Custom, Excise & Service Tax Tribunal
M/S. Vijay Aqua Pipes Pvt. Ltd vs Cce, Chennai I on 31 October, 2017
IN THE CUSTOMS, EXCISE & SERVICE TAX
APPELLATE TRIBUNAL
SOUTH ZONAL BENCH, CHENNAI
Appeal No. E/41867/2015
(Arising out of Order-in-Appeal No.112/2015 (CXA-I) dated 1.6.2015 passed by the Commissioner of Central Excise (Appeals I), Chennai)
M/s. Vijay Aqua Pipes Pvt. Ltd. Appellant
Vs.
CCE, Chennai I Respondent
Appearance Shri S. Ramachandran, Consultant for the Appellant Shri R. Subramaniyam, AC (AR) for the Respondent CORAM Honble Ms. Sulekha Beevi C.S., Member (Judicial) Date of Hearing : 25.10.2017 Date of Pronouncement: 31.10.2017 Final Order No. 42502 / 2017 Brief facts are that the appellants are engaged in the manufacture of PVC pipes and were availing the facility of CENVAT credit on inputs like PVC resins, stabilizers etc. On a surprise verification done by the Preventive Unit of the department, it came to light that the appellant had taken CENVAT credit on PVC resins to the tune of Rs.1,65,440/- which were not actually received in the factory but merely basing upon the invoices issued by various suppliers. The Director of the appellant-company, Shri Nainar, admitted that they had diverted the goods into the local market for higher price and that such inputs were not used for manufacture of PVC pipes. The Chief Executive, Shri Ramadoss, of M/s. Shree Mahaveer Impex who is one of the supplier of the appellant deposed that out of 54 MTs of PVC resins imported, only 10 MTs were supplied by him to the appellant and the balance quantity of 44 MTs were disposed by him though invoices were raised for entire 54 MTs in the name of the appellant. It was also found that the appellant had issued two sets of invoices containing the same numbers and had accounted only one set of invoices in their ER1 returns. In the statement of Shri S. Nainar, he had admitted that they have issued double set of invoices at the initial stage of their market entry and the proceeds realized from such transactions were received by them in cash and not accounted in their bank accounts for the purpose of paying central excise duty. On such evidence, it appeared that the appellant was not eligible to avail credit of Rs.7,79,796/- on inputs of 1,65,450 Kgs. which were not received and used in the manufacture of final products and also that they are liable to pay duty to the tune of Rs.62,425/- for the finished goods removed without payment of duty. Show cause notice dated 21.3.2012 was issued raising the above allegations which after adjudication confirmed the recovery of CENVAT credit of Rs.7,79,796/- along with interest and imposed equal penalty. It was also ordered to recover an amount of Rs.62,425/- being the duty on finished goods removed clandestinely and equal penalty was imposed. Separate penalty of Rs.2,74,208/- was imposed on M/s. Shree Mahaveer Impex. In appeal, Commissioner (Appeals) upheld the order passed by the original authority in toto. Hence this appeal.
2. At the time of hearing, ld. consultant Shri S. Ramachandran reiterated the grounds of appeal and put forward inter alia, the following contentions:-
(a) The ld. counsel submitted that the appellant is not contesting the demand of duty to the tune of Rs.62,425/- in regard to duty demand on finished goods removed clandestinely or the penalty thereon. It is also submitted by him that the appellant is not disputing the statement of Shri Ramadoss of M/s. Shree Mahaveer Impex who has supplied raw material by issuing invoices to the quantity of 54 MTs.
(b) That no evidence has been adduced by the department to justify that credit was taken without actual receipt of inputs. Out of the three suppliers two of them had categorically stated that they had actually supplied the inputs and that they had received payment from the appellant. This is reflected in para 4 of the show cause notice. Only the third supplier M/s. Shree Mahaveer Impex has admitted to have supplied 10 MTs of inputs by raising invoices for supply of 54 MTs. Thus, in any case, the demand is maintainable only to the extent of 44 MTs.
