Customs, Excise and Gold Tribunal - Mumbai
Viraj Alloys Ltd. And Ors. vs Commissioner Of Central Excise on 20 August, 2004
Equivalent citations: 2004(177)ELT892(TRI-MUMBAI)
ORDER Moheb Ali M., Member (T)
1. These appeals arose out of the order of Commissioner of Central Excise Mumbai, Thane-II.
2. The facts are that M/s. Viraj Alloys Ltd. is engaged in the manufacture of S.S. Bars and Billets falling under Chapter 72 of CETA 1985. They use ship breaking scrap as one of the inputs in the manufacture of the above said goods and avail of modvat credit of duty paid on such scrap. It appeared that the ship breakings scrap was mostly received from ship breakers situated in Mumbai and Alang, During the course of investigation, the registration number of the vehicles used for transportation of the said inputs shown in the modvatable invoices issued by the suppliers of the scrap were checked with the Regional Transport Offices situated in Mumbai, Thane, Nasik etc. Such a verification revealed that the vehicle numbers listed in annexures "A" to the show cause notice were found to be of Motor Cycle, Delivery, Vans, Tanker, Auto Rickshaw, Bus, Dumper etc. It is alleged that the appellant company has not received the inputs in to the factory as such inputs could not have been transported in the above type of vehicles. The officers recorded the statements of all the suppliers of the scrap and all of them have invariably stated that they sold the ship breaking scrap to M/s. VAL on verbal orders, they have received the remuneration from the buyer, the vehicles on which the scrap was loaded were provided by the purchaser himself and that they are not in a position to explain as to why the vehicles on which the scrap is supposed to have been loaded turned out to be Tankers, Lorries, Auto Rickshaw, Delivery Vans etc.
2. The Department also recorded the statements of owner of vehicle No. MH04S5516 who inter alia stated that he had never loaded any material from Darukhana and had never transported any material to M/s. VAL. Similarly the statement of owner/driver of vehicle No. MH04S2896 was recorded and the said person inter alia stated that he had not transported any goods to M/s. VAL. Yet these two vehicle numbers were shown in invoices issued by the suppliers of ship breaking scrap as the vehicles used for transportation of scrap to M/s. VAL.
3. On the basis of these investigation coupled with the RTO authorities verification reports the department came to the conclusion that the inputs on which modvat credit was taken were never received in the factory and therefore M/s. VAL had wrongly availed of modvat credit to the tune of Rs. 24,83,793/-. This amount of credit was disallowed in terms of Rule 57I (1) (ii) of the Central Excise Rules read with Sub-section (2) of Section 11A of Central Excise Act, 1944 and the said amount was accordingly demanded. An equal amount of penalty was imposed on the appellant company under Rule 57I (4) of Central Excise Rule read with Section 11AC of the Act. A penalty of Rs. 8,50,000/- was imposed from Chairman-Cum-Managing Director of the appellant company under Rule 209A of the said Rules read with Rule 26 of CENVAT Rule 2001/2002. Interest under Section 11AB on the said amount of credit disallowed was also demanded. The adjudicating officer imposed various penalties on the suppliers of ship breaking scrap under Rule 209A of Central Excise Rules. These appeals are directed against such order of the Commissioner.
4. Heard both sides.
5. Shri Lajja Ram the Ld. Advocate with T.R. Malik Consultant appeared for M/s. Viraj Alloy Ltd. and its Managing Director, the rest of the appellants were represented by other Ld. Advocates.
6. The Ld. Advocate argued that all the suppliers of the inputs confirmed that they issued invoices under Rule 52A of the Central Excise Rules; that they received payment for the scrap by way of cheques issued by M/s. VAL; that the inputs were used in the manufacture of final products; that the department never disputed that the appellant manufactured final products and cleared them on payment of duty; that they maintained proper records of all inputs received by them as reflected in RG 23A Part-I; that the whole case was made out on the reports of the RTOs purported to be saying that the vehicles used for transporting the scrap were non transport vehicles; that it is common knowledge that the vehicle owners converted their vehicle into transport vehicles without knowledge of the RTO; that the appellant cannot be held responsible for irregularities committed by transport owners; that in at least two cases it turned out that at least in his cases the vehicles shown as tankers in the RTO records were actually converted into goods transport vehicles much before 1996; that the department failed to establish as to what happened to the scrap purchased if it was not received in the appellants factory; that it is settled position in law; that for demanding any duty and for imposing any penalty, the charges levelled should substantiated with unimpeachable evidence; that the extended period has been invoked for dis-allowing the credit taken by alleging suppression of facts whereas the appellant at every point of time declared credit taken and utilized; that the jurisdiction to invoke the extended period of limitation is only with the Commissioner of Central Excise whereas the show cause notice was issued by the Additional Director General of DGCEI and therefore is invalid; that there is no ground for imposing any penalty on M/s. VAL under Rule 57I (4) of Rule 57AH read with Section 11AC of the Act; that there is no ground for imposing any penalty on the chairman Cum Managing Director that the adjudicating officer imposed penalties and reversed the credit on the basis of assumptions, presumptions or suspicion which is not permissible under law; that penalty under Section 11AC is the maximum penalty that can be imposed need not be mandatorily 100%; that penalty on the Chairman Cum Managing Director under Rule 209A is not warranted and; that there is no ground for charging any interest under Section 11AB; He therefore pleaded that the order of the Commissioner should be set aside. He relied on the various case law to buttress his contentions.
