Custom, Excise & Service Tax Tribunal
Bhartiya Enterprises vs C.S.T.-Delhi-Iv on 11 December, 2014
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL,
WEST BLOCK NO.II, R.K. PURAM, NEW DELHI-110066.
Single Member Bench
Court No. 4
ST/51179/2014-ST(SM)
Date of hearing: 02/7/2014
Date of Pronouncement: 11/12/2014
Bhartiya Enterprises Appellant
Vs.
C.S.T.-Delhi-IV Respondent
Appearance:
Present for the Appellant: Shri N.K. Sharma, Advocate Present for the Respondent: Shri Devender Singh, DR Coram: Honble Mr. Manmohan Singh, Technical Member FINAL ORDER No. 54701/2014 PER: MANMOHAN SINGH Appellant has come in appeal against Order-In-Appeal No.97/ST/APPL/DLH-IV/2013 dated 15.01.2014.
2. Original Adjudicating Authority vide Order-In-Original no. 01/JSY/12-13 dated 28.02.2013 confirmed the Cenvat credit of Rs.65,862.48 and appropriated alongwith interest. Penalty of Rs.1,48,851/- was also imposed. Commissioner in his above order-In-Appeal rejected the appeal and upheld Order-In-Original.
3. The facts as stated in the Commissioner (Appeals)s order are extracted to appreciate the facts of the case. Acting on an intelligence that the appellants were using diesel oil in their furnaces but were procuring bills of CBFS and showing the same to have been used in furnaces while actually diesel oil was being used and CBFS was not being received and only bills were being received to avail Cenvat Credit. Manager in his statement dated 06.3.2006 stated that their firm was availing Cenvat facilities on input credit and input service credit and utilizing the same towards payment of service tax on output services; that their firm had availed Cenvat credit on furnace oil used in the furnaces. On being asked whether they had used CBFS as fuel in their furnace he stated that he did not know whether there was any difference in CBFS or Furnace oil; that the furnace oil being used by the appellants, was supplied by the dealers on the invoices raised for CBFS as the dealers informed them that CBFS was the other name of furnace oil; that their firm had not received the CBFS against the invoices of dealers listed below and instead received furnace oil, which was contrary to the provisions of Cenvat Credit Rules, 2004, therefore, they were ready to pay back the Cenvat Credit availed and utilized by them on CBFS.
4. In the course of investigation, another case of suppression and wrong availment of Cenvat credit amounting to Rs.2,31,838.88/- also came to light in addition to wrong availment of Cenvat credit of CBFS during the period 01.04.05 to 31.12.05. Service provider was providing taxable as well as non taxable/exempted service, they were under the obligation to avail Cenvat credit not exceeding 20% of the tax payable. As the service tax payable by the appellants during the captioned period was Rs.3,72,126.19/-, the appellants were entitled to avail Cenvat credit amounting to Rs.74,425,53/- (20%) of Rs.37,2126.69/- only whereas the appellants had availed/utilized full Cenvat credit of Rs.65,862,48 of CBFS and Rs.3,06,264.21/- of other inputs. Shri Kapil Vashisht, Manager of the appellants in his voluntary statement dated 4.4.2006 recorded under Section 14 of the Central Excise Act, 1944, interalia, admitted that they were not aware of sub-rule 3(c) of rule 6 of Cenvat Credit Rules, 2004 wherein there was restriction on the availment of Cenvat Credit to the extent of an amount not exceeding 20% of the Service Tax.
5. It has been found during investigation CBFS was supplied as a feed stock for the manufacture of Carbon Black which has its won and primary end use application and as such the product CBFS was not sold as Furnace Oil.
6. Appellants submitted that they have already deposited excess credit beyond limit of 20% amounting to Rs.2,31,838.88/-. Further amount of Rs.65,862.48/- toward credit availed as CBFS Vide TR-6 Challans dated 21.3.2006 and Rs.2,98,440/- towards other inputs. They also claimed that they have deposited excess amount of Rs.66,641.16/-. However Commissioner (Appeals) did not consider their submissions. It has further been contended that the return availing and utilizing the credit to full extent for the payment of Service Tax for the period 01.01.05 to 31.03.05 was filed as 25.04.05 and the ST-3 return for April,05 to Sept, 05 as filed an 02.10.05. Similarly return for Oct., 05 to March,06 was also filed. The facts were thus known to the Deptt. Allegation of Suppression was accordingly not sustainable.
