Custom, Excise & Service Tax Tribunal
M/S. Mansi Industries vs Commissioner Of Central Excise & S.T., ... on 29 September, 2015
CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL, West Zonal Bench, Ahmedabad Appeal No. : E/573/2007 (Arising out of OIO-07/COMMR/2007 dated 29.03.2007, passed by Commissioner Central Excise & Service Tax, Ahmedabad) M/s. Mansi Industries : Appellant (s) VERSUS Commissioner of Central Excise & S.T., Ahmedabad : Respondent (s)
Represented by :
For Appellant (s) : Shri Paritosh Gupta, Advocate For Respondent (s) : Shri Sameer Chitkara, Authorised Representative For approval and signature :
Mr. P.K. Das, Hon'ble Member (Judicial) Mr. P.M. Saleem, 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?
No 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. P.M. Saleem, Hon'ble Member (Technical) Date of Hearing / Decision : 29.09.2015 ORDER No. A/11360/2015 Dated 29.09.2015 Per : Mr. P.K. Das;
The relevant facts of the case, in brief, are that on 28.03.2005, the Central Excise officers of Ahmedabad-I searched the premises of one M/s. Itisha Alu-Chem Industries, Bapunagar, (in short the said Firm) a registered manufacturer of Aluminium Ingots (Small Ingots) from aluminium scrap in a coal fired hand operated small furnace. It was found that there are no manufacturing activities. Shri Gautam Pal, proprietor of the said firm, in his statement dated 28.3.2005 and the other statements admitted that he had fraudulently issued the invoices to facilitate the CENVAT credit to the other manufacturers. Thereafter, the Central Excise officers visited the appellants factory on 08.4.2005, who is engaged in the manufacture of Anhydrous Aluminium Chloride classifiable under heading 28.27 of the schedule to the Central Excise Tariff Act, 1985, and availed cenvat credit on the basis of invoices issued by the said Firm. After verification of records, documents and the search operation of the said firm and the appellant, a show cause notice dated 28.03.2006 was issued proposing to deny the CENVAT credit of Rs. 54,17,780/- alongwith interest and to impose penalty on the appellant. By the impugned order, the adjudicating authority disallowed the CENVAT credit of Rs. 54,17,780/- alongwith interest and also imposed penalty of equal amount under Section 11AC of the Central Excise Act, 1944. The appellant paid the amount of Rs. 54,17,765/-, which was appropriated by the adjudicating authority.
2. The learned Advocate appearing on behalf of the appellant fairly submits that they are contesting denial of CENVAT credit on the ground of limitation. It is submitted that there is no suppression of facts with intent to evade payment of duty and therefore, the demand of CENVAT credit by show cause notice dated 28.3.2006, for the period April 2001 to March 2005 cannot be sustained. He particularly drew attention of the Bench to the statement of Shri Gautam Pal, proprietor of the said firm to substantiate that they purchased material from the open market and delivered the same to the appellant under the cover of Central Excise duty paying documents. It is submitted that the appellant received the goods at their factory and utilised in their finished products cleared on payment of duty. It is further submitted that the appellant had no knowledge of the modus-operandi of manufacture. He submits that only allegation in this case is that appellant has not taken reasonable steps as per Rule 7, Rule 9 of the Cenvat Credit Rules, 2001/2002/ 2004. He submits that the issue is squarely covered by the following decisions:-
(a) M/s. Bhagwati Silk Mills - Order No. A/55-185/WZB/AHD/ 2011 dated 23.11.2010 /24.01.2011.
(b) Prayagraj Dyeing & Printing Mills Pvt. Limited vs. UOI 2013 (290) ELT 61 (Guj.)
(c) CCE & Cus. vs. D.P. Singh 2011 (270) ELT 321 (Guj.)
(d) Minakshi Fashion Pvt. Limited vs. CCE & Cus., Surat 2015 (322) ELT 174 (Guj.)
3. On the other hand, the learned Authorised Representative for the Revenue reiterates the findings of the adjudicating authority. He submits that the Tribunal has already decided identical issue in the case of M/s. Akik Dyechem & Others vs. CCE, Ahmedabad vide Order No. A/515-540/WZB/AHD/2012, M/238-263/WZB/AHD/2009 dated 27.08.2008. In that case, M/s. M/s. Itisha Alu-Chem Industries had supplied the materials to the appellant for availing of CENVAT credit. There was difference of opinion of Hon'ble Members in respect of imposition of penalty. The Hon'ble third Member held that imposition of penalty is warranted. He particularly drew attention of the Bench to the said decision in respect of extended period of limitation.
4. After hearing both the sides and on perusal of the records, we find force in the submission of learned Authorised Representative for the Revenue. It is noted that the present appellant M/s. Mansi Industries is also party in the case of M/s. Akik Dyechem & Others (supra). The present proceeding is related with investigation in the case of M/s. Akik Dyechem & Others (supra). In that case, the investigation taken up by the Revenue revealed that the premises registered for manufacture of Aluminium Ingots did not have any electricity connection, only one manually operated furnace which was also being operated by a different person during the period from 1997 onwards. The Tribunal upheld the adjudication order. In the present case, we find that the proprietor of M/s. Itisha Alu-Chem Industries had admitted that they have issued invoices to the appellant to facilitate for availment of CENVAT credit. It is clearly evident that the invoices were fake and therefore, the appellant is not eligible to avail credit on the fake invoices.
