Custom, Excise & Service Tax Tribunal
M/S. P.M.S. International Pvt. Ltd vs Cce, Ludhiana on 19 May, 2014
IN THE CUSPTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL, NEW DELHI, PRINCIPAL BENCH NEW DELHI
Date of Hearing/ Decision: 19.05.2014
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Whether Press Reporter may be allowed to see the Order for publication as per Rule 26 of the CESTAT (Procedure) Rules, 1982?
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Whether it should be released under Rule 26 of CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
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Whether their Lordships wish to see the fair copy of the Order?
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Whether Order is to be circulated to the Departmental authorities?
1. Excise Stay Application No.58524 of 2013 in Appeal No.E/57923 of 2013
M/s. P.M.S. International Pvt. Ltd. Appellants
Vs.
CCE, Ludhiana Respondent
2. Excise Stay Application No.57958 of 2013 in Appeal No.E/57353 of 2013 M/s. Diamond Products (India) Appellants Vs. CCE, Ludhiana Respondent
3. Excise Stay Application No.57959 of 2013 in Appeal No.E/57354 of 2013 M/s. Rajesh Products India Appellants Vs. CCE, Ludhiana Respondent
4. Excise Stay Application No.57960 of 2013 in Appeal No. E/57355 of 2013 M/s. Jheeta Industries Appellants Vs. CCE, Ludhiana Respondent
5. Excise Stay Application No. 57961 of 2013 in Appeal No. E/57356 of 2013 M/s. Shree Radha Steel Works Appellants Vs. CCE, Ludhiana Respondent
6. Excise Stay Application No.58095 of 2013 in Appeal No. E/57513 of 2013 M/s. Kalia Gears Appellants Vs. CCE, Ludhiana Respondent
7. Excise Stay Application No. 58096 of 2013 in Appeal No.57514of E/ of 2013 M/s. Kalia Industries Appellants Vs. CCE, Ludhiana Respondent
8. Excise Stay Application No.58097 of 2013 in Appeal No. E/57515 of 2013 M/s. Doaba Factory Appellants Vs. CCE, Ludhiana Respondent
9. Excise Stay Application No.58098 of 2013 in Appeal No. E/57516 of 2013 M/s. United Engineers Appellants Vs. CCE, Ludhiana Respondent
10. Excise Stay Application No.58099 of 2013 in Appeal No.E/57517 of 2013 M/s. K.K. Engineers Appellants Vs. CCE, Ludhiana Respondent [(Arising out of common Order-in-Original No.9/LDH/2013 dated 05.03.2013 passed by the Commissioner of Central Excise, Ludhiana)] Appearance: Rep. by Shri Kamaljeet Singh, Advocate & Shri Sudhir Malhotra, Advocate for the appellant.
Rep. by Shri Amresh Jain, DR for the respondent.
Coram: Honble Mr. Justice G. Raghuram, President Honble Mr. Rakesh Kumar, Technical Member Final Order Nos. 52956-52965/ Dated:19.05.2014 Per Rakesh Kumar:
The facts leading to filing of these appeals and stay applications are, in brief, as under:-
1.1 M/s. P.M.S. International Pvt. Ltd. (hereinafter referred to as PMS) have central excise registration for manufacture of spare parts of Diesel Engine falling under Chapter 84 of the Central Excise Tariff. The period of dispute in this case is from September, 2005 to June, 2010.Durng this period, they were availing the cenvat credit of excise duty paid on inputs and capital goods as per the provisions of Cenvat Credit Rules, 2004. The raw materials used by the appellant for manufacture of various diesel engine parts are pig iron, H.B. wire, CR. Coils, C.R. Strips, M.S. Rounds, etc. According to the appellant, during the period of dispute, they were producing the raw materials from 14 suppliers viz. M/s. Super Star Industries, M/s.Shivam Enterprises, M/s. Marwaha Trading Company, M/s. Prestige Trading, M/s. Naveen Wires, M/s. Allied Steels, M/s. Ess Ess Steel Casting & Rolling Mills, M/s. Atma Ram Mills Steels Pvt. Ltd., M/s. Hinkan Export, M/s. Deep Tools, M/s. Walia Marketing, M/s. Shiv Shakti Engineering, M/s. Puja Sales Corporation and M/s. Jaldhara Small Tools Pvt. Ltd. and according to the appellant, these raw materials were being transported from the suppliers premises to the premises of PMS by using the services of the transporters viz. M/s. Gupta Transporters, M/s. Dashmesh, Batala, M/s. Diamond Road Links, Batala, M/s. Kaliga Transport Corpn., Batala and M/s. Baba Deep Singh Company, Batala. The PMS were taking cenvat credit of the raw materials received from the 14 suppliers mentioned above and according to them, they were sending the raw materials as such or after being processed to 24 job workers for processing further processing and return. M/s. Diamond Products India, M/s. Rajesh Products, M/s.Jheeta Industries, Shri Rajesh Steel Works, M/s. Kalia Industries, Shri Radha Steel Works, M.s Kaliga Transport, M/s. Doaba Factory, M/s. United India Insurance and M/s. K.K. Engineers are among the 24 job workers, who are supposed to have processed the raw materials supplied by M/s. PMS for manufacture of diesel engine parts. According to the PMS, they were clearing their finished goods on payment of duty for export under rebate claim and for payment of duty, the cenvat credit taken in respect of the raw materials was being utilized by them. The total cenvat credit taken by the appellant in respect of various inputs received from the 14 suppliers mentioned above is Rs.2,69,03,334/- .
