Custom, Excise & Service Tax Tribunal
M/S Shree Ganesh Industries vs Cce, Delhi-Ii on 22 March, 2011
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL West Block No. 2, R.K. Puram, New Delhi 110 066. COURT NO. III Date of Hearing : 22.3.2011 Excise Appeal No. 1607 of 2009-SM [Arising out of the Order-in-Appeal No. 147-CE/DLH/2008 dated 18.12.2008 passed by the Commissioner, Central Excise (Appeals), Delhi-II] Coram: Honble Mr. Mathew John, 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? 2. Whether it would be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? 3. Whether their Whether their Lordships wish to see the fair copy of the order? 4. Whether order is to be circulated to the Department Authorities? M/s Shree Ganesh Industries Appellant Vs. CCE, Delhi-II Respondent
Appearance:
Appeared for Appellant : Ms. Aditi Pandey, Advocate
Appeared for Respondent : Shri K.P. Singh, DR
CORAM: Honble Mr. Mathew John, Member (Technical)
Order No.dated.
Per Mathew John:
Heard arguments on both sides and perused records.
2. The Appellant had a factory at B-10, Dhanpati Industrial Estate, Najafgarh, New Delhi manufacturing LPG Cylinder Bungs, V. P. Rings, M.V. Parts, Forgings etc. falling under Central Excise Tariff Headings 7311, 8708, 7326 of Central Excise Tariff. This factory was sold to M/s Pile Foundation on 02-11-2004. The Appellant continued to file ER-1 return showing receipt of raw materials in the factory and manufacture of finished goods and payment of duty on final products. The fact that the Appellant was not having a factory at the address shown in ER-1 return after 2.11.2004 was detected by the department on 25-05-2005 during a surprise visit.
3. A statement of Shri. Anil Kumar Verma, the proprietor of M/s Ganesh Industries was recorded on 02-06-2005. He stated that he was purchasing raw material from different manufacturers and traders and sending it directly to his unit at Bhivandi and getting goods manufactured on job-work basis and selling the products. The address of his unit was wrongly shown at the old address sold by him in Nov 2004. It is an accepted fact that the unit at Bhivandi was not registered under Rule 9 of Central Excise Rules, 2002.
4. A Show Cause Notice was issued under Rule 14 of Cenvat Credit Rules, 2004 to the Appellant for recovery of Cenvat Credit availed by the Appellant for the period Nov 2004 to May 2005 amounting to Rs. 5,42,139/-. Further penalty under Rule 15 of the said Rules was proposed. Recovery of interest under Rule 14 said Rules, 2004 read with section 11AB of Central Excise Act also was proposed. The Show Cause Notice did not deal with duty paid on the finished goods stated to be cleared from the factory which was not existing. The question as to how much of such duty was paid from Cenvat credit and how much was paid from PLA also is not mentioned in the Show cause Notice.
5. The Appellant furnished a reply dated 27-11-06 to the SCN stating that the SCN was vague because there is no demand of any duty on finished goods and hence no case of evasion of excise duty is made out. It is contested that once duty is paid on finished goods cenvat credit on inputs used cannot be denied for procedural reasons.
6. It was also submitted that they were sending the inputs received by them for job-work to their own factory in Bhivandi and they were operating under sub-rule 5(a) of Rule 4 of the Cenvat Credit Rules. They also raised the objection that the SCN alleges that the goods were stored outside the factory premises without taking permission from the department but the notice does not mention where the goods were stored. They also contested that there is no requirement of informing the department before sending raw materials for job work.
7. In the reply they did not contest the facts that the goods on which they paid duty were not manufactured at the premises shown in the ER-1 return. There is no contest that the goods manufactured at Bhivandi factory was brought to the factory for which ER-I return was filed. There is no denial of the fact that the inputs were not received in any registered premises and that the finished goods on which duty was paid using the credit so availed had nothing to do with the premises shown in the ER-1 return. No explanation is given for furnishing ER-1 returns for a factory which were not in existence. The Appellant has been silent on these aspects. The Appellant also remained silent on the question as to how much of the duty was paid from cenvat credit and how much was paid from PLA.
7. The adjudicating authority gave his finding that in the absence of a registered factory, there is no way to conclude that the impugned goods on which Cenvat credit was taken was actually used in the manufacture of the goods on which excise duty has been paid. The Adjudicating authority passed order dated 31-01-07. The operating portion of the order is reproduced below:-
(i) I disallow Cenvat credit on inputs amounting to Rs.5,42,139/- under Rule 14 of Cenvat Credit Rules, 2004.
(ii) I impose a penalty of Rs.5,42,139/- under Rule 15 of Cenvat Credit Rules, 2004 read with Section 11AC of Central Excise Rules, 2002.
(iii) I also order to recover interest under Rule 14 of Cenvat Credit Rules, 2002 read with Section 11AB of Central Excise Rules, 2002.
(iv) I impose a personal penalty of Rs.1,00,000/- (Rs. One lakh only) against Shri Anil Kumar Verma, Proprietor of M/s Shree Ganesh Industries under Rule 26 of the Central Excise Rules, 2002.
