Custom, Excise & Service Tax Tribunal
M/S Ranjeev Alloys Limited vs Cce, Chandigarh on 14 August, 2008
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL,
R.K. PURAM, W.B. NO. 2, PRINCIPAL BENCH
NEW DELHI, COURT NO. I
Excise Appeal No. 2434 of 2006
[Arising out of Order-in-Appeal No. 314/CE/Appeal/Chd/1759/2006 dated 31.5.2006 passed by the Commissioner (Appeals) Central Excise, Chandigarh]
Date of Hearing: 14.08.2008
Date of decision: 03.09.2008
For approval and signature:
Hon'ble Mr. Justice S.N. Jha, President
Honble Mr. M. Veeraiyan, 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?
M/s Ranjeev Alloys Limited Appellant
Vs.
CCE, Chandigarh Respondent
Appearance:
Mr. R. Santhannam, Advocate for the Appellant
Mr. K.K. Goyal, Jt. CDR & Mr. Sumit Kumar, Departmental Representative for the Respondent
CORAM: Mr. Justice S.N. Jha, President
Mr. M. Veeraiyan, Member [Technical]
O R D E R
Per S.N. Jha:
Per: Justice S.N. Jha This appeal by the assessee is directed against the Order-in-Appeal of the Commissioner (Appeals), Central Excise, Chandigarh dated 29.11.2004 dismissing the appellants appeal alongwith other appeals by various parties and upholding the Order-in-Original of the Deputy Commissioner dated 31.01.2006. By the said order, the Deputy Commissioner disallowed ccenvat/modvat credit of Rs. 55,062/- under Rule 11AH of the Central Excise Rules, 1944 read with Section 11A of the Central Excise Act directing its reversal with interest under section 11AB of the Act. Penalty of equal amount i.e. Rs. 55,062/- was also imposed under section 11AC of the Act read with Rule 57AH and Rule 173Q of the 1944 Rules.
2. The appellant are engaged in the manufacture of Non Alloy Steel Ingots falling under Chapter 72 of the Schedule to Central Excise Tariff Act. Brief facts of the case are that M/s Tata Iron & Steel Company Limited (TISCO) has a stockyard at Mandigobindgarh in the State of Punjab where they deal in various items of iron and steel viz tandish jam, pooled iron, bloom butt clear, hot strip mill, HSM coil box CO, rejected scrap ingot etc. The said stockyard is separately registered under Central Excise Act/ Rules. TISCO appointed M/s Adhunik Steels Limited, Mandigobindgarh as consignment agent. M/s Neepaj Steels (India) at Mandogobindgarh also deals in iron and steel goods. Acting on information that modvat /cenvat credit was being fraudulently passed on and taken on the basis of fictitious transportation of goods from TISCO, Mandigobindgarh, the preventive staff of the Central Excise Department visited the said premises of TISCO at Amloh Road, Mandigobindgarh on 16.5.2001. After resuming the sale invoices of the company for the financial year 2000-01, the verification of the vehicles supposedly used for transporting the goods was got made. Verification revealed that a large number of vehicles were in fact light motor vehicle such as scooters, mopeds, motor cycles, combines, jeeps, tractors, cars etc. on which transportation of huge quantities of iron and steel was not possible. Steps were taken to get further verification from various Central Excise formations and the concerned registering authorities. On 29.08.2001, the excise officials again visited the registered premises of TISCO at Mandigobindgarh and resumed sale invoices for the period 1996-97 to 1999-2000 and 2001-2002. Further, lists of vehicles shown to have been used for transporting goods during the previous five years was prepared and sent to various Central Excise formations in ten states for verification of the vehicles from the concerned registering authorities. Verification reports received from different places revealed the same story of so-called transportation of goods by vehicle like scooters, motor cycles, mopeds, combines, jeeps etc. which are incapable of carrying huge quantities of iron and steel items mentioned in the relevant invoices. In some cases the registration nos. had not even been issued by the concerned transport authorities. In some cases, the same vehicle was shown to have been used a number of times. The verification thus indicated that there was no actual transport of the goods and the transactions were mere paper transactions to facilitate fraudulent availment of inadmissible modvat/ cenvat credit.