5. The learned Advocate strongly relied upon the decision of the Hon'ble High Court of Gujarat in the case of Prayagraj Dyeing & Printing Mills Pvt. Otd (supra). In that case, the invoices issued by the dealers were a valid piece of document at the time of clearance of the goods. In this context, the Hon'ble High Court held that the demand is barred by limitation. The decision of the Hon'ble Gujarat High Court in the case of D.P. Singh (supra) is in the context of rebate claim on the exported goods. So, the facts of the said case are different from the present case and would not apply in the present case. We find that the decision of the Tribunal in the case of Akik Dyechem & Others (supra) is applicable in the present case. The Tribunal in respect of extended period of limitation observed as under:-
12. As regards invocation of extended period, it is quite clear that none of the appellants had taken steps as contemplated under Rule 7 and availed credit without ensuring that duty was paid on the material purchased by them and did not even ensure that all the raw material was received in respect of the invoices on the basis of which credit was taken. Shri Goutam Pal clearly admitted that after deducting 10 to 15% of the duty amount availed as credit, the remaining amount was passed on the purchasers. Further, the buyers who paid duty under protest when the case was detected by the Department informed Shri Pal that such amount has been debited in his account of balance. However, before this Tribunal, a claim was made that duty paid under protest should be refunded to them even though it was not paid from their pocket. The evidence shown by the Revenue in the form of statement of Driver of GRU 4198, vehicles which were earth movers and owned by GSRTC show that the cenvat credit was taken only on the basis of documents fraudulently and knowingly. Clear admission statements which have not been retracted by the Managing Directors/ partners etc. support this contention of the Revenue. The Revenue also has relied upon the decision of this Tribunal in the case of M/s. AIA Engineering Pvt. Limited [2006 (195) ELT 154 (Tri. Mum.)]. The following observation is relevant which is reproduced for better appreciation:
In the present case the manufacturers being in the knowledge of the fact that the credit was travelling only on the basis of the invoices without actual travel of the inputs is established from the statements of the various persons recorded during the course of investigation. As such, we do not find any force in the appellant plea of the demand being barred by limitation. It is further seen that in the said decision of IDL Chemical Limited, the Tribunal observed that the credit taken on the basis of the fake and no genuine duty paying documents is required to be reversed. Accordingly, we are of the opinion that the reversal of credit by M/s. AIA Engineering Pvt. Limited and Bhagwati Autocast Limited is justified.
6. In the case of M/s. Akik Dyechem & Others (supra), there is difference of opinion between the Hon'ble Members and the matter was referred to the third Member. The Hon'ble third Member observed as under:-
8. It can be seen from the findings of both the Members that manufacturer/manufacturing unit have availed the CENVAT Credit only on the basis of invoices issued by M/s Itisha. It is also an admitted fact by both the Members that no duty was actually paid by M/s Itisha and no credit was available to such manufacturers/manufacturing units. On concurrence of such views with both the Members, it is accepted by both the Members that reversal of CENVAT Credit by the manufacturing unit in balance was not seriously challenged and was correctly upheld. It is to be noted that though the provisions of Rule 7 of CENVAT Credit Rules, 2004 cannot be stretched too far, at the same time, it was the preliminary duty of the manufacturing unit to at least verify the fact of the manufacturing unit who has supplied the goods to them. Be that as it may, since it has been proved beyond doubt that the manufacturer as well as the manufacturing unit have availed CENVAT Credit based on only documents and reversal thereof is not seriously challenged, it would amount to availment of CENVAT Credit wrongly in contravention of provision of CENVAT Credit Rules. It is also not disputed that the extended period of limitation will apply in this case as the entire modus operandi of passing on the credit by M/s Itisha, without having manufacturing unit, only on documentary evidence and even without paying the same to Government of India, has been un-earthed after detailed investigation, a fraud committed by M/s Itisha. It is well settled that fraud vitiates everything and disadvantage of such fraud cannot be taken by anyone.
9. In my considered view, once there is no dispute as regards ineligible CENVAT Credit availed by the manufacturers and manufacturing units and the same being reversed on being pointed out, the penalties on the manufacturing unit and the manufacturer under the provisions of Rule 15 of CENVAT Credit Rules, 2004 are correctly fastened on them.
10. The manufacturers/manufacturing units cannot shirk away from the responsibility of availing the ineligible CENVAT Credit on the face of it. All the defences raised by the learned Counsel for appellants are very weak on the face of it.
7. We agree with the submission of the learned Advocate that the adjudicating authority had not given option to pay penalty 25% of the duty under Section 11AC of the said Act.
8. In view of the above discussion, we upheld the adjudication order. The appellant is given option to pay penalty 25% of the duty alongwith entire amount of duty and interest within 30 days from the date of communication of the order. Appeal is disposed of in the above terms.
(Dictated and pronounced in the Court)
(P.M. Saleem) (P.K. Das)
Member (Technical) Member (Judicial)
..KL
7