Custom, Excise & Service Tax Tribunal
J&J Precision Industries vs Commissioner Of Central Excise on 22 May, 2014
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL,WEST ZONAL BENCH AT MUMBAI COURT No. II APPEAL No.E/956, 957, 979 to 983, 987 to 988, 994 to 1002/07 (Arising out of Order-in-Original No.05/Commissioner/ Goa/CX/2007 dated 29/03/2007 passed by Commissioner of Customs, Central Excise & Service Tax, Goa) For approval and signature: Honble Mr. P.R. Chandrasekharan, Member (Technical) Honble Mr. Anil Choudhary, 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 :Yes 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? ========================================
J&J Precision Industries Annapurna Impex Pvt.Ltd., Mardia Samyoung Capillary Tubes Co. Ltd., Mardia Tubes Pvt. Ltd., Jay Wire & Conductors Deepak Glass & Plywoods Uttam Glass Company Lata Steels Appellants Shri Joit Kumar Jain Shri Navneet Agrawal Shri Ravindra Mardia Ramesh Ratilal Chauhan Shri Ambalal Jain, Shri Bhavarlal Jain Shri Pawan Lata Shri Pravin Singh Gullchem Industries Shri Narayan Walvalkar Vs. Commissioner of Central Excise, Respondent Goa Appearance:
Shri.V.M. Doiphode, Shri. S.P. Mathew and Shri Neerav Mainkar, Advocate for the appellants Shri.K.M. Mondal, Special Consultant, for respondent CORAM:
Honble Mr. P.R.Chandrasekharan, Member (Technical) Honble Mr.Anil Choudhary, Member (Judicial) Date of Hearing : 22/05/2014 Date of Decision : /2014 ORDER NO Per: P.R. Chandrasekharan The appeals are directed against Order-in-Original No.05/Commissioner/ Goa/CX/2007 dated 29/03/2007 passed by Commissioner of Customs, Central Excise & Service Tax, , Goa. Vide the impugned order, the learned adjudicating authority has confirmed a duty demand of Rs.4,45,50,547/- along with interest thereon against M/s.J & J Precision Industries, Goa, towards ineligible Cenvat Credit availed by them without receipt of the goods and on the strength of fake/manipulated documents. He has also imposed an equivalent amount of penalty each on the said M/s.J & J Precision Industries and its proprietor Shri Joit Kumar Jain. The following penalties have been imposed on the co-noticees as given in the table below:-
S.No. Name of the co-noticee Amount of penalty imposed (in Rs.) 1 M/s.Annapurna Impex Pvt. Ltd.
3,06,03,937/-2
Navneet Agarwal, Managing Director of S.No. 1 above 3,06,03,937/-3
M/s.Mardia Samyoung Capillary Tubes Co. Ltd.
70,48,480/-4
M/s.Mardia Tubes Pvt. Ltd.
10,04,622/-5
Ravindra Mardia, Managing Director of S.No.3 above 80,53,102/-6
Jay Wire & Conductors 5,17,445/-7
Ramesh Ratilal Chauhan, Partner of S.No. 6 above 5,17,445/-8
M/s.Deepak Glass & Plywoods 37,38,809/-9
Ambalal Jain, Proprietor of S.No. 8 above 37,38,809/-10
M/s.Uttam Glass Co.
9,91,379/-11
Bhavarlal Jain, Prop. Of S.No. 10 above 9,91,379/-12
M/s.Lata Steels 6,45,875/-13
Pawan Lata, Partner of S.No.12 6,45,875/-14
Shri Pravin Singh, Proprietor of M/s.Andhra Roadways Corporation 9,00,000/-15
M/s.Gullchem Industries 50,00,000/-16
Shri Narayan Walvalkar, Proprietor of S.No. 15 above 50,00,000/-
Aggrieved of the same, the following appellants, namely, M/s.J&J Precision Industries, M/s.Annapaura Impex Pvt. Ltd., M/s.Mardia Samyoung Capillary Tubes Co. Ltd., M/s Mardia Tubes Pvt. Ltd., M/s.Jay Wire & Conductors, M/s.Deepak Glass & Plywoods, M/s.Uttam Glass Co., M/s.Lata Steels, Shri Joit Kumar Jain, Shri Navneet Agrawal, Shri Ravindra Mardia, Shri Ramesh Ratilal Chauhan, Shri Ambalal Jain, Shri Bhavarlal Jain, Shri Pawan Lata, Shri Pravin Singh, M/s.Gullchem Industries and Shri Narayan Walvalkar are before us.
2. The case against the main appellant, M/s.J&J Precision Industries, is that they availed Cenvat Credit, without receipt of the goods, amounting to -
(i) Rs.3,06,03,937/- on copper/brass ingots/bars/rods, alleged to have been supplied by M/s.Annapurna Impex Pvt. Ltd.;
(ii) Rs.70,48,480/- in respect of supplies made by M/s.Mardia Samyoung Capillary Tubes Co. Ltd.;
(iii) Rs.10,04,622/- in respect of supplies made by M/s.Mardia Tubes Pvt. Ltd.;
(iv) Rs.5,17,445/- in respect of supplies made by M/s.Jay Wire & Conductors;
(v) Rs.37,38,809/- on float glass and sheet glass alleged to have been supplied by M/s.Deepak Glass & Plywoods;
(vi) Rs.9,91,379/-. on float glass and sheet glass alleged to have been supplied by M/s.Uttam Glass Co.; and
(vii) Rs.6,45,875/- on Stainless Steel/HR Coils/Sheet, etc. alleged to have been supplied by M/s.Lata Steels.
2.1 It is the case of the Revenue that copper ingots/bars/rods and float glass/sheet glass are not at all required for manufacture of wristwatch cases and wristwatch straps, which the main appellant, M/s.J&J Precision Industries were undertaking and these goods were never received from these suppliers and were never put to use in the factory. The allegations of the Revenue is based on the various incriminating documents seized and the statements recorded not only of the officials of the main appellants firm but also the statements recorded from the various suppliers of the goods and their officials. Evidence by way of statements from transporters who are alleged to have undertaken the supplies are also relied upon. In addition, some of the documents seized were subjected to forensic examination which revealed the bogus/fake nature of the documents. Accordingly show cause notice was issued which was adjudicated upon by the impugned order and the demands were confirmed and penalties imposed. Aggrieved of the same, the appellants are before us.
3. The learned Counsel for the main appellant, J & J Precision Indsustries and its proprietor, Shri. Joit Kumar Jain, made the following submissions:-
3.1 The appellant manufactures Watch Cases and Watch Straps from various base metals like Stainless Steel, brass, copper etc. The major buyers are Titan Watch industries Ltd., Duncan industries, Rishabh industries and Prerana industries. The Appellants availed Cenvat Credit on inputs during April 2003 to April 2005 as under :
S.No. Name of the Supplier Material Amount of the credit availed.
1.
M/s. Annapurna Impex Pvt. Ltd., Ludhiana Copper Rs.3,06,03,937/-
2. M/s. Mardia Samyoung Capillary Tubes Ltd.
Copper/ Brass Rs. 70,48,480/-
3. M/s. Mardia Tubes Ltd.
Copper/ Brass Rs. 10,04,622/-
4.
M/s. Jay Wire & Conductors Copper Rs. 5,17,445/- 5. M/s. Deepak Glass & Plywoods Float Glass Rs. 37,38,809/- 6. M/s. Uttam Glass Company Sheet Glass Rs. 9,91,379/- 7. M/s. Lata Steels Stainless Steel Rs. 6,45,875/- Total credit availed Rs.4,45,50,547/-
3.2 The appellant cleared on payment of Central Excise duty Watch Cases and Straps. The appellants also entered details of inputs in the private and statutory records and the materials requisition notes (MRN) when goods are required for production. During the impugned period, audit of the records of the appellants factory was conducted and also preventive checks but the officers never found that the inputs on which Cenvat credit was availed, were not received. The appellant had also written letters dated 4/8/04 and 2/12/03 to the Superintendent Central Excise Range VIII, Ludhiana, regarding purchase of raw materials from M/s. Annapurna Impex with a request to verify the records and confirm the facts to the Superintendent of Central Excise in charge of appellants factory.
3.3 On 25/4/05, the officers of Directorate General of Central Excise Intelligence searched the factory premises of the appellant. A detailed investigation was conducted by recording statements of the employees and the proprietor of the appellants firm. Enquiries were made at the suppliers end also. The investigation also included verification of vehicles particulars from R.T.O., bank account of M/s. Annapurna Impex Pvt. Ltd., one of the suppliers and scrutiny of the records seized from appellants premises. Thereafter, a show cause notice dated 16/1/2006 was issued to the appellant assessee and others. Appellant had sought cross examination of the witnesses whose statements were relied upon in the show cause notice. However, the Ld. Commissioner rejected the request for cross examination on the ground that they are co- noticees/ co-accused and cross examination need not be allowed. This fact is recorded in the minutes of personal hearing held on 19/6/06. Request for cross examination of other witnesses, particularly of employees of the appellants firm, who had retracted their statements, was rejected which is also recorded in the minutes of personal hearing held on 30/6/06 by relying upon the decision of the Tribunal judgement in the case of Rathi Ispat Ltd., Vs. CCE Meerut reported in 2001 (129) E.L.T. 701 (Tri.). Thereafter, the Ld. Commissioner, has proceeded to pass the impugned order dated 29/3/2007, confirming the duty demand along with interest and penalties.
