Custom, Excise & Service Tax Tribunal
Amar Ispat Pvt. Ltd vs Commissioner Of Central Excise, ... on 26 June, 2015
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT No. I APPEAL Nos. E/878, 890 to 894 & 895/08-Mum (Arising out of Order-in-Original No. 11/MS-11/2008/Thane-I dated 23.5.2008 passed by Commissioner of Central Excise, Thane-I) For approval and signature: Honble Mr. P.K. Jain, Member (Technical) and Honble Mr. Ramesh Nair, Member (Judicial) ======================================================
1. Whether Press Reporters may be allowed to see : No 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 Lordships wish to see the fair copy : Seen of the Order?
4. Whether Order is to be circulated to the Departmental : Yes authorities?
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1. Amar Ispat Pvt. Ltd. Appellants
2. Sandeep Garg
3. Mohammad A. Master
4. Mohsin Hajibhai Memon
5. Harikrishna B. Soneji
6. Ram Awatar Agarwal
7. Diamond Roadways Vs. Commissioner of Central Excise, Thane-I Respondent Appearance:
Shri Nikhil Rungta, Advocate for appellants 1 & 2 Shri S.P. Sheth, Advocate for appellants 3,4,5 & 6 None for appellant 7 Shri Ashutosh Nath, Assistant Commissioner (AR), for respondent CORAM:
Honble Mr. P.K. Jain, Member (Technical) Honble Mr. Ramesh Nair, Member (Judicial) Date of Hearing: 8.4.2015 Date of Decision: 26.6.2015 ORDER NO Per: P.K. Jain Brief facts of the case are that M/s. Jindal Iron & Steel Co. Ltd., Tarapur and M/s. Jindal Steel & Alloys Ltd., Vasind (hereinafter together referred to as Jindals) are engaged in the manufacture of HR coils. After the manufacture of the said goods, these are slitted to make them of uniform width. In this process, cuttings in the form of coil of varying width, say from one inch to three inches are left out. These left out trimmings are sold as HR trimmings. Though such HR trimmings are waste and scrap for Jindals, but the same are used in the manufacture of iron and steel wires which in turn are used in the manufacture of nails as also barbered wire/fencing. The conversion of HR trimmings to wires and thereafter to nails/barbered wire fencing etc. is carried out by a large number of small scale units. There is concentration of such units in and around Ahmedabad, particularly in place like Viramgam. Since this conversion is done by small scale units who are exempt from payment of excise duty, they are unable to avail the credit of central excise duty paid on HR trimmings by Jindals.
2. On the other hand, the main appellant in the present case is engaged in the manufacture of MS ingots from iron and steel scrap. There are various sources for getting such scrap. From some of these sources, the scrap is duty paid, for example, shavings left out of mechanical process. In addition to this, scrap is also available from non-duty paid sources such as bazaari or scavenger scrap. Such scrap is non-duty paid. However, the final product of the main appellant, MS ingot, is chargeable to excise duty irrespective of the fact that it is made from duty paid scrap or non-duty paid scrap.
3. For the Virangam based small scale unit, duty paid invoices of the HR trimmings are of no use as far as availment of credit of duty is concerned. However, such invoices can be made use (though illegal and fraud) by the main appellant (or other M.S. ingot manufacturers) by taking credit of duty paid, particularly for the portion of non-duty paid bazaari/scavenger scrap.
4. In brief, the case of the Revenue is that the main appellant has purchased/procured duty paid invoices of Jindals and credit of duty paid indicated in such invoices was taken without receiving the HR trimmings covered by the said invoices and the HR trimmings covered by the said invoices were diverted to Viramgam and nearby areas and there HR trimmings were used by hundreds of small scale units manufacturing nails etc. Based upon the information/intelligence, investigations were taken up in respect of number of units who have availed the credit of the duty paid on HR trimmings procured from various manufacturers of HR coils where HR trimmings are produced as a waste or scrap in Maharashtra and credit of the same is taken by the various ingot manufacturers. The main appellant is one of such MS ingot manufacturer. In the present case, appellant No.2 is the Director of the main appellant. Appellant No.3, 4 & 5 are traders/brokers based in and around Virangam, who would receive the HR trimmings cleared from Jindals and in turn, sell the same to various small scale manufacturers. Appellant No.6 is a broker/trader of iron and steel based in Mumbai. Appellant No.7 is the transporter who would arrange the transportation of the HR trimmings from Jindals factory in Vasind/Tarapur to Virangam. Appellant No.6 and 7 together would ensure that the documents from Jindals are procured in the name of the main appellant and physically receive these documents at the time of taking delivery from the Jindals factory. These documents in turn will be sent to the main appellant. In addition, certain fictitious documents will be created in order to indicate that the goods are being sold from some trader to other persons in Viramgam. These documents will accompany the transport of the goods from Jindals units to the end user. Further, since the goods have gone to Viramgam, the price or the amount relating to such goods will be received through angadia or other sources in Mumbai and will be