Custom, Excise & Service Tax Tribunal
M/S Siddhartha Bronze Products Pvt. ... vs Commissioner Of Central Excise & S.T., ... on 28 April, 2015
CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL, West Zonal Bench, Ahmedabad Appeal No. : E/11512,11513/2013 (Arising out of OIO No.05/BVR/Commr/2013, dt.28.02.2013, Passed by Commissioner of Central Excise & Service Tax, Bhavnagar) 1. M/s Siddhartha Bronze Products Pvt. Limited : Appellant (s) 2. Shri K.K. Gupta, Managing Director VERSUS Commissioner of Central Excise & S.T., Bhavnagar : Respondent (s)
Represented by :
For Appellants : Shri C. Hari Shankar Senior Advocate & Shri S. Sunil, Advocate For Respondent : Shri K. Sivakumar, Authorised Representative For approval and signature :
Mr. P.K. Das, Hon'ble Member (Judicial) Mr. H.K. Thakur, Hon'ble Member (Technical) 1 Whether Press Reporter may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
No 2 Whether it should be released under Rule 27 of 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?
Seen 4 Whether Order is to be circulated to the Departmental authorities?
Yes CORAM :
Mr. P.K. Das, Hon'ble Member (Judicial) Mr. H.K. Thakur, Hon'ble Member (Technical) Date of Hearing : 16.12.2014 Date of Decision : 28.04.2015 Order No. A/10426-10427/2015 Dated 28.04.2015 Per: P.K. Das
These appeals are arising out of a common order and therefore, both are taken up together for disposal.
2. The relevant facts of the case, in brief, as per records are that M/s Siddhartha Bronze Products Pvt. (Appellant No.1) are engaged in the manufacture of Copper Scrap, Nickel Scrap, Aluminum Scrap, Brass Scrap and Copper Alloy Scrap, registered with the Central Excise authorities. They are availing CENVAT Credit under CENVAT Credit Rules, 2002 & 2004. At the initial stage, the appellants were manufacturing Scrap from ship breaking. As the ship breaking industry was experiencing recess, the appellant had to search a alternative source of raw material for manufacturing Scrap. Then, they started to procure duty paid inputs viz. Copper Ingots /Wire Bars, Nickel Ingots, Aluminum Ingots, Copper Alloy, Ship Breaking material etc from the indigenous manufacturers or imported from oversea suppliers either directly or through purchase of high sea sales and traders. The appellants have been manufacturing Scraps and supplied to the various customers namely, M/s. Jindal Stainless Steel Limited, M/s. Alcobex Metals Limited etc. on payment of Central Excise duty.
3. On 09.01.2007, the Central Excise officers of Directorate General of Central Excise Intelligence (DGCEI) visited the Appellants factory and searched the premises and also seized several records and documents. As a follow-up action, investigation were conducted at various places at check post of the Commercial Tax Department, Rajasthan, Custom House Agents, suppliers of raw materials, the appellants Delhi and Gurgaon office etc. The said officers recorded the statements of various persons including employees and Directors of the Appellant and also the transporters of the input materials, amongst others.
4. A Show Cause Notice dt.23.12.2008 was issued by the Additional Director General of Directorate General of Central Excise, Intelligence, Ahmedabad Zonal Unit proposing, to deny the CENVAT Credit amounting to Rs.5,57,58,449.00 alongwith interest and to impose penalty on the Appellant No.1, on the ground that the Appellant Company wrongly availed the CENVAT Credit, without actual receipt of the inputs in the factory premises at Bhavnagar. It was further proposed to appropriate the amount deposited by the appellants, during investigation. It was also proposed to impose penalty on Shri K.K. Gupta, Managing Director of Appellant Company (Appellant No.2). By the Adjudication order dt.30.04.2010, the Commissioner of Central Excise confirmed the demand of duty alongwith interest and imposed penalty of equal amount of duty on the Appellant Company. It has also imposed penalty on the Appellant No.2. The Appellants filed appeals before the Tribunal. By Final Order No.A/1672-1673/WZB/AHD/2011, & M/1788/WZB/AHD/ 2011, dt.28.09.2011, the Tribunal set aside the Adjudication Order and remanded the matter to the Adjudicating authority to decide afresh after observing the principles of natural justice. By the impugned Order, in de-novo adjudication, the Commissioner of Central Excise & Service Tax, Bhavnagar confirmed the demand of CENVAT Credit of Rs.5,57,58,449.00 alongwith interest and imposed penalty of equal amount of CENVAT credit on the Appellant Company and also appropriated the amount deposited by the Appellant during investigation. It has also imposed a penalty of Rs.50 lakhs on Shri K.K. Gupta, Manager of the Company (Appellant No.2 herein).