3.4 The Ld. Commissioner has essentially relied on the statements of appellants employees and others wherein he has given a detailed chart indicating contents of the statements and whether retracted or not. Apart from these statements, the Ld. Commissioner has relied upon other evidences which are as under :
(a) Invoice Nos. 307 dated 23/3/05 and 310 dated 24/3/05 issued by M/s. Annapurna Impex Pvt. Ltd. and on these dates, there was no physical stock available with the said supplier.
(b) Panchnama proceedings drawn on 18/5/2005 at the factory of M/s. Annapurna Impex Pvt. Ltd., as per which they did not have any facility to manufacture Copper ingots, and no quantity of copper ingots were found during the course of search.
(c) Vehicle Verification Report indicating that Vehicle with registration nos. PB 08 AE 6428, PB 08 X 7854 and PB 08 W 3299, used for transportation of the goods supplied were in fact two wheelers. Verification Report from their Kolkata counterpart showed that the vehicle bearing registration No. WB 25 A 3380 allegedly used for transportation was a light motor vehicle.
(d) Verification of Bank Account No. CA042010200007443 of M/s. Annapurna Impex Pvt.Ltd., at UTI Bank Ltd., Ludhiana for the period 12/9/2003 to 19/5/2005 showed that the amounts allegedly paid for the supplies made were withdrawn in cash immediately.
(e) The transporters, M/s. Satkar Tempo Transport Union and M/s. New Satkar Tempo Transport Union at Ludhiana whose vehicles were mainly used for transport of the goods from M/s Annapurna Impex as reflected in the transport documents corroborated the fact that transactions were fictitious.
(f) M/s. Multi-Arc Ltd., Umargam had not plated wristwatch cases made out of copper on the basis of invoices issued by them to the appellants.
(g) The thickness of float/ sheet glass supplied by M/s. Gujarat Guardian Ltd., M/s. Haryana Sheet Glass Ltd., M/s. Triveni Glsass Ltd., and M/s. Asahi India Glass Ltd., ranged between 2 mm and 12 mm whereas the thickness of the glass used by the appellant was above 5 mm.
(h) Verification of the original copy of Lorry Receipts received from M/s. Gujarat Guardian Ltd., showed endorsement on the consignment sheets of the transport companies; however, closer scrutiny of these endorsements showed that though the endorsements appeared to show the receipt of the consignments by the appellant, the said handwriting tallied with the handwriting showing receipt of the consignments at Bangalore on the same dates which fact been confirmed by the Central Govt. Examiner on Questioned documents, Hyderabad, in his expert opinion.
(i) M/s. Dharti Road Corporation and M/s. Bhimandi Andhra Transport Company who allegedly transported inputs from from M/s. Uttam Glass Co., Hyderabad to the appellant in Goa, were fictitious firms which did not exist.
3.5 Section 9D of Central Excise Act, 1944 provides that-
(1) A statement made and signed by a person before any Central Excise Officer of a gazetted rank during the course of any enquiry or proceeding under this Act shall be relevant, for the purpose of proving, in any prosecution for an offence under this Act, the truth of the facts which it contains,
(a) when the person who made the statement is dead or cannot be found, or is incapable of giving evidence, or kept out of the way by the adverse party, or whose presence cannot be obtained without an amount of delay or expense which, under the circumstances of the case, the Court considers unreasonable; or
(b) when the person who made the statement is examined as a witness in the case before the Court and the Court is of opinion that, having regard to the circumstances of the case, the statement should be admitted in evidence in the interests of justice.
(2) The provisions of sub section (1) shall be so far as may be, apply in relation to any proceedings under this Act, other than a proceeding before a Court, as they apply in relation to a proceeding before a Court. 3.6 The scope of Section 9D came up for consideration before Delhi High Court in the case of J.& K Cigarettes Ltd., Vs. Collector of Central Excise [2009 (242) E.L.T. 189 (Del.)] and followed in the case of Basudev Garg Vs. CC [2013 (294) E.L.T. 353 (Del.)]. The Honble High Court while upholding the validity of Section 9D also held that the right of cross examination in any quasi judicial proceedings is a valid right given to a noticees as these proceedings may have adverse consequences to the accused while at the same time, under certain circumstances this right of cross examination can be taken away. Such circumstances have to be exceptional as stipulated in said Section 9D. It is thus clear that unless such circumstances exist, the noticee has a right of cross examination, even in quasi judicial proceedings. Therefore, the appellant submits that following these 2 judgements of the Honble Delhi High Court, the Ld. Commissioner rejection of the request for cross examination is contrary to the statutory provisions of Section 9D and the law laid down by the Honble Delhi High Court. Further, the Honble Allahabad High Court in the case of CCE, Meerut-I Vs. Parmarth Iron Pvt. Ltd., [2010 (260) E.L.T. 514 (All.)] held that if the Adjudicating authority relies upon the statements, then he must offer them for cross examination and if they are not offered for cross examination, the Adjudicating authority cannot rely upon the contents of those statements. Therefore, the Ld. Commissioner has erred in relying upon the contents of the various statements without granting cross examination of the deponents. In the absence of exceptional circumstances as enumerated in Section 9D exist, the Commissioner is not justified in refusing cross examination.
3.7 In the alternative, it is submitted that the Ld. Commissioner in para 103 of his order has relied upon by calling the direct evidence though he refers to only statements in many cases. The appellant agrees that since there was no physical stock in respect of invoice Nos. 307 dated 23/3/05 and 310 dated 24/3/05 issued by them, they have already reversed the Cenvat credit of Rs.5,65,000/- + Cess of Rs.42,557/- which they do not dispute. The appellant has purchased Copper rods from M/s. Annapurna Impex Pvt. Ltd., during the period 7/11/03 to 24/3/05 and the reliance is placed on the Panchnama dated 18/5/05. There is no dispute that M/s. Annapurna Impex Pvt. Ltd., has paid duty in respect of these invoices. Therefore, if subsequent to that date, if no machinery was found for manufacture of copper ingots, no adverse conclusion can be drawn against the appellant, particularly when the appellant, vide letters dated 2/12/03 and 4/8/04 had written to Superintendent Central Excise to verify regarding purchase of copper ingots made by them from Annapurna Impex Pvt. Ltd., and for the period of demand, there is no evidence that copper ingots were not manufactured by Annapurna Impex Pvt. Ltd.
3.8 The Ld. Commissioner has relied upon Vehicle Verification Report received from Ludhiana; in respect of Ludhiana, there only 3 vehicles which are incapable of carrying the load. In respect of Kolkata, there was only one vehicle which was a light motor vehicle and as per Thane RTOs report, there were 4 vehicles. The appellant submits that since the subject inputs were delivered at their factory, they cannot be blamed for the wrong registration numbers declared on the L.Rs. At worst, Cenvat credit attributable to these vehicles which were incapable of carrying the inputs could be demanded from them and the Ld. Commissioner could be asked to quantify the demand in respect of inputs pertaining to these vehicles.
3.9 The Ld. Commissioner has relied upon the statement of bank account of M/s. Annapurna Impex Pvt. Ltd., at UTI Bank Ltd., Ludhiana in para 103 (v) of the order in respect of cash withdrawals to conclude that no goods were supplied. This cannot be a direct evidence as it is for Annapurna Impex Pvt. Ltd., to explain as to why they have withdrawn the cash and there is neither any evidence from the appellants proprietor nor from the representative of Annapurna Impex Pvt. Ltd., evidencing that cash was sent back to the appellant. In any case, the cash withdrawn was negligible compared to the total consideration paid by the appellant.
3.10 The Ld. Commissioner has also relied upon the Purchase Tracking Register. However, each and every order in the purchase Register has not been mentioned in Purchase Tracking Register as it was maintained for only casual items requiring emergency supplies.
3.11 The Appellants had submitted Form ST.XXIV-A obtained from the Excise & Taxation Dept. of Punjab (as recorded by Commissioner in para 68 (xii) to show the goods were sent through the transporters from Ludhiana. There is no finding given by the Ld. Commissioner regarding this important submission.
3.12 The Ld. Commissioner in para 103 (c) has referred to a printed sheet which gives case specifications of various types of watch cases manufactured by the appellant. This Product sheet pertains to only 10 models. Appellant has been manufacturing at least more than 200 different models. Same applies to Product data, mentioned in para 103 (h) of the impugned order. By referring to a few models, no conclusion can be drawn that appellant has not used copper.
