Custom, Excise & Service Tax Tribunal
Shri Sunder Lal Aggarwal, Director vs C.C.E., Rohtak on 21 February, 2014
IN THE CUSTOMS, EXCISE & SERVICE TAX
APPELLATE TRIBUNAL
WEST BLOCK NO.2, R.K. PURAM, NEW DELHI 110 066
Date of Hearing 24.01.2014
Date of Decision 21.02.2014
For Approval &Signature :
Honble Mrs. Archana Wadhwa, Member (Judicial)
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 would be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
Yes
3.
Whether Lordships wish to see the fair copy of the order?
Seen
4.
Whether order is to be circulated to the Department Authorities?
Yes
Appeal Nos. E/1049 & 1050/2011 -EX[SM]
[Arising out of Order-in-Appeal No.500-501/BK/RTK/2010, dated 27.12.2010 passed by the C.C.E.(Appeals), Delhi-III]
M/s. SK Foils Ltd.
Shri Sunder Lal Aggarwal, Director Appellants
Vs.
C.C.E., Rohtak Respondents
Appearance Shri Prabhat Kumar, Advocate - for the appellants Shri BB Sharma, DR - for the respondent CORAM: Honble Mrs. Archana Wadhwa, Member (Judicial) Final Order No.50733/50734/2014, dated 21.02.2014 Per Honble Mrs. Archana Wadhwa :
After hearing both the sides, I find that the appellants M/s. S.K. Foils Ltd. are engaged in the manufacture of cold rolled strips, etc. falling under Chapter 72 of the First Schedule to the Central Excise Tariff Act, 1985. They were availing the benefit of CENVAT credit of duty paid on the raw-materials/inputs received by them from M/s. Steel Mongers (I) Pvt. Ltd., Faridabad, a second stage dealer. Such receipt of raw-materials was on the basis of the cenvatable invoices issued by the said second stage dealer M/s. Steel Mongers (I) Pvt. Ltd., where, the name of the first stage dealer was shown as M/s. Bhagwati Trading Co. and the manufacturer of the goods was shown as M/s. Khemka Ispat Ltd.
2. Investigations were conducted at the end of the first stage dealer, M/s. Bhagwati Trading Co. and the manufacturer M/s. Khemka Ispat Ltd. In terms of the statement of various persons recorded by the Revenue, it turned out that M/s. Bhagwati Trading Co. was issuing only invoices in the name of M/s. Khemka Ispat Ltd. without the corresponding supply of the inputs and M/s. Khemka Ispat Ltd. was issuing excise invoices without the actual supply of their final product. As such, the bogus credit availed by M/s. Khemka Ispat Ltd. on the basis of the cenvatable invoices issued by M/s. Bhagwati Trading Co. was being used for showing payment of duty on their final product, which was never manufactured by M/s. Khemka Ispat Ltd. As M/s. Bhagwati Trading Co. were further issuing cenvatable invoices to M/s. Steel Mongers (I) Pvt. Ltd., who were further issuing the invoices to various manufacturers, Revenue entertained a view that the purchaser of the raw-material from the second stage dealer M/s. Steel Mongers (I) Pvt. Ltd. were not entitled to the benefit of the CENVAT credit.
Accordingly, investigations were also conducted at the appellants end. Shri Sunder Lal Aggarwal, Director of the appellants, in his statement recorded on 28.01.2009 deposed that they have actually received the cold rolled strips from M/s. Steel Mongers (I) Pvt. Ltd. under the cover of various invoices involved in the present appeal, on the basis of which they have taken the credit of Rs.5,42,580/- (Rupees five lakh forty two thousand five hundred and eighty only) in their RG 23A Part-II register account and have reflected the said goods in their RG 23A Part-I register. On being shown the statement of the proprietor of M/s. Bhagwati Trading Co. and also of Director of M/s. Khemka Ispat Ltd., wherein they deposed that they never manufactured the goods and never supplied the same and the transactions between the manufacturers and the first stage dealers were only paper transactions, Shri Aggarwal stated that they had purchased the materials from M/s. Steel Mongers (I) Pvt. Ltd., i.e., second stage dealer, which has been duly received by them and consumed in the manufacture of their final product, which was cleared on payment of duty. He contended that he is not concerned either with M/s. Khemka Ispat Ltd. or M/s. Bhagwati Trading Co. as they have purchased the material from the second stage dealer and have made payments by cheque/Demand Draft to the said second stage dealer. He also referred to ST 38 challans in support of his contention that the goods have physically arrived in their factory.
3. In the above back-drop, proceedings were initiated against the appellants for confirmation of CENVAT credit of Rs.5,42,580/- as also for imposition of penalties. The same culminated into an order passed by the original adjudicating authority and upheld by the Commissioner (Appeals). Hence, the present appeal.