3. Statement of the Authorized Signatory and Stock-yard in charge of TISCO, Mandigobindgarh, Shri Sushanta Banerjee, under section 14 of the Central Excise Act was recorded on 20.03.2002. He stated that he was appointed as stock-yard in- charge of M/s Adhunik Steels Limited in 1996 and on their recommendation, authorized by the Area Sales Manager of TISCO at Jalandhar to function as TISCOs stock-yard incharge at Mandigobindgarh. He was drawing salary from M/s Adhunik Steels Limited. As per agreement between TISCO, Jalandhar and M/s Adhunik Steels Limited, the latter collects materials from ex-steel works of TISCO, Jamshedpur which are brought to Mandigobindgarh on consignment basis by M/s Adhunik Steels Limited. The maintenance of stocks at the stock-yard is entirely the responsibility of M/s Adhunik Steels Limited till delivery to various customers on behalf of TISCO, Jamshedpur. The premises of the stock-yard are owned by M/s Adhunik Steels Limited. The books of accounts of the stock-yard are also maintained by M/s Adhunik Steels Limited who manage the staff and workers there. Shri Sushanta Banerjee further stated that their sales office at Jalandhar (now Ludhiana) issues offers to various customers of the materials and after receiving advance payments through cheques /drafts from them, issue delivery orders with intimation to the stock-yard against which goods are delivered to the customer from there. M/s Adhunik Steels Limited as the consignment agent is paid handling charges by TISCO, Jamshedpur. Shri Banerjee further revealed that the vehicles are arranged for transportation from stock-yard to the customers premises by the customers themselves. Deliveries are made to them on ex-stock yard basis, and as such transportation charges /onwards freight are borne by the customers themselves. Only loading charges are borne by M/s Adhunik Steels Limited on behalf of TISCO which are reimbursed to them. A specific question was put to Sushanta Banerjee about the alleged use of light vehicles such as scooters, mopeds, cars, tractors, tanker etc for carrying iron & steel items to which his answer was that the vehicle numbers appear to have been mentioned by mistake. His attention was drawn to the fact that the same vehicle like Vehicle No. PBG 645 - which was a motor cycle was shown to have been used 18 times between 8.4.97 and 10.9.97, and there could not be mistake in noting the vehicle number every time; he could not give any reply except that there was no check/ verification of the vehicle numbers.
4. Shri Nirmal Kumar Aggarwal, Director of M/s Adhunik Steels Limited was confronted with the statement of Sh. Sushanta Banerjee in course of his statement on 21.3.2002, and he signed the same in token of agreement with the contents of the statement. He admitted that the custody of the materials of the stock yard was the responsibility of M/s Adhunik Steels Limited and that it was also their responsibility to ensure that the goods are delivered to the right customer from the stock yard. He further stated that apart from being consignment agent of TISCO, Jamshedpur, M/s Adhunik Steels Limited has independent business of trading in iron steel items.
5. Shri Nirmal Kumar Aggarwal also appeared as authorized representative of M/s Neepaj Steels (India) on 5.4.2002. It may be mentioned here that he happens to be husband of the sole proprietor of M/s Neepaj Steels (India), namely, Smt. Anita Aggarwal, and he admitted that he was looking after day-to-day business of M/s Neepaj Steels (India) on behalf of his wife. He also admitted that the office of both M/s Adhunik Steels Limited and M/s Neepaj Steels (India) were in the same premises and they also shared the same godown. He stated that one Sh. Sunil Sharma, an employee of M/s Adhunik Steels Limited, mostly hired vehicles from open market and they have no fixed transporter. He stated that the freight used to be paid in cash to the drivers and their signatures obtained on the vouchers. He further stated that nobody accompanied the goods to the destination but they used to confirm receipt of goods from the purchasers telephonically. He was asked about whereabout of Sh. Sunil Kumar and he stated that he had passed away last year.
6. The statement of Shri Rattan Paul Bhatia, Director of appellant M/s Ranjeev Alloys Limited was also taken on 13.12.2004. In response to a specific question put to him, he stated that they did not check the registration number of the vehicle. However, he claimed to have actually received the goods as per the invoice by trucks. He however admitted that the goods in question cannot be transported by light motor vehicles. He further admitted that the goods were transported and sent to them by M/s Neepaj Steels (India) without issue of any GR etc. in support of the consignment. He failed to give any convincing answer to the question that in absence of any record showing dispatch of scrap/ material by M/s Neepaj Steels (India), the same could be received by M/s Ranjeev Alloys Limited particularly when the vehicles shown in the invoices were incapable of carrying the materials.