5. The learned Senior Advocate appearing on behalf of the Appellants submits that the Appellant Company procured the duty paid inputs in three sources as under:-
a) Imported re-melted copper ingots/wire bars, Nickel ingots etc Sri Lankan origin purchased on high sea sales basis from Delhi based importer and cleared from ICD Tughalakabad, Delhi and imported Copper Nickel ingots purchased on high sea sales basis from M/s Mittal Appliances, Indore and cleared from ICD Indore.
b) Indigenous Copper Ingots procured from M/s Annapurna Impex Pvt. Limited, Ludhiana.
c) Copper Ingots purchased from M/s V.K. Metal Works, M/s Jain Metal Works, Delhi/ Jammu based.
5.1 He submits that the Appellant received the inputs in their factory premises and used in the manufacture of final product and duly recorded in their statutory records such as CENVAT Account, RG-1 register etc. The Appellants cleared the goods to various reputed Companies viz. M/s Jindal Stainless Steel, M/s Alcobex Metals etc. There is no dispute that the Appellant paid duty on final product upon utilisation of CENVAT Credit to their renowned buyers. The entire investigation was conducted under impression that it is not commercially viable for any manufacturer to manufacture copper scraps out of copper ingots/ wires/ bars. They had produced Cost Accountant certificate to substantiate the viability of costing of final product, which was not disputed by the Adjudicating authority and the entire demand of duty is liable to be set-aside on this ground alone.
5.2 CENVAT Credit was also denied on the ground that the transporters had not availed to route through RTO check post. The various statements were recorded of the transport companies. He drew attention of the Bench to the Report for avoiding RTO check post and this cannot be a ground for denial of CENVAT credit as it is evident from records that they received the goods. It is submitted that the Adjudicating authority on the basis of Panchnama, dated 09.01.2007, observed that there was no manufacturing activity, which is contrary to the earlier Panchnama drawn on 10.02.2006, where, it is clearly mentioned that the Appellant had sufficient machineries for cutting of the ingots. He further submits that the Adjudicating authority had not given opportunity for cross examination of the various persons and also not followed the procedure as provided under Section 9D of Central Excise Act, 1944 to examine the witnesses. The learned Senior Advocate drew the attention of the Bench to the relevant portion of the Adjudication order and also various documents to substantiate the receipt and utilization of inputs at their factory. The learned Senior Advocate explained the reasons in detail for import of Copper Ingots to convert into scrap and Cost Accountant certificate. They have filed Written Submissions with the compilation of case laws and various documents duly certified by the Chartered Accountant.
6. The learned Authorised Representative for the Revenue reiterates the findings of the Adjudicating authority. He submits that the Tribunal in the remand order, had not directed to allow cross examination. The Appellants had not refuted the allegations in the Show Cause Notice. The evidences in the nature of statements of the transporters, CHAs, Buyers, etc would substantiate that the Appellants had not received the inputs in their factory premises. It is submitted that as per CENVAT Credit Rules, onus lies with the assessee to establish that the duty paid inputs were received in the factory and utilised in the manufacture of the final product. In the present case, it is evident from the records that the Appellant had not received the inputs at their factory premises and therefore, it is not necessary to examine the utilisation of the credit in the manufacture of final product and clearance thereof. He also drew the attention of the Bench to the relevant portion of the Adjudication order and filed Written Submissions with compilation of case laws.
7. After hearing both the sides and on perusal of the records, we find that the Appellants were engaged in the manufacture of Scrap of different non-ferrous metals and registered with the Central Excise department. They were clearing the finished goods on payment of duty and availing CENVAT Credit facilities on the inputs under CENVAT Credit Rules. The main buyers are M/s Jindal Stainless Steel Limited, M/s Stainless India Limited, M/s Alcobex Metals Limited, M/s Shah Alloy Limited, Ahmedabad and other companies. The learned Senior Advocate submitted that they procured inputs from three sources. The denial of CENVAT Credit of total amount of Rs.5,57,58,449.00 for the period from December 2003 to June 2007, would also be in three parts as under:
a) Rs.3,88,54,105.00 on imported inputs cleared from ICD, TKD and ICD, Indore.
b) Rs.1,39,42,355.00 on indigenous copper ingots cleared from M/s. V.K. Metal Works/ M/s. Jain Metal Works Delhi and Jammu.
c) Rs.29,61,989.00 on indigenous copper ingots cleared from M/s. Annapurna Impex Pvt. Limited (AIPL), Ludhiana.
