Custom, Excise & Service Tax Tribunal
M/S Akshay Lpg Valves vs The Commissioner on 19 January, 2016
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL REGIONAL BENCH AT HYDERABAD Bench Single Member Bench Court I Appeal No.E/1242,1243, 1266 & 1267/2011 (Arising out of Order-in-Appeal No.29,30,33 &34/2011(H-IV)CE, Dated 23-02-2011 in Passed by C.C&C.E.(Appeals-II),Hyderabad For approval and signature: Honble Ms. Sulekha Beevi, C.S. Member(Judicial) 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 Lordship wish to see the fair copy of the Order? 4. Whether Order is to be circulated to the Departmental authorities? M/s Akshay LPG Valves . V.K.Janaki Ram M/s Jagadamba Engineering(P)Ltd. V.K.Janaki Ram ..Appellant(s) Vs. The Commissioner. C&C.E, Hyderabad: IV ..Respondent(s)
Appearance Shri Sri Y.Sreenivasa Reddy, Advocate for the Appellant Sri Mohammed Yousuf. AR for the Respondent Coram:
Honble Ms. Sulekha Beevi, C.S. Member(Judicial) Date of Hearing: 15/12/2015 Date of decision: 19/01/2016 FINAL ORDER No._______________________ [Order per: Sulekha Beevi, C.S.] 1 The allegation leveled against the appellant is fraudulent availment of Cenvat Credit without receipt of raw material in the factory.
2. The appeals are filed against the demand of duty interest and penalty alleging fraudulent availment of Cenvat Credit on goods imported vide Bill of Entry without actual receipt of the goods into the factory. The appeal No.E/1242/2011 is with regard to goods imported vide B/E No.426 225 dated 16-05-2005 and appeal No.E/1243/2011 is the penalty proceedings against co-notices. The appeal No.E/1266/2011 is with regard to goods imported vide B/E No.412403, dated 07-03-2005 and appeal No.E/1267/2011 is again the penalty proceedings against co-notices. The issue involved in all the above appeals being the same and the show cause notices having been issued from the same investigation process, the appeals were heard together and are disposed by this common order.
3. The appellants are manufacturers of excisable goods and are availing facility of Cenvat credit. Upon certain investigations conducted by DGCEI, Ahmedabad Zonal unit and followup action initiated by DGCEI, Hyderabad, it was suspected that certain importers located in Delhi had resorted to importing re-melted copper ingots/wire bars directly in their name or some times directly in the name of manufacturers by filing Bill of Entry. But the goods imported were sold in and around Delhi. The manufacturers, however, availed Cenvat Credit on the Bills of Entry showing that these goods were transported from Delhi to their factory and received in the factory, when actually the goods were not received. The appellants were then issued show cause notices invoking extended period of limitation. After adjudication, the original authority confirmed the demand, interest and penalty.
4. The appellants filed appeal before the Commissioner (Appeals) and vide the Order impugned herein the Commissioner(Appeals) upheld the order passed by the original authority. Being aggrieved the appellants have preferred these appeals.
5. The crux of the case put forward by department is that the appellants though imported goods vide Bill Entry , diverted the same without bringing the goods into the factory or use in their manufacture. They thus wrongly availed credit on the strength of bill of entry without actually receiving the goods. The findings in the impugned order in E/1242/2011 is reproduced as below for better appreciation of facts and evidence in the present case.