7. The plea of the other appellants is that they have supplied the inputs on payment of duty and that they are not responsible if non-transport vehicles numbers were shown on the invoices. They cannot be fastened with any penalty under Rule 209A, inasmuch as they have cleared the goods on payment of duty.
8. The Ld. SDR Shri Ajay Saxena appearing for the department submitted that credit under Rule 57G is admissible only when the inputs were received in the factory of an assessee; it is mandatory that inputs are received in the factory under the cover of invoice issued under Rule 52A. Under Rule 52A a invoice should contain the correct registration number of the vehicle in which the excisable goods are transported. He relied on the case of Commissioner of Central Excise Jaipur v. Bansiwala Iron & Steel Re-Rolling Mills [1999 (105) E.L.T. 255 (Tribunal)] wherein the Tribunal held that omission to mention mode of transport and in case of motor vehicle, registration number on invoices, is a major procedural lapse. Modvat can be denied on that basis. He also relied on the case of A.N. Guha & Co. v. Collector of Central Excise, Bhubaneswar [1996 (88) E.L.T. 333 (Tribunal)] wherein the Tribunal held that in cases of clandestine removal, it is not possible for the department to prove the same with mathematical precision. The department is deemed to have discharged their burden if they place so much of evidence which, prima facie, shows that there was a clandestine removal. The onus in that event shifts on to the appellants to prove that there was no clandestine removal. He argued that in the present case no clandestine removal was involved but the principle laid down by the Tribunal applies. He argued that Supreme Court's decision in D. Bhoormull's case is applicable in the present case. The appellant failed to even produce the gats registers which would indicate the receipt of goods into their factory or the bills/vouchers indicating the payment of transport charges on the specious plea that they were all destroyed in fire. The appellant therefore failed to establish that the inputs were received in the factory. Modvat credit taken on inputs, which were not received, was rightly denied by the Commissioner. He argued penalty under Section 11AC on the company interest under 11/aB, penalty under 209A on the Chairman Cum Managing Director and on the supplier are imposable.
9. We have gone through the rival contentions and perused extensive case law filed by the Ld. Advocate for M/s. VAL. Before we proceed to examine the various contentions we may set out certain facts which have not been controverted by either party. The ship breaking scrap was purchased by M/s. VAL. The appellants produced S.S. Bars and Billets and cleared them on payment of duty. The department did lead any evidence to suggest that scrap other than the ship breaking scrap was procured by the appellant to manufacture the final product. The suppliers of scrap in their statements clearly stated that the vehicles for the transportation of this scrap from their premises were supplied by M/s. VAL. The adjudicating authority denied modvat credit only in respect of those consignments, which were supposed to have been transported on motorcycle, auto rikshaw and non-existing vehicle numbers etc. At least two vehicle owners with whom inquiries were made have categorically denied having transported any goods to the appellant's factory premises. M/s. VAL have failed to produce gate register which could show the entry of the vehicle into the premises nor could they show any Bill/Vouchers in support of their contention that the truck owners/driver of non transport vehicles were paid freight charges. The reason given was that these documents were destroyed in fire some where in the year 2000. M/s. VAL have filed all the necessary declarations before availing of modvat credit and maintained their R.G. 23A Part-I regularly. We examine the rival contentions only in the light of these facts.
10. Under Rule 57G of erstwhile Central Excise Rules a manufacturer can avail of modvat credit of goods received in their factory under an invoice issued under Rule 52A. The CBEC prescribed the particulars an invoice should contain. One such is that the vehicles registration number, it is not the case of the department that the appellant did not purchase scrap. The only contention is that such duty paid scrap was not received in the factory. The adjudicating officer relies on the report received from the RTOs.