7. On the basis of the said statements and the result of enquiry show cause notice was issued to the appellant as well as TISCO, Mandigobindgarh, M/s Adhunik Steels Limited, M/s Neepaj Steels (India) and Sh. Rattan Paul Bhatia, Sh. Sushanta Banerjee and Sh. Nirmal Kumar Aggarwal. On consideration of their replies which they filed, the Deputy Commissioner by the impugned order rejected their defence and disallowing cenvat/modvat credit to the tune of Rs. 56,062/- to the appellant, directed that the same be reversed with interest. Penalties were imposed on all the noticees including the appellant except Sh. Rattan Paul Bhatia who had died in the meantime. The appellant preferred by the appeal against the said order. The appeal having been dismissed by the Commissioner (Appeals), they have come to this Tribunal in the present appeal.
8. When the appeal came up before a Single Member Bench (in view of the amount of duty etc involved) the learned Member noticed that on identical facts Single Member Benches of the Tribunal had held that credit cannot be denied merely on the ground of transport of materials by fictitious vehicles as per the invoice. A Division Bench of the Tribunal in Viraj Alloys Limited vs. CCE, Thane-II 2004 (65) RLT 196 (Tribunal Mumbai) however, took the view that where vehicle numbers mentioned in the invoice are found to be fictitious and no explanation is offered by the assessee, credit would be denied. The learned Single Member observed that this issue is required to be examined by the Division Bench of the Tribunal and accordingly referred the matter to Division Bench for decision. That is how this appeal came up for hearing before us.
9. At the outset we may observe that the question as to whether there can be transport of large quantities of iron steel items by light motor vehicles, like scooter, moped, jeep, car, tractor, tanker etc. can hardly be said to be an issue. There cannot be any dispute that for claiming modvat/ cenvat credit there must be actual receipt of the goods and where the goods are alleged or shown to have been transported by vehicles which turn out to be really scooter, moped, car etc., the inference would be irresistible that there was no actual transportation or receipt of the goods and, therefore, modvat/ cenvat credit will not be available to the party. The question as to whether modvat/ cenvat credit can be claimed with respect to fictitious transportation or receipt of goods can hardly be called an issue to warrant any adjudication or decision. If any issue is involved, it is an issue of fact whether the vehicles in question are indeed light motor vehicles like scooter, moped, car etc or they are transport vehicles like truck. Depending on the determination of this issue the modvat/ cenvat credit can be allowed to the party subject to fulfilment and compliance of other requirements of law. In this view of the matter, one option available to us was to send the case back to the Single Member Bench for final disposal. But being prima-facie of the view that the decisions of the Single Member Benches referred to in the reference order that credit cannot be denied merely on the ground that the vehicles mentioned in the concerned invoices are fictitious, was not correct bordering on perversity, we decided to hear the appeal finally drawing support from the decision of the Division Bench in M/s Viraj Alloys Limited (supra).
10. We are conscious of the fact that some of the decisions of the Single Member Benches referred to above were challenged by the Revenue in the Punjab and Haryana High Court by way of appeal under Section 35F of the Central Excise Act which were dismissed vide 2008 (87) RLT 465 (P&H) (CCE, Chandigarh vs. Neepaz Steels Limited & Ors). Following the said order, the appeals in the cases of Nirmal Kumar Agarwal and M/s Adhunik Steels Limited (CEA Nos. 14-19 of 2008 dated 4.7.2008) were also dismissed on 07.07.2008. However, on a bare reading of the High Courts order in M/s Neepaz Steels (India), it is evident that the High Court declined to interfere in the matter on the ground that the Tribunal had recorded the finding of fact that the inputs were duly received by the manufacturers and used in the manufacture of the goods which were cleared on payment of duty, and that there was no question of law involved. After setting out the facts of the case and the arguments advanced, the High Court observed-
Thus, there is no merit in these appeals as no question of law, much less substantial, arises from the order of the Tribunal wherein pure findings of fact have been recorded in favour of the respondents.