Verification of case records reveals that the appellants had irregularly availed cenvat credit of Rs.7,17,415/- based on the Bill of Entry No.426225 dated 16-05-2005 without actual receipt and consumption of raw material mentioned therein, in contravention of above mentioned Cenvat Credit Rules, 2004 by adopting modus operandi as deposed in the statement dated 02-07-2008 by Sri V.K.Janaki Ram, Authorised Signatory of the appellant company before the Investigating Agency and the same was corroborated by the statement sof Sri Dilip Kothari, Proprietor of M/s Metal Udyog, Secunderabad, Srti Satish Agarwal,partner of M/s Time and Space Haulers,Mumbai, Sri Praveeen Agarwal, Parnter of M/s Time and Space Haulers given before the investigating agency The modus operandi was meticulously planned in such way that by seeing the transactions recorded in the books of accounts of the appellants, it cannot be proved that they had availed Cenvat Credit on the raw material without receiving the same into their factory premises since payments for raw material cost, customs duties, transport charges and CHA charges were made through cheques and later on they received back the amounts through cash except customs duties and CHA charges as the raw material was imported through Tughlakabad ICD, Delhi and cleared the same on payment of customs duty through the services rendered by the CHA. Whereas, the said raw material was not received by the appellants, since it was diverted elsewhere and shown the receipt of raw material by way of false documents issued by the transporter ie.M/s Time and Space Haulers, who issued the documents showing transportation of the raw material actually without transporting the same to the appellants factory. This fact has been accepted voluntarily by Sri V.K.Janaki Ram, Authorised Signatory of the appellant company and corroborated by Sri Satish Agarwal, Partner of the Transport Company. The modus operandi has been unraveled by the investigating agency beyond any scope of doubt and issued show cause notice, which was adjudicated by the respondent by not considering the contents of the cross examination of Sri V.K.Janaki Ram, Authorised Signatory and the affidavit of Sri Satish Agarwal, Partner of the transport company as the contents therein are after thought preparations to safeguard the malafide intentions of the appellants. In this regard, I concur with the findings of the respondent made in his impugned order. In view of the above, I find no force in the contentions of the appellants and the case laws relied by the appellants are distinguishable to the issue on hand since the authorized signatory of the appellant company had admitted the modus operandi in availment of Cenvat Credit fraudulently without actual receipt of the raw material in their factory premises and the same has been corroborated by the Partner of Transport Company. Form this, it is evident that the appellants had not received the raw material covered under the subject bill of entry but irregularly availed Cenvat credit based on such bill of entry contrary to the provisions of Cenvat Credit Rules as discussed in para supra.
6. The very same findings are made in the impugned order regarding appeal No.E/1266/2011 except for the change in amount of credit availed, number and date of bill of entry. Further according to department, Sri V.K.Janaki Ram whose statement is heavily relied by department is the authorized signatory of the appellant, in appeal No.E/1242/2011. He is the Managing Director of appellant in Appeal No.E/1266/2011.
7. Controverting these findings, the contentions put forward by appellant is as under:
(i) The appellant filed Bill of Entry at Tuglakabad and cleared the goods in appellants name. The goods were then transported from Tuglakabad to Hyderabad under proper Lorry Receipts (LR). On reaching Hyderabad, the goods were weighed in a weigh bridge for which weighing slips were issued. Appellant had furnished these documents to the department. The goods received in the factory was entered in statutory and private records maintained by appellant. The goods were then sent for job work for conversion into rods under job work challans. The receipt of processed goods from job worker and their usage in the manufacture of finished goods viz. LPG cylinder valves was entered in the records. The finished goods were manufactured and cleared on payment of duty. Amounts were paid to the actual importers from whom goods were purchased and payments to CHA, transporters and others was made by way of cheques.
(ii) The department has not adduced any evidence to prove that the imported goods were diverted to another place from Delhi. There is no evidence that they were not transported to Hyderabad or that they did not reach the appellants factory. The entries in the statutory records are proper and no discrepancy was found. There is no evidence that appellant made any cash transactions other than those entered in books. Further, though department alleges that the inputs were diverted there is no evidence to even suggest that appellant had procured inputs from elsewhere to substitute the diverted inputs. That during the relevant period the appellant has manufactured finished goods and paid duty.
(iii) The whole case is framed upon statements recorded, some of which have been retracted. None of the statements are corroborated by material evidence. The statement of Sri Janakiram was recorded showing him the statement of transporter Sri Satish Agarwal. But Shri Satish Agarwal retracted his statement before a Magistrate. Further, Shri Satish Agarwal is only a partner of the Transporter firm stationed at Mumbai. He was asked to sign a list of LRs which also included three LRs relating to the appellant. That the said list of LRs is not made part of RUD.
