Gujarat High Court
Gyscoal Alloys Ltd & vs Commissioner Of Central Excise ... on 13 January, 2014
Author: Akil Kureshi
Bench: Akil Kureshi, Sonia Gokani
O/TAXAP/812/2013 ORDER
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
TAX APPEAL NO. 812 of 2013
============================================================
====
GYSCOAL ALLOYS LTD & 1....Appellant(s)
Versus
COMMISSIONER OF CENTRAL EXCISE III....Opponent(s)
================================================================
Appearance:
MR PARESH M DAVE, ADVOCATE for the Appellant(s) No. 1 - 2
MS AMEE YAJNIK, ADVOCATE for the Opponent(s) No. 1
================================================================
CORAM: HONOURABLE MR.JUSTICE AKIL KURESHI
and
HONOURABLE MS JUSTICE SONIA GOKANI
Date : 13-15/01/2014
ORAL ORDER
(PER : HONOURABLE MR.JUSTICE AKIL KURESHI) Assessee has challenged the orders passed by the Excise Authorities as confirmed by the Customs, Excise and Service Tax Appellate Tribunal raising following questions for our consideration :
"A. Whether denial of cenvat credit of Rs.8,99,805/- to the appellant Company for December, 2006 is justified and sustainable in the facts of the present case?
B. Whether the case of the Revenue that the appellant Company availed cenvat credit of Rs.8,99,805/- in December 2006 without receiving concerned inputs is correct and sustainable in the facts of the present case?Page 1 of 9
O/TAXAP/812/2013 ORDER
C. Whether the demand for cenvat credit of RS.8,99,805/-
raised in December, 2010 was not barred by limitation?"
Issue arose out of a show cause notice dated 28.12.2010 issued by the Joint Commissioner of Central Excise calling upon the assessee to state why Cenvat credit to the tune of Rs.8.99 lacs (rounded off) wrongly availed by them should not be recovered with interest and penalties. The premise for issuing such a notice was that on the basis of specific intelligence that the assessee was engaged in evasion of excise duty by availing Cenvat credit without actually receiving inputs from the sister concern, a search of the factory premises was carried out on 14.3.2007. During search, it was found that stock of 57.425 MT of TMT/CTD bars were found lying in the factory premises. It was further noticed that ingots, scrap and TMB/CTD bars received under various invoices were not available though it was shown as lying in balance as per the account register of the assessee. Statements of one Shri Viral M. Shah, Director of the firm was recorded on the same day where he confirmed the conclusions of the physical stock taking. He stated that MS ingots and CTD/TMT bars were received from Gyscoal Energy Pvt. Ltd. The assessee had also taken cenvat credit on such goods, but found that they were not fit for melting and therefore the same were sold on cash to local traders without invoice and without reversing the cenvat credit.
Further statement of Shri Viral M. Shah was recorded on 23 rd March 2007 where he confirmed his earlier statement. Yet another statement was recorded on 24.12.2007 when he was confronted with the reports received from RTO authorities about transporting the goods in question through vehicles whose registration numbers were recorded by the assessee in their records. The case of the Revenue was that such Page 2 of 9 O/TAXAP/812/2013 ORDER vehicles were not capable of transporting the articles such as iron ingots and bars. The show cause notice therefore urged that the assessee had wrongly availed the cenvat credit to the tune of Rs.8.99 lacs without actually receiving the goods. It was alternatively suggested that even if for the sake of assumption the goods were received, then also, the same were removed without reversing the cenvat credit availed on them. It was on such basis the show cause notice was issued.
The assessee replied to the show cause notice and opposed the proposals contending, inter alia, that the goods were actually received and further that part of the goods were lying in the premises of the sister concern and invoice made of the assessee was a mere mistake. The Adjudicating Authority rejected the defence of the assessee and confirmed the duty demand and interest and imposed penalties making following observations:
"Discussion and Findings:
11. I have gone through the facts of the case, the written submissions and the contentions raised during the course of personal hearing. The allegation against M/s.Gyscoal Alloys Ltd (Furnace Division) is that:
the invoices (as per Annexure B to the notice dated 28.12.2010 issued by M/s.Gyscoal Energy Pvt. Ltd., were not genuine as the vehicle numbers mentioned on the body of the invoices were either not allotted to anybody or the said vehicles were incapable of carrying the quantity of the load factor covered under the said invoices.
M/s.Gyscoal Alloys Ltd. (Furnace Division) had wrongly availed Cenvat Credit to the tune of Rs.8,99,805/- on the basis of invoices (as per Annexure A) without actually receiving the goods.