9. Aggrieved by the above order the Appellant filed first appeal to the Commissioner (Appeal). During this Appeal, the Appellant contested that the adjudication order is a non-speaking order in as much as it does not deal with the issue how the final products were manufactured and it does not deal with the contention that the goods were manufactured at his unit at Bhivadi. It was also contested that once duty is paid on final product Cenvat credit cannot be denied on inputs.
10. Commissioner (Appeal) also did not find any merits in Appellants arguments. He also observed in para 4.1 of his order that goods sent for job-work should be cleared from the premises of the job-worker or the factory of person sending the goods for job-work. Either of these conditions in sub-rule 5(a) of Rule 4 of Cenvat Credit Rules has been complied with was not satisfied. He observed in para 4.3 of the order that since the factory itself was not existing, the whole cycle of production of excisable goods is fictitious. He rejected the appeal.
11. Products of Iron and steel are items highly prone to evasion of excise duty. There are different streams supplying raw material for such products many of which streams are in the non-duty paying sector. Having regard to this fact, the order of Commissioner (Appeals) cannot be said to be bad for the reason that it did deal with the issue how the products, on which duty was paid by the Appellant was manufactured. I also note that the Appellant has not given any information as to how much of duty on final products has been paid in cash by him. If the Appellant was acting in a fraudulent manner to pass on credit, it cannot be responsibility of the department to find out how he obtained the raw materials.
12. The duty said to have been paid on final products using the Cenvat credit will in the normal course be taken and utilized by the buyers causing revenue loss in the manufacturing chain ahead. Notification 214/86-CE providing exemption from excise duty for goods manufactured on job work basis does not take into accounts goods manufactured on job-work basis for the purpose of the exempted turnover for Small Scale Units in a year (see Condition 3A(e) of Notification 8/2003-CE). Thus showing the products as manufactured at a factory not in existence can reduce the excise liability on the factory actually manufacturing the goods. These facts are not dealt with in the SCN but are relevant while appreciating the defense of the Appellant.
13. The Appellants rely on the following case laws to support their arguments
(i) BMA Zinc Pvt Ltd Vs. CCE Jaipur-2005 (191) ELT 792 In this case it was alleged that the inputs copper scrap used for manufacture of copper ingots were alleged to be not received in the factory. Factory was in existence. Final products were manufactured and sold on payment of duty in excess of the credit taken. In the circumstances the Tribunal did not believe the case of the Revenue that ingots were not received in the factory of production.
(ii) Vikram Cement Vs. CCE Indore-2006(194) ELT 3 SC This case dealt with the issue whether credit can be denied on explosives used in mines by a cement factory for the reason that the explosives were not used within the factory.
(iii) Rail Fab Vs. CCE Jalandhar In this case credit was taken on certain ancilliaries sold along with the final product which anciliaries were not brought into the factory. Since the assesse had paid duty on the final product inclusive of the value of anciliaries sold it was held that there was no case for reversal of credit taken on the anciliaries
(iv) CCE Ahemedabad Vs. Tripura Containers (P) Ltd-2009(241) ELT 279 This was a case where the raw material on which credit was taken was sold to another person before it was received in the factory of manufacture. The credit taken was reversed by the assesse on his own. The assesse was let off with a minor penalty.
(v) General Fabricators Vs. CCE Raipur- 2009 (245) ELT 395.
This was case where credit was allowed on the strength of an invoice issued by the holding company to the subsidiary company though the ECC Code was shown wrongly. No other matter was in dispute in this case.
14. It may be seen that none of the above cases deal with a situation were final products are cleared from a factory not in existence and the goods were claimed subsequently to be manufactured in an un-registered factory. Of the five case laws relied upon, only the case of BMA Zinc Pvt. Ltd has any relevance to the facts of this case. Here also the facts are different. The existence of the factory was not in dispute. The asseessee pleaded that he had paid duty more than the credit availed. In the facts of the case the Tribunal did not believe that the goods were not received in the factory of production as alleged by Revenue. This is only a matter of appreciation of evidence and cannot be taken a ratio to be applied in this case were facts are different.
15. This is a case where the manufacturer operated from a factory not in existence at the relevant time, took cenvat credit, filed ER-1 return showing the address of such factory and claimed during investigation that he got the goods manufactured in an un-registered unit. So the credit availed and passed on to the next stage of manufacture is basically fraudulent. It would have been desirable if the SCN detailed how much duty was paid through cash and how much duty was paid through the fraudulent credit. But this aspect does not strike at the root of the SCN because if any part of the duty has been paid through cash and that has been passed on to the next stage, it is not a matter of concern for the revenue. Further the violations of rules pointed out in the SCN are good enough reasons to deny the credit availed and passed on to the next stage through invoices issued from a factory which was not in existence.
16. In the circumstances, I find that the adjudication order and the order of the first Appellate Authority are on sound reasoning and this is no case to interfere with the orders.
17. Therefore the Appeal is dismissed.
(Pronounced in open Court) (Mathew John) Member (Technical) RM