(c) The department has not proved the quantification of duty demand on the basis of input-output ratio. According to the investigation, it is stated that the appellant had not received certain quantity of inputs. But there is no evidence to show that there was shortage of physical stock of inputs in the factory when compared to the stock reflected in the books.
(d) Further, the period involved is June 2009 to October 2009 and the finished goods cleared in numbers would be 93264. The input-output ratio for PVC pies as per ISI norms is as under:-
For production of single length (of 6 Mts.) 63 mm (2) pipe -
For the production of single length (6 Mtrs.) of 110 mm (4) pipe 2.8 Kgs. of all raw materials 7.8 Kgs. of all raw materials
(e) Thus, basing upon the number of PVC pipes cleared by the appellant as per the ER 1 returns during the disputed period would be 93264. The appellant has cleared two inch pipes as well as four inch pipes to the ratio of 85 : 15. Thus the goods of two inch and four inch pipes cleared during the period would be as under:-
Month Qty cleared in numbers Expected duty of 2 inch pipe (85% of Qty. cleared) Expected Qty. of 4 inch pipe (15% of Qty. cleared) Total Qty Cleared 93264 79280 13984
(f) The expected consumption of PVC resins/inputs for manufacture of above quantity of 93264 finished pipes would be basing upon the ISI norms Total Qty. cleared (in Nos.) Qty. cleared (63 mm & 110 mm) @ 85:15 PVC resin as per CENVAT register Qty. of PVC required for 2 dia pipe @ 2.8 kg. per length Qty. of PVC required for 4 pipe @ 7.8 kg. per length Total PVC Qty. required Prodn. Waste 63mm (2 dia) 110mm (4 dia) 93264 79280 13984 323450 221984 109075 331059 24736 (7%)
(g) That from the above Table, it would show that the appellants required 323450 Kgs. of PVC resins to produce 93624 PVC pipes. The appellant has accounted 323450 in their input register and therefore the allegation that the appellant has not accounted the inputs correctly and has availed credit merely on invoices without receipt of inputs into the factory is false. Therefore, he pleaded that the department has failed to establish that the appellant has availed irregular credit without actual receipt of raw materials and therefore the demand on this count has to be set aside. He relied upon the following decisions of the Tribunal:-
(a) M/s. G.S. Alloy Castings Ltd. Unit II Vs. Commissioner of Central Excise, Guntur 2015-TIOL-1696-CESTAT-BANG
(b) Commissioner of Central Excise, Ludhiana Vs. Pee jay International Ltd. 2010 (255) ELT 418 (Tri. Del.)
(c) Commissioner of Central Excise, Pune I Vs. Pioneer Industries 2014 (306) ELT 671 (Tri. Mum.)
3. The ld. AR Shri R. Subramaniyam reiterated the findings in the impugned order. He argued that the statement of the Director is binding on the appellant and the Director has categorically admitted that they have diverted the finished products. Further, it is clear from the statement of the supplier M/s. Shree Mahaveer Impex that on the invoices issued for the quantity of 54 MTs, the appellant has received only a quantity of 10 MTs into the factory, though they have accounted 54 MTs and availed credit on the same. It is also argued by him that evidence is not based merely on the statement but on the accounts and records unearthed on verification by department.