Page 3 of 9O/TAXAP/812/2013 ORDER Even otherwise if the goods were received then also they were removed without preparing Central Excise invoice and without reversing Cenvat credit availed on the same.
12. M/s.Gyscoal Alloys Ltd. (Furnace Division) have in their written submission raised various plea questioning the notice. Their major plea is that except for RTO verification, there is no other cogent and reliable evidence. Secondly, they have further stated that all these items were recorded in the statutory records, that payments were made through cheques (to emphasize the genuineness of the transactions); that the vehicles nos. were wrongly mentioned as semi-literate persons were handling these work related to preparation of invoices.
13. I would first like to deal with the submissions made vide their letter dated 18.5.2011. As far as doubting the investigation is concerned, I find that a person none other than Director of the firm in his statements has specifically admitted the allegations. In fact he has even accepted the shortage in respect of inputs which was noticed during the course of stock taking during panchnama. To get into the reasons for shortage, the verification conducted through RTO (an independent Government organization) has revealed that the goods were never transported to the Furnace Division. I find that the goods were sold by their sister concern. It is obvious that the payments were made in cheque to give sanctity to these transactions. Being interconnected units, this argument of payment by Cheque does not advance their case. Even otherwise, for the sake of argument, if it is accepted that the goods were received, then also, there is n defence advanced to contradict the shortage. Holding revenue guilty of not probing the buyers angle (in case the goods were received) is not a mature argument, in so far as removal to traders without invoices would become difficult to investigate/trail if the party in question does not cooperate and give out the names of traders to whom the goods have been sold. Revenue cannot be expected to magically identify the names of traders when the person who has entered into dubious transaction fails to remember the names of traders. Non-cooperation of the assessee has been the highlight of the notice. The charge of removal of input as such without reversal of duty and without preparation of invoices has also been accepted. In fact I find that till date the same has not been denied by way of an affidavit. Now questioning the investigation appears to be an after thought.
Page 4 of 9O/TAXAP/812/2013 ORDER
14. Regarding availment of credit on TMT/CTD bars, it is amply clear from the RTO verification, that the goods have not been received. However, even otherwise it is admitted fact that the same were required for civil work in rolling division and the credit was availed in Furnace division. In fact during the physical stock taking at the Rolling division, the exact quantity of the bars were found in excess. The physical stock taking has not been refuted. What more evidence can be garnered and what more is expected from Revenue when stock taking has given credence to the allegation.
15. What surprises me to no end is the contention that semi- literate persons were handling the most pivotal work of preparation of bills/invoices and therefore the argument goes, the vehicles nos. must have been wrongly mentioned. Business such as these, runs on two important elements viz. manufacturing and sales. No prudent person would entrust such an important function of sales which generates revenue and on which business strives to any semi-literate person. Was the person only committing mistakes as far as mentioning the number of vehicles is concerned. Had this mistake been made in mentioning the quantity, the loss to the business would have been enormous. Going by these facts, I find the argument untenable.
16. In view of the foregoing, there remains no doubt that the invoices (as per Annexure B to the notice dated 28.12.2010) issued by M/s.Gyscoal Energy Pvt. Ltd. were not genuine as the vehicle numbers mentioned on the body of the invoices were either not allotted to anybody or the said vehicles were incapable of carrying the quantity of the load factor covered under the said invoices and therefore M/s.Gyscoal Alloys Pvt. Ltd. (Furnace Division) had wrongly availed Cenvat Credit to the tune of Rs.8,99,805/- on the basis of invoices (as per Annexure A) without actually receiving the goods. For the sake of argument, even if the goods were received then also they were removed without preparing Central Excise invoice and without reversing Cenvat credit availed on the same. Hence, even in such a scenario, the credit availed needs to be demanded back. These facts were never revealed to the department with an intent to evade payment of duty. Hence, I hold that the Cenvat Credit to the tune of Rs.8,99,805/- availed on the invoices as mentioned in Annexure A to the notice is liable to be demanded and recovered under the provisions of Rule 14 of the Page 5 of 9 O/TAXAP/812/2013 ORDER Cenvat Credit Rules, 2004 read with proviso to Section 11A of the Central Excise Act, 1944 along with interest under Section 11AB of the Central Excise Act, 1944 on account of violation of Rule 3 f CENVAT Credit Rules, 2004.
17. Further, on the question of imposition of penalty, I find that the is a clear case of suppression of facts from the department with an intent to evade payment of duty thereby making them liable for penalty under Rule 15 of the Cenvat Credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944.