finally given to the main appellant who would have given the draft or account payee cheques to Jindals for the purported purchase of such goods. Cash may also be used to purchase bazaari/scavenger scrap. Detailed investigation of the case was taken up which included searching various places including the office of certain transporters, broker etc. based in Mumbai and certain incriminating records were recovered during these searches. Statements of various persons including the Director, General Manager of the main appellant as also various other appellants and other transporters and vehicle owners were recorded and based upon the investigation, a show cause notice dated 3.7.2007 was issued to the appellants demanding an amount of Rs.72,84,903/- of fraudulently availed cenvat credit and also proposing penalty under Rule 13(2) of the Cenvat Credit Rules, 2002 read with Section 11AC of the Central Excise Act, and interest under Rule 12. In addition, penalty was proposed on appellant No.2 under Rule 13(1) of the Cenvat Credit Rules, 2002. Penalty on appellant No.3 to 7 was proposed under Rule 26 of the Cenvat Credit Rules, 2002. The case was thereafter adjudicated vide the impugned order wherein the Commissioner has confirmed the demand, penalty and interest against the main appellant. A penalty of Rs.10,00,000/- was imposed on appellant No.2 under Rule 13(1) of the Cenvat Credit Rules, 2002. Further, a penalty of Rs.2,00,000/- each was imposed on appellant No.3, 4 and 5 and penalty of Rs.7.5 lakhs each was imposed on appellant No.6 and 7. Aggrieved by the said order, the appellants are before this Tribunal.
5. Learned counsel for the main appellant and appellant No.2s main grievance was that the impugned order has been passed in gross violation of the principles of natural justice inasmuch as the appellants request for cross-examination of various persons was not permitted. It was submitted that the impugned order records the fact that the appellant had asked for the cross-examination which was rejected by the Commissioner. Thereafter the appellant again requested for cross-examination which was also rejected by the Commissioner. It was submitted that it is a settled law that non-grant of cross-examination of noticees on the basis of whose statements liability is fixed, amounts to violation of principles of natural justice. In support of this contention, the learned counsel relied upon the following judgments:-
(i) Sai Kripa Ispat (P) Ltd. vs. CC reported in 2003 (156) ELT 225 (Tri.-Bang);
(ii) RK Soap & Oil Traders vs. CC reported in 2013 (294) ELT 463 (Tri-Del.);
(iii) Basudev Garg vs. CCE reported in 2013 (294) ELT 353 (Del).
It was further submitted that no reliance could have been placed on the statements of witnesses when cross-examination is not allowed and in support of the same, judgment of the Honble Supreme Court in the case of Swadeshi Polytex vs. CCE reported in 2000 (122) ELT 641 (SC) was relied upon. It was also submitted that the statements of various persons are self-contradictory as also contradictory to each other and therefore are unreliable. In support of the same, the learned counsel pointed out certain discrepancies in the statement of Shri Shantilal Shah, proprietor of Diamond Roadways, Shri Mahinder Singhal, proprietor of Agarwal Transport etc. It was further submitted that the statements relied upon by the Revenue are irrelevant and therefore hold no evidentiary value. It was submitted that statement dated 2.1.2004 of Mahinder Singhal, proprietor of Agarwal Transport, is irrelevant as no demand has been raised in respect of the said transporter. Similar is the position in respect of the statement of Shri Praful Jethalal Thanki of Gayatri Transport. It was also submitted that only one invoice of Gayatri Transport is listed among 403 invoices. It was also submitted that similarly the statement of Shri Suresh Jayantilal Vyas, proprietor of Shrinathji Roadways, is relevant in respect of 10 invoices and is not relevant for the remaining invoices. It was also submitted that the case is hit by limitation because the appellant has received the goods and the appellant had no reasons to doubt that the duty paid nature of the goods received by it and the appellant has paid the amount through account payee cheques. It was submitted that reliance is placed on the decision of the Honble Supreme Court in the case of Kay Kay Industries reported in 2013 (295) ELT 177 (SC). It was also submitted by the learned counsel that the evidence brought forth by the department, even if assumed to be true, admittedly covers only 224 invoices and therefore the entire demand on 403 invoices cannot be upheld.
5.1 Insofar as appellant No.2, Shri Sandeep Garg, is concerned, it was submitted that Shri Sandeep Garg was not looking after the day-to-day work and whatever wrong was done was not with his knowledge and therefore no penalty can be imposed on him.
5.2 The learned counsel for the other appellants main contention was that there are variations in the statements given by various persons on different dates and also the statements of one person to the other do not corroborate and hence the statements are not reliable. It was submitted that no penalty can be imposed under Rule 26 on the said appellants as the goods under question are neither liable to confiscation nor held so. Further, the appellants have not dealt with the goods, and demand etc. is for period prior to 1.3.2007.
