Custom, Excise & Service Tax Tribunal
Accelerate Synthetics Pvt. Ltd vs Commissioner Of Central Excise on 8 September, 2015
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL,WEST ZONAL BENCH AT MUMBAI COURT No. II APPEAL No.E/1199 to 1201, 1233, 1234 & 2158/10 With E/MA(Ors)/1447/2011-Mum (Arising out of Order-in-Original No.20/BR-20/Th-I/2010 dated 06/04/2010 passed by Commissioner of Central Excise, Mumbai) For approval and signature: Honble Mr. Anil Choudhary, Member (Judicial) Honble Mr. Raju, Member (Technical) 1. Whether Press Reporters may be allowed to see :No 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 :Yes CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? 3. Whether Their Lordships wish to see the fair copy :Seen of the Order? 4. Whether Order is to be circulated to the Departmental :Yes authorities? ========================================
Accelerate Synthetics Pvt. Ltd., Tulsidas Banbiharilal Goyal Leo Boldo Fernando Appellants Amica Traders Bhupendrabhai Ambalal Patel Shree Asha Traders Vs. Commissioner of Central Excise, Respondent Mumbai Appearance:
Shri.K.R. Bulchandani & Shri Navin Gheewala Advocate for appellant Shri.V.K.Singh, Spl. Counsel for respondent CORAM:
Honble Mr.Anil Choudhary, Member (Judicial) Honble Mr. Raju, Member (Technical) Date of Hearing : 08/09/2015 Date of Decision : /2015 ORDER NO Per: Raju
1. The Appellants, (M/s. Accelerate Synthetics Pvt. Ltd.) are registered as manufacturers of grey fabrics. They were availing credit on the basis of certain invoices of Polyster Yarn claiming that the same is being used for manufacture of grey fabrics. They were not manufacturing grey fabrics themselves but were getting the same done by certain weavers of Bhiwandi. In certain independent investigations, in Surat, it emerged that certain dealers were issuing bogus invoices, and the buyers of these bogus invoices were taking the CENVAT credit on the basis of these invoices, without receiving the goods. Thus an alert circular was issued by the Surat Commissionerate.
2. In the said alert circular it was noticed that some of those allegedly bogus parties had issued invoices in the name of appellants (M/s. Accelerate Synthetics Pvt. Ltd) and therefore investigations started against the appellants. As a part of investigations a number of statements of the Proprietor and employees of the appellant were recorded. Statements of number of yarn suppliers and brokers were also recorded. Certain evidences in shape of money trail and allegedly fictitious transportation records were also obtained. On the basis of these evidences it was alleged that:
i) They have taken credit on fake/ bogus invoices on which duty has not been paid
ii) They have taken the credit without receipt of goods
iii) They have not taken steps to verify the genuineness of the suppliers of goods as required under Cenvat Credit Rules
iv) They have issued fictitious invoices of final products in order to justify taking of credit
v) They have filed incorrect return wrongfully depicting receipt of inputs
3. One of the alleged suppliers of fake invoices to the appellant is M/s.Shiv Trading Company. It will be pertinent to mention here that in a case decided by this Tribunal in the case of Shir Kashinath Das (Proprietor Shiv Trading Co.) Vs. CCE, Mumbai, vide order No.A/376/14/EB/C-II dated 20/05/2014 following has been stated by Shri Kashinath Das (Proprietor of Shiv Trading Co.):
(i) He had registered a firm M/s Shiv Trading Company as its proprietor on the advice of one Shri Chandubhai Patel.
(ii) The address stated in the application form being B-204, Rishikesh Apartment, 100 Feet Road, Evershine Complex, Vasai (W), Dist. Thane is fictitious.
(iii) The said firm was supposed to do trading activity in grey fabrics. However, no activity took place in the said firm.
(iv) The bank account No. 3088 was opened in Bassein Catholic Co-operative Bank Ltd. and to the best of knowledge of the appellant, no business transaction took place.
(v) The bank account No. shown in the application for registration is a personal account with Punjab & Maharashtra Bank.