27.10.2017. The purchase invoices when compared with the raw material register, inward register, factory daily report and RG23A Part II register revealed discrepancy in the quantity of PVC resins received in the factory. Though purchase invoices showed 165450 Kgs. of PVC resins to have been received, the same was not reflected in the inward register, raw material register and in the factory daily report. The director of the company Shri S. Nainar was summoned to offer his explanation and wide statement 13.7.2010, he deposed that the above quantity of raw materials were not received by them but had taken CENVAT credit on the invoices. The statements of suppliers namely M/s. Shree Mahaveer Impex and M/s. Swastik Pumps were also recorded. M/s. Shree Mahaveer Impex has categorically deposed that out of 54 MTs of PVC resins imported by them only 10 MTs were supplied to the appellant and the balance quantity of 44 MTs were disposed though the Bill of Entry for entire 54 MTs of PVC resins were raised in the name of the appellant herein. Further, the director Shri S. Nainar has furnished a tabular statement showing the details of the purchase of PVC resins and other additives, production and sales of PVC pipes/finished products for the period April 2009 to November 2009 which reflects the actual receipt of PVC resins and the use of such inputs in the manufacture of finished products. The records corroborated with the statement especially that the appellant has not received 1,65,450/-kgs. of PVC resins into their factory for the manufacture of finished products although they availed full credit on the above quantity of PVC resins. That the demand raised to the tune of Rs.7,79,796/- for wrong availment of CENVAT credit is just and proper. On verification of the sales invoices of the appellant along with ER1 returns filed by them, it was noticed that the appellant have issued two sets of invoice of the same number and have accounted only one set of invoice in their ER1 returns. The director Shri S.Nainar in his statement dated 13.7.2010 has admitted that during the initial stage of market entry, such double set of invoices were issued by them for certain transactions to overcome the hectic price competition in the market. Thus, the appellant is guilty of clandestine removal of finished goods and the demand raised on this account is legal and proper. Show cause notice has been issued on 21.3.2010 invoking the extended period of limitation. The officers visited the premises on 11.12.2009 and thereafter statements were recorded and after completion of the investigation, show cause notice has been issued invoking extended period as it is revealed that the appellant has willfully suppressed facts and also mis-represented the same especially having raised parallel invoices with the intention to evade payment of duty. Thus, invocation of extended period is legal and proper.
4. Heard both sides.
5. The main contentions raised by the ld. consultant is two-fold. Firstly, that the appellant has availed CENVAT credit on the actual inputs received in the factory and that has been entirely accounted by them. Secondly, that the department has not been able to establish that the appellant has availed credit on inputs which are not been used in the factory basing upon the input-output ratio.
6. At the outset, it is to be stated that the ld. counsel has submitted that the appellant is not contesting the duty demand raised on alleged clandestine removal of the finished goods. Secondly, it is also submitted by the ld. consultant that the appellant is not contesting the duty demand in respect of the allegation that M/s. Sree Mahavir Impex has supplied only 10 MTs of inputs although the appellant has availed credit of a quantity of 54 MTs shown in the invoice. The ld. consultant has made an effort to explain that the entire input account was correct and proper adopting ISI norms and calculating the input output ratio which is shown in the tables in the above paragraphs. It is his contention that for quantity of 93264 MTs of PVC pipes cleared by the appellant during the relevant period, as per the input output norms, a quantity of 323450 Kgs. of PVC resins / inputs would be required. That such quantity has been actually accounted in their registers which would show that the amounts of CENVAT credit availed by the appellants on inputs is correct. This calculation of input-output ratio and the figures shown in the Tables has to be seen on the background of the admitted facts. The Director Shri S. Nainar has deposed and admitted that the appellants have issued two sets of invoices for clandestine clearance of finished goods. Further, he has also admitted that though 54 MTs of PVC resins was shown in the invoices by Sree Mahavir Impex, only 10 MTs was received in the factory and appellant has availed credit on entire 54 MTs of inputs. These facts stand undisputed by the appellant. On such score, the claim of the appellant basing upon certain calculations with regard to input output ratio, adopting ISI norms cannot be considered as cogent evidence so as to hold that the appellants have not availed wrongful credit. On the background of admission of issuance of double set of invoices, the suppression of facts, willful mis-statement with intent to evade duty is also established, for which reason I find that the invocation of extended period is also justified. It may be true that the allegation of clandestine clearance cannot be proved with mathematical precision, however, on totality of facts and evidences placed before me, I am of the view that the department has been able to prove the case of wrongful availment of credit as well as clandestine clearance of goods on the basis of balance of probabilities.
7. From the above discussion, I hold that the impugned order calls for no interference and the appeal is dismissed.
(Pronounced in open court on 31.10.2017) (Sulekha Beevi C.S.) Member (Judicial) Rex 10