3.13 In the RT-12 Return and in Annexure VI to Form 3CD, which forms part of the Audit Report for the financial year 2003-04, appellant has mentioned the raw material as brass and not copper. Appellant submits that he was mentioning brass everywhere, as brass and copper are the same except that brass is an alloy of copper. Therefore, this cannot be considered as a direct evidence in support of the case that the appellant had not received copper in his factory.
3.14 Appellant had returned 225 tons of Copper Rods to M/s. Annapurna Impex Pvt. Ltd.,. and had paid a duty of Rs.59,21,157/- by debiting in PLA. The Show Cause Notice in para 65.1 has termed this transaction as a mere paper transaction, that no such material has been received in the first place and therefore, the question of return does not arise. However, the fact remains that irrespective of receipt of material or otherwise, since Cenvat credit availed has been reversed by debit in PLA, the Ld. Commissioner ought to have given credit to the extent of Rs.59,21,157/- reversed by the Appellants in RG-23 Part II.
3.15 The Appellant, in respect of Central Excise invoices Nos. 307 dated 23/3/05 and 310 dated 24/3/05, had reversed cenvat credit of Rs.5,65,000/- as observed in para 4 of the Show Cause Notice. However, no credit has been given in respect of these reversals while computing the duty demand.
3.16 In the light of the above submissions, the ld. Counsel for the appellant pleads for remand of the case to the adjudicating authority for giving an opportunity to the appellant for cross examination of the witnesses whose statements have been relied upon by the Revenue in support of their case.
4. Submissions on behalf of the co-appellants:
4.1 The ld. Counsel for M/s Gullchem Industries and its proprietor Mr. Narayan Walwalkar, submits that they undertook jobwork of buffing/polishing of the watch-casings supplied by M/s J & J Precision Industries. The charge against the main appellant is availment of Cenvat credit without receipt of materials. The job-work activities undertaken by the appellant has nothing to do with availment of cenvat credit. Even if it is assumed that they showed in the job-work documents of having undertaken gold plating without having actually undertaken the said activity, it would not alter the position. Therefore, the charge against the appellant of having aided/abetted M/s J & J Precision Industries Ltd in availing ineligible cenvat credit is bereft of any logic and consequently, imposition of penalties on the two co-appellants are clearly unsustainable in law.
4.2 The ld. Counsel for M/s Lata Steels and its partner Shri. Pawan Lata submits that they are a registered dealers for issue of cenvatable invoices and they have supplied stainless steel to M/s J & J Precision Industries for which they have received the payments. These transactions are duly reflected in the RG 23 D register maintained by them and also in the form C issued for inter-state sales. The charge that one of the vehicles used for transportation as mentioned in the invoices was a tanker which was incapable of transportation of the goods supplied by them, it is their contention that it is the buyer who had arranged for the transportation and therefore any mistake in this regard could not be attributed to them. It is also submitted that if any wrong credit has been taken, the same has to be recovered from the person who has taken the credit and there is no provision in law for imposition of penalty on a dealer who has merely supplied the goods. Accordingly they plead for setting aside the penalties imposed on M/s Lata Steels and its partner.
4.3 The ld. Counsel for M/s Mardia Tubes Ltd., M/s Mardia Samyoung Capillary Tubes Co. Ltd. and Shri. Ravindra Milapchand Mardia, Director and Managing Director of the aforesaid firms respectively submitted that the issue pertained to availment of ineligible cenvat credit by M/s J&J Precision Ind. Ltd. and therefore, no action lies against them. They have admitted before the investigating officer about issue of invoices without supply of goods and they have nothing more to add in this regard. They have done nothing illegal and there is no provision in law providing imposition of penalty on the co-appellants who merely issued the documents and therefore, the imposition of penalties on the co-appellants is clearly unsustainable in law.
4.4 None represented the other co-appellants. However in their appeal memorandum, both M/s Deepak Glass & Plywoods and its proprietor Sri. Ambalal Jain and M/s Uttam Glass Co. and its proprietor Mr. Bhavarlal Jain have submitted that they had supplied the goods to M/s J & J Precision Industries. It is also contended that they had given the inculpatory statements of having not supplied the goods before the investigating officers on the belief that no action would be taken against them. They also dispute the statements of the transporters who have denied having transported the goods from their premises to Goa. In any case, it is their submission that since the goods supplied by them are not liable to confiscation, they are not liable to any penalty under Rule 26 of the Central Excise Rules, 2002.
5. The learned Special Consultant for the Revenue made the following submissions:-
5.1 The appellant M/s. J & J Precision Industries, Goa is a proprietary firm of Shri Joit Kumar Jain, engaged in the manufacture of Wrist Watch Cases falling under sub-heading 9111.00 and Wrist Watch Straps falling under sub-heading 9113.00 of the Central Excise Tariff Act, 1985. The main raw-materials used in the manufacture of the said wrist watch cases and straps are brass, stainless steel & mineral glass.
5.2 Based on an intelligence that the appellant-firm was availing irregular & inadmissible cenvat credit on the basis of invoices without receiving any inputs, the officers of DGCEI, Mumbai caused detailed enquiries at various places. In the course of such enquires, the officers made searches of the premises of the appellant-firm, its purported suppliers of inputs and also of the transporters and resumed various incriminating documents examination of which revealed that during the period April 2003 to April 2005, the appellant-firm had availed irregular and inadmissible Cenvat Credit of Rs. 4,45,50,547/- on the inputs, namely, copper, float glass, sheet glass, etc. based on the invoices supplied by 7 different suppliers, without physical receipt of the goods. In the follow-up action, the officers recorded statements of the employees of the appellant-firm, statements of the purported suppliers of inputs and also the statements of the transporters.
5.3 Statements of employees of the appellant firm:
(i) Shri Ratnakar H. Mahale, Accountant & Authorised Signatory, in his statement recorded on 25/04/2005 had, inter alia, stated that copper ingots had never been received in the factory & copper ingots as such had never been/cannot be used in the factory. During recording of his statement, he was shown two invoices, invoice no. 307 dated 23/03/05 & invoice no. 310 dated 24/03/05 of M/s. Annapurna Impex Pvt. Ltd., Ludhiana under which Copper Rods valued at Rs. 480/- per Kg. was shown to have been consigned to the appellant firm and cenvat credit was availed on it. On a query, Shri Mahale admitted that no such material was received in the factory. Shri Mahale also disclosed that there was one more invoice, namely, invoice no. 306 dated 23/03/2005 akin to the above invoices under which no material was received, but cenvat credit was availed by the appellant firm. He voluntarily debited Rs. 5,65,000/- BED and Rs. 42,557/- Cess to the cenvat account. He also voluntarily debited Rs. 6,06,780/- by debit entry no. 27 dated 25/04/2005 towards cenvat credit in respect of invoice no. 78 dated 11/11/2003 and invoice no. 80 dated 14/11/2003 of M/s. Matiz Metals Pvt. Ltd., Meghalaya, under which copper ingots were shown to have been received, though no goods were physically received by the appellant firm.
(ii) Shri A.N. Nagraj, Production in-charge, in his statement recorded on 25/04/2005 had, inter alia, stated that he had been in the employment for the past six months and he had never seen copper being received in the factory. He also stated that for manufacture of components of Wrist Watch Cases & Straps, the unit was using Mineral Glass and not Sheet Glass or Float Glass.
(iii) Shri Prashant R. Naik, employee in charge of issue of raw materials for production and Shri Premchand Pukhraj Bafna, Stores in-charge, who were shown invoice nos. 306 & 307 dated 23/03/05 & invoice no. 310 dated 24/03/12005 issued to the appellant firm by M/s. Annapurna Impex Pvt. Ltd., Ludhiana under which copper rods were shown to have been received in the factory in their statements recorded on 25/04/2005 had, inter alia, categorically stated that no such materials were received in the factory.
(iv) Smt. Namrata Vaze, Accounts Assistant, in her statement recorded on 25/04/2005 had, inter alia, stated that she was working for the last two months and was responsible for preparing the Goods Receipt Note (GRN) of raw materials received in the factory. On being shown the relevant pages of the stock register for receipt of copper rods, she stated that entries in the register had not been made by her.
5.4 Statements of transporters: Scrutiny of central excise invoices issued by M/s. Annapurna Impex and some of the Lorry receipts indicated that the consignments from M/s. Annapurna Impex to the appellants factory at Goa were transported by two transporters, namely, (i) M/s. Satkar Tempo Transport Union, Ludhiana and (ii) M/s. New Satkar Tempo Transport Union, Ludhiana. Hence statements of the transporters were also recorded.
(i) Shri Inderjeet Singh, Proprietor of M/s. Satkar Tempo Transport Union, in his statement recorded on 18/05/2005 had, inter alia, stated that he was operating his transport business in the states of Punjab, Himachal Pradesh, Delhi, Haryana and Uttar Pradesh with vehicles having load bearing capacities of 2 to 4 tons only and hence the said vehicles could not carry the consignments of 10 to 15 tons from Ludhiana to Goa.
