Custom, Excise & Service Tax Tribunal
M/S. G.L. Metallica Pvt. Ltd vs Commissioner Of Central Excise on 21 June, 2010
IN THE CUSTOMS, EXCISE AND SERVICE TAX
APPELLATE TRIBUNAL, NEW DELHI
PRINCIPAL BENCH, COURT NO. III
Excise Appeal No. 1117-1119 of 2008 -SM(BR)
[Arising out of Order-in-Appeal No. 83-85 (RKS)CE/JPR-I/2008 dated 17.4.2008 passed by the Commissioner of Customs & Central Excise (Appeals), Jaipur I ]
For approval and signature:
Hon'ble Mr. M. Veeraiyan, Member (Technical)
1. Whether Press Reporters may be allowed to see :
the Order for publication as per Rule 27 of the
CESTAT (Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 :
of the CESTAT (Procedure) Rules, 1982 for
publication in any authoritative report or not?
3. Whether Their Lordships wish to see the fair :
copy of the Order?
4. Whether Order is to be circulated to the :
Departmental authorities?
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M/s. G.L. Metallica Pvt. Ltd. Appellants
M/s. Agarwal Products
M/s. Yash Industries
Vs.
Commissioner of Central Excise Respondent
Jaipur I
Appearance:
Shri Alok Kothari, Chartered Accountant for the Appellants
Shri I. Baig, SDR for the Respondent
Date of Hearing/decision : 21.6.2010
ORAL ORDER NO . ________________________
Per M. Veeraiyan:
Appeal No. 1117/2008 is by M/s. G.L.Metallica (P) Ltd. a manufacturer of Copper Ingots and Copper alloys. Appeal No. 1118 and 1119/2008 are by M/s. Agarwal Products and M/s. Yash Industries respectively and they are dealers registered under Rule 9 of the Central Excise Rules 2002 for the purpose of passing on Cenvat credit of duty in respect of goods procured by them from the manufacturer /importer.
1.2 These three appeals arise out of common impugned order and are accordingly, dealt with by a common order.
2. Heard both sides.
3. The relevant facts, in brief, are as follows:-
a) M/s. Sulabh Impex Incorporation (hereinafter referred to as importer) with an Import and Export Code Number was in import business. M/s. Sulabh Impex Incorporation a proprietary concern with proprietor Shri Sunil Kumar Mittal. Shri Alok Jain was in the business as a broker of metal scrap on commission basis. Investigation by the officers revealed that Shri Sunil Kumar Mittal issued invoices in favour of the registered dealers but no goods were not supplied by the said M/s. Sulabh Impex Incorporation. The broker Shri Alok Jain has arranged goods through other sources. The registered dealers claim to have received the goods and invoices supported by bill of entry through the broker and subsequently sold the goods to M/s. G.L. Metallica Pvt. Ltd. (hereinafter referred to as Manufacturer ) who has taken Cenvat credit to the tune of Rs.3,46,797/- based on the invoices issued by these two dealers. Shri Sunil Kumar Mittal has admitted issuing invoices only and producing fake bills of entry as if the goods were imported through Neva Sheva port and showing as if duty have been paid on such imports. He also admitted having received payment by cheque for the amounts mentioned in the said invoices and returning the money after retaining his commission. This version also stands admitted by Shri Alok Jain, the broker. On that basis, show cause notice has been issued alleging that the registered dealers were not empowered to pass on any credit and that manufacturer was not entitled to take the credit. It was also alleged that the manufacturer and the registered dealers have intentionally involved themselves in the fraud and therefore penalties were proposed. The original authority confirmed the demand of Rs.3,46,797/- under Rule 14 of Cenvat Credit Rule, 2004 read with section 11A, along with interest under section 11AB of Central Excise Act, 1944 and imposed equal amount as penalty under Rule 15(1) and Rule 15(2) of Cenvat Credit Rules, 2004. In addition, he imposed a penalty of Rs.3,46,797/- on each of the registered dealers. On appeal by the parties, the Commissioner upheld the order of the original authority.
4.1 Learned Advocate submits that there is no evidence that the Registered dealers were aware of fake nature of bill of entries produced by the importer. The Manufacturer is not required to question the transaction between the importer and the Registered dealers. The Manufacturer has taken the credit based on the documents given by the Registered Dealers along with the goods. He seeks setting aside the demand and penalties on these appellants.
4.2 He also relies on the guidelines issued by Central Board of Excise and Customs Circular No. 766/82/2003-CX dated 15.12.2003 to submit that non-payment of duty at the end of supplier is no justification to deny the credit on bonafide purchasers.