4. After hearing both the sides and after going through the impugned order of the Commissioner (Appeals), I find that there is no dispute on the facts that the appellants have purchased the raw-materials from the second stage dealer M/s. Steel Mongers (I) Pvt. Ltd. The investigations conducted by the Revenue revealed fake transactions between M/s. Khemka Ispat Ltd., the manufacturing unit and M/s. Bhagwati Trading Co., the first stage dealer. If M/s. Khemka Ispat Ltd. has not received the raw-materials and has incorrectly availed the CENVAT credit and has not actually manufactured their final product and has incorrectly utilised the wrongly availed CENVAT credit for payment of duty on their final product, the Revenues remedy lies at their end. Admittedly, the present appellants have got nothing to do either with the first stage dealer or with the manufacturer of the goods. He has admittedly purchased the goods from the second stage dealer after making consideration of the goods in question along with excise duty, by way of cheque/Demand Draft. In fact, it is not even the Revenues case that the said appellants have not received the raw-materials in question in as much as there is no evidence to that effect and the appellants have produced the ST 38 challans showing movement of the goods to the appellants factory.
5. In terms of the provisions of Rule 7(2) of the CENVAT credit Rules, 2004, the manufacturer taking CENVAT credit of inputs or capital goods is required to take all reasonable steps to ensure that the inputs or capital goods in respect of which he has taken the CENVAT credit are goods on which the appropriate duty of excise as indicated in the documents accompanying the goods has been paid. How and in which manner the reasonable steps are required to be taken by a manufacturer? The answer lies in the Explanation to Rule 7(2). The same is to the following effect:-
The manufacturer or producer taking CENVAT credit on inputs or capital goods received by him shall be deemed to have taken reasonable steps if he satisfies himself about the identity and address of the manufacturer or supplier, as he case may be, issuing the documents specified in rule p7, evidencing the payment of excise duty or the additional duty of customs, as the case may be, either-
(a) From his personal knowledge; or
(b) On the strength of a certificate given by a person with whose handwriting or signature he is familiar; or
(c) On the strength of a certificate issued to the manufacturer or the supplier, as the case may be, by the Superintendent of Central Excise within whose jurisdiction such manufacturer has his factory or the supplier has his place of business, and where the identity and address of the manufacturer or the supplier is satisfied on the strength of a certificate, the manufacturer or producer taking CENVAT credit shall retain such certificate for production before the Central Excise Officer on demand.
6. As is seen from the above, a manufacturer has to satisfy himself about the genuineness of the supplier of the goods from the identity and address of the manufacturer or supplier from his personal knowledge or on the strength of certificate given by the Superintendent of Central Excise having jurisdiction over the factory. Admittedly, the second stage dealer in the present case was a registered dealer having registration number printed on the invoices being issued by him. His identity and address was also reflected in the said invoices. The payments for the materials received by him were being paid by the assessee by way of cheque or demand draft. Whether in such circumstances, an assessee is further required to walk a mile and find out as to whether the goods received by the second dealer were procured by him in a legitimate manner or were cleared by the manufacturer or the first stage dealer after payment of duty, stands answered by the courts in various decisions, which I shall discuss in the succeeding paragraphs.
7. Before I proceed to refer to the precedence decisions, I would like to reproduce certain observations made by the Commissioner (Appeals):-
It is observed that the appellant had procured the inputs from M/s. steel Mongers (India) Pvt. Ltd., a second stage dealer under the proper duty paying documents. There is no dispute on this aspect as the adjudicating authority has not mentioned anything indicating non-receipt of inputs under the cover of the said invoices. In the present case I find that the adjudicating authority has adjudicated the case on the basis of investigations and statements of Shri K.P. Khemka, Director of M/s. Khemka Ispat Ltd., the manufacturers and Shri Rupesh Bansal, Pro. M/s. Bhagwati Trading Co. a first stage dealer who were issuing cenvatable invoices to various parties. He has relied only on evidence of manufacturer supplier and first stage dealer without looking into the records of the appellants. Therefore, it is not the case of the department that the goods were not received in the factory. Further there is no dispute that the appellant had discharged its contractual liability by making the payment of invoice price to M/s. Steel Mongers, a second stage dealer who supplied the inputs to the appellant no.1. In fact the payments have been made through banking channel. The appellant has submitted sufficient evidence in from the copies of ST-38 Challan, GRs issued by the transport companies and various Central Excise records being maintained by them establishing receipt of goods and payment of the same to the dealer. The provisions governing the availment of the credit envisages that the assessee availing the credit should ensure that the inputs should have suffered duty at the hands of the manufacturer. In the instant case, the appellant has procured the goods from a dealer who had, issued a valid duty paying document. It is undisputed that the appellant had paid the amount of invoices under which the inputs were dispatched to them by the dealer and there is no contrary evidence to this.