1.2 The department on receipt of an information that the appellant without receiving any input are only receiving the invoices from the 14 suppliers as mentioned above and no goods have been sent to any of the job workers and were actually procuring the cheap diesel engine parts from market for export, while showing their clearance from their factory on payment of duty by utilizing the fraudulently taken cenvat credit initiated inquiries. The inquiries were conducted with all the 24 job workers including the 9 job workers as mentioned above and all of them, in their respective statements recorded under Section 14 of the Central Excise Act, 1944 admitted that they have not received any raw materials from PMS for processing and as such, have not sent any processed or finished goods to them and their transactions with PMS regarding job work are mere paper transactions. For sending all the raw materials to job workers and its return, the PMS had used the services of the certain transporters viz. M/s. Moon light Carriers, M/s. Surya Transporters, M/s. Cargo Carries India Ltd. and M/s. Ghai Goods Carriers. However, on inquiry, M/s. Moon Light and M/s. Surya Transporters appeared to be non-existent entity. Though on inquiry, the 14 raw materials suppliers stated that they had supplied the raw materials as mentioned in the records of the PMS, they could not give any details of the transporters through whom the materials have been delivered.
1.3 In view of the above investigations, a show cause notice dated 29.10.10 was issued to PMS, its Director, Shri Surjit Sehdev and 24 job workers including M/s. Diamond Products, M/s. Rajesh Products, M/s. Jheeta Industries, M/s. Kalia Gears, M/s. Kalia Industgries, Shri Radha Steel Works, M/s. K. K. Engineers, M/s. Doaba Foundary and M/s. United Engineers for-
(a) Recovery of wrongly taken cenvat credit amounting to Rs.Rs.2,69,03,334/- from PMS under Rule 14 of the Cenvat Credit Rules, 2004 read with Section 11A(1) of the Central Excise Act, 2004 along with interest thereon under Section 11 AB ibid,
(b) Imposition of penalty under Rule 15 (2) of the Cenvat Credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944 on PMS; and
(c) Imposition of penalty under Rule 26 of the Central Excise Rules, 2002 read with Rule 15 of the Central Excise Rules, 2004 on the 24 job workers including M/s. Diamond Products, M/s. Rajesh Products, M/s Jheeta Industries, M/s. Shri Radha Steel Works Industries, M/s. Kalia Gears, M/s. Kalia Industries, Doaba Factory, M/s. United Engineers and M/s. K.K. Engineers and also on Shri Surjit Kumar Sahdev, Managing Director of the PMS.
1.4 The above show cause notice was adjudicated by the Commissioner vide order-in-original dated 5.3.2013 by which the above mentioned cenvat credit demand was confirmed against PMS along with interest thereon under Section 11AB and besides penalty of equal amount on PMS under Rule 15(2) of Cenvat Credit Rules, 2004 read with Section 11 AC of the Central Excise Act. Besides this, penalty was imposed under Rule 26 of the Central Excise Rules, 2002 read with Rule 15 of the Cenvat Credit Rules, 2004 on the job worker except M/s. Radha Steel Works. No penalty was imposed on Shri S.K. Sahdev on account of his demise on 16.07.2010.
1.5 Against the above order of the Commissioner, these appeals have been filed by PMS and 9 out of 24 job workers as mentioned above along with stay applications.