11. It goes without saying that in any series of transactions some may be genuine for which the benefits available in law may be allowed to the party, for other transactions in the same series, similar benefit may not be allowed depending on the attending facts in particular cases. In other words, cenvat /modvat credit can be allowed where there is actual transportation and receipt of goods by the manufacturer entitling them to take cenvat credit, but where there is no such proof of actual transportation and receipt, credit cannot be allowed. Surely, it would be too wide to suggest that all transactions made by M/s Adhunik Steels Limited involving M/s Neepaz Steels ((India) and others were fictitious. Each of such transaction has to be considered as separate and independent. The appellant therefore cannot contend that in view of the judgement of the Punjab and Haryana High Court which was rendered between the same parties in the context of seemingly similar transactions, taking modvat/ cenvat credit by the appellant in the present case too was legal and they cannot be asked to reverse the same and demand cannot be made against them. As a matter of fact, for this reason alone, the issue involved in the appeal being an issue of fact resulting in inevitable consequence of allowing or disallowing cenvat credit depending on the outcome of the issue, we proceed to consider on the merit of the case as an independent case notwithstanding favourable decisions in so called similar cases by Single Member Benches. As observed above, at the cost of repetition, if the vehicles in question were really light motor vehicles incapable of carrying large quantities of steel and iron items, conclusion would be inevitable that there was no actual transportation or receipt of the goods and, therefore, the appellant could not have taken cenvat credit on them as held by the Division Bench in Viraj Alloys Limited (supra).
12. The vehicles in question by which the goods were allegedly transported on sale by M/s Adhunik Steels Limited as consignment agent of TISCO, Mandigobindgarh are PB 23 6412 and PUV 1796. While the former was a tractor, the latter was a scooter. The appellant cannot contend to the contrary as the finding is based on the report of the concerned Regional Transport Officer after due verification.
13. Learned Counsel for the appellant however submitted that the invoices in question are documents of transactions between M/s Adhunik Steels Limited on behalf of TISCO, Mandigobindgarh on the one hand and M/s Neepaz Steels (India) on the other hand and the appellant is in no way connected. In other words, according to the Counsel, there is no linkage or connection between transport of goods by M/s Adhunik Steels Limited at the first instance and onward transportation by M/s Neepaz Steels (India) to the appellant. Learned Counsel also submitted that the allegations about the vehicles being either tractor or scooter are being made for the first time in the Tribunal and the appellant has had no opportunity to reply to them.
14. Learned Joint CDR produced enclosure to the show cause notice, marked Annexure-I, which has not been included in the paper book as being part of the show cause notice, though the show cause notice is on record as part of the appeal paper book. Learned Jt. CDR submitted that the statement with the relevant details was duly communicated to the appellant as part of show cause notice - as referred to in para 12 of the Notice. We find substance in the submission of the Joint CDR that if annexure-I was in fact not sent to the appellant along with show cause notice as stated in para 12 of the notice, the appellant should have made a grievance of it in their reply and asked for a copy of the annexure. We are thus satisfied that the appellant was in know of the relevant facts regarding particulars of the two vehicles referred to above which are subject matter of proceeding so far as the appellant is concerned.
15. Learned Joint CDR drew out attention to page 83 of the appeal paper book which is the photocopy of the invoice issued by TISCO, Mandigobindgarh in favour of M/s Neepaz Steels (India) being excise invoice No. 500 dated 9.8.2000 for 23880 MTs quantity of Scrap/Indul.Scrap Tandish Jam (2) showing vehicle number as PB 23 6412 in the column Mode of Transport/Veh./wagon No.. Learned Joint CDR then invited our attention to the invoice issued by M/s Neepaz Steels (India) at page 81 of the appeal paper book being invoice No. 67 dated 10.8.2000 in favour of M/s Ranjeev Alloys Limited i.e. the appellant in respect of 23.880 MTs of same goods i.e. Indl. Scrap (Tandish Jam-2). The only difference being that whereas the total value of the goods in the invoice of TISCO was mentioned as Rs.222852.94, in the invoice of M/s Neepaz Steels (India) the value was mentioned as Rs.220890/- a rather in-significant discrepancy. What is significant is that it refers to Invoice No. 500 dated 9.8.2000 i.e. the same invoice used by TISCO, Mandigobindgarh, in the column meant for the particulars of the supplier. It also mentions the name of the manufacturer as TISCO, Jamshedpur.
16. Learned Joint CDR made similar comparison between the invoices issued by TISCO, Mandigobindgarh in favour of M/s Neepaz Steels (India) and by M/s Neepaz Steels (India) in favour of the appellant M/s Ranjeev Alloys Limited in respect of the other transaction which is subject matter of the proceeding against the appellant. The invoice of M/s Neepaz Steels (India) in favour of M/s Ranjeev Alloys Limited refers to receipt of goods by M/s Neepaz Steels (India) from TISCO, Mandigobindgarh under invoice Nos. 501 and 502 dated 9.8.2000. Invoice No. 501 refers to transport of goods by vehicle No. PUV 1796 in the relevant column.
