Customs, Excise and Gold Tribunal - Delhi
Haryana Steel Alloys vs Cce on 3 May, 2002
Equivalent citations: 2002(82)ECC589
ORDER G.R. Sharma, Member (T)
1. In the impugned order learned Commissioner disallowed Modvat Credit amounting to Rs. 20,22,240.72, imposed a penalty of an equal amount of the credit disallowed and also held that the appellant is liable to pay interest on the amount of modvat credit disallowed. Being aggrieved by this order the appellant has filed the captioned appeal.
2. The facts of the case in brief are that the proceedings were initiated against the appellant proposing disallowance of modvat credit availed by him during the period from 1994-95 to 1996-97 and proposing imposition of penalty also. The premises of the appellant were searched on 15.11.96 and records were resumed. Statements were also recorded. It was noticed that M/s. Bansal Iron & Steel Traders had sold Iron sheet cutting and iron sheet cutting scrap. The total sale was more than the quantity purchased in comparison to the modvatable scrap purchased from M/s. Maruti Udyog Limited (MUL). It appeared that the modvatable material purchased from MUL was sold as iron sheet cutting and iron sheet cutting scrap. Further it was noticed that the scrap was purchased by M/s. Bansal Iron & Steel Traders at a rate of Rs. 10,000 per M.T. from M/s. MUL whereas it was sold to Haryana Steel Alloys Ltd. at a rate of 7000 to 9000 per M.T. It was also noticed that M/s. Bansal Iron & Steel Traders had purchased scrap from other sources at a rate of 6000 to 7000 per M.T. It thus appeared that material purchased from M/s. MUL was being sold as non-modvatable scrap whereas the scrap procured from other sources was being sold as modvatable scrap. Statements were recorded. Shri Dharam Pal Jangra, Manager of the scrapyard of the appellant company, in his statement deposed that scrap material received from M/s. MUL was codified under 101 as m/mat; that scrap material of MUL was purchased by Bansal Iron & Steel Traders and M/s. V.D. Malik & Sons; that they had been receiving scrap from these persons which normally did not contain the scrap material purchased from MUL; that in fact the scrap supplied by M/s. Bansal Iron Steel Traders and M/s. V.D. Malik & Sons under cover of MUL invoices after raising their own invoices consisted mainly of sheet cutting which are normally generated in tool industries; that M/s. Bansal Iron & Steel Traders did not normally supply the original materials received from Maruti Udyog Ltd. and instead other material was supplied.
3. Shri Din Dayal in his statement, inter alia stated that M/s. Bansal Iron & Steel Traders and M/s. V.D. Malik & Sons were generally supplying the scrap purchased from Kabaris and a small manufacturer against the invoices of original scrap manufacturers. Accordingly, Show-cause Notices were issued to M/s. Haryana Steel Alloys Ltd., M/s. Bansal Iron & Steel Traders and M/s. V.D. Malik & Sons asking them to explain as to why Modvat credit should not be disallowed and why penalty should not be imposed. In reply, M/s. Haryana Steel and Alloys Ltd., the appellants stated that the scrap material supplied by M/s. Bansal Iron & Steel Traders and M/s. V.D. Malik & Sons was in fact from M/s. MUL. Even on the search of premises sufficient stock material was available in their stockyard. It was contended by the appellants that no reliance can be placed on the statements of people when other evidence in the form of material was available in the stock of the appellants; that there was no evidence from the transporters to show that the appellant was receiving scrap other than the scrap from M/s. MUL.