6. The learned AR, on the other hand, reiterated the various points made in the adjudication order and his main submission was that the appellants are just trying to find out some or the other reason to discredit the investigation carried out. He further submitted that the appellants have not given any explanation whatsoever or any evidence about the transport and receipt of HR trimmings in their factory. On the contrary, Revenues the case is based mainly on the documents. Learned counsel for the appellants is harping on cross-examination. The learned AR also submitted that the persons to whom the main appellant wants to cross-examine are in fact co-noticees and this Tribunal in the case of Maya Mahal Industries vs. CCE, Meerut reported in 1995 (80) ELT 118 has held that summoning of co-noticee for giving notice is not proper and cross-examination of co-noticee to be done only if he wishes. It was also submitted that summoning the co-noticee and putting him for cross-examination would amount notice to accept their guilt which is contrary to Article 20(3) of the Constitution. The learned AR in support of his contention relating to cross-examination, submitted the following case laws:-
(i) Maya Mahal Industries vs. CCE, Meerut reported in 1995 (80) ELT 118 (T);
(ii) Jagdish Shanker Trivedi vs. CC, Kanpur reported in 2006 (194) ELT 290 (Tri.-Del.).
6.1 In support of the contention of the learned counsel about penalty under Rule 26, the learned AR quoted the following case laws:-
(i) Sanjay Vimalbhai Deora vs. CESTAT reported in 2014 (306) ELT 533 (Guj.);
(ii) Sanjay Vimalbhai Deora vs. CESTAT reported in 2014 (309) ELT A131 (SC);
(iii) CCE vs. Navneet Agarwal reported in 2012 (276) ELT 515 (Tri.-Ahmd.);
(iv) Vee Kay Enterprises vs. CCE reported in 2011 (266) ELT 436 (P&H).
6.2 In addition to the above case laws, the learned AR relied upon the Honble Supreme Court decision in the case of Indian Special Casting Pvt. Ltd. vs. CCE reported in 2010 (255) ELT A44(SC) which is relating to availment of cenvat credit without receipt of the goods. The learned AR submitted that the Honble High Court of Punjab & Haryana in the case of Indian Special Casting Pvt. Ltd. vs. CCE, Ludhiana reported in 2010 (255) ELT 209 (P&H), has upheld the Tribunals order holding credit availment without receipt of the goods fraudulent and plea on limitation was also rejected. It was also submitted that the appellants plea that they have paid for the goods by cheque and payments to transporter made in cash is not tenable. The learned AR submitted this Tribunals decision in the case of CCE, Ludhiana vs. C.L. Engg. Ltd. reported in 2012 (279) ELT 262, wherein the Tribunal has held that manipulated transactions just to take credit - payment for such transaction through cheque is to be considered as part of manipulation only.
6.3 The learned AR further submitted that in view of the overwhelming evidences collected during the investigation, the impugned order is correct and the demand and penalty imposed are in order.
7. We have considered the rival submissions. The basic contention of the Revenue is that the main appellant has availed the credit without receiving goods covered by the corresponding invoices. A somewhat similar issue has come up before this Tribunal in the case of Bhagwati Steelcast Ltd. vs. CCE,Nashik reported in 2013 (293) ELT 417. In para 73 of the said order, this Tribunal has explained the scheme of the cenvat credit and is reproduced below for ready reference:-
73. It follows from the above that the? method of implementation adopted in India is the tax credit method. This economic concept of Value Added Tax has been encapsulated within the framework of Central Excise law as follows :
73.1 Under Section 37 of the Central? Excise Act, 1944, the Central Government has been given the power to make rules to carry out, in effect, the purposes of the Act. Clauses (xvi)(a) and (xvi)(aa) of sub-section (1) of the said Section provides for making of rules to provide for mechanism for credit of the duty paid or deemed to have been paid on the goods used in or in relation to the manufacture of the goods and the credit of service tax leviable under the Finance Act, 1994 used in or in relation to the manufacture of excisable goods.
73.2 Rules 11 of the Central Excise? Rules, 2002 stipulates that no excisable goods are to be removed from a factory or warehouse except under an invoice signed by the owner of the factory or his authorised agent. Sub-rule (2) of the said Rule stipulates that the invoices shall be serially numbered and shall contain registration number, address of the concerned Central Excise Division, name of the consignee, description, classification and date of removal, mode of transport and vehicle registration number, rate of duty, quantity and value of goods and the duty payable thereon. The proviso to the said rule provides the dispensation of the copies of the invoices i.e., original copy for the buyer, duplicate for the transporter and triplicate for the assessee. Sub-rules (4) to (6) deal with certain procedural requirements relating to invoices and sub-rule (7) provides that the provisions of said Rule shall apply mutatis mutandis to goods supplied by a first stage dealer or a second stage dealer. Similar provisions were stipulated in the Central Excise Rules, 2001 and also the Central Excise Rules, 1944 to the same effect.