(ii) Shri Kulwinder Singh, Proprietor of M/s. New Satkar Tempo Transport Union, in his statement recorded on 18/05/2005 had, inter alia, stated that he had never transported any goods from M/s. Annapurna Impex to the appellants factory at Goa.
5.5 Verification of vehicle particulars mentioned on the C.Ex. Invoices issued by M/s. Annapurna Impex was carried out and a report was obtained in this regard a from the Asstt. Commissioner of Central Excise, Div-I, Jallandhar on 06/12/2005. The said report revealed that three vehicles bearing registration nos. PB-08AE-6428, PB-08X-7854 & PB-08W-3299 were in fact two-wheelers, i.e., Hero Honda Splendor, Scooter & Motor Cycle Hero Honda.
5.6 Factory Premises of M/s. Annapurna Impex were searched under Panchnama dated 18/05/2005. The officers found that there was no facility to manufacture Copper Ingots or Copper Wire Rods nor was there any stock of copper in the factory.
(i) Shri Purushottam Lal, Office Attendant of M/s. Annapurna Impex, in his statement recorded on 18/05/2005 had, inter alia, stated that M/s. Annapurna Impex had no Melting Furnace in their factory and hence no manufacturing facility of Copper Rods in their factory.
(ii) Shri Navneet Agrawal, Managing Director of M/s. Annapurna Impex was summoned on several dates, but he failed to respond to the summons.
5.7 Shri Joit Kumar Jain, Proprietor of the appellant firm, in his statement recorded on 06/07/2005 had, inter alia, stated that he was personally looking after purchase of raw materials. On a query, he stated that M/s. Annapurna Impex, Ludhiana & M/s. Central Steel Corporation were his suppliers of copper items. On a further query, he stated that he had never used copper ingots as raw material in his manufacturing process. He was asked as to whether he purchased the material directly from M/s. Annapurna Impex, he stated that he purchased through a broker named Ashok and the material was delivered at the factory gate and he had never made any payment towards freight. He also stated that no gate register was maintained at his factory for recording such receipt of materials. He was shown the statement of a transporter who had purportedly transported copper items from M/s. Matiz Metals Pvt. Ltd., Meghalaya to his factory at Goa and that he had denied having transported any such materials from Meghalaya to Goa, he stated that he did not know why this person had given such a statement. On a query, he stated that he had purchased the material from M/s. Matiz Metals Pvt. Ltd., Meghalaya through a broker called Vastimal whose particulars he was unable to recall.
5.8 Shri Anirudha Narayan Walawalkar, the person in-charge of design, development and quality of the appellant-firm, in his statement recorded on 06/07/2005, had, inter alia, stated that the main raw materials used were brass, stainless steel and mineral glass in the thickness range of 0.8 to 1.2mm in the manufacturing process of Wrist Watch Cases and Straps. He also stated that float glass and sheet glass of higher thickness shown to have been received by the appellant firm from M/s. Deepak Glass & Plywoods, Bangalore and M/s. Uttam Glass company, Hyderabad could not be used in the manufacturing process of wrist watch cases & straps.
5.9 Shri Ashok Neelkanthappa, Manager of Unit No. III of the appellant firm, in his statement recorded on 06/07/2005, had, inter alia, stated that they were receiving brass strips from Unit-I for manufacture of wrist watch straps on job-work basis. He also stated that he had never done any job-work on copper items.
5.10 Enquires at the end of Deepak Glass & Plywoods, Bangalore revealed that most of the Central Excise invoices issued to the appellant firm bear the same vehicle number and L.R. number as shown in the corresponding suppliers invoice issued to M/s. Deepak Glass & Plywoods, Bangalore. For example, invoice no. 3032481 dated 03/09/2004 of M/s. Gujarat Guardian Ltd. in the name of M/s. Deepak Glass & Plywoods shows vehicle number used for transportation as KA-01/D-0979 under L.R. No. 9527276 dated 03/09/2004 of East India Transport Agency. Corresponding invoice no. 57 dated 06/09/04 issued by M/s. Deepak Glass & Plywoods showing purported sale/transport of the entire consignment to the appellant-firm also shows the same vehicle no. & LR no. though of a different date, i.e. 06/09/2004. Enquiries at the end of the transporters, namely, M/s. Bhorukha Roadlines Ltd., Ankleshwar, M/s. East India Transport Agency, Ankleshwar, M/s. Vikas Road Lines, Ankleshwar & M/s. Time and Space Haulers, Ankleshwar revealed that the material from M/s. Gujarat Guardian was actually off-loaded at the premises of Deepak Glass & Plywoods and none of the transporters had transported the same onward to the premises of the appellant-firm at Goa. On scrutiny of the LRs, it was revealed that on the reverse side of LRs acknowledgements of delivery had been obtained by the transporters concerned from the consignee, i.e. Deepak Glass & Plywoods. It was further observed that some of the LRs bear rubber stamps of Deepak glass & Plywoods and others bear the rubber stamps of the appellant-firm. On a careful examination of the hand written script accompanying the rubber stamps it appeared that although such acknowledgments were shown to have been given in Goa & Bangalore, such hand writing appeared to be of the same person. Hence the matter was referred to the Central Govt. Examiner of Questioned Documents, Hyderabad who vide his report dated 29/11/05 reported that the handwriting in both the cases is of the same person, thus clearing the doubt that the consignment had never been transported to Goa.
5.11 Shri Ambalal Jain, proprietor of Deepak Glass & Plywoods, Bangalore, in his statement recorded on 28/10/2005, had, inter alia, stated that no material had ever been sent to the appellant firm at Goa and bogus invoices had been prepared to facilitate availment of cenvat credit. On a query as to why the rubber stamp of J&J Precision Industries, Goa was affixed on the LRs, he stated that it was affixed at Bangalore by his staff to show that the material had been unloaded at J&J Precisions Industries, Goa.
5.12 Shri Bhavarlal Jain, proprietor of M/s. Uttam Glass Co. in his statement dated 08/11/05 had, inter alia, stated that no material had been dispatched to M/s. J&J Precision Industries. Only invoices were given to it to take fraudulent cenvat credit. When he was shown his invoice no. 002 dated 14/07/2004 for sheet glass and the R.T.O, Thanes report dated 24/10/2005 for vehicle no. MHT-5458 which was a Fiat Car, Shri Jain confirmed that he or his son put some number as vehicle no and that glass sheet could not be transported in Fiat Car.
5.13 Shri Ravindra Mardia, Managing Dierctor of M/s. Mardia Samyoung Capillary Tubes Co. Ltd., Silvassa and Director of M/s. Mardia Tubes Ltd., Tarapur, in his statement recorded on 22/09/2005, had, inter alia, stated that no goods had been physically sent to M/s. J&J Precision Industries, Goa under 40 invoices. On a query, he stated that he received payments by cheque from M/s. J&J Precision Industries which was returned to it by cash and that his profit in the whole transaction was Rs. 2/- per kg. of the material purportedly supplied under bogus invoices.
5.14 A statement of Shri S. Ramakrishnan, Manager Excise of M/s. Titan Industries Ltd., Hosur, was recorded on 08/10/2005 as per which M/s. Titan Industries Ltd. was procuring wrist watch cases/straps from the appellant firm. On being asked, he stated that base metal for these wrist watch cases/straps was brass or stainless steel only and added that he had never come across any pure copper based wrist watch cases/straps.
5.15 A statement of Shri K. Lakshripathy, Managing Director of M/s. Jayashree Horologicals Pvt. Ltd., Bangalore was recorded on 10/10/2005 wherein he had, inter alia, stated that he had supplied to the appellant firm mineral glass of thickness ranging from 0.80 to 1.20 mm. On a specific query, he stated that Float glass/Sheet glass is not usable/used in the manufacture of glasses for wrist watch as these glasses do not meet the transparency and thickness requirements for wrist watches.
5.16 A statement of Shri L. Rangaswamy, Director of M/s. Plasma Gold Coatings Pvt. Ltd., Hosur was recorded on 05/10/2005. In that he had, inter alia, stated that he was engaged in ion-plating of various wrist watch cases/straps. On a specific query, he had stated that he had never received from the appellant firm any wrist watch cases/straps of copper for plating.
5.17 The case of the Department is based not only on the statements of various persons, but also on numerous documentary evidences which are discussed herein below:
(i) Panchnama dated 6/7/2005 drawn at the factory premises of the appellant firm:
On 6/7/2005, the factory premises of the appellant-firm were searched by the officers of DGCEI, Mumbai and various incriminating documents were seized under a Panchnama drawn in the presence of Shri Joit Kumar Jain, Proprietor of the firm and two independent panchas. Perusal of the Panchnama would show that the Officers also ascertained the raw materials lying in stock and found that only brass rods/strips and stainless steel strips were in stock. No item of copper or glass was found in stock. The panchnama is a substantive piece of evidence.
