned duty paid materials from manufacturer suppliers like M/s.Abirami Industries, M/s.Skanda Engineering etc. There is also no investigation that has been done at the end of such manufacturer suppliers, to ascertain whether in fact they had supplied the said CR, HR, CR sheets etc. to the dealers concerned.
5.9 In the event, the entire allegations are supported only by the statement of Shri G.Baskaran, Proprietor of Amman Steels. The examination of Shri G. Baskaran was requested for by the appellants vide their letter dt. 05.01.2011. However, from the facts on record (para16) of the OIO dt. 30.03.2011, it emerges that Shri Baskaran vide a 21 E/12520,10523,10593,10917/2016 E/12275,12306-12308,12429,12431/2019 letter dt. 16.03.2011 conveyed his disinclination to appear for a cross examination on the grounds that they had already filed their reply to the SCN and that they were also a co-noticee in the SCN. The reply alluded to by Shri Baskaran is the letter dt.16.08.2010, reference to which is found in para-13 of the OIO. In the said reply, the allegations made in the SCN have been denied and it has been contended that the depositions made were not corroborated with any tangible or material evidence; that they received payments from the appellant for the supplies and it could not be alleged that they had issued only their invoices. In the circumstances, we find that even the slender thread of "supporting evidence" namely the statement of Shri G. Baskaran, Proprietor of Amman Steels, also stands neutralized. This being so, any allegation based on that sole statement will surely lose their bite.
5.10 Further, in the cross examination held by the adjudicating authority on 22.03.2011, Shri N. Gopinath, Manager (Accounts) of the appellants from whom statement dt. 25.02.2009 had been recorded during investigation, clarified that the officers had noticed only commercial invoice number and date of the dealer instead of Central Excise invoice number / date and apart from this, there was no discrepancy in the material supplied by the dealer. Shri Gopinath further deposed that the department had conducted four Central Excise audits in the past and that no discrepancy in the availment of cenvat credit by appellant was pointed out by audit. It was also deposed that scrap dealers had supplied scrap to appellant and that he did not accept any bill from such dealers without receipt of any goods and denied the allegations that he had insisted for Central Excise invoice from scrap supplier for non-duty paid goods.
5.11 Earlier in these discussions, we had flagged the lack of clarity from the facts on record as to the actual percentage of the total input invoices that were found to have discrepancies. In this regard, we find from para 18 of the OIO, that during the personal hearing held on 20.03.2011, the Consultant for the appellants had contended that the disputed credit worked out to only 10% and that there was no requirement on the part of appellants to take any erroneous credit. In our view, this averment has lot of implications. When the investigations have found discrepancies in only 10% of the invoices examined for a disputed period of 17 months between June 2005 and November 2006, that too on the basis of a sole statement which also has been subsequently denied by the person concerned, and in the absence of any samples of inputs drawn for corroboration, the allegation that appellants had received only locally procured scrap instead of CR, HR, CR sheets etc. in the input invoice, will not have any legs to stand upon.22
E/12520,10523,10593,10917/2016 E/12275,12306-12308,12429,12431/2019 5.12 We further note that the Ld. Consultant has correctly relied on the ratio of Tribunal decision in a similar case involving disputed cenvat credits on supplies made by the same dealers, M/s.Amman Steels, in Ellen Industries and Others Vs CCE & ST, where the Tribunal vide Final order No.40462-4464/2019 dt. 12.03.2019 had allowed the appeal. He has also drawn our attention to other Tribunal decisions involving similar facts which too had been allowed in favour of the assessees concerned.
6. In the light of the discussions, findings and conclusions herein above, and also following the ratio laid down by Tribunal in other cases with similar set of facts, we are of the considered opinion that allegations made out against the appellants have not been convincingly proved. This being so, the impugned order cannot sustain and will require to be set aside, which we hereby do. In consequence, the appeal is allowed with consequential benefits, if any, as per law."
6.13 In light of the above facts and circumstances, the revenue has not been able to substantiate its case, except raising allegations based on mere conjectures and surmises, that the Appellant had not received MS and SS scrap through the dealers. There is no other corroborative evidence to substantiate such serious charges and the demand on this count as such must be quashed and set aside.
7. Accordingly the impugned orders are set aside and all the appeals are allowed, with consequential relief, if any.
(Pronounced in the open court on 08.12.2023) RAMESH NAIR MEMBER (JUDICIAL) RAJU MEMBER (TECHNICAL) Raksha