73.3 The Cenvat? Credit Rules, 2004, deal with the procedure relating to availment of credit. As per Rule 3, a manufacturer or a producer of final products or a provider of taxable service shall be allowed to take credit (hereinafter referred to as Cenvat credit) of the duties specified therein paid on any inputs or capital goods and received by the manufacturer for use in or in relation to the manufacture of final products. Rule 4 of the said Rule stipulates that Cenvat credit in respect of inputs may be taken immediately on receipt of the inputs in the factory of the manufacturer or in the premises of the provider of output service. Rule 9 of Cenvat Credit Rules, 2004 deals with the documents and accounts on the basis of which the Cenvat credit can be taken and this includes an invoice issued by a manufacturer, an importer, a first stage dealer or second stage dealer. Sub-rule (2) further stipulates that no Cenvat credit shall be taken unless all the particulars as prescribed under the Central Excise Rules, 2002 or the Service Tax Rules, 1994 are contained in the said document. In case any particulars are missing, Cenvat credit may be taken only with the prior approval of the jurisdictional Asst./Dy. Commissioner of Central Excise, if he is satisfied that the goods or service covered by the document have been received and accounted for in the books of account of the receiver. Sub-rule (4) of the said rule further stipulates that the Cenvat credit in respect of input or capital goods purchased from a first stage dealer or second stage dealer shall be allowed only if such first stage dealer or second stage dealer, as the case may be, has maintained records indicating the fact that the input or capital goods was supplied from the stock on which duty was paid by the producer of such input or capital goods and only an amount of such duty on pro rata basis has been indicated in the invoice issued by him. Sub-rule (5) further stipulates that the burden of proof regarding the admissibility of the Cenvat credit shall lie upon the manufacturer or provider of output service taking such credit. Similar provisions existed in Rule 57A of the Central Excise Rules, 1944, Rule 7 of the Cenvat Credit Rules, 2001 and 2002.
73.4 From the above? provisions of law, it becomes evident that to avail Cenvat credit, the inputs or capital goods should have suffered the stipulated duty by the producer/manufacturer of such goods and the goods should be received by the manufacturer availing credit in his factory and the inputs or capital goods so received should be utilised in or in relation to the manufacture of final products. In respect of inputs received from a first or second stage dealer, an additional condition is stipulated to the effect that the inputs or capital goods were supplied from the stock on which duty was paid by the producer of such goods and only an amount of such duty on pro rata basis has been indicated in the invoices issued by him. It is further stipulated that the burden of proof regarding admissibility to Cenvat credit shall lie upon the manufacturer taking such credit. Sub-rule (2) of Rule 7 of the Cenvat Credit Rules, 2001/2002 (as they stood at the relevant time) further stipulated that a manufacturer/producer taking Cenvat credit on inputs or capital goods shall take all reasonable steps to ensure that the inputs or capital goods in respect of which he has taken Cenvat credit are goods on which appropriate duty of excise as indicated in the document accompanying the goods has been paid and the manufacturer shall be deemed to have taken reasonable steps if he satisfies himself about the identity, name and address of the manufacturer/supplier issuing the document specified in the said Rule either from his personal knowledge or on the strength of a certificate given by a person with whose handwriting or signature he is familiar with or on the strength of a certificate issued to the manufacturer or supplier by the jurisdictional Superintendent of Central Excise.
73.5 The Central? Excise duty regime underwent a significant change with effect from 1-10-1996. Under the new regime, assessment of the tax liability by the department which hitherto existed was done away with and self assessment facility was extended to the assessees.
73.6 Paragraphs 134? and 135 of the Finance Ministers Budget Speech for the year 1996-97 lucidly explains the new regime which was introduced.
134.?Our excise procedures are outdated and not in tune with the times. They need to be modified. They should encourage voluntary compliance with tax laws by the tax payers. With effect from 1st October, 1996, assessees would no longer be required to furnish copies of invoices along with the monthly returns. All that they would be required to furnish to the excise department will be a simple Return indicating the duty paid on self-assessment basis. Wherever possible the assessees computers could also be linked to the Departments computers for on line assessment.