4.3 Learned Advocate relies on the following decisions:
1. CCE Chandigarh vs. Shakti Roll Cold Strips Pvt. Ltd.
2008 (229) ELT 661 (P & H)];
2. Ajay Industrial Corporation vs. CCE, Delhi III [2009 (237) ELT 175 (Tri-Del)];
3. CCE, Ludhiana vs. Malerkotla Steels & Alloys Pvt. Ltd.
[2009 (244) ELT 48 (P&H)]; and
4. Vikram Knittex Pvt. Ltd. vs. CCE, Surat I [2008 (230)ELT 190 (Tri-Ahmd.)]
5. Learned SDR reiterating the findings and reasoning of the Commissioner (Appeals) submits that the goods have never been imported and the Bills of Entry based on which the Importer supplied the goods to the registered dealers are fake and since fraud is clearly involved, the question of passing on credit based on such fake bill of entry does not arise. Since the registered dealers have made payments and since the goods have been shown to have been received by them under transport documents in the name of Importer, the registered dealers were also clearly privy to the arrangement. As the registered dealers have not received duty paid imported goods, the question of passing on the credit by them does not arise. He seeks upholding the order of the Commissioner (Appeals). He relies on the decision of the Tribunal in the case of V.K. Enterprises vs. CCE, Panchkula reported in [2010 (249) ELT 462 (Tri-Del)] wherein the obligations of the registered dealers have been dealt with and the registered dealers in the present case have failed in their obligation.
6. I have carefully considered the submissions from both sides. It is clearly emerging that the consignments on which the appellant manufacturer has taken credit was not actually imported by M/s. Sulabh Impex Incorporation. The basic documents namely, the Bills of Entry were admitted to be a fake -ones and therefore, the question of passing on any credit based on such fake documents does not arise. The broker Shri Alok Jain has in his statement dated 23.3.2006 has also admitted that Shri Sunil Kumar Mittal, proprietor of M/s. Sulabh Impex Incorporation only supplied the documents. On receipt of payment against the invoices issued by the Importer, it was submitted that Shri Sunil Kumar Mittal encashed the sum and returned the money to him after deducting his (Shri Sunil Kumar Mittal) commission. The investigation at the end of the registered dealers revealed that they have received the goods as well as invoices and the supporting documents from their broker. Infact no statement has been taken from the registered dealers. The statement of Shri Sunil Kumar Mittal and Shri Alok Jain clearly bring out the role played by both of them. But they do not reveal knowledge, intention on the part of the registered dealers. The claim of the registered dealers that they received the goods through broker Shri Alok Jain is not being disputed. The claim of the broker was that the goods were procured from other sources. The goods procured by the broker may be from non-duty paying sector. While the statement of broker and the importer confirms the non-duty paid nature of the goods supplied to the registered dealers, the same does not reveal any knowledge or intention on the part of the registered dealers and Manufacturer. It is not known why no statement was taken from the registered dealers and manufacturer. It is not shown that the statement of Shri Sunil Kumar Mittal and that of Shri Alok Jain was retracted at any point of time. Under these circumstances, the fraud committed by passing on fake Bill of Entry as duty paying documents to the registered dealer has been proved. Therefore, it is evident that no duty has been paid on the goods received by the registered dealers as the Bills of Entry which were produced as the duty paying documents were found to be fake. The registered dealers do not have the right to pass on the credit relying on said fake bill of entry, after all, fraud vitiates any transaction. The registered dealers having no right to pass on the credit, the question of validity of the credit taken by the Manufacturer does not arise.
7. However, the evidence on record do not show that the registered dealers and the manufacturer were in the knowledge of fraud committed by M/s. Shobit Impex Incorporation. It is stated that separate action has been initiated against M/s. Shobit Impex Incorporation and Shri Alok Jain, the broker.
8. The guidelines of the Board dated 15.12.03 refers to a situation where the goods were supplied by the manufacturer and the manufacturer has subsequently defaulted in payment of duty and the buyer has taken the Cenvat credit having paid the value of the goods and the duty amount to their supplier of goods along with invoices. The same has no relevance to the facts of the present case. The decision of the High Court of Punjab and Haryana in the case of Commissioner of Central Excise vs. Shakti Roll Cold Strips Pvt. Ltd. and CCE, Ludhiana vs. Malerkotla Steels and Alloys Pvt. Ltd. are decisions upholding the orders of the Tribunal after clarifying that no question of law is involved. The Honble High Court not interfering with the the orders of the Tribunal in the said circumstances cannot be laying down binding precedents of law. The decision of the Tribunal in the case of Ajay Industrial Corporation cited supra is based on a finding of fact that merely because the address of the owner of the vehicle was found to be fake, the transportation could not be doubted. Similarly, the decision of the Tribunal in the case of Vikram Knittex Pvt.Ltd. cited supra relied by the appellants is on a factual finding that the inputs have been received by the manufacturer after reasonable precaution and credit taken by the recipient of inputs and the address of the manufacturer of inputs was subsequently found to be uncorroborated was no justification for the denial of credit.
9. In the light of the above, the following emerges:-
1) The registered dealers have not received the goods with proper duty paying documents. The goods were procured from other sources. There is no correlation between the document supplied by the Importer and the goods arranged by the broker. The credit passed on by the registered dealers was irregular and therefore, the credit taken by the manufacturer is not legal and proper.
2) However, there is no evidence that the two registered dealers and the manufacture are aware of the fabrication of bill of entry as duty paying documents. They have acted bonafide. Therefore, penalties on them are not sustainable.
10. In view of the above, the appeals are disposed of as follows with consequential relief as per law:-
a) Appeal No. 1117/2008 of M/s. G.L. Metallica (P) Ltd. is disposed of by upholding the demand of duty alongwith interest and setting aside the penalty.
b) Appeal Nos. 1118/2008 and 1119/2008 are allowed by setting aside the penalties on M/s. Agarwal Products and M/s. Yash Industries.
( M. Veeraiyan ) Member(Technical) ss 2