(ii) Panchnama dated 18/05/2005 drawn at the premises of M/s. Annapurna Impex Pvt. Ltd., Ludhiana :
The factory premises of M/s. Annapurna Impex Pvt. Ltd. were searched by the officers of DGCEI, Ludhiana on 18/05/2005 in the presence of its employees and a Panchnama was drawn. No relevant records were found in the factory. However, the officers noted the machinery installed in the factory. They found that there was no facility to manufacture copper ingots or copper wire rods nor was there any stock of copper ingot or copper wire rods in the factory.
(iii) Purchase order tracking register :
The appellant-firm maintains a register called Purchase Order Tracking Register in order to keep track of purchase orders. This register was found to have been maintained from 3/11/2004 onwards. Scrutiny of this register showed that the purchase orders placed on M/s. Annapurna Impex Pvt. Ltd., Ludhiana, M/s. Uttam Glass Company, Hyderabad, M/s. Deepak Glass & Plywoods, Bangalore and M/s. Mardia Samyoung Capillary Tubes Co. Ltd., Silvassa were not entered in the said register. Instead, identical/parallel purchase orders with nos. & dates in the names of some other parties have been entered in the said register. These are shown below in the tabular form:
Sr. No P.O. No. & Date Identical/Parallel P.O. No. & Date
1.
229/2005-2006 dtd. 11.3.2005 placed on M/s. Annapurna Impex Pvt. Ltd., Ludhiana does not find any entry in the PO Tracking Register.
229/2005-2006 dt. 11.3.2005 placed on M/s. Loki Enterprises, Bangalore for Mineral Glass Gasket finds entry in the PO Tracking Register and also shows receipt of items.
2. 185/2005-2006 dtd. 15.1.2005 placed on M/s. Uttam Glass Company, Hyderabad does not find any entry in the PO Tracking Register.
185/2005-2006 dtd. 15.01.2005 placed on M/s. Akshay Marketing for Store items finds entry in the PO Tracking Register and also shows receipt of items.
3. 159/2004-2005 dtd. 13.12.2004 placed on M/s. Deepak Glass & Plywoods, Bangalore does not find any entry in the PO Tracking Register.
159/2004-2005 dtd. 13.12.2004 placed on M/s. Komal Agencies for Store Items finds entry in the PO Tracking Register and also shows receipt of items.
4. 147/2004-2005 dtd. 2.12.2004 placed on M/s. Mardia Samyoung Capillary Tubes Co. Ltd., Silvassa does not find any entry in the PO Tracking Register 147/2004-2005 dtd. 2.12.2004 placed on M/s. Jaico Tools for supply of Store Items finds entry in the PO Tracking Register and also shows receipt of items.
From the above it can be safely inferred that the genuine POs have been entered in the PO Tracking Register, whereas the fictitious POs have not been entered in the PO Tracking Register
(iv) Record no. 85 seized from the factory premises of the appellant-firm is Annexure-IV register maintained by it for removal of partially processed inputs under Rule 57F(2) and/or notification no. 214/86-CE dated 25/03/1986 for further processing/job working. On page no. 7 of this register, there were three entries showing copper rods sent to Unit-III of the appellant-firm under challan no. 33 dated 13/04/2005, challan no. 35 dated 13/04/2005 and challan no. 36 dated 14/04/2005 for manufacture of watch straps. These entries were compared with the seized document no. 3, i.e. Annexure-V register maintained at Unit-III for receipt of inputs or partially processed goods under Rule 57 F(4) and/or notification no. 214/86-CE dated 25/03/1986 for the period 01/01/2005 to 01/07/2005, but no such receipt of copper rods was shown in the said register. It is, therefore, quite evident that no such copper rods were sent to Unit-III. Consequently, no entry was made in the said Annexure-V Register.
(v) Seized document no. 63 is a file containing misc. papers. Page no. 105 is a printed sheet giving specifications of various types of watch cases manufactured by the appellant-firm. This document clearly shows that all the wrist watch cases were made from either brass or stainless steel. Hence, it is evident that no watch case was made by the appellant-firm by using copper.
(vi) Seized document no. 51 is a file containing invoices of M/s. Multi-Arc India Ltd. All the invoices clearly show decorative coating charges for brass watch cases or brass watch straps only. There was no invoice showing decorative coating charges on copper watch cases/straps.
(vii) Application for renewal of factory licence for the year 2005 The appellant had filed an application for renewal of the factory licence for the year 2005 with the Chief Inspector, Inspectorate of Factories & Boilers, Government of Goa along with a list of raw materials used. The said list of raw materials did not show use of copper, float glass or sheet glass. From this it is quite evident that the appellant-firm is not using copper and sheet glass or float glass in the manufacture of wrist watch cases and straps.
(viii) Periodical Returns (ER-1) for the year 2003-2004 :
As per the Returns filed by the appellant-firm for the above period, description of the goods was shown as brass, whereas the invoices from M/s. Mardia Samyoung Capillary Tubes Co. Ltd. showed the description of the goods as Copper Bar.
(ix) Seized documents No.54 is a file containing 1 to 53 pages of design input and output maintained by the Design Department of the appellant-firm. On scrutiny of this document, it was found that all the models are to be developed either in brass or in stainless steel.
(x) Documents No.14 submitted by the appellant-firm under summons on 25/04/2005 revealed that it contains product data for wrist watch cases. Annexure II of this document describes the press shop operations. It is found that different press shop operations have been given only in respect of steel and brass cases. No press shop operation has been given in respect of copper cases. From this also it is clear that wrist watch cases are made by using only steel and brass and not copper.
(xi) Audit Report for the financial year 2003-2004:
The Audit Report for the above period shows details of raw materials and finished products. However, no item of Copper finds any mention in the list of raw materials.
From the above documentary evidences, there is no doubt that the appellant-firm used only brass and stainless steel in making wrist watch cases and straps.
5.18 Cross Examination
(i) The grievance of the appellant-firm is that the Commissioner has denied the cross-examination of the witnesses, though their statements have been relied upon in the impugned order. Consequently, there has been violation of principles of natural justice. It is submitted that the grievance of the appellant-firm is not genuine. The Commissioner has not solely relied upon the statements of various persons. He has considered various other documentary evidences establishing the fact that the appellant-firm had availed Cenvat Credit without receipt of the inputs physically. In light of these facts, it cannot be said that there has been any violation of principles of natural justice by not allowing cross-examination of the witnesses.
(ii) In the case of K. Balan V/s. Govt. of India 1982 (10) ELT 386 (Mad.), the Honble Madras High Court has observed that the right to cross-examine is not necessarily a part of reasonable opportunity. Whether in a particular case, a particular party should have the right to cross-examine or not depends upon the facts and circumstances of the case and it very largely depends upon the adjudicating authority who is not guided by the rules of evidence as such.
(iii) In the case of Indru Ramchand Bharvani V/s. Union of India 1988 (38) ELT 459 (Del.) in para 23, the Honble High Court has observed Eventually each case would turn upon its own facts and circumstances and the conduct of the parties. If the facts are so revealing or improbable as in this case, no useful purpose would be served by cross examination. The facts are to be analysed in the light of the totality of circumstances and the conduct of the parties. This judgment has been affirmed by the Honble Supreme Court as reported in 1992 (59) ELT 201 (S.C.).
(iv) In the case of State of Jammu & Kashmir V/s. Bakshi Gulam Mohammad reported in 1967 AIR 122 (S.C.), the Honble Supreme Court has also observed that the right to cross-examination must depend upon the circumstances of each case and must also depend on the statute under which the allegations are being enquired into.
(v) There is no express provision under the Central Excise Act or the Rules made thereunder that cross-examination of witnesses must be allowed. This, however, does not mean that no cross-examination of witnesses is at all necessary. As submitted herein above, the right to cross examine will depend upon the facts and circumstances of each case. In the present case, there are innumerable documentary evidences establishing the fact that the appellant-firm did not receive the input materials physically. It simply availed the Cenvat Credit based on the invoices given by the purported suppliers. This apart, the inputs (i.e. copper rods, float glass/sheet glass) on which Cenvat Credit was availed by the appellant were not required in the manufacture of wrist watch cases and straps. Therefore, the statements of various persons which merely corroborate the documentary evidences need not be tested again by way of cross-examination of those persons.
(vi) In the present case, though the employees of the appellant-firm had retracted the original statements dated 25/4/2005, in their subsequent statements, they re-confirmed the same as true and correct. They also said that they had given the retraction Affidavits under the influence of Shri Joit Kumar Jain, Proprietor of the appellant-firm.
(vii) In the case of Surjeet Singh Chhabra V/s. U.O.I. 1997 (89) E.L.T. 646 (S.C.), the Honble Supreme Court has held that the confession, though retracted, is an admission and binds the petitioner. So there is no need to call Panch Witness for examination and cross-examination by the petitioner. In the case of Fortune Impex V/s. C.C. Calcutta 2001 (138) E.L.T. 556 (T), the Honble Tribunal has observed that the cross-examination of witnesses, wherever necessary, has to be allowed in Departmental Proceedings. But it is not required that in each and every case cross-examination should necessarily be allowed. There is no absolute right of cross-examination provided in the Customs Act. Hence, it cannot be demanded as a matter of right. The presumption is that unless the noticee makes out a case for cross-examination , he will not be granted cross-examination.