135. I also propose to introduce a scheme of selective audit by?the excise officers and dispense with the existing scheme of routine examination and checking of returns and documents furnished by the assessees. This scheme would also come into force from 1st October, 1996. While introducing the new regime, in para 138 thereof, the Finance Minister also observed as follows :
138. The Modvat scheme which provides for duty credit on inputs?and capital goods has been liberalised considerably over the past few years. Still, there are problems about the coverage of certain inputs and capital goods. I propose to clarify the scope of eligible capital goods by specifying the heading and sub-headings of the tariff relating to capital goods in the Modvat Rules. It is also a matter of concern that there is misuse of the Modvat credit scheme. At present, Modvat invoices can be issued by any dealer registered with the excise department and this facility is reportedly being misused. Therefore, I propose to restrict the issue of Modvatable invoices by dealers up to two stages. Suitable provisions are also being made in the Modvat Rules for charging of interest in the case of wrong availment of Modvat credit and for mandatory penalty for misuse of Modvat facility. It is in this background and context, the issues involved in the present case need to be examined.
8. It is to be noted that in 1986 when the modvat credit scheme was introduced, then at that point of time the manufacturer-assessees were allowed to take credit only after intimation to the range Superintendent and verification of the inputs physically by the range Superintendent/Inspector. Later the said conditions were relaxed and a provision was made wherein the range Superintendent and Inspector were required to verify within the stipulated time and after the stipulated time, the manufacturer-assessee was at liberty to use the inputs. Later on, the Government has reposed more faith in the manufacturer-assessees and all such requirements have been done away with. However, reposing the faith on the manufacturer-assessee does not imply that they can avail the credit of duty on the basis of invoices without getting the goods covered by such invoices. Any such act by any manufacturer-assessee is nothing but act of fraud and total misuse of faith and trust reposed in the assessees.
9. In the present case, the Revenue has raised the demand in respect of 403 invoices. Invoices are pertaining to HR trimmings. Revenues case is that the said HR trimmings were transported from Jindals, Vasind/Tarapur to Viramgam based dealers/SSI units while the corresponding invoices were made in the name of the main appellant and the said invoices did not travel along with the goods, but only the invoices were received by the main appellant and they took credit on the basis of such invoices without receiving the HR trimmings. During the investigation, the main appellant and their officials including appellant No.2 were specifically asked whether they have any evidence whatsoever to prove that the goods viz. HR trimmings covered by the said invoices were transported to their factory and received in their factory. The appellants could not produce copy of the Gate register, goods receipt note or LR or even any document evidencing payment of freight charges to the driver/transporter in respect of each invoice (whether paid in cash or by any other means). The appellants main contention was that they have paid for the goods through banking channels and if at all the goods were not supplied, it is because of the manipulation by the supplier. We are not convinced with such argument. First of all, payment through banking channel in such manipulated transactions is a part of the manipulation only and it does not prove genuineness of the transaction. We are unable to understand that how the appellant is not able to produce any document relating to transport or receipt of the goods such as goods receipt note, independent weighment slip, gate register, lorry receipt, payment receipts (which are normally given by the drivers of such vehicles) or any document of the transporter to prove that the goods covered by the invoices did travel from Jindals units in Vasind and Tarapur to appellants factory. We also note that almost in all transactions, the vehicle registration numbers are of Gujarat. It is a common knowledge that a vehicle registered in Gujarat cannot undertake the freight movement from one place to the other within the State of Maharashtra. Such vehicle can only take the interstate freight, i.e. Maharashtra to Gujarat in this case. Moreover, HR trimmings in coil form are very different from bazaari/scavenger scrap and can be distinguished by any person in the business.
9.0 In the present case, the Revenue has presented a catena of evidences which include the transporters record etc. as is evident from para 93 of the impugned order. These include, -
(i) v) From certified copies of Annexure-1 and Annexure-2 sent by Sales Tax Officer of Bhilad Check post it was found that vehicle No. GJ 10 U 7985 carrying H.R. Trimmings had passed through the check post to Gujarat on 14.12.2002. The said vehicle number is appearing on invoice No.1207253 dated 14.12.2002 issued by M/s. JSAL favouring M/s. AIPL. It shows that the H.R. Trimmings consigned to M/s. AIPL on 14.12.2002 were in fact transported to Gujarat.
(ii) vi) From the records of M/s. New Shri Swaminarayan Transport it was found that 84 vehicles consigned to M/s. AIPL from M/s. JISCO & M/s. JSAL were in fact transported the goods to various destinations in Gujarat. The vehicle numbers in the above 84 cases are appearing on the invoices issued by M/s. JISCO & M/s. JSAL in the name of M/s. AIPL.
(iii) vii) Vehicle No. GJ 10 U 8157 and GJ 13 T 5226 owned by Shri Suresh Jayantilal Vyas, were appearing on ten invoices of M/s. JISCO & M/s. JSAL which was in fact indicating that the goods i.e. H.R. Trimmings & M.S. scrap were transported to Gujarat and not to the factory premises of M/s. AIPL.
(iv) viii) From the records of M/s. Gayatri Transport Service it was found that the goods covered under invoice No. 12109063 dated 31/.2003 of M/s. JISCO, Tarapur issued in favour of M/s. AIPL was transported to Satej in vehicle No. GJ 11 W 2910.