(vi) Registration of Shiv Trading Company was surrendered on 21.7.2004, as no activity had taken place, only return for the period of registration was filed.
(vii) As regards two rubber stamps found in the course of search in the name of J.P. Textiles, it was stated that it was a proposed firm, which was never opened.
(viii) As regards M/s Sofina Fashion, all the acitivites etc. were looked after by Shri Chandubhai Patel and his associate namely, Shri Pandey and Mukesh, who all belong to Surat.
(ix) In his further statement recorded on 17.1.2006, the following statements were made: -
On being shown invoices issued by M/s Shiv Trading Company in favour of M/s Accelerated Synthetics Pvt. Ltd., Bhiwandi, being 24 in number, it was categorically stated that the said invoices were not issued by him or by his firm to the best of his knowledge. It was further categorically stated that the signature appearing on the 24 invoices purportedly issued in favour of M/s Accelerated Synthetics Pvt. Ltd. are not the signature of Shri Kashinath Das and the same appear to be forged. It was further stated that Shri Kashinath Das does not know any person by the name of Sudhir Bhimrajka or Tulsidas Goyal or Leo Fernando.
4. This Tribunal in that case has given following findings:
7. Having considered the rival contentions, we find that there are no categorical findings against the appellant so as to prove the charges as alleged in the show-cause notice inspite of there being names available of the alleged supplier in the invoices from whom the appellant allegedly purchased, no enquiry appears to have been done. Further, it is seen that the appellant is situated in Mumbai, whereas the invoices recovered from M/s Accelerated Synthetics Pvt. Ltd. allegedly issued by the appellant are printed by one Ambaji Stationery, Surat. No enquiry has been made with the printer as to who got the stationery printed. Further, the appellant had stated that he had obtained the registration under Central Excise on being inspired by one Chandubhai Patel of Surat, who has also admitted in his statement before the Revenue authorities that he had also registered one firm at Surat with the Excise Department in similar name of Shiv Trading Company. The said Chandubhai Patel has been found to be involved in the issue of bogus CENVAT invoices in other names also. It appears that the said Chandubhai Patel has been instrumental in the mischief by using the name of the appellant without his knowledge. Moreover, it is found that the adjudicating authority has imposed penalty without any categorical finding against the appellant. Rather the penalty is imposed on the basis of assumption and presumption which have no legs to stand.
5. The learned Counsel for the appellants argued that the principles of natural justice have not been followed as no cross-examination has been allowed. It was argued that each and every imputation raised in the notice is based on the statements recorded during investigation. It was argued that the appellants had been denied cross-examination wrongfully. It was also argued that the appellants were not heard on merits and the matter needs to be remanded for fresh adjudication after allowing cross-examination of the witnesses and the personal hearing to the applicants to enable them to produce all the records before the respondent. The applicants have also filed a miscellaneous application No.E/MA(Ors)/1447/11-Mum seeking to introduce fresh documents as evidence, which could not be produced before the adjudicating authority for want of sufficient opportunity.
6. The learned Counsel for the appellants also argued that in view of the decision of Honble High Court of Gujarat in the case of Prayagraj dying and printing mills and others (dated 28.09.2012), the notice itself needs to be quashed as time-barred. The appellants argued that the show cause notice does not allege any wrongdoing on the part of appellants and if any fraud has been committed by the sellers of the yarn then they cannot be blamed for any misdeclaration or fraud. They argued that since there is no allegation of any fraud or misdeclaration against them extended period of limitation cannot be invoked in view of the decision of Honble High Court of Gujarat (supra). Learned Counsel Shri Bulchandani argued at length trying to draw a parallel between the facts before the High Court of Gujarat in the aforementioned case and in the impugned case. He argued that the facts in both the case are similar and therefore the ratio of the said judgement should apply to the present case.