(viii) In the present case, the appellant had requested for cross-examination of certain witnesses vide its letters dated 09/06/2006 and 26/06/2006 without giving any reason or justification, whatsoever. Therefore, the grievance of the appellant that he has been denied cross-examination in violation of the principles of natural justice is totally unacceptable.
(ix) Learned Counsel for the appellant-firm, heavily relied upon the judgment of the Honble Delhi High Court in the case of J & K Cigarettes Ltd. V/s. C.C.E. 2009 (242) E.L.T. 189 (Del.) and the judgment of the Allahabad High Court in the case of C.C.E, Meerut I V/s. Parmarth Iron Pvt. Ltd., - 2010 (260) E.L.T. 514 (All). In the case of J & K Cigarettes, the Honble High Court has observed that though the right of cross-examination in any quasi-judicial proceeding is a valuable right, it can be taken away under certain circumstances. In other words, it is not necessary in each and every case. In the case of Parmarth Iron Pvt. Ltd., the Honble High Court has held that cross-examination of witnesses is to be given if their statements are relied upon by the revenue. However, this judgment cannot be said to be an authority to say that cross-examination of witnesses is to be given in each every case.
(x) In the present case, the documentary evidences are so overwhelming that even without the statements of various persons the documentary evidences alone are sufficient to hold that the appellant-firm did not receive the input materials physically and it availed of the Cenvat credit only on the basis of invoices given by the purported suppliers. Having regard to these facts and circumstances, there has been no violation of principles of natural justice by not allowing cross examination of the witnesses.
5.19 Penalties under Rule 26 of the Central Excise Rules on the co-noticees.
It is submitted that the co-noticees are guilty of aiding & abetting the appellant-firm in availing irregular & inadmissible cenvat credit. But for their active assistance and co-operation, the appellant-firm could not have been able to avail of such irregular & inadmissible cenvat credit. Hence imposition of penalties on them under Rule 26 of the Central Excise Rules, 2002 is q justified. In this connection, reliance is placed on the following judgments/decisions:
(i) Sachidananda Banerjee, ACC, Calcutta V/s.Sitaram Aggarwala - 1999 (110) ELT 292 (SC)
(ii) Dr. Writers Food Products V/s. CCE, Pune II - 2009 (242) ELT 381 (Tri-Mum) In view of the foregoing submissions, the impugned order dated 29/06/2007 passed by the Commissioner is required to be confirmed.
6. We have carefully considered the submissions made by both the sides.
7. Our findings and conclusions are enumerated in the ensuing paragraphs.
7.1 M/s.J&J Precision Industries, the main appellant contends that the principles of natural justice have been violated inasmuch as no opportunity of cross examination was given in spite of request of the various deponents of the statements recorded under Section 14 of the Central Excise Act. In the absence of opportunity to cross examine the deponents, prejudice has been caused to the appellant and therefore, the impugned order is not sustainable in law. A strong reliance is placed on the decision of the Honble High Court of Delhi in the case of J & K Cigarettes Ltd. Vs. CCE 2009 (242) ELT 189 (Del) and the decision in the case of Basudev Garg Vs.CC 2013 (294) ELT 353 (Del). In these decisions it has been laid down that Section 9D to the Central Excise Act mandate that the statements recorded under Section 14 shall be relevant for the purpose of proving an offence under the said Act, and therefore, right of cross examination of the deponents of statements has to be given if they are relied upon by the Revenue to prove the charge against the accused. Only in certain situations, namely, when a person who made statement is dead or cannot be found, or incapable of giving evidence, or is kept out of the way by the adverse party, or whose presence cannot be obtained without an amount of delay or expense, which under the circumstances of the case, the court considers unreasonable, statements can be relied upon without cross examination. In all other situations, the statement against the assessee cannot be used without giving them an opportunity of cross examining the deponents. Cross examination is a valuable right of the accused/noticee in a quasi-judicial proceedings which can have adverse consequences and therefore, as a matter of practice, the right of cross examination has to be granted to the noticee. It is the contention of the appellant that these rights have been denied to them inasmuch as Revenue has heavily relied upon these statements, in support of the charge against the appellants and therefore, the principles of natural justice violated in the present case. It is therefore, pleaded that the matter be remanded back to the adjudicating authority for grant of cross examination of the deponents of the statements which have been relied upon and thereafter, for passing a fresh order in accordance with law.
7.2 The learned Special Consultant for the Revenue has contended that no prejudice has been caused to the appellants by denial of cross examination as the documentary evidences in support of the allegations in the show-cause notice are overwhelming and therefore, even without cross examination of the witnesses , the some conclusion could have been arrived at. It is also pleaded that cross examination is not a matter of right and the decision to allow cross examination depends on the facts and circumstances of the case.
7.3 In their request for cross examination vide letter dated 09/06/2008, the appellant M/s.J&J Precision Industries had sought cross examination of M/s.Annapurna Impex Pvt. Ltd., Mardia Samyoung Capillary Tubes Co. Ltd., M/s.Mardia Tubes Ltd., M/s.Jay Wire and Conductors, M/s.Deepak Glass & Plywoods, M/s.Uttam Glass Co., & M/s.Lata Steels. Nowhere in the said letter they have made any specific request as to who is the person to whom they want to cross examine and what is the relevance of the cross examination in respect of the persons whose cross-examination has been sought for. Thus, the request for cross examination made by the appellant itself is faulty and lacks details.
7.4 In the case of K Balan Vs.GOI (supra), the Honble Madras High Court held that the right to cross examine is not necessarily a part of a reasonable opportunity and depends upon the facts and circumstances of each case. It largely depends upon the adjudicating authority who is not guided by the rules of evidence as such but who must afford such opportunity to the party concerned as would ensure him proper opportunity to defend himself. Similarly in the case of Mehek Glazes Pvt. Ltd., Vs. UOI (supra) the Honble High Court of Gujarat held that the right to cross examine has to be examined by the adjudicating authority separately and a decision taken thereon. The adjudicating authority has the right to reject the request for cross examination and if he exercises this right judiciously, it cannot be said that the principles of natural justice have been violated. In Bharti Bhutada case (supra), it was held that cross examination of witnesses cannot be claimed as a matter of right. If the reasoning for denial of cross examination is stated clearly before the adjudication process is completed, then it cannot be said that there is any denial of principles of natural justice.
7.5 In the present case, we notice that before the proceeding with the final adjudication, the adjudicating authority had given a hearing on the request of the appellant with regard to cross examination and had rejected the request giving reasons for such denial. The record of personal hearing dated 19/06/2006 & 30/06/2006 clearly shows the consideration of the request made by the appellant for cross examination and the reasons for rejection. Further, Shri Ravindra Mardia, Managing Director of M/s.Mardia Samyoung Capillary Tubes Co. Ltd. & Director of Mardia Tubes Ltd. had submitted before the adjudicating authority that the case should be decided based on the evidence available on records and by taking a lenient view. He also refused to be cross-examined by the main appellant. Similarly, M/s.Deepak Glass & Plywoods and M/s. Uttam Glass Co. have also stood by their statements recorded under Section 14 and have stated so before the adjudicating authority. Their only plea before the adjudicating authority was that the mistakes committed by them be condoned and a lenient view be taken. In view of this factual position, the denial of cross examination of the co-appellants, namely, M/s.Mardia Samyoung Capillary Tubes Co. Ltd., M/s.Mardia Tubes Ltd., M/s.Deepak Glass & Plywoods and M/s. Uttam Glass Co. could not said to have caused any prejudice to the appellants.
7.6 From the records, it is seen that the appellants own employees, namely, Shri Ratnakar H. Mahale, Accountant & Authorised Signatory, Shri A.N. Nagraj, Production in-charge, Shri Prashant R. Naik, employee, Shri Premchand Pukhraj Bafna, Stores in-charge and Smt Namrata Vaze, Accounts Assistant, in their statements recorded under Section 14 of the Act, had clearly admitted that the appellant never received any copper ingots or rods from M/s. Annapurna Impex Pvt. Ltd., Ludhiana and only credit was taken without receipt of the goods, both in respect of M/s. Annapurna Impex Pvt. Ltd., and M/s. Matiz Metals Pvt. Ltd., Meghalaya. Though some of these statements were retracted, they were re-confirmed in the subsequent statements and the deponents have also admitted that they were forced to retract their original statements in view of the pressure exerted by Shri. Joit Kumar Jain, Proprietor of the main appellant firm. This is also corroborated from the statement of Shri Narayan Walwalkar who admitted to issuing job-work challans indicating gold-plating of watch casings while in fact no such activity was undertaken. Thus from the records available on records, it is clearly seen that Shri. Joit Kumar Jain has been exerting undue influence to thwart the investigation which is a judicial proceeding. Recording of a statement under section 14 of the Central Excise law by issue of summons is a judicial proceeding under the Indian Penal Code. In these circumstances, statements of the employees of the main appellant which are corroborated by the incriminating documents seized during investigation can be fully relied upon as provided for under the exceptional circumstances specified in section 9D as exerting undue influence to retract the statement would also amount to keeping out of the way by the adverse party.
