Custom, Excise & Service Tax Tribunal
The Commissioner Of Central Excise vs Prakash Industrial Corporation on 3 August, 2009
IN THE CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT No.II APPEAL No.E/69/08 (Arising out of Order-in-Appeal No.CPA/20/TH.I/07 dated 10/10/2007 passed by Commissioner of Central Excise & Customs (Appeals), Mumbai) For approval and signature: Honble Mr. Ashok Jindal, 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 Lordships wish to see the fair copy :
of the Order?
4. Whether Order is to be circulated to the Departmental : authorities?
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The Commissioner of Central Excise,
Mumbai Appellants
Vs.
Prakash Industrial Corporation Respondents
Appearance:
Shri.T.Tiju, SDR for Appellants
Shri.J.H. Motwani, Advocate for Respondents
CORAM:
Mr. Ashok Jindal, Member (Judicial)
Date of Hearing : 03/08/2009
Date of decision :
O R D E R No:..
Per: Ashok Jindal
1. This appeal is filed by the revenue against the impugned order wherein the appeal of the respondent was allowed by setting aside the order-in-original imposing the penalty on the respondent of Rs.3,51,097/- under Rule 25 of Central Excise Rules 2002 and a personal penalty of Rs.3,51,097/- on the Proprietor Shri Prakash Chandrakant Jadhav, under Rule 13 of Cenvat Credit Rules, 2002.
2. The facts of the case are that the respondent is a 2nd stage dealer is engaged in the trading of Iron and steel scrap. On the basis of intelligence gathered by the investigating officials that M/s.Simandhar Steel Movers (I) Pvt Ltd., (SSMIPL) and M/s.Simandhar Enterprises (SEPL), who were registered as first stage dealers, were issuing bogus invoices to different dealers of iron and steel scrap and manufacturing units of iron and steel goods on the basis of invoices issued by the units, which were non existing at Alang, Bhavnagar. It was also revealed that many of the vehicle numbers under which the goods were purported to be transported were in nature of private cars, motor cycles, three wheelers, tankers, dumpers, etc., which were not capable of transporting tones of iron and steel scrap. Further, enquiry made with Sales Tax authorities at Bhilad, Gujarat-Maharashtra border revealed that the said vehicles were loaded with ship breaking scrap and consigned to SSIMPL and SEPL had never crossed the check post suggesting that the said first stage dealers were only receiving the documents without receiving the scrap under reference. The enquiries made with the jurisdictional range superintendent of the original manufactures revealed that the original manufacturers had stopped/closed their activities since very long back and they had not filed their ER return and that either the assessee or the so called manufacturer of scrap or any other person was issuing bogus invoices without any physical clearance and without payment of Central Excise duty.
3. Based on the investigation as aforesaid, the revenue came to the conclusion that the credit passed on by SSMIPL and SEPL, the first stage dealers were fraudulent ab-inito, as only invoices were prepared without actually receiving/supplying the duty paid scrap material and purchase and receipt of iron and steel scrap from SSMIPL by the second stage dealer has not been substantiated by proper evidence. Thus, the second stage dealer, i.e. the respondent has contravened the provisions of Rule 11 of Central Excise Rules, 2002 read with Rule 7 of Cenvat Credit Rules, 2002 inasmuch as they have issued cenvatable invoices without receiving duty paid goods and, therefore, they were liable for penal action. Accordingly, the appellant ordered for revocation of Central Excise Registration issued to the respondent under Rule 9 of the Central Excise Rules, 2002 read with clause 7 of Notification No.35/2001-CE(NT) dated 26/06/2001 as amended.
4. A penalty was also imposed on the respondent under Rule 25 of Central Excise Rules, 2002 and Rule 13 of Cenvat Credit Rules, 2002 read with Section 9 of Central Excise Act, 1944 for fraudulently passing on Cenvat Credit. A penalty was also imposed on Shri Prakash Chandrakant Jadhav, the Proprietor, under Rule 13 of Cenvat Credit Rules, 2002 read with Rule 26 of Central Excise Rules, 2002. Aggrieved by the same, the respondent filed an appeal before the Commissioner (A), which was allowed. Aggrieved from the same, the revenue is in appeal before me.
5. Shri T Tiju, Ld. SDR submits that the goods in dispute had never crossed Gujarat Maharashtra border as per the enquiries with the Sales Tax authorities and further that the units which were non-existing units at Alang, Bhavnagar. It is clearly established the fact that the respondents has not received the same material along with invoices issued by SSMIPL and accordingly, the respondent is not entitled for the credit availed by him on the strength of duty paid invoiced received from SSMIPL. He placed reliance on K.T. Nagar vide order No.A-404/C-IV/WZB/2004 dated 21/05/2004 wherein it was held that the Commissioner (Appeals) was not right in granting the benefit to the respondents and ought not to have accepted their version about the actual vehicle numbers used in alleged transportation of the goods. On the basis of the transport vehicles indicated in the duty paying documents issued in favour of the manufacturer, the case was correctly made out against the respondents that, they had issued only the duty paying documents without dispatch of physical stock to the factory of their customers. He further relied on New India Assurance Co. Vs. Kamla & Others, 2001-AIR (SC) 0-1419 2001-SCC-4-342 wherein it was held that the insurer and insured are bound by the conditions enumerated in the policy. Insurer is not liable to the insured if there is violation of any policy condition. If the Insurance Company succeeds in establishing that there was breach of policy condition, then Claims Tribunal shall direct the insured to pay the amount to the insurer since the insurer had paid the amount to third party on the direction of Supreme Court.