8. The learned Senior Advocate submitted that the Adjudicating authority had not allowed cross examination of several persons as prayed for, despite the order of the Tribunal. It is a second round of litigation. The Tribunal by Final Order No.A/1672-1673/WZB/ AHD/2011, dt.28.09.2011, M/1788/WZB/AHD/11, dt.28.09.2011, remanded the matter for de-novo adjudication after observing principles of natural justice. The relevant portion of the said order is reproduced below:-
4. Another aspect of the case before us to be noted is that there is violation of principles of natural justice. The Appellant sought cross examination of various persons. The Adjudicating authority gave the cross examination on 12.04.2010 of one of the persons. Subsequent to cross examination, the Appellant filed detailed reply on 20.04.2010. It is seen from the records that the Appellant was not granted any personal hearing after 20.04.2010. In our considered view, after receiving the detailed reply, post cross examination, it is mandatory on the part of the Adjudicating authority to grant personal hearing to the Assessee to put forth the defence and consider the same before reaching a conclusion. Absence of personal hearing is gross violation of principles of natural justice. It is seen from the Record of personal hearing on 06.6.2012, before the Commissioner of Central Excise, Bhavnagar that the Appellant requested to allow cross examination of 7 (seven) transporters as mentioned at Para 11 of Show Cause Notice.
8.1 The learned Authorised Representative for the Revenue submits that nowhere in the order of the Tribunal, it was directed to the Adjudicating authority to grant cross examination of all the witnesses, whose statements have been relied upon in the Show Cause Notice. It is submitted that the Adjudicating authority had given detailed reasons for rejecting the request of cross examination of the witnesses on merit. The contention of the Appellant is that the statements of all the witnesses would be required to examine by the Adjudicating authority under Section 9D of the Central Excise Act, 1944, supported by the decision of the Honble Delhi High Court in the case of M/s J.K. Cigarettes Limited Vs Commissioner of Central Excise 2009 (242) ELT 189 (Del). The learned Authorised Representative opposed the submissions of the learned Senior Advocate as the decision is not applicable in the present case. The said decision of the Hon'ble Delhi High Court is in respect of constitutional validity of Section 9D of the Central Excise Act, 1944. He submits that it is not necessary to grant the request for cross examination, which is recklessly made. He relied upon the following decisions:-
i) M/s Fortune Impex Vs Commissioner of Customs 2001 (138) ELT 556 (Tri-Kolkata)
ii) M/s Kanugo & Co. Vs Commr. of Customs & Others 1983 (13) ELT 1486 (SC)
iii) M/s Debu Saha Vs Collr. of Customs 1990 (48) ETL 302 (Tri)
iv) M/s Onida Saka Limited Vs CCE 2011 (267) ELT 101 (Tri-Del.) 8.2 We are not able to accept the contention of the learned Authorised Representative. It is observed by the Honble Delhi High Court in the case of M/s J.K. Cigarettes Limited (supra) that right of cross examination in quasi-judicial proceedings can be taken away in certain exceptional circumstances as specified under Section 9D of the Central Excise Act, 1944. The Honble Delhi High Court in the case of M/s J.K. Cigarettes Limited (supra) held as under:-
32.?Thus, we summarize our conclusions as under :-
(i) We are of the opinion that the provisions of Section 9D(2) of the Act are not unconstitutional or ultra vires;
(ii) while invoking Section 9D of the Act, the concerned authority is to form an opinion on the basis of material on record that a particular ground, as stipulated in the said Section, exists and is established;
(iii) such an opinion has to be supported with reasons;
(iv) before arriving at this opinion, the authority would give opportunity to the affected party to make submissions on the available material on the basis of which the authority intends to arrive at the said opinion; and
(v) it is always open to the affected party to challenge the invocation of provisions of Section 9D of the Act in a particular case by filing statutory appeal, which provides for judicial review. 8.3 The Honble Delhi High Court in the case of M/s Basudev Garg vs. Commissioner of Customs 2013 (293) ELT 353 (Del.), following the earlier decision in the case of J.K. Cigarettes Limited (supra), held that the statement against the assessee cannot be used without giving them opportunity of cross examining the deponents. It is observed that cross examination is a valuable right of the accused/noticee in quasi judicial proceedings which can have adverse consequences for them. In the case of Commissioner of Customs, Allahabad vs. M/s Govind Mills 2013 (294) ELT 361 (All.), the Honble Allahabad High Court held that the assessee was entitled to cross examine that person as well as Excise officer, and in absence thereof, report of Excise officer on alleged confession could not be relied upon. In an unreported decision in the case of Union of India & Others vs. GCT Industries & Others vide judgment dt.03.01.1995 in SLP (Civil) No.21831/1994, the Honble Supreme Court clarified that in case the reliance is placed on the provisions of Rule 9D of the Act in respect of any particular witness, any intimation of the same is required to be given to the Respondent and it would open to the Respondent to approach the High Court against the order made by the authority in that behalf. The Honble Delhi High Court in an Income Tax matter in the case of Commissioner of Income Tax vs. M/s S.M.C. Share Brokers Limited - (2007) 288 ITR 345 (Delhi), held that the Tribunal is right in his view that in absence of A being made available for cross examination his statement could not be relied upon to his detriment. The assessing officer was functioning as quasi judicial authority and was under obligation to adhere to principles of natural justice. Honble Supreme Court in the case of M/s Arya Abhushan Bhandar vs. Union of India 2002 (142) ELT 25 (SC), held that non-production of such witness for cross examination resulted in breach of natural justice. In the present case, the Tribunal directed de-novo adjudication after observing the principles of natural justice, which would include the cross examination of the witnesses. In view of that, there is no need to discuss the case laws relied upon by the learned Authorised Representative.
