Custom, Excise & Service Tax Tribunal
M/S.Smi Electrowire (P) Ltd vs Cce, Delhi-Ii on 23 November, 2015
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL,
WEST BLOCK NO.II, R.K. PURAM, NEW DELHI-110066.
DIVISION BENCH
Court No.III
Appeal No.E/2791/2002-EX(DB)
E/Misc/51903/2015
(Arising out of OIA No.459-60-CE/DLH/2002 dt.6.8.2002 passed by the CCE(Appeals), Delhi)
Date of Hearing: 13.11.2015
Date of Order:23.11.2015
For approval & Signature:
Honble Smt.Sulekha Beevi C.S., Member (Judicial)
Honble Mr.B.Ravichandran, Member (Technical)
1.
Whether Press Reporter may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
No
2.
Whether it would be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
No
3.
Whether their Lordships wish to see the fair copy of the order?
seen
4.
Whether order is to be circulated to the Department Authorities?
yes
M/s.SMI Electrowire (P) Ltd. Appellant
Vs.
CCE, Delhi-II Respondent
Appearance:
Present for the Appellant: Shri N.L.Jangir, Advocate Present for the Respondent: Shri R.K.Mishra,DR Coram: Honble Smt.Sulekha Beevi C.S., Member (Judicial) Honble Mr.B.Ravichandran, Member (Technical) Final Order No.53505/2015 Per: Sulekha Beevi C.S. The appellant is aggrieved by the disallowance of cenvat credit on the ground that the goods were not actually received by the appellant and that the transactions were bogus.
2. This case was originally disposed by the Tribunal vide Final Order No.A/255/03-NBC dated 29.4.2003. By the said order, the Tribunal then upheld the disallowance of cenvat credit but reduced the penalty imposed. The appellants then filed an application for rectification of mistake before the Tribunal as E/ROM/121/03. The same was decided vide order dated 23.12.2005 whereby the ROM was rejected. The appellants then approached the Honble High Court of Punjab & Haryana, at Chandigarh and vide judgement dated 23.1.2015 in CEA 128/2006 the High Court set aside the Final Order of the Tribunal dated 29.4.2003 and remanded the matter to this Tribunal for adjudication afresh after examining the statement made by Shri R.K.Gupta, bills, invoices, receipts, cheques and various forms and declarations etc. filed by the appellant before the department. The case was thus listed for hearing as per remand order of the Honble High Court.
3. Brief facts are as under:
3.1 Appellant was engaged in the manufacture of copper wire and was availing modvat/cenvat credit of the duty paid on its inputs namely CC copper rod. A show cause notice dated 1.1.2002 was issued alleging wrongful availment of modvat credit on invoices issued by M/s.R.K.Enterprises, a registered dealer, alleging that goods as per these invoices were not actually received by appellants. After adjudication, the Order-in-Original was passed confirming the demand of duty and also imposed equivalent penalty. Being aggrieved, the appellant filed appeal before the Commissioner (Appeals) who dismissed the appeal filed by appellants. However, the penalty imposed on Shri Pramod Kumar Gupta was set aside. The appellant is thus before us.
4. The learned Counsel for the appellant submitted that the whole allegation is based on the statement given by Shri R.K.Gupta of M/s.R.K. Enterprises. The department has erroneously placed reliance on this statement as there is nothing in the statement of Shri R.k.Gupta incriminating the appellant herein. In all the transactions done by appellant with M/s.R.K. Enterprises, invoices were issued and these invoices were accompanied by goods. The appellants made payments by way of cheque. The goods were duly entered in the RG-23A register and the invoices were sent for defacement to Range Office along with RT-12 returns as per law. These goods were used in production of final products and the same has been entered in RG-1 and reflected in RT-12 returns also. That therefore the allegation that the appellant has not received goods as per invoices is not sustainable. The audit team had visited the appellants unit several times and no discrepancies were found in the stock of raw material/inputs or of finished goods. Again, though the officers conducted visit on 7.2.2001, the stock of finished goods and raw material were found correct with the statutory records. If the appellant had not received the goods along with invoices, the stock of finished goods and raw material would not have tallied. Further, there is no case that these invoices were fabricated by the appellant. The appellant had no reason to doubt the invoices issued by M/s.R.K.Enterprises as these invoices were accompanied by goods. Full payments were made by cheque and this is reflected in the bank statement produced by appellant to the department. A photocopy of the purchase ledger would show the details of payments made to the suppliers. On receipt of goods, the appellant entered the same in Form-IV register and its RG-23A Part 1. Copies of these registers were furnished. The utilization of credit was reflected in RG-23A Part-II. The appellant filed copies of said invoices, RG 23A Part I and II along with its RT-12 returns which have been assessed to duty finally and the department cannot allege thereafter that modvat is not admissible. The appellant is filing sales tax returns and the sales tax for the relevant period has been finally assessed after scrutiny and verification. M/s.R.K. Enterprises was registered dealer and all the invoices bear the correct registration number of the dealer. The authorities while placing reliance on the statement of Shri R.K.Gupta failed to appreciate the evidences placed by the appellant and fact that Shri R.K.Gupta has deposed that some of transactions were genuine. There is no iota of evidence to show that appellants have not received goods as per the invoices.