4. After careful consideration of the submissions made the learned Commissioner held as indicated above.
5. Arguing the case for the appellant (s) Shri A.K. Jain alongwith Shri Rajesh Jain, Advocates submit that the appellant had been receiving modvat credit under invoice from the registered dealers. He submits that there was no evidence placed on record to show that modvat credit has been claimed on invoices issued by registered dealers that did not show the amount of duty paid on the scrap. Learned Counsel submits that it was not the responsibility of the appellant to verify the sources from where the registered dealers supplying the modvatable scrap. He submits that the appellants had 63 suppliers of scrap and it was not possible for the appellants to check up whether the registered dealers had actually obtained the scrap was modvatable or not. He referred to Board's Circular No. 18/86-CX6 dated 28th May, 1986 and submitted that Central Board of Excise & Customs had directed the field staff as, "It has been decided that the Range Staff should be asked to verify to the extent possible in the manner provided in the Basic Manual the duty paid goods with duty-paying documents, during their visit to units availing of Modvat facilities." Learned Counsel submitted that Central Board of Excise and Customs further directed, "It has further been decided that the Range Staff should undertake cent percent verification of duty-paying documents in respect of which duty credit exceeds Rs. 10,000." Learned Counsel submits that in their case each invoice had duty incidence of more than 10,000 rupees. He submits that during the material period no objection was raised by the Range Staff when the duty-paying documents were submitted to them alongwith RT-12 returns. Learned Counsel also refers to the judgment of this Tribunal in the case of C.C.E., Chandigarh v. B. T. Steels 2000 (41) RLT 836. In para 7 it has been held as under:
7. I have considered the submissions and perused the record. The Final Order under consideration had followed the reasoning adopted in the earlier decision of the Tribunal in Sharu Steel Co. Ltd. and it was observed that where the Gate Passes ultimately received by the manufacturer of the final products has passed hands a number of times before it reached him it would not be reasonable to expect that the assessee would be able to satisfy himself about the genuineness of the original manufacturer of the goods, especially when such manufacturer is located at a different or distant place. However, I do find some force in the point raised in the Reference Application and a point of law does arise in such cases and it requires judicial interpretation as to what is the limit of the obligation cast on the manufacturer under Rule 173Q(1)(bb) read with Explanation thereto. The reasonable steps that are expected to be taken by the person availing of credit of duty is that he should satisfy himself either from his personal knowledge or on the strength of a certificate given by a person with whose hand-writing or signature he is familiar or on the strength of a certificate issued to the manufacturer or the supplier by the Superintendent of Central Excise within whose jurisdiction such manufacturer has his factory or the supplier has his place of business subject to the proviso to the said Explanation.
Learned Counsel submits that appellant had taken modvat credit on the strength of invoices issued by the registered dealers, that there was no illegality or infirmity in the documents on the basis of which modvat credit was taken. He further submits that the appellants were manufacturing steel ingots and they had no facility of re-rolling the products.
6. Learned Counsel further submits that the Department did not bring any evidence on record to show that the scrap available in their stockyard at the time of visit of the Central Excise Officers was not the scrap sold by M/s. MUL to the registered dealers who supplied the scrap to the appellants. Learned Counsel, therefore, prays that the appeal may be allowed with consequential benefit.
7. Shri Mewa Singh, learned SDR refers to the statements of the employees of the appellant and submits that the employees have in their statements stated that sometimes the registered dealers were supplying the goods which were not modvatable but the documents alongwith scrap were being supplied in respect of the goods which were modvatable. Learned SDR further submits that in view of these statements of the employees and in view of the fact that these statements have not been retracted, the authorities below have rightly disallowed modvat credit and imposed penalty.
8. We have heard the submissions of both the sides. We have also perused the evidence on record as also the case law cited by the learned Counsel.
9. We note in the instant case that scrap was available at the time of visit of the Central Excise Officers to the factory premises. No effort was made to check up whether the scrap in the stockyard was modvatable stated to have been supplied by M/s. MUL or not. No sample was drawn for test or verifying the veracity of the document. We note that the appellant was purchasing scrap from registered dealers. Registered dealers were in their invoices showing the scrap as duty paid. The invoices have not been found to be bogus. If at all anybody was manipulating the invoices it was the registered dealer and, therefore, the demand, if any, of duty should have been raised against the registered dealers. There is no evidence on record to show except the statement of the employees of the appellant. The statement of the employees alone cannot be the sole evidence. There is no evidence to prove that the invoices on the strength of which modvat credit was taken did not cover the goods actually received. The claim of the appellant was that in their stockyard there was sufficient scrap, which showed that the scrap was from M/s. MUL.
10. We note however that in the scrap market the scrap changes hands from place to place and from one dealer to the other. Thus it is not possible for the recipient of the scrap to verify whether the scrap was actually from one source or the other. This view finds supports from the judgment of the Tribunal in the case of CCE, Chandigarh v. B.T. Steels cited above.
11. We have also perused the Board's Circular, which inter alia set out a procedure in respect of verification of payment of duty exceeding Rs. 10,00.00. In the instant case no such verification to prove the case against the appellants is brought out.
12. Looking to the above circumstances and the discussions we find force in the argument of the appellant. The appeal is accordingly allowed. Consequential relief, if any, shall be admissible to the appellants in accordance with law.