Custom, Excise & Service Tax Tribunal
M/S Krebs Biochemicals & Industries Ltd vs Cce & St, Visakhapatnam on 26 September, 2016
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL REGIONAL BENCH AT HYDERABAD Bench SMB Court I Appeal No. E/21383/2015 (Arising out of Order-in-Appeal No. 58/2014-15 (V-II) CE dt. 23.03.2013 passed by CCE, C & ST (Appeals), Visakhapatnam) For approval and signature: Honble Ms. Sulekha Beevi, C.S., 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 Lordship wish to see the fair copy of the Order? 4. Whether Order is to be circulated to the Departmental authorities? M/s Krebs Biochemicals & Industries Ltd., ..Appellant(s) Vs. CCE & ST, Visakhapatnam ..Respondent(s)
Appearance Sh. P. Dwarakanath, Consultant for the Appellant.
Sh. Nagraj Naik, Deputy Commissioner (AR) for the Respondent.
Coram:
Honble Ms. Sulekha Beevi, C.S., Member (Judicial) Date of Hearing: 26.09.2016 Date of Decision: 26.09.2016 FINAL ORDER No._______________________ [Order per: Sulekha Beevi, C.S.] The brief facts of the case are:
(a) The Appellant firm, a manufacturer of Bulk Drugs/API, availed input credit of Rs. 2,53,805 under CENVAT Credit Rules, 2004 on Invoice No. 312 dated 24.08.2009 and Invoice No. 20 dated 06.10.2009, issued by excise dealers, M/s Aerochem and Aerochem Impex, Hyderabad, covering consignments of Acetonitrile and THF respectively.
(b) The DGCEIs Hyderabad Regional Unit investigating the said dealers transactions in a different case, concluded inter alia, that the dealer (Aerochem Impex) colluded with M/s YM Drugs, Nalgonda, to generate fake invoices without physical movement of goods for the purpose of passing on credit fraudulently; that the cited two invoices though issued to the appellant firm, there was no physical transit of goods covered therein; that hence the credit availed by the appellant firm is irregular, meriting recovery with interest and penalty on the firm.
(c) The following conclusions were drawn by DGCEI upon investigations conducted in regard to the said Dealers:
* M/s Mehta & Company, Mumbai is a fictitious firm, non-existent;
* All bills/invoices said to have been issued by M/s Mehta & Company are fake, created by M/s Aerochem Impex; * M/s YM Drugs have not received any material against the invoices said to have been issued by Mehta & Co; that when no material is received, the question of processing it does not arise; that hence they neither processed nor supplied material to M/s Aerochem Impex; * M/s YM Drugs issued Central Excise invoices to M/s Aerochem without actually supplying material; based on which the dealer issued CE invoices to the appellant firm without physical supply of material; who in turn availed the impugned credit irregularly without physical receipt of material;
2. A Show Cause Notice dated 15.06.2012 was issued to the appellant demanding recovery of the irregular credit availed on the two invoices to the tune of Rs. 2,53,805/- along with interest and also proposing to impose penalty. After due process of law the proposals were confirmed and the amount of Rs. 2,22,480/- and Rs. 31,325/- deposited/debited by the appellant were appropriated. The appellant preferred appeal before the Commissioner (Appeals) and vide order impugned herein, the Commissioner (Appeals) upheld the confirmation of demand, interest and penalty. The appellants are thus before the Tribunal.
3. On behalf of appellant the Ld. consultant Sh. P. Dwarakanath explained the background of initiation of investigation conducted by DGCEI and details of the credit availed by the appellant. He submitted that the appellant has been implicated in the investigation/proceedings only for the reason that appellant purchased materials from M/s Aerochem Impex and M/s. Aerochem. The proceedings against appellant are on the ground that M/s YM Drugs had not received any material against invoices said to have been issued by M/s Mehta & Company and that therefore M/s YM Drugs had not supplied any material to M/s Aerochem Impex / M/s Aerochem. That M/s YM Drugs issued CE invoices to M/s Aerochem & M/s Aerochem Impex without actually supplying any material and therefore the credit availed on the two invoices dated 24.08.2009 and 06.10.2009 are not eligible.