5. Per contra, the learned DR reiterated the findings in the impugned order. He submitted that Shri R.K.Gupta/M/s.R.K. Enterprises was not having godown or storage place for the goods. He had obtained Central Excise Registration as a dealer upon fictitiously declaring some premises taken by him on rent. He got printed G.R. books in the name of transport companies which did not exist, and issued such G.Rs to cover bogus transactions. It was also stated by him that payments were received as cheques for the bogus transactions. The method adopted by him was such that Shri R.K.Gupta used to give cheque to cover the purchase made through bogus invoices to his seller, who in turn gave Shri R.K.Gupta equivalent cash. He used to sell such invoices to his customers. The customer used to give him cheque to cover the transaction and Shri R.K.Gupta used to give the cash received from seller to the customer. The cash was thus passed to the final buyer of the bogus invoices. One cheque of the appellant (S.M.I.Electrowire (P) Ltd.) drawn in favour of M/s.R.K. Enterprises was resumed from the premises of Shri R.K.Gupta. Though the appellant contends that goods were actually received, the appellant has not adduced evidence to establish to which transaction this cheque relates. The fact that M/s.R.K.Enterprises had no godown, along with statement made by Shri R.K.Gupta and the cheque recovered from the premises of Shri R.K.Gupta would establish that the transactions were bogus.
6. Before proceeding to discuss the rival contentions made by either side, we think it necessary to point out the error in the cause title of the appeal as well as the impugned order. The name of the appellant is actually S.M.I.Electrowire (P) Ltd.. This name is seen stated in the show cause notice as well as in the Order-in-Original. But in the impugned order passed by the Commissioner (Appeals), the name of the appellant is seen stated as S.M.I.Electronics (P) Ltd.. Interestingly in the appeal memorandum as well as in the stay application, the appellant has impleaded itself as, S.M.I.Electronics (P) Ltd. The reason may be because, the appellant might have apprehended that the appeal might not get admitted or rather rejected for defects, unless the appellant gets the mistake in Order-in-Appeal rectified which may consume time resulting in delay in filing appeal. However, in the ROM application filed earlier, seeking the rectification of earlier final order of CESTAT, the appellant had put forward the submission to rectify this mistake also. In the appeal filed before the Honble High Court, the name of the appellant seems to be correctly shown by appellant as seen from the judgement of the Honble High Court. In view thereof, we hold that the error in the cause title of the appeal will stand corrected as S.M.I.Electrowire (P) Ltd., as seen stated in the show cause notice.
7. Reverting to the facts of the case, the foremost contention put forward by the appellant is that all his documents, registers would go to show that the transactions were genuine and that appellant had actually received the goods. It is seen that the department has mainly relied upon the statement of Sh.R.K.Gupta and also a cheque of the appellant seized from the premises of Shri R.K.Gupta. As pointed out by the learned counsel for appellant shri R.K.Gupta, in his statement has stated that some of the transactions were genuine where goods have been actually supplied to customer. The relevant portion of the statement reads as under:
Question No.16: Were these G.Rs used for selling?
Answer: No these G.Rs were used in selling as well as purchasing of the bogus transaction of the goods but in few cases these G.R. were also used where genuine transaction that is actually delivery of goods took place.
Question No.17: Why did you use the bogus G.Rs to cover the genuine transaction where actual delivery of the goods effected also?