17. As the relevant particular in the two sets of invoices tally in all respects, it is established that what was sold and allegedly transported from the stockyard of TISCO, Mandigobindgarh under Excise Invoice Nos. 500 and 501 dated 9.8.2000 to M/s Neepaz Steels (India), was in turn allegedly sold and transported to appellant M/s Ranjeev Alloys Limited respectively under Invoice Nos. 67 and 66 dated 10.8.2000. If the alleged transport by vehicle no. PB 23 6412 which was a tractor or vehicle no. PUV 1796 which was a scooter, was fictitious, there could not be another sale and transport of the goods by M/s Neepaz Steels (India) to the appellant and therefore, it would follow, the credit taken by the appellant on the basis of fictitious transportation of goods was fraudulent. There can be no two opinions that there must be actual receipt of the goods to entitle the manufacturer to take modvat/cenvat credit.
18. Learned Counsel for the appellant at one stage tried to convince us that in the invoice of M/s Neepaz Steels (India) the vehicle was described as truck and the number was mentioned as PAT 8124 and PB-10F 9755 respectively. The submission is totally misplaced. From a bare glance it is evident that the words Truck No are printed portion of the column in the invoice against which PAT 8124 or PB-10F/9755 was typed. And so far as the vehicle numbers are concerned, the transport from M/s Neepaz Steels (India) to M/s Ranjeev Alloys Limited was shown to be by another set of vehicles, but if the transport of goods in question from TISCO, Mandigobindgarh to M/s Neepaz Steels (India) was not possible and the same was fictitious, as found above, it is clear that there could not be further transport of goods to appellant M/s Ranjeev Alloys Limited. At the cost of repetition it may be said that unless there is actual receipt of the inputs/ raw material, the manufacturer cannot take modvat/ cenvat credit.
19. It was submitted on behalf of the appellant that wrong description of particulars of the vehicle per se cannot be at ground to deny modvat / cenvat credit. It was also submitted that the mis-description could be result of clerical error. It was also submitted that the onus lay on the Department to prove that the goods were not actually received by the appellant. It was submitted that there is no evidence to suggest that the goods were diverted to any other destination and used elsewhere. These submissions do not cut any ice. We are of the view that onus initially lies on the Department but having established that the vehicles in question were incapable of transporting large quantities of iron & steel items as admitted by all concerned, the movement of goods from Mandigobindgarh stock yard of TISCO being fake and fictitious, - an allegation duly made known to appellant by the show cause notice read with Annexure-I thereto, the onus shifted onto the appellant to prove that the goods were duly received by them and used in the manufacture of iron & steel items. We are satisfied that the appellant utterly failed to discharge the onus. It is not in dispute that they took cenvat credit of Rs.55062/- on the basis of the alleged receipt of two consignments carrying contained duty liability of the said amount. Having failed to establish that they actually received the goods, they were clearly not entitled to take any cenvat credit and therefore the impugned order directing them to reverse credit and confirming demand of Rs.55062/- does not suffer from any illegality to warrant any interference. We are fortified by decision of the Division Bench in Veeraj Alloys Limited (supra) and the following observations therefrom may be usefully quoted.
We observe that the department raised a presumption against the appellants by establishing the 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 input to their factory. They have failed to do so. Their gate register was burnt in some fire accident and the bills/ vouchers indicating payment of cash to the drivers/owners of the trucks were also, destroyed in fire. One could understand 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 appellants 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, motorcycles 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 cannot 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.
20. Learned Counsel for the appellant also took the plea that the extended period of limitation was not applicable. He submitted that the appellant was a bonafide buyer and should not suffer for the mistake of others. We find no merit in this submission either. The entire transaction was vitiated by fraud coupled with mis-statement and suppression of facts with intent to evade payment of duty and, therefore, extended period was rightly applied. The act being fraudulent, imposition of penalty also does not suffer from any illegality, particularly, in view of the systematic manner in which the fraud was committed; however, taking a lenient view, the penalty is reduced to Rs. 10,000/-
21. In the result, subject to the modification in penalty, as mentioned above, the appeal is dismissed.
[Pronounced in the open Court on 03.09.2008] (Justice S.N. Jha) President [M. Veeraiyan] Member [Technical] [Pant]