Custom, Excise & Service Tax Tribunal
M/S. Ferro Alloys Corpn. Ltd vs Commissioner Of Central Excise, Nagpur on 4 February, 2008
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT NO APPEAL NO. E/1726 to 1728/05 (Arising out of Order-in-Original No. 03/2005/C dt.24.2.2005 passed by the Commissioner of Central Excise (Appeals) Nagpur. For approval and signature: Hon'ble Shri M. V. Ravindran, Member (Judicial) Hon'ble Shri K.K. Agarwal, 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. Ferro Alloys Corpn. Ltd.
Shri Vinod Saraf
:
Appellant
Shri P.D. Lele
VS
Commissioner of Central Excise, Nagpur.
Respondent
Appearance
Shri Z.B. Nagarkar, Consultant for Appellant
Shri S.G. Dewalwar, Authorized Representative (SDR)
CORAM:
Shri M. V. Ravindran, Member (Judicial)
Shri K.K. Agarwal, Member (Technical)
Date of hearing : 04.02.08
Date of decision................
ORDER NO....................................................
Per : Shri M. V. Ravindran, Member (Judicial)
These appeals are filed against Order-in-Original No. 03/2005/C dt.24.2.2005, wherein the adjudicating authority has confirmed the demand and imposed penalties on the appellant company as well as on the President and Advisor of the company.
2. The relevant facts that arise for consideration are the appellant company are engaged in the manufacture of various alloy/non alloy steel products classifiable under Chapter 72 of the Schedule to the Central Excise Tariff Act, 1985 and were availing modvat credit on the inputs which were duty paid. During the course of audit in March 2000 it was observed that the appellant had shown to have received various inputs on loan basis from other companies/manufacturers and after some time the assesses have shown as cleared some inputs as return of the loan material. The further scrutiny of the records was done by the authorities and certain documents related to the transactions were withdrawn. The scrutiny of the documents in the investigation revealed to the authorities that the appellant had shown the receipt of Aluminium ingots, Ferrous scrap and Nickel Plates as received on loan basis and has returned the material to the suppliers. The officers came to the conclusion that the appellant had while returning the loan back to the said suppliers had in fact issued the duty paid raw materials on which credit was taken and this is in violation of the provisions of Central Excise Rules 1944. A show cause notice dt. 5th May 2000 was issued to the appellants directing them to show cause as to why an amount of Rs. 58,91,088/- be not demanded from them as having cleared the duty paid inputs without reversing modvat credit and also why the penalty not be imposed on the company as well as the two officers of the company. The adjudicating authority vide Order-in-Original No. 23/04/CE dt. 27.2.2004 confirmed the demand and also imposed penalty of equivalent of amount on the company and imposed penalties on the officers of the company. Aggrieved by such order, the appellant moved Hon'ble Tribunal in Appeal No. E.2076-2078/04 and Tribunal vide Order No. A-1310-1319/WZB/2004 C/-III dt. 19.11.2004 set aside the impugned order and remanded the case for de novo adjudication. The adjudicating authority in the current impugned order has come to the conclusion that the appellants had cleared the duty paid inputs i.e. Aluminium ingots amounting to 286.605 MTs, Ferrous scrap 658.350 MTs and Nickel plates 32.98 MTs without reversal of modvat credit and hence confirmed demand of the duty of rs. 58,91,088/- and appropriate an amount of Rs. 50,00,998/- which was paid by the appellant during the proceedings under protest, also imposed equivalent amount of penalty on the appellant company and imposed penalty of Rs. 5 lakhs on Shri Vinod Saraf, President of the appellant company and Rs. 2.5. lakhs on Shri P.D. Lele Adviser to the appellant company. The appellants are in appeal against the such impugned order.