7. In the impugned order penalty has been imposed on M/s Asha traders and its proprietor for supplying bogus invoices to the main appellants. On behalf of Asha traders the learned counsel Shri Gheewala argued that the invoices Nos. in respect of which penalty has been imposed on his client are also the subject matter in a different proceeding, which has already been adjudicated by the Surat Commissionerate. He argued that since the matter pertaining to these very invoice numbers has already been adjudicated in a different proceeding the same cannot be done again in the present proceedings.
8. The learned AR argued that the receipt of goods has been disputed in the present case and hence the facts of the present case are substantially different from the facts before the Honble High Court of Gujarat in case of Prayagraj dying and printing mills. Moreover in the instant case there are specific allegations of involvement against the appellants. He also argued that the manager of the appellants has admitted that they were involved in paper transactions and no goods were received. He argued that the manager of the appellant had also admitted to receiving the money back in cash against the cheque issued to brokers for suppliers of yarn.
9. It is apparent that the principle of natural justice has not been followed in so much as no final hearing has been given and cross-examination has been denied without assigning any reasons. However it is seen that in the case of Prayagraj dying and printing mills, Honble High Court of Gujarat had observed that since in that case there was no allegation of mensrea on the part of the appellants in that case, the Tribunal was wrong in remanding the matter to the lower authorities. The Honble High Court had observed in that case that the Tribunal ought to have allowed the benefit on limitation.
10. In the present case the appellants have claimed that they got grey fabrics manufactured from weavers by supplying them polyester yarn purchased from yarn dealers or manufacturers. The case of the Department is that they have received only invoices and not received the yarn. The case of the Department is also that no grey fabric has been sold but only invoices have been issued. The Department has also alleged that all the money given to yarn dealers or manufacturers has been received back in cash through brokers or agents. It has been alleged by the revenue that the appellants have actively connived in the entire operation and their manager has also confessed the same during investigations. The learned counsel for appellant had however argued that the confession was obtained under duress and was retracted immediately.
11. In the case of Prayagraj dying and printing mills (PDPL) and others (supra) the facts were that PDPL were receiving fabric for processing from various dealers and were returning the processed fabrics back to the dealers. It was alleged that the fabrics supplied by the dealer was accompanied by bogus or fake invoices and the credit taken on the same was challenged. The Honble High Court in the said case observed as under:
11. We, therefore, find no substance in the contention of the learned Counsel for the Revenue that simply because the original manufacturer is now not traceable, is sufficient for reversal of Cenvat credit already taken by the appellants by virtue of the original invoices. However, at the same time, we find substance in the contention of Mr.Oza and Mr.Champaneri, the learned Counsel appearing on behalf of the Revenue, that in order to get the credit of Cenvat Rule 7 (2) cast a further duty upon the appellants to take all reasonable steps to ensure that the inputs or the capital goods in respect of which the appellants had taken the credit of CENVAT are the goods on which appropriate duty of excise as indicated in the documents accompanying the goods, has been paid. The explanation added to Rule 7 (2) even describes the instances which are the reasonable steps. The appellants in these cases, however, not having taken those steps, cannot get the benefit of the credit even though he is not party to fraud. In his connection, we fully agree with the views taken in the case of Sheila Dying (supra) and hold that the said decision supports the case of the Revenue and taking of all reasonable steps as provided in Rule 7 (2) is an essential condition of availing the credit. The distinction sought to be made by Mr.Parikh that the period involved therein related to June, 2003 is not tenable because sub-rule (e) of Rule 7 was introduced even earlier with effect from April 1, 2013.