18. I further find that Shri Viral M. Shah, Director of M/s.Gyscoal Alloys Pvt Ltd was the person concerned, who acquired the possession of, or is in any way concerned in transporting, removing, depositing, keeping, concealing, selling or purchasing, or in any other manner dealt with the excisable goods which he knew and had reason to believe that the same are liable for confiscation. These acts, have rendered him liable for penal action under Rule 26 of the Central Excise Rules, 2004.
The assessee challenged such order before the Appellate Authority. The Appellate Authority rejected the appeal placing considerable stress on the RTO report produced by the Department showing that the modes of transportation of the inputs as declared in the invoices were dubious. The stand of the assessee that there was a mistake in mentioning the vehicle numbers in the invoices due to plain human error was not accepted.
The orders passed by the Appellate Commissioner were challenged before the Tribunal in two appeals. Before the Tribunal a request was made for remand of the proceedings before the Commissioner on the ground that certain factual aspects were not properly appreciated. The Tribunal, however, thought it fit to examine the appeals on merits. After perusal of the evidence on record, the Tribunal held and observed as under:
Page 6 of 9O/TAXAP/812/2013 ORDER "10. In view of the above judicial pronouncements, the department has reasonably discharged the burden that inputs were not received by the appellants. No manufacturer can be expected to keep documentary evidence of its clandestine activities. The order passed by Commissioner (Appeals) is, thus, correct and legal. So far as the appeal No.E/155 of 2010 filed by Shri Viral M. Shah, Director of M/s.Gyscoal Alloys Limited, against the personal penalty imposed upon him is concerned, it is seen from the records that he was aware of the bringing of inputs without actually receipt of the same and therefore, the penalty has been rightly imposed on the Director."
The assessee is therefore before us in appeal.
15.01.2014 Having heard the learned counsel for the parties and having perused the documents on record, we notice that the Revenue Authorities as well as the Tribunal concurrently came to the conclusion that the assessee had indulged into availment of cenvat credit without actually receiving the goods. It was found that the goods were never received in the factory and mere entries were made. This was established through the evidence on record which showed that the vehicles supposed to have been used for transport of the goods could never have been put to such use. The Revenue Authorities relied on the RTO reports which showed that the vehicles in question were of two wheelers and auto-rickshaws which allegedly transported tonnes of goods to the factory premises of the assessee. The assessee did not dispute the RTO reports, but canvassed that the entries in the record could have been made erroneously and hence discrepancy. From the stage of the show cause notice itself, it was alternatively suggested that in view of the short-fall in the stock in the premises of the assessee at the time of checking, even if the goods were Page 7 of 9 O/TAXAP/812/2013 ORDER actually received, the same were removed without payment of duty or reversal of the cenvat credit. The assessee contended that the goods were of inferior quality and therefore not possible to put to use for manufacture and the same was therefore sold in the local market. The Adjudicating Authority held that even in such a scenario, the assessee was required to reverse the cenvat credit which it was not done. In addition to the main finding that the assessee evaded payment of duty, the authority also based its order in original on the alternative plank, namely, even if the goods were received, the same were removed, as per the admission of the assessee, without reversal of the cenvat credit. This view was confirmed by the Appellate Authority and the Tribunal. In our opinion, the findings and conclusions of the Revenue Authorities as confirmed by the Tribunal do not give rise to any question of law. The entire issue is based on facts. Two Revenue Authorities and the Tribunal concurrently on the basis of the material on record came to the conclusion that the assessee had indulged into creation of false entries of receipt of goods without physical delivery thereof, we do not find any question of law arises. No perversity is pointed out in such factual findings. On the contrary, we notice that there was considerable evidence on record to come to such a conclusion. As noted, the report of the RTO authority established that the numbers of the vehicles through which the goods were said to have been transported were two wheelers and rickshaws in which such heavily weighing goods could not ever have been transported. The assessee did not dispute the RTO report, but only suggested that the numbers of the vehicles in their registers would have been wrongly noted. We are afraid, such a flimsy explanation cannot be accepted. Discrepancies were noted not in one or two vehicles, but in large number of cases. Further, the assessee in order to explain away the short-fall in the physical stock, contended that the goods previously Page 8 of 9 O/TAXAP/812/2013 ORDER received were sold in the market as the same was found to be inferior and not possible for use in manufacturing activity. Even this was so, the assessee was required to reverse the cenvat credit which the assessee admittedly did not do. The Authority, therefore, rightly invoked the extended period of limitation.
On all counts, therefore, the appeal must fail. The same is therefore dismissed.
(AKIL KURESHI, J.) (MS SONIA GOKANI, J.) vijayan Page 9 of 9