3. The Ld. Consultant appearing on behalf of the appellants submits that the impugned order is incorrect on three grounds. On merits it is his submission that the appellant had clearly maintained records as regards the inputs being received on loan by the company. It is his submission that the authorities had in fact withdrawn the register maintained by the appellant, of material received on loan. It is also his submission that the appellant had a furnace which had melting capacity of 130 to 150 MTs per day and in order to not to loose the production of a day, due to shortage of inputs appellant always kept stock of inputs on loan basis, as a buffer. It is his submission that this was done despite their being stock with the appellant. It is also submitted that the reason for doing so was to see that the melting process, which is a continuous one, is not hampered due to non-availability of the raw material. He submits that the quantity of the inputs which were received on loan basis was on the delivery challan and such documents are recorded in the register which was withdrawn by the authorities. He submits that the appellant had always received/purchased duty paid as well as non-duty paid inputs from the market for manufacturing process. It is his submission that when ever the loan which has been taken is returned back, the said loan is returned from the non-duty paid inputs which were received. It is his submission that as such, the Revenue's interest in this case will not be affected as the quantity of the inputs received on as loan was always on delivery challan and no cenvat credit was availed, while return of the loan was also on challan on which no was duty paid. It is his submission that the credit which has been availed by the appellant on the inputs received by them were never in question and the inputs which were dispatched even, if considered out of duty paid inputs, would have not resulted any undue benefit to the recipient of such inputs, as there was no duty paying document. It is his submission that the total quantity of the inputs which was taken on loan by the appellants will come to 977.935 MTs. of all the inputs put together which is just miniscule of the quantity of the manufactured goods during the relevant period. It is his submission that consumption being 130MTs to 150MTs of inputs per day, this loan availed inputs will amount to just 9 days average production for the entire period from 1995-2000. It is his submission that the Revenue was aware of their activity of taking loan of this material from 1996 onwards, as they had vide letters dated 30th July 1996 and 29th January 1997 informed the Superintendent of Central Excise In-charge of the factory about bringing in material on loan and return thereof. Hence it is submitted that the entire demand which has been raised on them is time barred but for the period of one year for the date of issuance of the show cause notice.
4. Ld. SDR on the other hand would contend that the entire modus operandi of the appellant, i.e.receiving the quantity of inputs on loan and returning the same, is in order to avail the ineligible benefit modvat/cenvat credit. It is his submission that the appellant had removed the duty paid inputs on which credit was availed as return of the loan taken which would indicate that the appellant had not utilized the inputs for the reason for which they were brought in. It is his submission that the duty paid inputs, if they are brought into the factory premises for the consumption in the manufacturing of final products, it had to be done so. The appellant cannot remove the said inputs from the factory premises without reversing the credit on such inputs. It is his submission that the adjudicating authority has clearly brought out the instasnces wherein the appellant had the stock of material in their hand, despite that they had procured the material on loan and returned the same. It is his submission that the appellant had procured material on loan from far away places like Thane and Alang and receipt of the material and return was on the very same day which indicate that there is something missing. He submits that the vehicle registration Nos. which was mentioned in the document submitted by the appellant, to justify that they had returned the loan, verification of the same indicated that the vehicles were three wheelers, dumpers scooters etc. This would definitely lead to conclusion that the no material was dispatched by the appellant and all those entries of loan return was just book entries. As regards limitation, it is his submission that the appellants did not provide information on the first instance is itself enough to come to the conclusion that appellant had something to suppress from the department. It is his submission that in the remand proceedings, the Tribunal had categorically directed the appellant to produce the evidences as regards the loan return and the adjudicating authority has correctly dealt with all the evidences which were produced by the appellant. He reiterate's the findings of the adjudicating authority and submits that duty confirmed on the appellant is correct and the penalties imposed on the appellant company as well on two officers of the company is warranted and there is no need of interference in such an order.
5. We considered the submission made at length by both sides and perused the records. We find from the records that this is a second round of litigation. In the first round of litigation we had directed the adjudicating auhority to reconsider the issue as under:
"After hearing the Ld. JDR and after going through the impugned order we find that in respect of the inputs, the Commissioner has not examined the records maintained by the appellants and their p lea that the return of inputs earlier taken on loan basis from other manufacturer was out of the stock of the non-modvatable inputs in the light of the said records. As such we feel that without expressing any opinion on the merits of the case, the impugned order is required to be set aside on this ground alone and the matter needs to go back to the Commissioner for re-decision after considering the the entire evidence available on record including the record relied upon by the appellants in support of their defence. As such we set aside the impugned order and remand the appeal to the Commissioner for de novo adjudicating in the light of the directions contained above. The other pleas including the plea of time bar and imposition of penalty are kept open. All the appeal are thus allowed by way of remand".