6. The main contention of the SDR is that the SSMIPL and SEPL had never procured the physical goods but got only the fake invoices and also issued the invoices to the respondent on the strength of fake invoices. The respondent is not entitled to get any Cenvat credit.
7. On the other hand, the Ld. Advocate for the respondent submits that the revenue has contended that the respondent has not received iron and steel scrap from SSMIPL and the registration numbers of the vehicles reflected in invoices issued by SSMIPL were those of private cars, motor cycles and three wheelers, not capable of carrying heavy consignments. There is no evidence has been put forth with regard to the vehicle numbers mentioned in the invoices issued by the SSMIPL to the respondent by the Revenue. The vehicle numbers appearing in the invoices issued by SSMIPL to the respondent were entirely different than those in respect of which investigation have revealed that those are of private cars, motor cycles and three wheelers. He also filed the copies of the invoices of SSMIPL issued to the respondent and the same are reproduced as per list as under:-
Sl.No. Invoice No. & Date Vehicle No. 1 538 dt. 30/12/2001 MWU 5272 2 539 dt. 30/12/2001 MH 04 P 266 3 542 dt. 09/01/2002 MH-04/C-5142 4 561 dt. 11/01/2002 MH-04/4589 5 117 dt. 01/05/2002 MH-12/AQ-9335 6 118 dt. 01/05/2002 MH-04/P-6120 7 119 dt. 01/05/2002 MH-12/R-9019 8 1657 dt. 13/01/2003 MH-04/C-5437
8. He further pleaded that the revenue had failed to consider their contention that they have received the iron and steel scrap from SSMIPL under the cover of cenvatable invoices, which were complete in all respect indicating in the appropriate column viz. the description of the goods, name of their manufacturers, date of its invoice, quantity and assessable value etc. and after satisfying the identity and address of SSMIPL, who issued them cenvatable invoices. They took the cenvat credit on the duty paid invoices. He also filed the copy of the show cause cum demand notice, which reflects that the only disputed invoice after co-relating is the Invoice No.1657 dated 13/01/2003. But the revenue did not make any enquiries and investigation in the case of the respondent and arrived at a conclusion only on the basis of investigation made against the SSMIPL. He further placed reliance on the Amrit Foods Vs. CCE, UP, 2005 (190) ELT 433 (SC) wherein it was held that it is necessary for the assessee to be put on notice as to the exact nature of contravention for which the assessee was liable under the provisions of law. He also placed reliance on Haryana Steel Alloys Vs. CCE, New Delhi, 2002 (148) ELT 377 (Tri-Del) wherein it was observed that We note in the instant case that scrap was available at the time of visit of the Central Excise Officers to the factory premises. No effort was made to check up whether the scrap in the stockyard was modvatable stated to have been supplied by M/s.MUL or not. No sample was drawn for test or verifying the veracity of the document. We note that the appellant was purchasing scrap from registered dealers. Registered dealers were in their invoices showing the scrap as duty paid. The invoices have not been found to be bogus. If at all anybody was manipulating the invoices it was the registered dealer and therefore, the demand, if any, of duty should have been raised against the registered dealers. There is no evidence to prove that the invoices on the strength of which modvat credit was taken did not cover the goods actually received. The claim of the appellant was that in their stockyard there was sufficient scrap, which showed that the scrap was from M/s.MUL.
9. Heard.
10. On perusal of the records and submissions made by the parties, I find that as per the show cause notice, the only disputed invoice is Invoice No.1657 dated 13/01/2003, wherein it was alleged that the SSMIPL has purchased the goods from Beldev Ship Breakers (who is not existing since long).
11. On the other hand, the department did not bother to investigate the matter relating to the other seven invoices. Moreover, the department did not bother to investigate the actual vehicle Numbers used in transportation of goods to the place of the respondent. The decision arrived at by the original adjudicating authority arrived that although the goods under the cover of eight invoices is on the strength of the bogus invoices. No evidence was brought on record by the revenue in this regard. On the other hand, the respondent has taken out care to find out the identity and reliability of the supplier of the goods after examining the proper documents under duty paid invoice and the payment was also made by cheque also.
12. The revenue has failed to bring the evidence on record that the respondent has contravened the provisions of law. The revenue arrived on the conclusion without investigation and evidence.
13. In the facts and circumstances of the case and on the basis of the above observation, I do not find any infirmity in the impugned order and the same is upheld.
14. The appeal filed by the revenue is disposed off, accordingly.
(Pronounced in Court on .) (Ashok Jindal) Member (Judicial) pj 1 8 2