Customs, Excise and Gold Tribunal - Mumbai
Shaper Chemicals Ltd. And Ors. vs Commissioner Of Central Excise on 21 May, 2004
Equivalent citations: 2004(97)ECC127, 2004(173)ELT327(TRI-MUMBAI)
ORDER S.S. Sekhon, Member (T)
1. Officers of the Headquarters Preventive, Mumbai VII Commissioner, Central Excise, pursuant to an intelligence carried out search/stock taking operation and a Show Cause Notice pursuant to enquiry made was issued No. V/Adj(15/Seiz)48/98/M-VII dated 18.8.1998 to 17 notices therein to show cause as to why -
i) Modvat credit of Rs. 1,26,17,981/- wrongly availed by M/s Shaper Chemicals Ltd (hereinafter referred to as 'Shaper') on goods not received in the factory during the period 1995 to September 1997 should not be disallowed and recovered under Rule 57I(1) of the Central Excise Rules, 1944.
ii) Amounts of Rs. 84,9621 & Rs. 20.00 lakhs paid by them in RG23A and TR 6 challans should not be confirmed.
iii) Central Excise duty of Rs. 24,5666/- on raw material found short should not be confirmed.
iv) Excess stock of raw material and finished goods not be ordered to be confiscated.
v) Penalty and interest not be imposed/demanded.
Show Cause Notices were also issued to the supplier of Shaper M/s Rang Rasayan Udyog dt 14.9.1998, M/s Pradeep Shetye Pvt. Ltd. dt 28.1.1999, the suppliers of the alleged documents on which credit was availed when no goods have been stated to have been supplier were also decided by the Commissioner as the issue involved was same.
2. After hearing the notices and considering the submissions, the Commissioner found -
(a) (i) Statements recorded could be relied.
(ii) there is material to conclude, based on statements recorded, that though duty paid invoices moved and credits were availed, no goods went to the 4 suppliers from Shaper as investigated into by the officers and no finished goods were received back by Shaper. There was material on record to conclude that false production entries were made and recorded in RG1 to cover up the false receipt of the raw materials which in fact were never recorded.
(iii) Consequently the charges made in the Show Cause Notice were to be upheld.
(b) The following orders were passed:
(i) disallowance's of Rs. 1,26,17,981/- being Modvat credit wrongly availed by Shaper on strength of invoices issued under Rule 52A without actually receiving the materials (as per details in Annexure A to Notice) and recovery thereof ordered after appropriating Rs. 20.00 lakhs & Rs. 84,962/- for already paid.
(ii) Confirmed duty of Rs. 24,566/- being duty on raw material found short as per Annexure C and appropriation of that amount already paid.
(iii) Confiscation of excess stock of raw material valued at Rs. 1,77,974/- and finished goods valued at Rs. 3,00,700/-as per Annexures D & E to the Notice and to be redeemed on payment of fine of Rs. 25,000/-.
(iv) Penalty of Rs. 1,26,17,981/- on Shaper under Rule 57I (4) read with Section 11AC was imposed along with penalty of Rs. 20.00 lakhs under Rule 173Q read with Rules 210 & 2126 and interest under Section 11AB was demanded in respect of Modvat disallowed.
(v) Penalties were imposed on the following under Rule 209A of the Central Excise Rules, 1944 for the role in fraudulent availment of Modvat credit. The persons are S/Shri K.N. Nikorawalla, Managing Director, D. Chaturvedi, Store Keeper, Girish Muraka, Company Secretary, K.N. Nikorawala, Director of M/s Shaper and Shri Pradeep Shetye, Director of M/s Pradeep Shetye Pvt Ltd, Vijay Puri, proprietor of M/s Rang Rasayani Udyog, S.S. Ghate, Director of M/s Aricon Fine Chem Pvt Ltd & M/s Capris Chemicals (P) Ltd, Shri Raj Kuam Makharia, Director of M/s Maya Rasayan Ltd, S.K. Suratkar, Partner of M/s Epsilon Industries, Deepak Shah, partner of M/s Chemida Enterprises, Shrfi Parikshit Shah, partner of Chemida Enteprises, Sunil Patel, Director M/s Clarisis Organics Ltd, M.R. Tiwari, Director of M/s Paramed Pvt Ltd, Boob, Director of M/s Mangalam Rasayan Pvt Ltd, Pankaj Shah, Proprietor of M/s Parshavnath Traders, Sarna, Director of M/s Savi Chemicals Pvt Ltd.
(c) In case of Show Cause Notice to M/s Rang Rasavani Udyog, it was ordered:
i) Disallowance of credit of Rs. 15,636,350/- and appropriation of amount of ks 502771.72 with penalty of Rs. 15,36,650/- under Section 11AC, Rs. 3 lakhs under Rule 173Qa read with Rule 57I with Rule 226.
ii) Penalty under Rule 209A on proprietor Shri V. Puri and Shaper for fraudulent availment of Modvat credit along with penalty on K.N. Nikorawala, Managing Director of M/s Shaper, M.D. Chaturvedi, Storekeeper of Shaper.
(d) In case of Show Cause Notice to M/s Pradeep Shetye Pvt Ltd.
The Commissioner disallowed credit of Rs. 23,05,250/-and appropriated of Rs. 8 lakhs paid. Confirmed duty demand of Rs. 1,55,409/- shortage raw material and Rs. 27,936/- on finished goods and duty on goods sent for reprocessing and not received back along with equivalent penalty of Rs. 23,05,250/- under Section 11AC read with Rule 571 and penalty of Rs. 4 lakhs under Rule 173Q and Rule 226 with penalty under Rule 209A for fraudulently availing of Modvat credit on Shri Pradeep Shetye, Shri K.N, Nikorawala, Managing Director of Shaper, Shri R.R. Umbre, Production Manager of M/s Pradeep Shetye Pvt Ltd.
Hence these appeals.
3. After hearing both sides and considering the materials on record, it is found:
a) Since there are no goods to be moving, as found by the Ld Commissioner and credit has been availed only on documents without receipt of any goods, the question of liability of any goods to confiscation does not arise and has not been determined. To effect and uphold penalty liability goods should have been found to be liable to confiscation. Since it is the case of Revenue itself that there were no goods which actually moved, the liability under Rule 209A arrived only on account of role in fraudulent availment of credit cannot be upheld. All appeals as regards Rule 209A are to be allowed after setting aside the order of penalty under the rule.
b) Since no goods have moved the penalty under Rule 173Q read with other rules cannot be approved as far as alleged fraudulent Modvat credit is concerned, as penalty under Rule 173Q is related to value of the goods and since goods are admittedly as per the case of Revenue not to exist the value thereof cannot. Penalty under Rule 173Q read with the rules is to be set aside.
c) As regards the eligibility to credit, it is the submission of Shaper in the reply to the notice to the adjudicator submitted as under:
"3.......The company has prepared the same chart by adding transport details against each entry in Annexure A to the Show Cause Notice to show the physical movement of the intermediate products from the 14 parries to the company..."
No findings on this chart are arrived at, which was required. The order is issued without considering the defence reply. It is to be set aside and remitted back to the adjudicator. He should rehear the appellants in all the three notices and redetermine the alleged eligibility to credit. Thereafter, penalty, if required under Rule 226 and or Rule 210 of the Central Excise Rules for the credit entries made but not permissible be determined.
4. In view of the findings arrived, the appeals are allowed in above terms as regards penalty under Rule 209A and 173Q. The other appeals remitted for rehearing and de novo adjudication on all issues.
5. Appeals disposed off in above terms.
Pronounced in Court on 21/05/2004)