(v) iv) Further from the records of M/s. Star Industries, Tarapur it was found that goods consigned to M/s. AIPL from M/s. JISCO, Vasind under invoice No. 1306515 dated 11.9.2003 and 1307516 dated 11.10.2003 through vehicle No. MCT 5101 and MCU 1051 respectively were in fact delivered to M/s. Star Industries, Tarapur.
(vi) iii) Shri Janedrasingh Ramsingh Sodha residing at Jamnagar, Gujarat vide letter dated 2.8.2004 owner of vehicle No. GJ 10 U 4367 stated that they had loaded the above vehicle from Diamond Transport during the period April, 2000 to December, 2003 for Gujarat. The said vehicle is appearing on following invoices.
Sr. No. Name of the supplier Factory location Invoice No. Date 1 Jindal Iron and Steel Co.
Shahapur 1202146 11.9.02 2 Jindal Iron and Steel Co.
Shahapur 1302059 4.6.03 3 Jindal Iron and Steel Co.
Shahapur 1308745 21.11.03 4 Jindal Iron and Steel Co.
Tarapur 13102274 5.7.03 5 Jindal Iron and Steel Co.
Tarapur 13103087 1.8.03 6 Jindal Iron and Steel Co.
Tarapur 1207371 12.8.03 7 Jindal Steel & Alloys Ltd.
Vasind 1207371 17.12.02 8 Jindal Steel & Alloys Ltd.
Vasind 1207731 28.12.02 Many of these are in addition to the statements, as against this the appellant was not able to produce any evidence regarding transport and receipt of the goods in respect of any of the invoices. In our considered view, the only conclusion to be drawn is that the goods have not been received by the appellant.
9.1 It also defies any logic that the goods such as HR trimmings in the coil form which can be used for the manufacture of items like nails or wires, would be used for melting in the furnace. Even the prevailing prices of such HR trimmings will be much higher compared to normal iron and steel scrap and it does not make any economic sense for a manufacturer to use HR trimmings in coil form for purpose of melting.
10. The learned counsel for the appellants main grievance is relating to non-permission of cross-examination by the adjudicating authority. We find in the present case that the appellant wanted to cross-examine mainly the co-noticees and as held by this Tribunal in the case of Maya Mahal Industries (supra) as also in the case of Jagdish Shanker Trivedi (supra) read with Article 20(3) of the Constitution of India, we are of the view that no prejudice has been caused to the appellants, particularly keeping in view the fact that they themselves did not produce a single evidence that the HR trimmings were transported to their factory and were received in their factory. They have also not given any explanation with reference to the records recovered from various transporters. Thus, even if the statements of the co-noticees are ignored, the demand will still hold good. If the main appellant would have produced some evidence to contradict Revenues claim, we would perhaps be inclined to hold that denial of cross-examination has prejudiced their case. This Tribunal in the case of Jagdish Shanker Trivedi (supra) has observed as under:-
7.?We first take up the contention that there was denial of principles of natural justice by not offering the witnesses for cross-examination by the appellant Ashish Kumar Chaurasia, despite his request that all witnesses should be examined. We have already noted that the appellant, Ashish Kumar Chaurasia had cross-examined two officers on 19-6-1995. It also transpires that summons were sent to Ram Avatar Singhal, Ram Kumar Mishra and Ram Bilas Mandal (driver), Jagdish Shanker Trivedi and Dilip Kumar Singhal, who refused to be cross-examined on the ground that they cannot be compelled to give incriminating evidence against themselves in view of their fundamental right guaranted by Article 20(3) of the Constitution under which no person accused of any offence shall be compelled to be a witness against himself. Section 124(c) which provided that no order confiscating any goods or imposing any penalty on any person shall be made under Chapter IV unless the owner of the goods or such person is given a reasonable opportunity of being heard in the matter, does not specify any right of cross-examination.