2. Heard both the sides.
3. Though these matters were listed for hearing of the stay applications only, after hearing the same for some time, the bench was of the view that the matters can be taken up for final disposal. Accordingly, with the consent of both the sides, the matters were heard for final disposal.
4. Shri Kamaljeet Singh, Advocate, ld. Counsel for PMS and Shri Sudhir Malhotra, Advocate, ld. Counsel for the other appellants submitted that the entire case against PMS and other noticees is based on the statements of the job workers, stating that no materials have been received by them from PMS and that their transactions with PMS showing job work for PMS are bogus transactions, that this claim of the job workers is not supported by the suppliers of the raw materials as all the 14 suppliers have maintained that they had supplied the materials as mentioned in the invoices to PMS, that the transporters, M/s. Gupta Goods Transport, M/s. Dashmesh Road Links, Kalga Transport Corpn. and Baba Deep Singh, TPT in their statements have stated that they had transported the raw materials to the premises of the PMS, that M/s. Cargo carriers have confirmed transportation of raw materials from the premises of PMS to the premises of certain job workers, that no inquiry has been conducted by the department with M/s. Ghai Goods Carriers, that according to the department, M/s. Surya Transport and M/s. Moonlight Carriers do not exist, but it is very much possible that they may have closed their business and that the appellant used the service of Surya Transport Company and Moon Light for the transportation of the raw materials to their job worker that just because, the department is not able to locate their premises, it cannot be concluded that they are bogus entities, that the appellant had sought cross examination of the job workers, whose statement have been used by the department against PMS, that in para-3.1 of the impugned order-in-original, it has been recorded that PMS vide their letter dated 13.09.2011 had sought cross examination of the 21out of the 24 job workers and seven transporters, that the cross examination of these persons was wrongly disallowed by the Commissioner on the ground that the same would be an exercise in and would delay the adjudication endlessly, is totally wrong. That denial of cross examination of the transporters and the job workers has resulted in denial of natural justice which has vitiated these proceedings and that on this ground itself, the impugned order would not be sustainable. He, therefore, pleaded that the impugned order is not sustainable.
5. Shri Amresh Jain, ld. DR defended the impugned order by reiterating the findings of the Commissioner and pleaded that all the 24 job workers including M/s. Diamond Products India, M/s. Rajesh Products, M/s. Jheeta Industries, Shri Rajesh Steel Works, M/s. Kalia Industries, Shri Radha Steel Works, M/s. Kalia Transport, M/s. Doaba Factory, M/s. United Engineers and M/s. K.K. Engineers have clearly stated in their respective statements that they had neither received any raw materials from PMS nor had sent any processed or finished goods to them and that the records regarding the job work for PMS were fabricated on the request of Shri S.K. Sahdev, that most of the job workers were not even capable of processing the materials which is claimed to have been processed by them, that two transport companies M/s. Moonlight and M/s. Surya Processors, which according to the PMS have been used for transportation of the raw materials to the job workers and its return have been found to be non-existence, that in these circumstances, the denial of cross examination of the job workers has not resulted in violation of principles of natural justice, that the raw material suppliers who claim to have been supplied the raw materials to PMS, have not been able to give the details of the transport arrangements, that some of the vehicles claimed to have been used for transport of the raw materials to PMS were non-transport vehicles like two wheelers and Maruti Car, in which the quantity shown in the invoices could not have been transported, that one of the major input for manufacture of diesel engine parts is pig iron, that as per the records, PMS during the period of dispute i.e. June08 to March09 had purchased a total quantity of 2252.06 MT of pig iron on which they had availed Cenvat redit of Rs.77.21 Lakhs, that the whole quantity of the 2252 MT of pig iron is shown to have been consumed during the above mentioned period in the factory premises of PMS but in the factory premises of PMS while there is no furnace for melting the pig iron and making the casting, there was only one Lathe machine installed for machining of the castings of the pig iron and hence, the consumption of such huge quantity of pig iron was not possible, that other machinery installed in the factory premises of PMS was not sufficient to process such a huge quantity of pig iron for manufacturing/machining stated to have been done, that one lathe machine installed in the premises of PMS, was not at all sufficient for processing of 2252.06 MT of pig iron and as per the normal parameter at least 10 to 12 lathe machines were required, that similarly, there was no grinding and hydraulic press machine in the factory premises of PMS which were required to complete the manufacturing process of diesel engine parts, that all these evidence shows that the transactions of PMS with raw materials suppliers and also their transactions with the job workers are bogus transactions, the documents regarding these transactions have been fabricated to fraudulently avail the Cenvat credit, which was used to show payment of duty on the diesel engine parts on cheap diesel engine parts purchased from the market, which were exported under rebate claim. He, therefore, pleaded that there is no infirmity in the impugned order.