As against the above remand order and the direction, the adjudicating authority has considered the submissions made by the appellant before him and came to the conclusion that the "in this regard it is observed that one to one correlation with the loan material returned is not possible from these documents. To correlate/relate these documents with MRVs showing return of loan material one has to take help of the computer print-out of statement furnished by M/s. FACOR at the time of filing reply to the show cause notice. Since this computer print-out of statement was never made available during the course of investigation and appears to have been prepared with a view to build defence, cannot be relied upon on this point of time". It can be noticed from the above reproduced portion of the order that the adjudicating authority has not appreciated the reasons for sending the matter for de novo proceedings in its correct perspective. Be that as it may, we find from the records that the appellant had in fact during the entire period 1995-2000 procured on loan and returned the same quantity of 977.935 MTs of inputs. The year-wise production of the appellant of all the categories of the finished goods is as under:-
Year MT 1995-96 54475.840 1996-97 51163.455 1997-98 44730.169 1998-99 38488.041 1999-2000 40358.599
The above information was submitted by the appellant at the time of reply to the show cause notice and remains undisputed. It can be noticed from the above noted figures that the production of the appellant in the year is Approximately 50,000 MTs of all the categories of the finished goods. If that be so, the daily production on an average will be around 136 MTs on 365 day's working. We find strong force in the contention raised by the Ld. Consultant that the melting capacity of their furnace per day is around 130MTs. per day based on these figures. If that be so, the quantity of the inputs taken on loan and returned back during the entire period of five years, we find that the same is of negligible quantity. It is further seen that the appellants were filing ER4 returns. The perusal of these returns for the subsequent period indicate that per day average consumption of inputs was 150 MTs. From the records, we also find that the appellants had clearly indicated in their statement produced before the authorities that they are in receipt of non-duty paid inputs, duty paid inputs and the consumption thereof, these figures remain un-controverted by lower authorities. If that be so, it is an admitted fact that appellant was receiving the duty paid as well as non-duty paid inputs for consumption in the manufacture of their final products. This being undisputed, the appellants' contention that they had returned the loan back from the non-duty paid inputs received, has merits. We also find strong force in the contention raised by the Ld. Consultant that the inputs, which were cleared, as loan returned were miniscule and the same were returned only on challan. If it is so, no one could have availed the modvat/cenvat credit on such inputs which were cleared from the factory premises of the appellant on challans. We also find force from the data produced by the Ld. Consultant that 97% of the inputs which were received on loan by the appellant was from the nearby areas i.e. Nagpur/Chandrapur. Only 3% of the total amount inputs received on loan was from out station. We also find force in the contention of the Ld. Consultant that the appellants had kept Department informed about the procurement of non-duty paid material on returnable basis and the return thereof. Letters dt. 30th July 1996 and 29th January 1997 clearly indicate that they had procured on loan basis non duty paid material and returned the same by purchase from open market. We also find from the withdrawal memo (which withdrew the records from the appellants factory) details as to the documents which were withdrawn. The very first entry and the second entry in the said memo ndicate that the appellant had maintained register for the material received on loan basis and material dispatched as loan return. Further we find that the Revenue had withdrawn the file as regards the loan return for the entire period. All this would go to indicate that the appellant had the system of receiving the inputs on loan basis and returning the same to the loanees. We also find that the Revenue was aware of existence of loan system, which was being followed by the appellant.
6. Accordingly, we find that the appellant has made out a case in their favour as the Revenue has not been able to produce any evidence contrary to the evidence which has been led by the appellant to indicate that the inputs which were removed as 'loan returned' was out of non duty paid inputs availed. In the absence of any contrary evidence, we are of the view that the quantity of the inputs cleared as loan returned by the appellant was from the non-duty paid inputs received by them.
7. As such, in view of the foregoing reasoning, we find that the impugned order that confirms the demand of the duty and imposes equivalent amount of penalty on the appellant company and imposing penalty on the two officers of the company is unsustainable and is liable to be set aside and we do so. The appeals are allowed with consequential relief, if any.
(Pronounced in court on................................) (K.K.Agarwal) Member (Technical) (M. V. Ravindran) Member (Judicial) Sm 9