8.4 In the present case, the Adjudicating authority observed that the statements of the transporters are not the only evidences to level the allegations of non-receipt of the cenvatable inputs to registered factory premises of the Appellant. It has further been observed that from the documentary evidences placed on record that the Show Cause Notice is issued after bringing on record various corroborative evidences to justify the allegation and considering all the evidences including the versions of the transporters. In view of that, the Adjudicating authority observed that the cross examination of the transporters is not found mandatorily required to be granted as requested by the noticee and the matter may be decided on the basis of evidences as available on record. In our view, there is no need to remand the matter again for cross-examination, and it may be decided on the basis of evidences, as held by the Adjudicating authority.
9. Learned Authorised Representative for the Revenue submits that during investigation various evidences were unearthed to prove that the appellant had not received the inputs in their factory, such as;
(i) No manufacturing activities was found during visit on 09.1.2007. No documents was produced for lower electricity consumption.
(ii) Transportation of goods from Delhi/ Indore to Gujarat were not entered through R.T.O. check posts, as no seal of any CTO/ RTO was found in the transport documents. It has not followed the shortest route.
(iii) CHAs had deposed that they transported goods only to the border of Delhi at Shahadra and unloaded there. The goods purchased from Metal Appliances, Indore on High Sea Sale basis. But, the Transporter denied transporting the goods to the appellants factory.
(iv) Shri Ashok B. Bafna, broker of AIPL stated that he had supplied only invoices without any goods to the appellants and payment received by cheques, which were returned by cash. This is corroborated with the documents of M/s. AIPL.
(v) Shri Bipin M. Joshi, Joint Accountant of the Appellant Company in his statement dated 09.01.2007 admitted the allegation of the Revenue.
(vi) Two buyers namely M/s. Shah Alloys Limited and M/s. Red Strips Limited in their statements stated that they were not aware that the appellant was manufacturing Scraps, out of Ingots.
10. We find from the records that on 10.02.2006, the Central Excise officers of DGCEI visited the Appellants factory premises and examined the manufacturing activities. They have seized voluminous records from their factory premises for the year 2001-02 to 2005-06 as evident from the Panchnama dated 10.02.2006. It is seen from the Panchnama dated 10.02.2006 that the following machineries were available for the purpose of manufacturing of scrap:-
a) Heavy Capacity Band Saw Cutting Machines (4 Nos.)
b) Low Capacity Band Saw Cutting Machines (6 Nos.)
c) Two Lathe Machines (non working in unused condition)
d) Portable Welding Machine.
e) Crane (60 MT Capacity Movable)
f) Wire Cutting Machine 10.1 Thereafter, on 09.01.2007, the Central Excise officers of DGCEI visited the factory premises of the Appellant Company and prepared Panchnama dated 09.1.2007 and seized several records and documents. It was recorded that there was physical stock of meagre quantity of Aluminum ingots, 4 small cutting machines and 2 big cutting machines in the adjacent shed in unused condition, and the adjacent shed 2 very old wire winding machine covered with plastic sheet. Outside of the said shed, 3 small manually operated old machines which were used for conventional method for melting of the metals were found.
10.2 On the basis of the said Panchnama dated 09.1.2007, it has been alleged in the Show Cause Notice that the appellant were not having sufficient machineries installed and infrastructure available in their factory for manufacture of Scraps of various metals. The appellant stated that as recorded from Panchnama dated 10.02.2006, they had sufficient machineries installed in their factory and the Department had not disputed Panchnama dated 10.02.2006. But, the appellant disputed the preparation and authenticity of Panchnama dated 09.01.2007. They also requested for cross-examination of Panchas, which was not allowed. The adjudicating authority observed that both the Panchnamas were drawn on different dates and there is no contradiction in each other and were prepared in the presence of independent witnesses.
10.3 We find that the matter may be decided without going into the controversies of preparation of Panchnama dated 09.7.2007. The demand of duty is for the period during 2003 to 2007. It is evident from Panchnama dated 10.02.2006 that the various machineries were installed in the factory premises for manufacturing Scrap. So, there is no scope to doubt that machineries were installed in the appellants factory for manufacturing Scrap up to 10.02.2006. Further, there is no material available on record and no enquiry was conducted by the Department that the appellants removed the machineries after 10.02.2006. So, there is no force in the submission of the learned Authorised Representative that there was no machinery installed in the factory for manufacturing Scraps.