12. The next question is whether demand of reversal is barred by the period of limitation. In our opinion, in view of our above finding that if the original document is issued even by practicing fraud, a holder in due course for valuable consideration unless shown to be a party to a fraud, cannot be proceeded with by taking aid of a larger period of limitation as indicated in Section 11A (1) of the Act. It is now settled law that Section 11A (1) is applicable when there is positive evasion of duty and mere failure to pay duty does not render larger period applicable. In the case before us, it is not the case of the Revenue that the transferees were party to any fraud and therefore, the Revenue cannot rely upon a larger period of limitation. Our aforesaid view finds support from the following decisions of the Supreme Court:
i) CCE Vs/ Chemphar Drugs & Liniments, reported in 1989 (40) ELT 276.
ii) Padmini Products Vs. CCE, reported in 1989 (43) ELT 195
iii) Lubrichem Industries Ltd. Vs. CCE, Bombay reported in 1994 (73) ELT 257.
iv) Nesle (India) Ltd. Vs. CCE Chandigarh reported in 2009 (235) ELT 577
13. We thus find substance in the contention of Mr.Parikh that the case before us, in the absence of any allegation that the appellants were parties to the fraud, the larger period of limitation cannot be applied and thus, even if the original document was assumed to be issued by practicing fraud, the appellants being holders in due course for valuable consideration without notice, the larger period of limitation cannot be extended in the case before us. In this connection, we may profitably refer to the decision of the Supreme Court in the case of Commissioner of Central Excise, Belapur Vs. E. Merck India Ltd., reported in 2009 (238) ELT 386 (SC) where the Supreme Court took a view that in the absence of a willful misdeclaration on the part of the respondent assessee, there was no scope of invoking Section 11A of the Act.
12. It can be seen that the Honble High Court has given the decision in a case where there was no allegation on the person being charged of any involvement in creation of the bogus or fake invoices. However it is noticed that in the present case the facts are different. In the present case there are direct allegations on the appellants of being involved in the fraud. In the case before the Honble High Court the receipt of goods by the appellants was not in doubt, however, in the present case it has been specifically alleged that the goods have not been received by them and only papers have travelled. Thus it can be seen that the facts in the present case are substantially different from the facts in the case before the Honble High Court of Gujarat. The learned Counsel for the appellants argued that the decision of Honble High Court of Gujarat was based on the facts in the case of Prayagraj dying and printing mills and others, and in that case the receipt of goods was not challenged. He argued that among the group of appeals before Honble High Court of Gujarat, there was also an appeal of M/s Asha traders. In the case of Asha Traders the receipt of goods was challenged. Therefore, the learned Counsel argued that in the case before the Honble High Court there was also a case where receipt of goods was challenged. It is seen that the Honble High Court has given decision based on presumption that the appellants in that case had received the goods along with the invoices, and therefore were not aware that the invoices were fake or bogus. The findings of the Honble High Court are based on lack of mensrea on the part of the appellants in that case. In the instant case there are direct allegations against the appellants and therefore, their involvement cannot be ruled out. In the circumstances the benefit of the aforesaid decision of the Honble High Court cannot be extended to the appellants.
13. The appellants had given detailed reasons for seeking cross-examination of witnesses. It is seen that the cross-examination has been denied solely on the grounds that there is hard evidence which is corroborated by the statements and therefore no cross-examination is necessary. It is observed that this is not sufficient ground for denying cross-examination of witnesses whose statements have been relied upon. If cross-examination is to be denied then cogent reasons for denying in each case need to be given.
14. In the circumstances, since principles of natural justice have not been followed and opportunity of cross-examination of person whose statements have been relied upon has not been given, were left with no option but to set aside the order and remand the matter for fresh adjudication. In this fresh adjudication proceedings the additional documents which the appellants seek to introduce will be taken on record. Miscellaneous appeal for admission of fresh documents is also disposed of in above terms. Cross-examination of witnesses on whose statements reliance has been placed will be considered on merit as per law.
15. In case of M/s Asha traders the invoices on the basis of which impugned notice has been issued will be compared with the invoices in the case where the proceedings in the Surat Commissionerate have been concluded. If the invoices being considered in the impugned proceedings are the same as the invoices included in the proceedings before the Surat Commissionerate then the notice will be vacated. The appeal of M/s Asha traders is also allowed by way of remand to the adjudicating authority for fresh consideration in light of facts mentioned above.
(Pronounced in Court on .) (Anil Choudhary) Member (Judicial) (Raju) Member (Technical) pj 1 13 Appeal No.E/1199/10