Custom, Excise & Service Tax Tribunal
C.C.E., Noida vs Vinayak Hardware Pvt. Ltd on 21 March, 2014
CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL,
West Block No.2, R.K.Puram, New Delhi
Date of hearing/decision: 21.3.2014
Central Excise Appeal No.2837 of 2010
Arising out of the order-in-appeal No.160//CE/APPL/NOIDA/2010 dated 21.5.2010 passed by the Commissioner (Appeals), Customs, Central Excise and Service Tax, Noida.
For Approval and Signature:
Honble Mr. Manmohan Singh, Technical Member
1
Whether Press Reporter may be allowed to see the Order for publication as per Rule 26 of the CESTAT (Procedure) Rules, 1982?
2
Whether it should be released under Rule 26 of 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?
C.C.E., Noida . .. Appellant
Vs.
Vinayak Hardware Pvt. Ltd. . Respondent
Appearance:
Present Shri Devendra Singh, A.R. (Jt.CDR) for the appellant- Revenue None for the respondent Coram: Honble Mr. Manmohan Singh, Technical Member Final Order No. 51791/2014 Per Manmohan Singh:
This is an appeal filed by Revenue. However, the respondent is not present. On perusal of the date sheets, it is observed that the notice was issued on 15.10.12 and later on 14.12.2012. In the meanwhile no Court was held on 9.5.13, 18.2.2013, 16.7.13, 6.12.13 and 8.1.2014. However, due to non-availability of the Bench, the matter could not be proceeded. Hence the matter is fixed on 21.3.2014 for which the respondent is not present. The appeal is taken up for disposal with the assistance of the ld. Joint C.D.R. appearing for the Revenue.
2. The brief facts of the case are that the party is manufacturer of Hinges, Gate latches, Pole line H/W fittings and door fitting falling under Sub-heading No. 8302.0-0 of the Central Excise Tariff and registered with Central Excise Division-I Noida. They procured raw material namely M.S.Bars from M/s Sidh Balak Enterprises 17, Sector-5A, Opposite Haryana Mill, Prem Nagar, Mandi Gobind Garh, a registered dealer under the Jurisdiction of Central Excise Division Mandi Goving Garh amongst other suppliers. They claimed to have purchased MS Bars weighing 71.980 MT from M/s Sidh Balak Enterprises under following invoices:-
Invoice No & date Quantity Excise duty involved
62 dt. 30.04.05 24.470 MT 92563/
85 dt. 12.05.05 15,000 MT 58700/
86 dt. 12.05.05 25,590 MT 100142/-
150 dt. 11.06.05 6,920 MT 26935.55/
The party availed Cenvat credit on the above invoices
3. The officers of the Central Excise Division Mandi Gobind Garh investigated a case against the said M/s Sidh Balak Enterprises 17, Sector-5A, Opposite Haryana Mill, Prem Nagar, Mandi Gobind Garh , a Proprietorship Concern owned by Shri Sachin Aggarwanshi (hereinafter referred to as Shri Sachin) and found the said firm non existing and fictitious. The said dealer obtained Central Registration No. AIOPK6617PXD001 on 13.05.04 for trading of excisable goods. During the verification of said firm, it was found that the premises declared by the said firm for operation of business was occupied by one M/s. Mahalaxmi Steel. Enquiries revealed that the said premises were owned by Shri K.R.Goyal. In his statement dt. 17.04.07 Sh. Goyal stated that Sh. Sachin Proprietor M/s Sidh Balak Enterprises took the said premises on rent but did not enter in any written agreement. He further stated that Sh. Sachin vacated the said premises in July04 without informing him. In April05 the said premises was given to M/s. Mahalaxmi Steel on rent. In his statement dt. 05.04.07 Sh. Sachin confessed that his firm did not own any office or godown in Mandi Gobind Garh. He further stated that he had an office at Lalheri Road, Opposite Soodan Di Hatti (Ground Floor) Khanna and from there he carried out his business. Verification of the said address by the Central Excise Officers further confirmed that there had never been any office or godown in existence of Sh. Sachin or his any firms. Sh. Sachin stated in his statement dt. 05.04.07 that the registration obtained by him for M/s. Sidh Balak Enterprises was surrendered in 2006 on 25.05.07. Besides M/s. Sidh Balak Enterprises, Sh. Sachin was also carrying out trading business in other two firms, M/s. Sidh Industries and M/s. Jal Sidh Yogi, Baba Balak Nath Alloys & Metals which were also found fictitious. Sh Sachin could not produce any record in respect of M/s. Sidh Balak Enterprises when demanded by the investigating officers. In view of the above, it was found that M/s. Sidh Balak Enterprises was not in existence. Hence transactions for sale of goods on trading basis by M/s. Sidh Balak Enterprises were farce and invoices issued by them were bogus. It was observed during the course of investigation that M/s. Vinayak Hardware (p) Ltd., B-94, Sector-2, Noida purchased M.S.Bars from said M/s. Sidh Balak Enterprises during April05 to June05 and took Cenvat Credit on the basis of said invoices issued by them. As said M/s. Sidh Balak Enterprises was not in existence, the transaction shown with them by M/s. Vinayak Hardware (P) Ltd. were bogus and only paper transactions. M/s. Vinayak Hardware (P) Ltd. indulged in only paper transactions with M/s. Sidh Balak Enterprises, Cenvat Credit taken by them in respect of inputs shown to have been purchased from M/s. Sidh Balak Enterprises was improper and was not admissible.