Answer: Many a times we used to deliver the goods through tempos picked up at random from the tempo stands that is goods were not delivered through any established transport Co. As such tempo owners usually do not have any G.Rs book of their own therefore. To avoid problems with sale tax enforcement team and traffic police in transit we used to issue these G.Rs.
Question No.18: In answer to foregoing questions you have admitted that in at least 50% of the cases actual delivery of the goods never took place and you traded in modvatable invoices only can you please give us the distinguished features of all such bogus transaction?
Answer: At the outset, I would like to tell you that two of my customers never purchased any material from me they were given only the modvatable invoices without actual delivery of goods. The names of these two buyers are:
(i) Gupta Metal Sheets Pvt.Ltd., Rewari
(ii) Prakash Strips Ltd., Jagadhari As told by me elsewhere that I did not have any godown to store the goods purchased therefore I used to deliver the goods to my buyers directly from the manufacturers or the warehouse of the dealer/importer in the same tempo in which I used to take delivery. Therefore in all these cases where the tempo Nos. is same in the purchase invoices and sale invoice of the same date. The transaction were genuine and actual delivery of goods did take place. However, in all these cases particularly relating to copper wire rod where the tempo Nos. differ in purchase invoice and corresponding sale invoice the transaction were bogus.
In case of scraps and other such materials where the quantity delivered on an invoice through a tempo is more than 6 ton the transaction were bogus. In short where on a single invoice quantity sold to my buyers is more than 6 tons the such invoices are bogus.
8. Again as answer to Question.No.29, Shri R.K.Gupta has stated, one cheque pertaining to M/s.S.M.I.Electrowire (P) Ltd. was in favour of my firm and was for sale made by my firm where the goods were physically sold. Shri R.K.Gupta has stated that he used to dispatch goods directly to the customers from the sellers godown. He emphasized names of the two buyers to whom goods were never sold, but only modvatable invoices were given. He specifically stated that where the quantity of goods transported through a tempo is more than 6 tons, the transactions were bogus. He also clarified that in cases where the tempo number differs with sales invoices the transactions are not genuine. After taking the statement of Shri R.K.Gupta, department has not conducted any investigations with regard to the tempo number shown, in these invoices. Instead, the department has just shifted the burden on the appellant stating that appellant has to correlate the cheque with the transactions made. It is the department who alleges fraud. Shri R.K.Gupta has specifically stated that all the transactions were not bogus. It was stated by him that with regard to the cheque of the appellant the goods were actually supplied. In case of supply of less than 6 tons (i.e. capacity of a tempo vehicle) the transactions are genuine; and that though he had no godown, he used to dispatch goods directly from the sellers godown. In such a scenario, when the documents and registers of the appellant are proper, it is for the department who alleges fraud to establish that the invoices issued to the appellant by Shri R.K.Gupta were not genuine. The department cannot take shelter by merely saying Shri R.K.Gupta was involved in fraud of bogus transactions and thus infer that whoever purchased goods from Shri R.K.Gupta are also part of the fraudulent transactions. On examining the evidence placed on record and analyzing the submissions made before us, we are able to conclude that department has not succeeded in establishing guilt on the part of appellants. The statement of Shri R.K.Gupta does not contain incriminating evidence against the appellants so as to deny the credit. Further, there is no discrepancy in the statutory records, and returns filed by them. If the goods as per these invoices had not been actually received, as contended by the department, then such defect ought to have reflected in their stock of raw materials and stock of finished goods and their VAT returns. The department does not allege any defect in these records. Therefore the allegation raised in the show cause notice against the appellant is not sustainable and the disallowance of modvat/cenvat credit is unjustified. The impugned order is therefore liable to be set aside. The appellant had also raised the ground that the notice is hit by limitation. As the substantial issue is answered in favour of the appellant, we do not think it necessary to delve into this issue. The appellant had filed Misc.application No.51903/2015 to receive additional submissions. On perusal of this application, it is seen that these submissions are nothing but the very same contentions raised in the appeal memo along with the judgement of the Honble High Court. The misc.application is accordingly allowed.
9. In the result, the impugned order is set aside and the appeal is allowed.
(pronounced in open court on 23.11.2015 (B.Ravichandran) (Sulekha Beevi C.S) Member (Technical) Member (Judicial) mk 9