4. The Ld. Consultant, adverted to the entries in the relevant copies of RG-23 register and submitted that M/s Aerochem has been the major supplier of inputs to the appellants. The appellant is engaged in the manufacture of Bulk Drugs and Drug Intermediaries. All the statutory records were found to be correct and proper by the Department. He submitted that though there were several transactions/supply of materials from M/s Aerochem Impex and Aerocehm the department has alleged descrepency only with regard to 2 invoices. The appellant had received Acetonitrile supplied by M/s Aerochem vide invoice No. 312 dated 24.08.2009. However, due to defect of goods the same was returned to the supplier vide invoice No. 096 dated 20.10.2009 which is properly accounted in their books. Another invoice alleged to be improper is one bearing No. 20 dated 06.10.2009. The Ld. Consultant submitted that the appellant had received the goods supplied as per this invoice and had utilised the same in manufacture of final products. The receipt of the goods is reflected in RG-23 register. The weighment slips for inward entry of goods would show that the goods were received in the factory of the appellant. The Ld. Counsel stressed upon the fact though there were several transactions with M/s. Aerochem Impex and M/s. Aerochem the Department alleges discrepency with regard to 2 invoices only and do not allege any discrepency with other transactions or with regard to the quantity of finished products cleared during the relevant period using the inputs pertaining to the disputed invoice. He submitted that the entire investigation is based on statements. It is brought out in evidence that M/s Aerochem Impex as well as M/s Aerochem were supplying materials along with invoice also, though there has been allegation against them that they issued invoices only without supply of goods. The Ld. Counsel submitted that the department has not conducted any investigation with regard to the transporters to check whether appellant had received the material on the above mentioned invoices. Further there being no discrepancy with regard to the quantity of inputs used and quantity of finished products cleared (input-output ratio), the allegation that the appellant has not received goods but only invoices is without any basis.
5. Refuting the above contentions the Ld. AR Sh. Nagraj Naik reiterated the findings in the impugned order. He submitted that from the investigations conducted by DGCEI it is brought out that M/s YM Drugs had procured certain commercial invoices through M/s Aerochem Impex Private Limited in the name of non-existing firms such as Mehta and Company, Mumbai and shown in their records that they had received certain materials against the said invoices. By taking support from the above fake documents, M/s YM Drugs had shown as processed the material received against fake commercial invoices and issued Central Excise invoices to M/s Aerochem Impex Private Limited and M/s Aerochem, Hyderabad registered as dealers. These dealers have issued CENVAT invoices to the appellant and based on the invoices the appellant as taken fraudulent credit even though no material was supplied against said invoices. He strongly argued that, on enquiry it was revealed that no firm by name M/s Mehta and Company is located in the address given in their registration and the fact that M/s Mehta and Company, Mumbai is a fictitious firm which does not exist at all, it is to be concluded that the invoices issued by M/s Mehta and Company are nothing but fake invoices and no material has been supplied against said invoices. He therefore argued that appellant has availed fraudulent credit on the two invoices showing supply of Acetonitrile, as the appellant was issued only invoices and no material has been supplied against the invoices. He submitted that the confirmation of demand, interest and the equal amount of penalty imposed is legal and proper.
6. I have heard both sides.
7. The foremost fact that is to be stated is that M/s Aerochem Impex/ M/s Aerochem are the major supplier of the appellant. The copy of RG-23 register shows several transactions for supply of material by these two suppliers/dealers to the appellant. Though the department alleges that M/s Y.M. Drugs had issued fake Invoices to M/s Aerochem Impex / M/. Aerochem, and all such invoices are fake, since Mehta & Company is a fictitious firm etc; it is seen that only two invoices No. 312 and 20 dated 24.08.2009 and 06.10.2009 respectively are disputed by the department. The case of the department is that the appellant has not received materials as per these invoices and that the appellants have availed fraudulent credit on these invoices. The records show that materials were received as per invoice No.312 dated 24.08.2009 and due to poor quantity was rejected and returned to the supplier vide invoice No. 096 dated 20.10.2009. A certificate is issued by the Chartered Accountant showing that the goods received vide the said invoice was totally rejected and that the appellant has not made any payment against Bill No.312 dated 24.08.2009. The certificate also shows that materials to an extent of 180 kg out of the total quantity of 4320 kg received vide Bill No. 20 dated 06.10.2009 was rejected by the appellant. Thus appellant has not paid payment on the rejected portion of the goods of the invoice No. 20 dated 06.10.2009. Further the appellant has also produced the weighment slips which show that the goods were received in the appellants factory. Against all these documentary evidence, the only evidence placed by Department before me is the summary of investigations conducted against M/s Y.M. Drugs and M/s. Mehta and Company and also against M/s Aerochem Impex Private Limited and / M/s Aerochem which are mainly statements. However, there is no evidence to conclude that M/s Aerochem Impex / M/s Aerochem had not supplied any material to any one during the disputed period. When there are so many other transactions entered in the RG-23 register of the appellant supplied by M/s Aerochem Impex / Aerochem, which is not disputed by the Department, the strong probability is that the appellant has received the materials as per two invoices. Again, there is no evidence regarding the input-output ratio, as submitted by the Ld. Consultant, to establish that such quantity of inputs was not used in manufacture of final products. The evidences placed by department before me are not cogent to establish that appellant is guilty of fraudulent availment of CENVAT Credit. Mere suspicion or assumptions and presumptions cannot be the basis for such serious allegation of fraudulent availment of credit. From the facts and evidences placed before me, I am of the view that department has not succeeded in establishing the allegations raised in the SCN against the appellant. In view thereof, the impugned demand alleging fraudulent availment of credit is not sustainable.
8. In the result, the impugned order is set aside. The appeal is allowed with consequential reliefs, if any.
(Operative part of this order was pronounced in court on conclusion of the hearing) (SULEKHA BEEVI C.S.) MEMBER (JUDICIAL) Jaya.
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