3. The adjudicating authority proceedings resulted in disallowance of Cenvat Credit of Rs.2,78,343/- wrongly availed by the appellant on the basis of invoices issued by M/s Vinayak Enterprises. Penalty of equivalent amount to the duty was also imposed.
4. M/s Vinayak Hardware Pvt. Ltd. came in appeal before the Commissioner (Appeals) challenging the order passed by original adjudicating authority. The Commissioner (Appeals) observed that the appellant had procured the inputs from the registered dealers under the proper duty paying documents. There was no dispute on this aspect as the adjudicating authority has not mentioned anything indicating non-receipt in inputs under the cover of the said invoices. He also concluded that it was the case of the department that the goods were not received in the factory. Further there was no dispute that the appellant had discharged its contractual liability by making the payment of invoice price to the registered dealer. In fact, the payment have been made through banking channel. The appellant submitted sufficient evidence in form of copies of Sales Tax Forms, Dharm Kanta receipt, Transport GR and Bank Draft establishing receipt of goods and payment of the same to the supplier. The provisions governing the availment of the credit envisaged that the assessee availing the credit should ensure that the inputs should have suffered duty at the hand of the manufacturer. In the instant case, the appellant has procured the goods from a registered dealer and who had, while passing over the credit had issued valid duty paying documents. On the basis of the above contention, he came to the conclusion that the present respondent could not go beyond the duty paying documents in their hand. The respondent had checked the authenticity of the dealer who was duly registered. Accordingly, he allowed the benefit of cenvat credit to M/s Vinayak Hardware Pvt. Ltd. and set aside the imposition of penalty.
5. However, Revenue did not accept the findings of the Commissioner (Appeals and preferred an appeal before the Tribunal. Following grounds have been taken in appeal:
(a) The joint reading of provisions of Rule 4 and 9 of the Cenvat Credit Rules, 2004 indicates that that for taking Cenvat Credit, it was essential that inputs should be received in the factory and there should be should be accompanied the specified documents along with the inputs as mentioned above. It was observed that M/s. Sidh Balak Enterprises, a registered dealer, was shown as the supplier of inputs to the party hence the issue related to first/second stage dealer. A first/second stage dealers was required to take out registration as provided under Rule 9 of the Central Excise Rules, 2002 and as per terms and conditions of Rule 9 of the Central Excise Rules, 2002 read with Notification No. 35/01-CE(NT) dated 24.10.1994 it is clarified that A registration certificate issued under Rule 174 is valid only for the premises specified in such certificate. In the instant case, premises registered by the department for M/s Sidh Balak Enterprises as per details in discussions and findings of the impugned order of the adjudicating authority, it has been proved by the department that the premises indicated on documents were not used by M/s Sidh Balak Enterprises for carrying out trading business. The invoices against which credit was taken by the party were showing address of the firm Prem nagar, Mandi Gobind Garh while factually no godown of the said firm was in existence at the place during the period when the invoices were issued. Thus, Revenue contended that M/s Sidh Balak Enterprises, 17, Sector-5A, opposite Haryana Mill, Prem Nagar, Mandi Gobind Garh, were not first/second stage dealer and invoices issued by the said firm were not valid documents under Rule 9 of the Cenvat Credit Rules, 2004. Reliance was placed on the decision of the Honble CESTAT in the case of Baldev Raj Ram Murti [2007 (220)-ELT-T-786(T)] wherein it has been held that in case dealer is not in possession of godown at the shown place, the transaction can be inferred to be only paper transaction.