11. The appellants refuted the evidences placed by the Revenue before the Adjudicating authority, as the electricity consumption was less because the Bronze (cutting machine) was adjusted in such a manner that while it was running there was no pressure or load on the machine and by that process electricity consumption was highly reduced. The deposition made by Shri Ashok B. Bafna, agent of AIPL, Ludhiana wherein, he had stated that he used to give invoices to the appellant without physically supplying the goods. The statement of Shri Ashok B. Bafna would also be of no assistance for substantiating the case of the Revenue because the appellant had no direct connection with Shri Ahok B. Bafna. In fact, as regards the goods purchased from AIPL, Ludhiana, the said transactions were through broker named Jayant Bhai based in Mumbai, who used to send the goods alongwith invoices of AIPL. The appellant had never been in touch with the personnel of AIPL. We find that the appellant purchased the Copper Ingots from M/s. AIPL, Ludhiana in February 2004, March 2004 and in July 2004 and April 2005. It is seen from the Panchnama dated 10.02.2006, the DGCEI officers recovered papers from the premises of the appellants factory. No dispute was raised and the present proceeding was initiated on the basis of visit on 09.01.2007, Shri Ashok B. Bafna, broker of M/s. AIPL made his statement in July 2007 in respect of clearance of goods in 2004 and 2005, which were not testified by cross-examination.
11.1 The adjudicating authority observed that the shortest and more appropriate route for transporting goods from Delhi, Indore and Ahmedabad is alone the NH No.8, which enters into Gujarat from Shyamlajee check post and that since the Lorry Receipt under which the inputs were received by the appellant did not bear the seal of the said Check Post, it must be held that the inputs did not travel from Delhi and Indore to the appellants factory in Gujarat. The appellant contended that the alternative route was taken by the transporter while travelling to Gujarat. There is no logic in the conclusion drawn by the adjudicating authority that the goods would travel by the only route indicated by the department. The transporters for their own reason may not declare the entire goods loaded in the truck that they are carrying or transporting. They may do so for avoiding local RTO taxes or National Permit expired. Moreover, for safety reason also the transporters deliberately may not declare the entire goods loaded in the truck owing to fear of being stolen during transportation of goods to Gujarat. The mere fact that Lorry Receipt did not bear the stamp of the authorities at Check Post is not a ground to presume that the goods had never been transported to the appellants factory. There was no efficient checking in the Inter State Check Posts of Gujarat Border. This would be clear from the survey report of 2003 regarding checking of goods at the check posts, Computerized System at the check posts did not have database creation or alert mechanism for habitual violators of norms. The statements of transporters cannot be relied upon as no cross-examination was allowed.
11.2 It is submitted by the appellant that the adjudicating authority has failed to appreciate that the original importers already booked the material from whom the appellant had purchased the inputs were located in or around New Delhi and Indore. The said importers in or around Delhi and Indore used to book their consignments for their final destination i.e. Delhi and Indore. The appellant could not change it. Further reliance on the deposition made by the representatives of Custom House Agent would also be of no assistance to substantiate the case of the Revenue. It is submitted that merely because clearance of the goods taken place at ICD TKD and the same were initially transported locally by local transporters does not lead to the conclusion that the goods have been sold in Delhi. No evidence has been given by the Revenue to show that the goods were locally disposed of in Delhi. The finding of the Commissioner is that the goods were sold in the factories in Delhi is merely an assumption. In fact, no dealer at Delhi has been identified to whom the said goods has been sold. There is no statement by any person to the effect that the inputs were disposed of in the factories in or around Delhi.
11.3 The adjudicating authority relied on the statement dated 09.01.2007 of Shri Bipin M. Joshi, Accountant of the appellant Company. But, he retracted his statement by letter dated 13.01.2007. It is submitted that the buyers had not disputed the purchase of Scrap and the buyer is not supposed to know the raw material (i.e. Ingot).
12. We find that on the basis of evidences unearthed during investigation, the Adjudicating authority presumed that the appellant availed CENVAT credit on the basis of the invoices without receiving the goods. But, the presumption was rebutted by appellant before the Adjudicating authority, as recorded from the impugned order, as under:-
48. I find from the documents and evidences submitted by the Noticee under their letter dated 05.12.2011 that under aforesaid letter, the Noticee has produced a reconciliation statement in respect of M/s. Jindal Stainless Limited and M/s. Alcobex Metals Limited who are their buyers. These documents are submitted to support the contention that finished products had actually been cleared by the Noticee to the said buyers, which was not possible if no inputs had been received by the Noticee [referred by the Noticee as Annexure M-1 to M-3]. The noticee has also produced documents as per Annexure M-4 to M-14 to support the contention that the inputs were actually received from the suppliers and payment made therefore through normal banking channels. The Noticee has further produced the documents as per Annexure M-15 to M-17 relating to payment of duty on finished products cleared under Bond without duty, details of payment of Central Excise duty through PLA for the year 2003-04 to 2007-08 and Audit Reports for the relevant period.