7.7 Now let us see whether denial of cross-examination of M/s Annapurna Impex has caused any prejudice to the appellant. When the factory of M/s Annapurna was searched on 18/5/2005 under a panchnama proceeding, it was noticed that the said firm had no facility to manufacture copper ingots or copper wire rods nor was there any stock of copper in the factory. Sri. Purushottam Lal, office attendant, who was present at the time of search, also confirmed that the said firm had no melting furnace in their factory and no manufacturing facility for copper rods in their factory. Further in many of the invoices/LRs issued by Annapurna, the names of the transporters were found to be M/s Satkar Tempo Transport Union and M/s New Satkar Tempo Transport Union, Ludiana. When the proprietors of these firms S/Shri. Inderjeet Singh and Kulwinder Singh were examined, they had clearly stated that they had never transported any goods from M/s Annapurna, Ludiana to M/s J&J Precision Ind. at Goa. These statements were never retracted nor the appellant had sought any cross examination of these transporters. Further some of the vehicles, whose registration Nos. figured in the transport documents, were found to be two-wheelers, namely, Hero Honda Splendour, Scooter and Motor cycles. Thus sufficient documentary evidence is available on records to show that the appellant did not receive any copper ingots/rods from M/s Annapurna. It is also on record that the Sri.Navneet Ararwal, Managing Director of M/s Annapurna failed to respond to the many summons issued by the investigating agency which also reveals his non-cooperative attitude. Once the revenue establishes by way of documentary evidence/ statements the non-receipt of the goods on which credit has been taken, the onus of proof that the appellants did receive these goods shifts to the appellant. The appellant has not discharged this onus cast on them in any meaningful manner. In these circumstances, the cross examination, if given, would have led to only inordinate delay and expense which, under the circumstances of the case, could be considered as unreasonable. It is also pertinent to note that the purchases from M/s Annapurna, who was the biggest supplier of copper ingots/bars, was not done directly but through a broker Mr. Ashok whose last name Sri. Joitkumar Jain was unable to recall and about whom no information could be furnished. Further, in spite of such large supplies made, no payment towards freight was made by the appellant nor the receipt of the goods from M/s Annapurna was found recorded in the gate register of the appellant firm. Further, the orders relating to supplies form Annapurna was also not found in the purchase tracking register maintained by the appellant. Thus the evidences available on record as discussed above clearly reveals non-receipt of any goods from M/s Annapurna. Similar is the case in respect of purchase of copper bars/rods from M/s Matiz Metals Pvt. Ltd., Meghalaya. The statement of the transporter clearly shows that no such material was transported. In this case also, the purchases were effected through a broker called Vastimal whose particulars/whereabouts could not be given by Shri. Joit Kumar Jain. In these circumstances, the only conclusion that can be drawn is that no prejudice has been caused to the appellant by denial of cross examination of M/s Annapurna and M/s Matiz Metals and we hold accordingly.
7.8 The fact that the appellant never received copper ingots/rods and never used the same in the manufacture of watch cases/straps is also corroborated by the statements of the employees of the appellant firm. Sri Ratnakar Mahale, Accountant and authorized signatory in his statement dated 25/4/05 has confirmed that copper ingots had never been used in their factory. He had also voluntarily debited sums of Rs.6,08,057/- and Rs.6,06,780/- in respect of invoice nos. 306 dated 23/3/05 of M/s Annapurna and invoice nos. 78 dated 11/11/03 and 80 dated 14/11/03 of M/s Matiz Metals on 25/04/05. Similarly Sri. Nagaraj, Production in charge of the appellant firm had also stated that he had never seen copper ingots/rods being received in the factory. He has further confirmed that for manufacture of wrist watch cases and straps, they were using mineral glass and not sheet/float glass. Sri. Prashant Naik, in-charge for issue of raw materials for production and Shri Premchand Bafna, Stores in-charge have also confirmed that they have never received copper rods from M/s Annapurna. Smt. Namrata Vaze, Accounts Assistant, responsible for preparing Goods Receipt Note has also confirmed the non-receipt of copper rods. These statements of the people concerned with the production, inventory and accounts of the appellant firm corroborate the non-receipt and non-use of copper rods and sheet/float glass in the manufacture of watch cases/straps by the appellant. It is also on record that the appellant did not maintain any record in respect of receipt of raw materials in its factory. These admissions coupled with the statements of the transporters, Shri Inderjeet Singh, Proprietor of M/s. Satkar Tempo Transport Union and Shri Kulwinder Singh, Proprietor of M/s. New Satkar Tempo Transport Union, clearly establish the case against the appellant in respect of ineligible cenvat credit on account of supplies allegedly made by M/s. Annapurna Impex Pvt. Ltd. to the appelalnts factory in Goa. Verification of a few of the vehicles, allegedly used for transportation from M/s. Annapurana, namely, vehicles bearing Registration Nos.PB-08AE-6428, PB-08X-7854 & PB-08W-3299, showing the vehicles used to be scooters and motor cycles, fortifies the case against the appellant. Shri Joit Kumar Jain, Proprietor of the main appellant has also confirmed in his statement that they had never used copper ingots in the manufacturing process.
7.9 More evidences have been unearthed by the investigation to prove their case. Shri Anirudha Narayan Walvalkar, the person-in-charge of design, development and quality of the appellant firm, in his statement, has admitted that float glass and sheet glass are not used in the manufacture of wrist watches and only brass and stainless steel and mineral glass are used, that too of specified thickness, in the manufacture of watch straps/cases. In the declaration made to the Chief Inspector, Inspectorate of Factories and Boilers, the appellant had declared the raw materials to be Brass rod, Stainless Steel, Mineral glass, case pipe, oring and so on and copper rods/bars, float glass and sheet glass never figured in the said declaration. The case specifications recovered during the search proceedings clearly indicated the raw materials used for various types of watch cases to be brass/stainless steel. These corroborative evidences available on record also establish the fact the appellant never used any copper rods/bars and sheet/float glass in their manufacturing activities.
7.10 A major buyer of the appellants products namely, M/s. Titan Industries Ltd., Hosur, has confirmed that they were procuring wrist watch cases/straps from the appellant firm, which was made of brass/stainless steel and have never come across any copper based wrist watch cases/straps. Similarly, M/s Jayashree Horologicals, who had supplied glass materials to the appellant, also confirmed that they had supplied mineral glass of thickness ranging from 0.80 to 1.20 mm. They have further confirmed that float glass/sheet glass are never used in the manufacture of wrist watches as they do not meet the transparency and thickness requirement for wrist watches. M/s Plasma Gold Coatings Pvt. Ltd. who were engaged in ion-plating of wrist watch cases/straps for the appellant have also confirmed that they had never received from the appellant firm any wrist watch cases/straps of copper for plating.
7.11 As regards the purchase of copper/brass bars/rods from M/s Mardia Samyoung Capillary Tubes Co. Ltd. and M/s Mardia Tubes Ltd. under 40 central excise invoices during the period March 2003 to December, 2004 is concerned , Sri Ravindra Mardia has categorically admitted before the investigating officers that they had not supplied any materials under these invoices to the main appellant herein. He has further confirmed that the payments allegedly made by the main appellant were returned in cash and he did this for a consideration of Rs.2 per kg. The same position has been maintained by Sri Mardia before the adjudicating authority as well as before this Tribunal. Therefore, the appellants claim in this regard completely fails and the availment of Cenvat credit to the extent of Rs.80,53,102/- is on the strength of bogus/fake documents issued by these two firms.
7.12 As regards the supplies made by M/s Deepak Glass & Plywood and Uttam Glass Co., Sri. Ambalal Jain and Sri. Bhavarlal Jain, Proprietors of these firms respectively, have admitted that no material was sent to M/s J & J Precision Ind. and the documents issued in this regard were bogus/fake. The goods procured by M/s Deepak Glass & Plywood from M/s Gujarat Guardian Ltd. were transported to Bangalore and off-loaded there as per the statements of the transporters M/s Bhorukha Road Lines, M/s East India Shipping Agency, M/s Vikas Road Lines and so on. These documents were also forensically examined and it was found that the endorsements showing receipt at Goa by the main appellant were forged. Further the vehicle used for the alleged transportation by M/s Uttam Glass was found to be a Fiat Car which was incapable of being used for transportation of goods. Similarly in the case of supplies allegedly made by M/s Lata Steels, the vehicle used for transportation was found to be a tanker.