7. Revenue also took the plea that once it has come on record that dealer was not having godown on the date of issue of invoices, such invoices loose their authenticity. It clearly indicated that no goods have been received in the godown and subsequent details given in the invoices indicating clearances from the godown were not correct. Revenue has also contended that such invoices become paper transactions without receipt of the goods, even subsequent availer of the credit also became the party to the fake transaction. They have also invited attention of Honble CESTAT decision in the case of Baldev Raj Ram Murti -2007 (220) ELT 786 (Tri) wherein it has been held that dealer is not in possession of godown at the shown place, the transaction can be inferred to be only paper transaction.
8. Ld. A.R. has also referred to the grounds of the appeal where the CBEC Circular No.107/18/95-CX dated 2.3.95 has been referred that no cenvatable invoice could be issued by a registered dealer until goods have been received by them and a dealer could not receive the goods without a godown whose locations and others details were not declared by him to the Department.
9. Heard the ld. A.R. for the Revenue and also perused the record.
10. It is observed that Revenue has contested the finding of the Commissioner (Appeals) where he has observed as under:
It is observed that the appellant had procured the inputs from the registered dealers under the proper duty paying documents. There is no dispute on this aspect as the adjudicating authority has not mentioned any thing indicating non-receipt in inputs under the cover of the said invoices. Therefore, it is not the case of the department that the goods were not received in the factory. Further there is no dispute that the appellant had discharged its contractual liability by making the payment of invoice price to the registered dealer. In fact the payment have been made through banking channel. The appellant has submitted sufficient evidence in form of copies of Sales Tax Forms, Dharm Kanta receipt, Transport GR and Bank Draft establishing receipt of goods and payment of the same to the supplier. The provisions governing the availment of the credit envisages that the assessee availing the credit should ensure that the inputs should have suffered duty at the hand of the manufacturer. In the instant case, the appellant has procured the goods from a registered dealer and who had, while passing over the credit had issued a valid duty paying documents. It is undisputed that the appellant had paid the amount of invoices under which the inputs were cleared to them by the supplier and there is no contrary evidence to this.
11. I am not in agreement with the finding of the Commissioner (Appeals) holding that in view of payment of invoice price has been made by the dealer and such payment has been made through banking channel and of passing of the credit by such dealer on valid invoices could not be disputed; Commissioner (Appeals) also held that the appellant could not go beyond the duty paying documents in their hand. His observation that the appellant have taken due care while procuring the duty paid inputs and Cenvat credit on such invoices cannot be denied simply on the ground that invoices were issued by the dealer fraudulently, is also not acceptable. Once the fraud is involved, it vitiates the transactions and no benefit can accrue on such invoices. Commissioner (Appeals)s finding that credit will be available even fraud at dealer stage is involved is not acceptable at all.