49. I find from the written submission dated 18.3.2012 filed by the Noticee contending that present submissions may be read alongwith the submissions made by them before the predecessor, who adjudicated the case earlier and further went on contending that during the period in dispute, the majority of goods were cleared to M/s. Jindal Stainless Steel Limited (JSL); that the Show Cause Notice no where disputes the said clearances made to JSL; that the allegation that the noticee had no facility to manufacture is not sustainable for the reason that it is impossible for the noticee to manufacture and clear the goods without having the facility to manufacture scrap; that the allegation that the goods were sold locally in Delhi, is also without any merit as no such buyer had been identified in the Show Cause Notice to whom the goods has been allegedly sold by the Noticee; that the Noticee has in its possession documents showing clearances of its finished goods; that no such enquiry has been conducted from the buyer of the finished goods; that without conducting such inquiry the allegation that no clearances were made actually by the noticee and only paper transaction were made to avail CENVAT credit is totally without merit; that the allegation that the noticee had adopted a circuitous route for transporting the goods which was not commercially viable cannot be made a basis for demanding CENVAT credit; that it is not necessary that the route as indicated in the Show Cause Notice should have been the route for transportation of the goods to Bhavnagar, it is always the discretion of the buyer to get the goods transported through a route which is more viable. 12.1 The learned Authorised Representative submits that there are decisions that demand of fraudulently availed CENVAT credit has been upheld on the ground that no inputs were actually received, in a similar situation which is applicable in the present case, as under:-
(a) 2004 (177) ELT 892 (Tri. Mum.) Viraj Alloys Limited vs. CCE, Thane-I
(b) 2009 (236) ELT 124 (Tri. Del.) Ranjeev Alloys Limited vs. CCE, Chandigarh This case was upheld by Hon'ble Punjab & Haryana High Court vide 2009 (247) ELT 27 (P&H)
(c) 2010 (249) ELT 462 (Tri. Del.) V.K. Enterprise vs. CCE, Panchkula
(d) 2007 (218) ELT 426 (Tri. Mum.) Shree Ambe Mata Industries vs. CCE, Aurangabad.
13. In the above cases, as relied upon by the Learned Authorised Representative, it has been held that the burden to prove the receipt of goods on assessee comes, when goods not reaching to its destination as evident from check post documents. On perusal of Annexure A-1 to Show Cause Notice, we find that during the period 2003-04 to 2007-08 (up to June 2007), the appellant purchased 77 consignments to the quantity of 11,27,636 Kgs. imported re-melted Copper Ingots/ Wire, involving CENVAT credit of Rs. 3,88,54,105.00. Annexure A-2 of the Show Cause Notice indicates that during the period 2003-04 to 2005-06 (up to 04.4.2005), the appellant purchased 6 consignments to the quantity of 71,164 Kgs Copper Ingots, from M/s. Annapurna Impex Pvt. Limited, Ludhiana, involving CENVAT credit of Rs. 29,61,982.00. As revealed from the Annexure A-3 to the Show Cause Notice, during the period 2006-07 to 2007-08 (Up to May 2007), the appellant purchased 20 consignments to the quantity of 2,15,276 Kgs of Copper Ingots from M/s. V.K. Metals Works/ Jain Metals Works, Jammu, involving CENVAT credit of Rs. 1,39,42,355.00. Thus, the present case relates to purchase of 103 consignments.
13.1 The appellant submitted the Chartered Accountant certificates that the above materials were purchased by the appellant and duly recorded in their books and accounts and CENVAT records and also reflected in their audited Balance Sheet. It is also certified the consumption of material in the finished goods are in conformity with statutory Audit Reports. There is no material available on record that such huge quantity of inputs of 103 consignments were sold by the appellant in the open market. Further, there is no evidence of procurement of alternative inputs for manufacturing of finished products. Furthermore, the Revenue has not disputed the evidences placed by the appellants, manufacture of finished goods, cleared on payment of duty. The receipt of huge quantity of materials and their utilization in the manufacture of final product, reflected in statutory records and in conformity with the statutory audit report and evidentiary value of such records can not be discarded on the basis of statements and the evidences of third party, relied upon by the Department which were not testified by allowing cross-examination. Furthermore, after thorough investigation, there is no iota of evidence of cash flow of huge amount involved in the 103 consignment. The adjudicating authority observed that Revenue need not establish its case by mathematical precision. In our considered view, evidence placed by the Department, is required to rebut, ought to be convincing, no matter that degree of proof may not be as high as proving the fact, beyond the reasonable doubt, as the test of preponderance of probability would be applicable on both the sides. In the present case, the inference of proof by relevant facts and materials on records, as placed by the appellant, would rationally construe that the issue is in their favour also.