11. In the present case the show cause notice is issued by ADG of DGCEI. He is competent to issue such a notice. The Ld. Advocate's contention that if the authorities allege that the inputs were not received in the factory it is also obligatory on them to establish as to what happened to the duty paid inputs purchased and how the appellant could have produced the final products without the inputs is not tenable. In our opinion the above issues are extraneous and therefore the department is not required to deal with them. It is enough if the fact of non-receipt is established to deny modvat credit under Rule 57G. The Ld. Advocate relied on the case of Indian Polypipes and Ors. v. CCE, KOL.I [2003 (89) ECC 249 (Tri.)]. We have perused this decision the facts in that case are completely different from the present one. We do not consider that the ratio of the decision applies in the present case. Similarly the decision in the case of Swastik Tin Works v. CCE Kanpur also does not lay down any ratio which supports the appellants case. We observe that the department raised a presumption against the appellants by establishing that the inputs could not have been received in the factory in vehicles mentioned in the invoices. This allegation itself is based on the reports by RTOs, who certified that the registration numbers belonged to vehicles other than goods transport vehicles with 10 tons capacity. It is for the appellants thereupon establish that indeed such vehicles as mentioned in the invoice did bring the inputs to their factory. They have failed to do so. Their gate register was burnt in some fire accident and the bills/vouchers indicting payment of cash to the drivers/owners of the trucks were also destroyed in fire. One could under stand that bills/vouchers, getting destroyed in fire or lost. But one cannot understand as to what has happened to the ledgers and registers to which the transactions done in cash are ultimately transferred. It is not the appellant's case that even such ledger and registers were destroyed in the fire. The fact that the inputs in the form of ship breaking scrap was entered in RG 23A Part-I does not establish that the goods were received in the factory. At least two truck owners have categorically denied having transported any goods to the appellant. The plea that the truck owners indulged in mal-practices and run them with false numbers is farfetched. In the appellants case 99 vehicles were such that they could not have carried the goods from the supplier to the buyer, some of the numbers belonged to auto rickshaws, motor cycles and some numbers did not exist. The fact that out of the list of vehicles which were shown to be tankers, according to RTOs Office, two vehicles turned out to be regular carriers of goods does not establish that the case of other vehicles also it was true. An exception can not make a rule. Once it is established that the input has not been transported in the vehicle mentioned in the invoice it is but reasonable to say that the inputs were not received in the factory as required under Rule 57G. The Commissioner as well as the Ld. SDR relied on the case of A.N. Guha & Co. cited supra wherein the Tribunal held that it is not necessary for the department to establish a fact with mathematical precision once a presumption as to the existence of a fact is raised against an assessee. This test is satisfied in the present case.
12. We have also come across the decision of this Bench in the case of M/s. Lloyds Metal Engineering Ltd. order No: C-I/2762-2763/WZB/2003 where a similar situation cropped up. In the said case some vehicles in which inputs were carried proved to be other than goods transport vehicles, but the Tribunal gave the benefit of modvat credit because transporters admitted that the goods were transported. No such corroboration exists in the present case. More over the Cost Auditor appointed by the Commissioner in his report stated that he had verified the stock of inputs lying in the factory during the disputed period in that case. We therefore hold that the ratio of that decision does not apply to the present case.
13. We hold that allegation of mis-declaration is established inasmuch as the appellants took credit of duty paid on the inputs which were not received in the factory. Thus the entries made in the RG 23A part-I and II are false. In such a situation extended period can be invoked for denying modvat credit. The Ld. Advocate contended that Section 11AC is not invokable when modvat credit is dis-allowed. We observe that recovery of credit wrongly availed of or utilized in an irregular manner is provided under Rule 57I. The Commissioner invoked Rule 57I (4) and Rule 57AH(2) of the Central Excise Rules read with Section 11AC for imposing a penalty of equal amount of credit dis-allowed. We see no Infirmity in this regard.
14. In so far as interest under Section 11AB goes, we observe that interest is chargeable as per provisions of that Section in regard to the penalty imposed on the Chairman Cum Managing Director, we observe he was involved in day to day affairs of the company. His statements on different dates also reveal that he was conversant with the issues involved. A penalty under Rule 209A of Central Excise Rules can be imposed on an employee of the firm be was knowingly concerned with evasion of duty.
15. In so far as suppliers of the inputs are concerned, we observe that the responsibility of supplying goods to the consignee whose address is given on the invoices is cast on them. By mentioning vehicle numbers which do not exist and which are not goods carriers the appellants rendered themselves to penalty under Section 209A of the Central Excise Act. When they were asked to explain the discrepancies in the invoices in regard to the vehicle numbers they have uniformly replied that they had nothing to say.
16. Now we examine whether penalty under Section 11AC should necessarily be the maximum indicated in the section. The Tribunal has been holding the view that it is the maximum penalty that is indicated in Section 11AC. In the present case the allegation is non-receipt of input into the factory and the consequent non-availability of credit. The appellants contend that part of the goods in the form of billets and rods produced by them were exported out of the country. It is also brought out that the appellant's record of production of final products is genuine. Having regard to this we hold that the present case does not warrant 100% penalty under Section 11AC. We therefore, reduce the penalty imposed under this Section to Rs. 6 lakhs (Rupees Six Lakhs only). Having regard to the role played by the Chairman Cum Managing Director of the appellant company we reduce the penalty to Rs. 50,000/-. Thus the appeal by M/s. VAL and its Managing Director are partly allowed. The appeals of the suppliers of the scrap are rejected. The demand for reversal of modvat credit taken to the tune of Rs. 24,83,793/- is confirmed.