7. They also contended that excess utilized was paid back in cash and that even before the issue of shown cause notice. So no extended period was invokable nor was rule 15(2) of Cenvat Credit Rules 2004 or Section 11AC and thus no penalty was imposable.
8. On the other hand DR contested that fraud has been manifested. Paper transaction have been resorted as CBFS was not found fit to be used in their process. Credit has fraudulently been availed credit has since been reversed but penalty has rightly been imposed. Further credit was to be restricted to 20% of total credit as they were manufacturing dutiable and exempted goods, penalty was also impossible on this account. Credit has of course been reversed by the appellant.
9. It is observed from Commissioner (Appeals) order from Para 13 to para 16 that fraudulent intent on the part has been manifested where fraudulent credit of input on CBFS and other inputs have been availed. Issue has been analyzed in detail for ready reference, paras are reproduced.
M/s Hindustan Petroleum Corporation Ltd (another manufacturer) has also opined that the CBFS is a chromatic rich extract stream; that the properties desired for the CBFS are density and BMCI (Bureau of mining Correlation Index); that the typical values of these properties are in the range of 0.99-1.01 (density) and 80-90 (BMCI) and that the Carbon black stock is supplied to the customers for manufacturing Carbon Black which is generally used in Rubber/Tyre Industries. Thus, I agree with the Adjudicating Authority that CBFS cannot be used as fuel in the furnaces as this product contains very high percentage of Carbon Black and if the same is used as fuel in the furnaces, generated smoke will have very high carbon contents and it will not be possible for the workers to work in the factory.
I further find that it is an admitted fact on record that the invoices of M/s Naveen Oil Gas Company, Faridabad on the basis of which Cenvat credit was availed by the appellants, showed the description of the goods as CBFS and not as Furnace oil/fuel. Moreover, the appellants have not produced any documentary evidence on record that they had received and used CBFS as fuel in their factory especially when Shri S.K. Bhardwaj, Manager of the appellants in the voluntary statement dated 06.03.2006 had claimed that they had used only furnace oil. Further the fact that the said CBFS being aromatic rich extract stream was not ideally suited for being used as furnace oil and was a critical raw material for producing Carbon Black for Rubber/Tyre Industries as well as has other uses in the manufacture of dry cell batteries, electrodes, carbon brushes, inks, paints, pigments, plastic and paper, automotive parts, construction and consumer products coating electrical cables, plastic films, pipes and sealants where its ability to observe ultraviolet light is utilized, is duly corroborated from the expert/technical opinions of the manufacturers of said CBFS as well as the Ministry of Science and Technology, Govt. of India, New Delhi. Therefore, the CBFS was not an input of the appellants and they had wrongly and irregularly availed the Cenvat credit on the CBFS during the material period. Moreover, the appellants have already voluntarily deposited the amount of wrongly availed/utilized Cenvat credit on CBFS by admitting that they had never used said CBFS as fuel in their furnaces; that they had used only the furnace oil and that they had accepted the invoices of CBFS issued by the dealers as the said dealers had convinced them that it was the other name of furnace oil, as admitted by Shri S.K. Bhardwaj, Manager of the appellants in his voluntary statement dated 6.3.2006.