11. Another contention of the learned counsel for the appellants was that the statements are at times self-contradictory or are contradicting each others statements. We have gone through the statements. While there are some variations in the statements, in our considered view, these variations are not fatal in the facts and circumstances of the present case. It is a common knowledge that the persons who are familiar with the excise laws and are aware about the violations of excise law, they are indulging in them they do not disclose proper and true facts at the first instance and they tend to give at times misleading explanations. In the present case also, generally the co-noticees have said in the statements after assessing the information already available with the investigating officers. In the later statements when they were shown more details, they came out with correct facts. We also note that the above modus operandi relating to diversion of HR trimmings to Viramgam and selling of the invoices to various iron and steel furnace units was done by number of steel furnace units and with reference to number of producers of HR coils/trimmings and the statements of various persons particularly the brokers in Mumbai, transporters in Mumbai/Nagpur and the traders based in Viramgam have been recorded by Central Excise Intelligence and with reference to other cases. These persons are common in all such investigations. Few days back, we have decided a similar case in respect of Bhagwati Steelcast Ltd. wherein also some of the appellants are common and there the statements given by the appellants were more to the point. We have absolutely no hesitation whatsoever in holding that the appellant No. 3, 4 and 5 are Viramgam based brokers/traders who in fact were participating in the auction bidding process either themselves or through brokers based in Mumbai and were purchasing the HR trimmings from manufacturers such as Jindals in this case. Later on, the HR trimmings were going to Viramgam. Since the invoices of such HR trimmings were of no use to them, they were trading the invoices through brokers based in Mumbai who in turn were locating the furnace units who could fraudulently avail the credit based on such invoices. The cash amount of HR trimmings being sent through angadia or other services from Viramgam and nearby area and were being converted into Bank Draft etc. through banking channels either by such brokers or by manufacturers of ingots or was used in cash to purchase bazaari scrap/scavenger scrap. In view of the above position, we have no hesitation in holding that the demand and penalty imposed on the main appellant is correct and the appeal of the main appellant is, therefore, dismissed. Appellants contention on limitation is also rejected as this is clear cut case of fraud as credit is availed without receiving the duty paid goods covered by the corresponding invoices.
11.1 As far as appellant No.2 is concerned, we find he was the Director of the main appellant-company and was supervising the day-to-day operation. It is incomprehensible that such a thing could happen without his knowledge. In our view, he would be main beneficiary. We also note that in his initial statement, he denied the things but on showing the statement of other persons, he tried to take a stand that the suppliers/brokers might have substituted the goods without their knowledge. We are unable to appreciate such a contention. HR trimmings in the coil form is very distinct commodity compared to the bazaari/scavenger scrap and if they were receiving invoices for the HR trimmings, there was no reason for them to accept the bazaari scrap. In any case, HR trimmings is more expensive than bazaari/scavenger scrap. We, therefore, hold that the penalty imposed on him under Rule 13 of the Cenvat Credit Rules, 2002 is in order and the quantum of penalty imposed is also not on the higher side. The appeal of appellant No.2 is, therefore, dismissed.
11.2 As far as appellant No.3, 4 & 5 are concerned, their main plea is that they are not registered dealers and the goods have not been confiscated and, therefore, no penalty can be imposed on them. Rule 25 and Rule 26 are as under:-
Rule 25 - Confiscation and Penalty.
(1)?Subject to the provisions of Section 11AC of the Act, if any producer, manufacturer, registered person or a warehouse or a registered dealer, -
(a) remove any exciseable goods in contravention of any of the provisions of these rules or the notifications issued under these rules; or
(b) does not account for any exciseable goods produced or manufactured or stored by him; or
(c) engages in the manufacture, production or storage or any exciseable goods without having applied for the registration certificate required under section 6 of the Act; or
(d) contravenes any of the provisions of these rules or the notifications issued under these rules with intent to evade payment of duty, then, all such goods shall be liable to confiscation and the producer or manufacturer or registered person of the warehouse or a registered dealer, as the case may be, shall be liable to a penalty not exceeding the duty on the exciseable goods in respect of which any contravention of the nature referred to in clause (a) or clause (b) or clause (c) or clause (d) has been committed, or [rupees two thousand] whichever is greater.
(2)?An order under sub-rule (1) shall be issued by the Central Excise Officer, following the principles of natural justice. Rule 26. Penalty for certain offences :
(1)?Any person who acquires possession of, or is in any way concerned in transporting, removing, depositing, keeping, concealing, selling or purchasing, or in any other manner deals with, any excisable goods which he knows or has reason to believe are liable to confiscation under the Act or these rides, shall be liable to a penalty not exceeding the duty on such goods or [two thousand rupees], whichever is greater.
(2)?Any person, who issues-
(i) an excise duty invoice without delivery of the goods specified therein or abets in making such invoice; or
(ii) any other document or abets in making such document, on the basis of which the user of said invoice or document is likely to take or has taken any ineligible benefit under the Act or the rules made thereunder like claiming of CENVAT Credit under the CENVAT Credit Rules, 2004 or refund, shall be liable to a penalty not exceeding the amount of such benefit or five thousand rupees, whichever is greater. In the present case, goods were not transported to consignee as per duty paying invoice and this was done to evade duty by availing credit fraudulently, thus goods are confiscable under Rule 25.