13.2. The Hon'ble Gujarat High Court in the case of Commissioner vs. Motabhai and Steel Industries -2015 (316) ELT 374 (Guj.) held as under:-
19. From the findings recorded by the Tribunal, it is apparent that payment to M/s. Vasmin Corporation in respect of purchases was made through banking channels. Under the circumstance3s, the Tribunal has lightly held that the demand cannot be confirmed against the assessee. The Tribunal has further found that it is an undisputed fact that all the purchases were duly recorded in the statutory books of the assessee and the goods were also found to be entered in its statutory records. That the Department had not made any investigation at the unit of the assessee, which could have supported the findings of the adjudicating authority. None of the consignors of the goods have denied the clearance of goods to the assessee. There was no evidence on record to show that the records maintained by the assessee were not correct. The Tribunal, was accordingly, of the view that on the basis of statements of some transporters which were not corroborated by any material on record, a huge credit could not be disallowed. It is under these circumstances that the Tribunal has set-aside the demands and the penalties imposed upon the assessee and the co-noticees. 13.3 The Hon'ble Gujarat High Court in the case of Commissioner of Central Excise vs. Saakeen Alloys Pvt. Limited 2014 (308) ELT 655 (Guj.) held as under:-
7. As can be noted from the decision of the Tribunal, it has extensively dealt with the entire factual matrix presented before it. The Tribunal rightly concluded that in the case of clandestine removal of excisable goods, there needs to be positive evidences for establishing the evasion, though contended by the Revenue. In absence of any material reflecting the purchase of excessive raw material, shortage of finished goods, excess consumption of power like electricity, seizure of cash, etc,, the Tribunal noted and held that there was nothing to bank upon except the bare confessional statements of the proprietor and of some of the persons connected with the manufacturing activities and such statements were retracted within no time of their recording. The Tribunal also noted the fact that the requisite opportunity of cross-examination was also not made available so as to bring to the fore the true picture and therefore, it concluded against the Revenue observing that not permitting the cross-examination of a person in-charge of records of M/s. Sunrise Enterprises and absence of other cogent and positive evidences, would not permit it so sustain the demand of Rs. 1.85 Crores raised n the Demand notice and confirmed by both the authorities below. 13.4 The Tribunal in the case of M/s Aarya Fibers Pvt. Limited & Others Vs Commissioner of Central Excise, Ahmedabad-II 2014-TIOL-15-CESTAT-Ahmedabad held that the probative value of the document needs to be established by independent corroboration. In the said case, the Tribunal set-aside the demand of duty and observed that there being a conspicuous absence of actual diversion of the goods in the domestic market and flow-back of funds; a demand of duty cannot be sustained on the basis of mere statements made by the transporters of goods. In the present case, we have already stated that there is absence of evidence of the huge quantity of material of 103 consignments were sold in the open market, flow back of funds, etc. In such situation, CENVAT Credit can not be denied, on the basis of statements of the transporter, evidence of third party and the goods were not transported through the check post.
14. We find that the main issue is involved in this case, as revealed from the Adjudication order that the entire investigation was conducted on the basis that it was economically not viable to import the ingots and manufacture scrap from the said ingots and no prudent businessman would indulge in such activity. For the proper appreciation of the case, the relevant portion of the impugned adjudication order is reproduced below:-
In the instant case, it is surprisingly found that copper scraps were manufactured out of costly imported copper ingots/wires/bars. In fact, copper ingots/wires/bars are intermediatory products used for manufacture of different copper articles out of the same; Whereas, the copper ingots are manufactured out of copper scraps, but copper scraps are not manufactured out of copper ingots in view of the value factor, as the cost of copper ingots/wires/bars is higher than the cost of copper scrap. Thus, it is not commercially viable for any manufacturer to make copper scraps out of costly imported copper ingots/wires/bars. Hence, it appeared that the duty paid raw materials as shown in the duty paying documents were not physically received in their factory for being used in or in relation to the manufacture of final products and as such the CENVAT Credit, where inputs were actually not received and not used in the manufacture of final products and only duty paying documents were being received, is not admissible to them.
14.1 The appellant in their reply to show cause notice submitted that a certificate issued by Cost Accountant would show the costing of the scrap out of imported Ingots from Srilankan origin vis-`-vis scrap obtained from local/ domestic market. The certificate of Cost Accountant is prepared on the basis of their accounts and as per the standard accounting principles. The cost of production per unit is less than the sales value realized during the year 2003-04 and similar is the position in the rest of the years. It may be appreciated that in one year the cost of product is more than the value realized, it can be said that the Company has occurred loss in that particular year. The profit or loss are both sides of the same coin. Sometimes to minimize the loss Company has to continue production even at loss. So far as remaining years are concerned, the cost of production has been much less than the sales value realized. It is very important to note that the main work is to cut the big pieces of copper into smaller pieces so as to be used by the stainless steel manufacturers and automobile bushes manufacturers. Srilankan origin scrap comes in the form of ingots just to save import duty. The same has to be converted into scrap, if it is to be used by the stainless steel manufacturers and automobile bushes manufacturers.