I further find that during the period when the present show cause notice was issued to the appellants in 2007, numbers of other manufacturers working under the jurisdiction of Central Excise Commissionerate, Delhi-IV, Faridabad, had also obtained Cenvatable invoices of CBFS under the guise of furnace oil and M/s Jaindendra Industries (P) Ltd, Faridabad was also one of them. The Honble CESTAT, New Delhi has already decided the case of M/s Jainderdra Industries (P) Ltd, Faridabad vide its judgement reported as 2012 (278) ELT 613 (Tri-Del) disallowing the Cenvat credit on CBFS on the basis of export opinions. The relevant portion of the above judgement is reproduced below:-
Cenvat/Modvat Wrongful availment of credit CBFS not received in factory and paper credit enjoyed on fake documents Government Technical Report showing goods claimed to be used, not usable as furnace oil substitute HELD : Firstly impugned goods not received, secondly as per technical report goods not usable Failure to lead evidence to claim genuineness of transition of goods from origin to destination In instant case, totally negative opinion against assessee If claim permitted, same will amount to legalizing illegality When goods not received and no genuine transaction, assessee appears to have oblique motive and not entitled to credit Plea or remand not entertainable as department not required to prove case with mathematical precision or formula Onus of proof on assessee to satisfactorily explain receipt and use of goods Failure to do so makes claim fatal Assessee does not succeed in appeal. Therefore, the impugned demand of Cenvat Credit of Rs.65,862.48/- so confirmed by the Adjudicating Authority on account of wrong availment/utilization of Cenvat credit on CBFS, is legally sustainable in view of the above settled dictum of law. Further as the Cenvat credit on the said CBFS was availed fraudulently, the penalty so imposed is also legally sustainable in view of the above settled dictum of law. Further as the Cenvat credit on the said CBFS was availed fraudulently, the penalty so imposed is also legally sustainable.
So far as the confirmation of the demand of excess Cenvat Credit of Rs.2,31,838.88/- by the Adjudicating Authority, is concerned, I find that the appellants have not disputed the said demand and by admitting their mistake and liability, they had already paid the said demand of Cenvat Credit, which has also been appropriated in the impugned Order-In-Original. Moreover, Shri Kapil Vashist, Manager of the appellants in his voluntary statement dated 4.4.2006, recorded under Section 14 of the Central Excise Act, 1944, interalia, admitted that they were not aware of sub-rule 3) of Rule 6 of the Cenvat Credit Rules, 2004 wherein there was a restriction on the availment of Cenvat credit to the extent of an amount not exceeding 20% of the Service Tax payable where the service provider was providing taxable as well as non-taxable services. Therefore, the above demand of Cenvat credit so confirmed in the impugned Order-In-Original, is also legally sustainable.
I find that the appellants have also challenge the impugned demands of Cenvat credit on the issue of time bar, by pleading that there was no deliberate default on their part; that the entire transactions on record and that there was no suppression, mis-statement or contravention of Rules with intent to evade payment of duty. So far as this contention of the appellants is concerned. I find that it has been established on record that the appellants had obtained fake invoices or CBFS without receiving and utilizing the said CBFS under the guise of furnace oil and similarly, the appellants had never disclosed to the Department that they had availed and utilized the Cenvat credit in excess in contravention of provisions of Rule 6(3) ) of the Cenvat Credit Rules, 2004. Therefore, there was definitely fraud and suppression of facts on the part of the appellants and hence the impugned demands so confirmed under the extended period of limitation, are legally sustainable.
10. In view of above and keeping in mind totality of facts, it is evident that Commissioner (Appeals) has examined the issue in detail and concluded the issue in favour of revenue. I have also examined the matte and fully concur the conclusions. I don not find any force in the contention of appellant as fraud has clearly manifested and has also been admitted. Extended period has rightly been involved. Penalty is also imposable as intent to defraud the revenue is very clear. Since both dutiable and exempted products were being manufactured credit availment was to be restricted to 20% of Rs.372126.69/-. But they availed total Rs.372126.69 (Rs.65862.48 of CBFS and Rs.306264.21 other inputs). Adjustments have also been made.
11. Regarding issue of refund of excess amount of duty, it is felt that this aspect has not been fully examined. Excess amount should be considered for refund as per prevailing law on the issue.
12. In view of above Commissioner (Appeals)s order is upheld with observation relating to refund as above. Commissioner (Appeals)s order shall stand modified if refund of excess deposit is found admissible.
13. Ordered accordingly.
(Pronounced on 11/12/2014 in open Court) (MANMOHAN SINGH) Member (Technical) K. Gupta 9