Further, in our view, the contention of appellant No.3, 4 & 5 merits outright rejection for the simple reason that all the three persons were concerned in acquiring possession of, and were concerned in selling and purchasing of HR trimmings and such HR trimmings were confiscable under Rule 25(1)(d) as the name of the purported consignee and the true consignee was different and this manipulation was with a clear cut intention to defraud the Government by availing inadmissible cenvat credit. In view of the said position, the penalty imposed under Rule 26 on the appellants 3, 4 and 5 is in order. We also note that the penalty imposed is not on the higher side and, therefore, their appeals are dismissed. We also note that the Honble High Court of Gujarat in the case of Sanjay Vimalbhai Deora vs. CESTAT reported in 2014 (306) ELT 533 (Guj.), has held that a person would render himself liable for penalty for indulging in activities mentioned in Rule 26 of the Central Excise Rules, 2002, even if goods are not confiscated or had not been rendered liable for confiscation. We also note that as in that case, even in the present case all the appellants have full knowledge about every stage of removing, keeping, selling, concealing the excisable goods and the same would not have been possible without their active participation and connivance with each other. We also note that the said judgment of the Honble Gujarat High Court has been upheld by the Honble Supreme Court as reported in 2014 (309) ELT A131 (SC). Further, the Honble Punjab & Haryana High Court in the case of Vee Kay Enterprises vs. CCE reported in 2011 (266) ELT 436 (P&H), has held as under:-
9. As regards? applicability of provisions introduced on 1-3-2007 to alleged acts committed prior to the said date, the matter is covered by orders of this Court referred to above which are not shown to be distinguishable. Accordingly, we hold that the amended provisions will not apply to the acts committed prior thereto.
10. Inspite of? non-applicability of Rule 26(2), penalty could be levied as the appellant was concerned in selling or dealing with the goods which were liable to confiscation inasmuch as the appellant claimed to have sold the goods in respect of which the cenvat credit was taken. In such a case, Rule 25(1)(d) and 26(1) are also applicable. The person who purports to sell goods cannot say that he was not a person concerned with the selling of goods and merely issued invoice or that he did not contravene a provision relating to evasion of duty. The appellant issued invoices without delivery of goods with intent to enable evasion of duty to which effect a finding has been recorded and which finding has not been challenged. We are, thus, unable to hold that appellant was not liable to pay any penalty.
11. As regards? alternative submission of the appellant, that even if there is jurisdiction to levy penalty equal to the amount of duty evaded distinction in culpability may be found in person who actually evades the duty and the person who enables the same to be done. This distinction in culpability may be required to be gone into from case to case. The Tribunal does not seem to have been conscious of this issue.
12. The penalty? prescribed is admittedly not the minimum. Its quantum will thus be in discretion to be exercised having regard to mitigating or aggravating circumstances. In the context of exercise of discretion of imposition of appropriate sentence, it was observed in State of Karnataka v. Puttaraja, AIR 2004 SC 433 :-
10.?It has been very aptly indicated in Dannis Councle MCGDautha v. State of Callifornia, 302 US 183 : 28 LD 2nd 711, that no formula of a foolproof nature is possible that would provide a reasonable criterion in determining a just and appropriate punishment in the infinite variety of circumstances that may affect the gravity of the crime. In the absence of any foolproof formula which may provide any basis for reasonable criteria to correctly assess various circumstances germane to the consideration of gravity of crime, the discretionary judgment in the facts of each case, is the only way in which such judgment may be equitable distinguished. Since in the present case the Tribunal has not considered the issue of quantum of penalty, the matter may require fresh consideration of the Tribunal to determine the quantum of penalty which ought to be levied on the appellant. Accordingly, we allow these appeals partly as above and remand the matters to the Tribunal for passing an appropriate orders on the quantum of penalty. 11.3 As far as appellant No. 6 & 7 are concerned, their plea is again relating to Rule 26. We find that appellant No.6 was a broker based in Mumbai. He along with the help of the transporter i.e. appellant No.7 was creating the fictitious documents for movement of the goods from Vasind/Tarapur to Viramgam. The documents received from Jindals at Vasind and Tarapur were being given to the main appellant. Appellant No.7 was expected to carry the invoices issued by the Jindals along with the goods to the consignee mentioned in the said invoices, which was not done. Both the appellants put together, helped in the manipulation and were concerned with the goods which are confiscable and, therefore, they are liable to penalty under Rule 26, even before the amendment made on 1.3.2007. The penalty imposed on the two appellants is not on the higher side and, therefore, we dismiss the appeals of the appellants 6 and 7.
12. Both sides have quoted number of case laws in support of their various contentions. We have gone through these case laws and do not consider it necessary to discuss. The facts of the present case are different. The main appellant has not produced any evidence to support that HR trimmings covered by the invoices for which credit was taken were transported to the factory of consignee and received in their factory or in any way used for manufacturing by them. On the contrary, enough evidences exist that H.R. trimmings were diverted to Viramgam and nearby areas.
13. In the result, all the seven appeals are dismissed.
(Pronounced in Court on 26.6.2015) (Ramesh Nair) Member (Judicial) (P.K. Jain) Member (Technical) tvu 1 2