7.13 From these substantial evidences available on record, it is abundantly clear that the main appellant M/s J & J Precision Industries never received any copper bars/rods, float glass/sheet glass or stainless steel materials from the suppliers mentioned in paragraph II above and cenvat credit was availed on the strength of bogus/manipulated documents. In the light of these evidences available on record, the charge against the main appellant stands clearly established and therefore, the order of the adjudicating authority confirming the duty demand cannot be faulted at all except in respect of a sum of Rs.59,21,157/- reversed by the Appellants in RG-23 Part II on account of return of goods to M/s.Annapurna Impex Pvt. Ltd.
7.14 An issue of fraudulent availment of cenvat credit using bogus transport documents arose for consideration by this Tribunal in the case of Viraj Alloys Ltd. vs. CCE, Thane - II 2004 (177) ELT 892 (Tri-Mumbai). In that case, enquiry with the RTO revealed that the registration numbers of the vehicles mentioned in the invoices were mostly non-transport vehicles and the assessees were not able to produce the gate registry for entry of the vehicles. In that context it was held by this Tribunal that the assessees are not eligible to avail CENVAT credit covered by those invoices. A similar view was taken by this Tribunal in the case of Ranjeev Alloys Pvt. Ltd. vs. CCE, Chandigarh 2009 (236) ELT 124 (T). In that case also this Tribunal held that the assessee is not entitled for CENVAT credit of the duty paid on the inputs covered by the invoices where the transport vehicles were found to be incapable of carrying the goods covered by the invoices. It was further held that once the department establishes that the details given in the transport documents are not genuine, the onus shifted to the appellants to prove that the goods were duly received by them. In the case of A.N.Guha & Co. vs. Collector [1996(86) ELT 333], this Tribunal held that it is not necessary for the department to establish a fact with mathematical precision. Once the presumption as to the existence of a fact is raised against the assessee that the input has not been transported in the vehicle mentioned in the invoices, it is reasonable to say that the inputs were not received in the factory. In our considered view, the ratio of these decisions applies squarely to the facts of the case before us.
7.15 The degree of proof required to establish facts in a civil case was examined by the honble Apex Court in the case of R.V.E. Venkatachala Gounder vs. Arulmigu Viswesaraswami & V.P. (order dated 08/10/2003 in Civil Appeal No.10585 of 1996) and the hon'ble apex Court held as follows:-
" Whether a civil or a criminal case, the anvil for testing of proved', disproved' and not proved', as defined in Section 3 of the Indian Evidence Act, 1872 is one and the same. A fact is said to be proved' when, if considering the matters before it, the Court either believes it to exist, or considers its existence so probable that a prudent man ought, under the circumstances of a particular case, to act upon the supposition that it exists. It is the evaluation of the result drawn by applicability of the rule, which makes the difference. "The probative effects of evidence in civil and criminal cases are not however always the same and it has been laid down that a fact may be regarded as proved for purposes of a civil suit, though the evidence may not be considered sufficient for a conviction in a criminal case. BEST says : There is a strong and marked difference as to the effect of evidence in civil and criminal proceedings. In the former a mere preponderance of probability, due regard being had to the burden of proof, is a sufficient basis of decision: but in the latter, especially when the offence charged amounts to treason or felony, a much higher degree of assurance is required. (BEST, S.95). While civil cases may be proved by a mere preponderance of evidence, in criminal cases the prosecution must prove the charge beyond reasonable doubt. Similarly in the case of Collector of Customs, Madras vs. D. Bhoormul [2002-TIOL-253-SC-CUS] the hon'ble Court further held as follows:
"It cannot be disputed that in proceeding for imposing penalties under Clause (8) of S.167 to which s. 178-A-does not apply, the burden of proving that the goods are smuggled goods, is on the Department. This is a fundamental rule relating to proof in all criminal or quasi-criminal proceedings, where there is no statutory provision to the contrary. But in appreciating its scope and the nature of the onus cast by it, we must pay due regard to other kindred principles, no less fundamental, of universal application. One of them is that the prosecution or the Department is not required to prove its case with mathematical precision to a demonstrable degree, for, in all human affairs, absolute certainty is a myth, and-as Prof. Brett felicitously puts it all exactness is a fake" El Dorado of absolute proof being unattainable, the law accepts for it, probability as a working substitute in this work-a-day world. The law does not require the prosecution to prove the impossible. All that it requires is the establishment of such a degree of probability that a prudent man may, on its basis, believe in the existence of the fact in issue. Thus, legal proof is not necessarily perfect proof; often it is nothing more than a prudent man's estimate as to the probabilities of the case. If we apply the ratio of these decisions to the facts of the case before us, there is substantial evidence by way of documentary evidence and by way of confessional statements to establish the fraudulent availment of cenvat credit by the appellant. The main appellant has not been able to produce any evidence in support of receipt of the goods or its utilization.
7.16 From the evidences available on record as discussed in detail in the preceding paragraphs, it is evident that the main appellant played a fraud on the exchequer by availing ineligible credit without receipt of materials on the strength of fake/forged/bogus documents. The honble apex court in Commissioner of Customs (Preventive) vs M/s Aafloat Textiles (I) Pvt Ltd [2009-TIOL-42-SC-CUS] had held as follows:-
A "fraud" is an act of deliberate deception with the design of securing something by taking unfair advantage of another. It is a deception in order to gain by another's loss. It is a cheating intended to get an advantage
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"Fraud" as is well known vitiates every solemn act. Fraud and justice never dwell together. Fraud is a conduct either by letter or words, which includes the other person or authority to take a definite determinative stand as a response to the conduct of the former either by words or letter. It is also well settled that misrepresentation itself amounts to fraud. Indeed, innocent misrepresentation may also give reason to claim relief against fraud. A fraudulent misrepresentation is called deceit and consists in leading a man into damage by willfully or recklessly causing him to believe and act on falsehood. It is a fraud in law if a party makes representations, which he knows to be false, and injury ensues therefrom although the motive from which the representations proceeded may not have been bad. An act of fraud on court is always viewed seriously. A collusion or conspiracy with a view to deprive the rights of the others in relation to a property would render the transaction void ab initio. Fraud and deception are synonymous. Although in a given case a deception may not amount to fraud, fraud is anathema to all equitable principles and any affair tainted with fraud cannot be perpetuated or saved by the application of any equitable doctrine including res judicata. This observation of the honble apex court applies on all fours to the facts of the present case.
7.17 In view of the foregoing discussion, we uphold the confirmation of demand of Rs.3,86,29,390/- (Rs.4,45,50,547 minus Rs.59,21,157, already reversed in respect of the material returned to M/s Annapurna) along with interest thereon under the provisions of Rule 12/14 of the Cenvat Credit Rules, 2002/2004 read with section 11A(2) and 11AB of the Central Excise Act, 1944.
7.18 As regards the penalty imposed under section 11AC, the penalty is no doubt imposable as the appellant has played a fraud on the exchequer. However, imposition of penalty both on the proprietory firm and the proprietor is not correct in law. Therefore, while upholding the penalty imposed on the proprietory firm M/s J & J Precision Industries under section 11AC equivalent to the duty demand confirmed as above , we set aside the penalty imposed on the proprietor Sri. Joit Kumar Jain.
7.19 As regards the penalties on Annapurna Impex Pvt.Ltd., Mardia Samyoung Capillary Tubes Co. Ltd., Mardia Tubes Pvt. Ltd., Jay Wire & Conductors, Deepak Glass & Plywoods, Uttam Glass Company, Lata Steels, Shri Navneet Agrawal, Shri Ravindra Mardia, Ramesh Ratilal Chauhan,Shri Ambalal Jain,Shri Bhavarlal Jain Shri Pawan Lata, Shri Pravin Singh, Gullchem Industries and Shri Narayan Walvalkar , the said penalty has been imposed under Rule 26 of the Central Excise Rules, 2002. This imposition of penalty cannot be sustained as at the relevant time there was no provision for such imposition on the persons issuing fake documents for availing Cenvat Credit. The provisions for imposition of penalty on persons issuing documents on the basis of which, the user is likely to take or has taken any ineligible credit was introduced in the said Rule 26 only with effect from 01/03/2007. Since the period involved in the present appeal is prior to 2007, the said penalty cannot be sustained. However penalty is imposable on them under the residuary Rule 27 of the Central Excise Rules, for violation of the provisions of these Rules. At the relevant time, the maximum penalty imposable under the aforesaid Rule was only Rs.5000/- Therefore, we impose a penalty of Rs.5000/- each on Annapurna Impex Pvt.Ltd., Mardia Samyoung Capillary Tubes Co. Ltd., Mardia Tubes Pvt. Ltd., Jay Wire & Conductors, Deepak Glass & Plywoods, Uttam Glass Company, Lata Steels, Shri Navneet Agrawal, Shri Ravindra Mardia, Sri. Ramesh Ratilal Chauhan, Sri. Pawan Lata, Sri Pravin Singh and M/s Gullchem Industries, after excluding the proprietors, where penalty has already been imposed on the proprietory firms.
The appeals are disposed of in the above terms.
(Pronounced in the Court on ) (Anil Choudhary) Member (Judicial) (P.R.Chandrasekharan) Member (Technical) pj 46