14.2 During the course of hearing before the Tribunal, the learned Authorised Representative for the Revenue placed a copy of letter dated 13.11.2013 of the Deputy Commissioner (O&A), Office of the Commissioner of Central Excise, Bhavnagar. It is stated in the said letter, on the basis of 7 invoices of supplier of Ingot and 7 invoices of the appellant in June/ July 2005, it was not commercially viable to manufacture copper scrap out of costly imported copper ingots. Further, the Balance Sheet is not relied upon documents to the show cause notice issued and not available in the records.
14.3 The Appellant, in their Written Submissions explained as under:-
It has been explained by the Appellant that the items which have been imported by the Appellant by way of high seas sale were remelted Copper Ingots. There is vast difference between refined Copper and remelted Copper Ingots. As per Note to Chapter Heading 74, the refined Copper means the metal containing at least 99.85% by weight of Copper or metal containing at least 97.5%, by weight of copper, provided that the content by weight or any other element does not exceed the limit specified in the appended to the said note. It means that in refined copper the other element should not exceed the limit of 2.5%. If it exceeds the said percentage, it will not be called as refined copper and the same would have to be treated as unrefined copper (re-melted copper). The items which have been imported by the Appellant are re-melted copper ingots. Re-melted copper ingots can be refined only by the process of melting. It is, therefore, cheaper than refined copper. Even though the remelted copper ingots are required to be refined, it has a great demand in the market owing to the fact that certain metal elements present in the said remelted Copper Ingots would be of great use for company manufacturing steel. Since the Appellants majority of the sale was to Steel Industry, it was economically viable for the Appellant to import remelted Ingots and convert the same into scrap and send it to their buyers. The Appellant sends re-melted scrap without melting. It is further important to note that there is a difference between re-melted Ingots and Scrap because re-melted Ingots are free from impurities like Plastics, Woods, Rubber etc. The Steel Industry can straight away use the remelted Ingots. They do not have to undergo the process of removing impurities like Rubber, Wood etc. If the scrap is imported, it will not be economically viable for the Appellant and its buyers for the following reasons:-
(a) As per SAARC Treaty, the import duty has to be paid on the scrap but no duty was payable on the re-melted Ingots.
(b) If scrap is imported, and then sent to the Steel Industry, the said industry will first have remove the impurities and only thereafter use for manufacturing steel. It would not be economically viable for the buyer to engage in such a process. It is for this reason, they prefer buying re-melted Copper Ingots rather than the scrap.
14.4 The aforesaid submission was already made by the appellant before the Adjudicating authority and no dispute was raised. We find that the Appellant submitted the cost certificate of the goods showing the economical viability of the goods in converting the ingots to scrap. The Adjudicating authority had not disputed the cost certificate in the Adjudication Order. In our considered view, the viability of manufacturing cost of final product would be determined following the Accounting principle and system of Institute of Cost Accountant and Institute of Chartered Accountant. The appellant submitted that Cost Accountant Certificate. The Deputy Commissioner (O&A) by letter dated 12.11.2013 attempted to ascertain the viability of cost, Profit and Loss only on the basis of 7 invoices of supplier and manufacturer, ignoring the accounting principle, cannot be accepted.
14.5 Section 14AA of Central Excise Act, 1944 was inserted in the statute books providing for Special Audit in certain cases, which is a self contained provisions. As per Section 14AA, if the Commissioner of Central Excise has reason to believe that the credit of duty availed of or utilized under the rules made under this Act by a manufacturer of any excisable goods; has been availed of or utilized by reason of fraud, collusion or any willful mis-statement or suppression of facts; he may direct such manufacturer to get the accounts of his factory, office, depot, distributor or any other place, as may be specified by him, audited by a cost accountant or Chartered accountant nominated by him. The cost accountant or Chartered accountant so nominated shall, within the period specified by the Commissioner of Central Excise, submit a report of such audit duly signed and certified by him to the said Commissioner mentioning therein such other particulars as may be specified. The manufacturer shall be given an opportunity of being heard in respect of any material gathered on the basis of the audit and proposed to be utilized in any proceeding under this Act or rules made thereunder. In the present case, the Adjudicating authority had not directed to get the account of Appellant would be audited by a Cost Accountant or a Chartered Accountant as per the provisions of Central Excise Act, 1944. On the other hand, the appellant produced Cost certificate, Chartered Accountant certificate of utilization of input in the manufacture of final product. Therefore, the contention of the Adjudicating authority on this issue cannot be accepted.
15. In view of the above discussion, we find that the demand of duty along with interest and penalty cannot be sustained. Accordingly, the impugned order is set aside. The appeals filed by the Appellant are allowed with consequential relief.
(Pronounced in Court 28.04.2015)
(H.K. Thakur) (P.K. Das)
Member (Technical) Member (Judicial)
KL.
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