In order to prove non receipt of inputs it has to be established that there had been no manufacture and removal of goods. I find that the Adjudicating Authority has not looked into this aspect. The appellants record establish that material was supplied and the credit of duty paid on inputs were availed and used in manufacture of excisable goods on which appropriate duty of Central Excise was paid and monthly return as prescribed under the Central Excise Rules read with CENVAT Credit Rules was filed with the jurisdictional Central Excise Range Officer. The appellants entered the duty paid inputs in the R.G.23A part I and further issued to production department for manufacture of finished product and sold in the market paying appropriate duty of Central Excise for which proper returns etc. to the proper authorities filed. The appellant have availed the CENVAT Credit on the documents prescribed under the Cenvat Credit Rules, 2002 on which proper duty have been paid.
8. As is seen from the above, it stands admitted by the appellate authority that the raw-materials stand received by the assessee, which were used by him in the manufacture of their final product, on which appropriate duty of central excise was paid and monthly returns were filed. It also stands observed by him that they have availed the credit on the basis of the documents prescribed under CENVAT Credit Rules, 2002 on which proper duty have been paid. Similarly, he also refers to the Tribunals majority decision in the case of Tejwal Dyestuff Industries [2007 (216) E.L.T. 310 (Tri.-Ahmd.)], laying down that if this is not disputed that the inputs were used for the final product, the matters cannot be decided on the basis of preponderance of probabilities. He has also relied upon various decisions of the Tribunal but has simplicitor observed that they are not applicable to the facts of the present case in as much as the Revenue has been able to prove that the original manufacturer has not manufactured the goods at all and accordingly, rejected the appeal.
9. I find that in the light of the observations made by the Commissioner (Appeals) as also the factual position that the appellants have received the goods, the burden placed upon them under Rule 7(2) of the CENVAT Credit Rules, 2002 stands discharged. A manufacturer cannot be expected to undertake investigations like Revenue officers and to find out the truth behind the scene. As long as he is receiving the goods from a known dealer under the cover of the invoices and making payments by cheques, he is deemed to have discharged the onus placed upon him under the said rule. This has been the ratio of all the precedent decisions of the Tribunal.
Tribunal in the case of Rishab Industries Vs. CCE & ST, Goa [2007-TIOL-1330-CESTAT-MUM] has held that the fraudulent credit taken by the consignor and duty payment therefrom while removing manufactured goods cannot lead to denial of credit availed by the consignee in as much as the transaction was bona fide. Further, in the case of CCE, Pondicherry Vs. SPIC Pharmaceuticals Division [2006 (199) ELT 686 (Tri.-Chennai)], it was held that in the absence of any dispute about the receipt of inputs under the cover of the invoices issued by the supplier carrying duty payment parts, credit availed by the recipients cannot be denied. In the case of Prachi Poly Products Ltd. Vs. CCE, Raigad [2205 (186) ELT 100 (Tri-Mumbai)], it was held that the appellants having taken all reasonable steps to ensure that the duty has been paid on the inputs received by them, credit cannot be denied at the fault of the manufacturer. To the same effect is Tribunal decision in the case of R.S. Industries Vs. CCE, New Delhi-I [2003 (153) ELT 114 (Tri.-Del)], which also stands upheld by Hon'be High Court of Delhi reported in 2008 (228) ELT 347 (Del).
I may also refer to a recent decision of the Hon'ble High Court of Uttarakhand in the case of CCE, Meerut-I Vs. Purushottam Industries Ltd., Roorkee, wherein vide their order dated 28.12.29012, Revenues appeal stands rejected. To the same effect is the decision of the Hon'ble High Court of Karnataka in the case of CCE, Bangalore Vs. Bhuwalka Alloys Pvt. Ltd. [2012 (281) ELT 213 (Karnataka)] laying down that in the absence of any dispute as regards the receipt and consumption of inputs in the factory of the assessee, the CENVAT credit cannot be denied on the ground that the dealer was not non-existence and the inputs were not duty paid.
10. By applying the ratio of all the above decisions to the facts of the present case, I find that the Revenue is not disputing the fact of receipt of inputs by the manufacturer. It is also seen that no investigation stands conducted by Revenue from second stage dealer, who has actually supplied the inputs to the appellants. Also, there is no answer by Revenue as to from where the second stage dealer has received the inputs so as to supply the same to the appellants.
11. For all the reasons recorded above, I set aside the impugned order and allow the appeals with consequential relief to the appellants.
Pronounced on 21.02.2014 (Archana Wadhwa) Member (Judicial) SSK -10-