12. On perusal of the grounds of appeal by Revenue as well as the Honble CESTAT judgments in Baldev Raj Murti - 2007 (220) ELT 786 wherein it clearly comes out that a manufacturer issued modvatable invoices without transport of any goods based on fictitious invoices issued by appellant as second stage dealer, no modvatable invoices could have been issued until goods were received by registered dealer and he could not have received goods without a godown, location and details entered in application for registration. It is fact on record that Mr. Sachin Agarbanshi , owner of the dealers firm has taken registration with the Department as a dealer and for issuing cenvatable invoices upto 12.5.04. However, he continued to issue invoices in absence of godown. Preventive Staff office of Central Excise Division, Mandi Gobind Garh in their investigation have revealed that trading of ingots conducted by him from the Dealer firm with M/s. Ved Trading Company, Mandi Gobindgarh was merely a paper transaction. He confessed to have indulged in paper transaction only without actual receipt/sale of the ingots for which he got a commission @ Rs.50/- PMT from M/s. Ved Trading Company, in cash. On being informed that Sh. Ved Prakash, Prop. of M/s. Ved Trading Company in his statement dt. 20.12.06 had mentioned the address of his (Dealer) firm as Prem Nagar, Mandi Gobindgarh having land line phone no.01765-501647 was used mobile phone no. 98880-16789; he stated that he did not have any office at Mandi Gobindgarh and did not have any land line phone, and mobile no. 98880-16789 was used by him for about one year which was surrendered by him in December, 2006, as he kept changing his mobile phone numbers frequently. It is pertinent to mention here that Sh. Sachin vide his earlier statement dt. 11.05.06 tendered under section 14 of the Act before the Superintendent (Prev.), Central Excise Division, Mandi Gobindgarh in the case against M/s. Aggarwal Steel Rolling Mills & Metal Industries, Mandi Gobindgarh h ad also confessed to have indulged in paper transactions only. On being asked to produce the records of his firms, he stated the same to be with his Chartered Accountants M/s. Sameer Garg & Associates, Mandi Gobindgarh. He promised to produce all his records within two days; which he never submitted.
13. Investigation has also revealed that M/s Vaid Trading Company have indulged in paper transactions without actual receipt/sale of the ingots for which they got 50 PMT from Vaid Trading Company. It has also come on record that Sachin Aggarwanshi has not been cooperative with the Revenue authority and has been disregarding the summons issued to him. Instead he indulged in filing compliant against the Central Excise authority and also moved the Honble Punjab & Haryana High Court. His matter was referred to SSP who did not find any verifiable contents of this representation and complaint was closed. It is seen that the purchaser of the MS ingots from the company of M/s Sidh Balak Enterprises has shown that no enquiry about genuineness of the company was made as admitted by Ms. Mamta Sharma, Director of the Company. On the other hand, she stated that material was received on credit basis and payment was made after 45 to 60 days and entry in the ledger account of Shri Sidh Balak Enterprise have shown receipt of Rs.5,00,000/- on 2.7.05 and Rs.3,30,440/- on 27.7.05, through bank DD, however which has been found as not correct.
13A. It is also observed from in depth investigation undertaken by the Revenue, that Mr. Sachin has indulged in creation of fake firms without any establishment and has indulged in false transactions/trading to pass on cenvat credit fraudulently.
14. From the above discussions, I am convinced that Sachin Aggarwanshi floated the company to undertake paper transactions and these paper transactions have been proved by the confessional statements. It also came out that all these Central Excise transactions have been organized in such a way to facilitate illegal availment of credit by M/s Ved Trading Company. The role of Sachin in this fraudulent activity is clearly manifested . His subsequent actions and behavior in prolonging investigation and non-cooperation with the Department and later taking recourse to the legal forums to contest the Departments allegations have proved false as nothing substantive was found by the Police authorities who later closed the investigation. Mr. Sachin clearly became liable for penal action for executing fraudulent activities. Further investigations have clearly brought out that the paper transactions have taken place without actual movement of goods and credit has been passed on fraudulently. Such illegally availed credit requires to be reversed back along with penal action as whole fraud has been pre-mediated and executed with the sole intent to defraud the revenue.
15. In view of the above, I am inclined to accept the Departments appeal, I set aside the Order-in-Appeal No.160/CE/Appeal/Noida/2010 dated 21.5.2010 and uphold the findings of the original adjudicating authority.
16. Ordered accordingly.
(Manmohan Singh) Technical Member
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