6. In rejoinder, Shri Kamaljeet Singh and Shri S. Malhotra, Advocates, pleaded that as regards the allegation that some non-transport vehicles like two wheelers, and Maruti Cars are shown to have been used for transport of the raw materials from raw materials suppliers to the premises of the PMS, though the appellant had requested the department to furnish copies of the relevant reports from the RTO office, but the same have not been supplied. They also pleaded that substantial quantity of pig iron had been sent to the job workers for manufacture of the castings and another processes.
7. We have considered the submissions from both the sides and perused the records.
8. The claim of the main appellant PMS is that they had received the raw materials for manufacture of diesel engine parts from 14 suppliers and bulk of the raw materials had been sent to 24 job workers for processing and return and by using the manufacturing infrastructure of their job workers they had got the diesel engine parts for export, which had been cleared on payment of duty. The 14 raw materials suppliers in their respective statements have supported the above claim of PMS and besides this, the transporters viz. Dashmesh Road Links, Gupta Transport Co., Kalga Transport Corpn., and Baba Deep Singh TPT., Company have also corroborated the claim regarding receipt of the raw materials by PMS, as these transporters maintain that they had transported the materials from 14 raw material supplies to the premises of PMS. However, the main evidence relied upon by the department in support of its allegation against PMS of having been taken fraudulent Cenvat Credit is
(a)statements of 24 job workers and
(b)the reports received from the office of RTO stating that certain vehicles registration nos. mentioned in the invoice issued by the raw materials suppliers to PMS are of non-transport vehicles like two wheelers and Maruti Cars which could not have been transported the quantity of the raw materials mentioned in the invoices.
We find that though the PMS had requested for supply of the RTO reports but the same were not supplied and similarly while they requested for cross examination of 21 out of 24 job workers, and also of 7 transporters but the same were disallowed by the Commissioner on the ground that the same is not required and the request is being made only to delay the adjudication proceedings. When in this case is the main evidence relied upon by the department is the statement of 24 job workers, in our view, before relying upon the statement of the job workers, and using the same against the PMS, their cross examination should have been permitted. In this regard, Section 9D (1) of the Central Excise Act, 1944 provides that a statement made and sent by a person before any central excise officer of a gazetted rank during the course of any inquiry 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 contained, when the person who had 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. The circumstances in which this examination and cross examination can be waived are specified in Clause (a) of Section 9 D (1) and these circumstances are that the person who had made the statement is dead, or cannot be found, or is 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 Sub-section (2) of Section 9 D provides that the provisions of sub-section (1) shall, sofar as may be, apply in relation to any proceeding under this Act, other than a proceeding before a Court, as they apply in relation to a proceeding before a Court. In view of the provisions of sub-section (2) of Section 9 D, the provisions of sub-section (1) of Section 9 D are applicable to the adjudication proceedings also and accordingly, as far as possible before using the statement of a person recorded under Section 14 of the Central Excise Act, 1944, against an assessee, that person must be examined by the adjudicating authority and if his cross examination is requested, the same must be allowed. The Honble Delhi High Court in the case of J & K Cigarette Ltd. Vs. CCE reported in 2009 (242) ELT-189(Del.) and Honble Allahabad High Court in the case of CCE Allahabad Vs Govind Mills Ltd. reported in 2013 (294) ELT-353(Del.) have held that in view of the provisions of sub-section 9D (2) of Central Excise Act, 1944, the cross examination of a witness, whose statement has been relied upon by the adjudicating authority is a must. Besides this, when the report of the RTO regarding the registration number of the vehicles mentioned in the invoices being non-transport vehicles was relied upon by the department, the copies of the reports should be supplied to the appellant, which admittedly have not been supplied. In view of this, the impugned order is not sustainable. The same is set aside. The matter is remanded to the original adjudicating authority for de novo adjudication after supplying the reports of the RTO relied upon by the department and also examination of the job workers by the Commissioner in terms of the provisions of Section 9 D(2) and also permitting their cross examination by the appellant. The appeals and stay applications stand disposed of as above.
[operative portion already pronounced in the open court] (Justice G. Raghuram) President (Rakesh Kumar ) Member (Technical) Ckp.
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