(iv) The statement of Sri V.K.Janakiram was recorded on 02-07-2008 as if he is the authorized signatory of the appellant in appeal No.E/1242/2011. In fact Shri V.K. Janakiram is no way connected with the appellant in that case. The GPA is in favour of Sri Ashwin. Sri V.K.Janakiram is the father of the proprietor/appellant and during his cross examination, he stated before the original authority that his computer typed statement was recorded by physically assaulting his elder son by the officer of DGCEI by removing his clothes. He admitted to be the Managing Director of appellant firm in E/1266/2011.
(v) Though department alleges that Shri Dilip Kothari a trader at Hyderabad planned the whole operation, Dilip Kothari not made party to the notice. Shri Dilip Kothari denied the allegation.
(vi) Though it is alleged that appellants purchased the goods from Dinesh International and Vipin Enterprises at New Delhi and goods were diverted at New Delhi itself, the statement of suppliers of the goods was not recorded. No enquiry was made about the alleged diversion or cash flow.
(vii) Though it is alleged that the CHA, J.M.Baxi cleared the goods for the importer and that he received the money in cheque and later returned the same as cash, the statement of CHA was not recorded.
(viii) The statement of the transporter at Delhi was not taken and also the statement of the Owner/Driver of vehicles in which the appellants contend that the goods were transported was not recorded.
(ix) The appellant produced the weighment slips to establish that the goods were received in the factory. Neither did the department conduct any enquiry in this regard nor was it accepted as evidence.
(x) Though the appellant submitted that goods received were sent for job work under proper challan no enquiry was conducted in this regard. Further, no evidence is adduced by department to show that appellant substituted the raw materials alleged to be diverted.
(xi) That appellants were denied opportunity to cross examine.
8. I have considered the submissions made by either side and perused the records carefully. At the outset, it has to be stated that in this case no discrepancy was found in the statutory records. So also apart from the statements there is no material evidence brought out by investigation to establish that the goods did not reach the factory of the appellants. Whereas, all the documentary evidence stand in favour of the appellants. The learned AR Sri Mohammed Yousuf vehemently argued that the operation was meticulously planned and therefore the department in such cases cannot be asked to establish the case with mathematical precision. I have no quarrel with the submission made by the learned AR that in clandestine cases, it may not be possible to put forward the case with extreme precision. This does not mean that mere statements recorded would be sufficient to establish the charges alleged in the show cause notice. The statements should be supported by corroborative evidence. In the case on hand, if the department alleges that the raw materials were diverted without reaching the factory, then there should surely be evidence let in to show how the appellants have substituted the raw material since the statutory records show production and clearance of finished goods on payment of duty. There is absolutely no evidence to show the substitution of raw material which in my view would cut the root of the allegation as the statutory records show that goods were manufactured. No shortage of raw material was detected during enquiry.
9. Apart from the above, the statement of the transporter Shri Satish Agarwal has been retracted before a Magistrate and Sri Janakiram in cross examination retracted his statement and also deposed that his statement was recorded under duress. The case of the department is built-up mainly on these statements. As the statements have been retracted, there has to be some other evidence to conclude that the goods were not actually received. Whereas, the statutory records, weighment slips, job work challans, production register all stand in favour of the appellants. These documentary evidence do prevail over the retracted confessional statements.
10. The learned counsel for appellant drew support from the decision rendered by Honble High Court of Gujarat in CCE, Ahmedabad Vs Tejal Dyestuff Industries 2009(234) ELT 242(Guj) and argued that in the absence of corroborative evidence, credit cannot be denied based on confessional statements. In Commissioner Vs Motabhai Iron & Steel Industries 2014-IL-1617-HC-AHM.CX. The Honble High Court observed that when the assessee was deprived of the opportunity to cross examine no reliance can be placed on the statement of such witness. Again, the appellants contended that the goods were transported from Delhi to Hyderabad. But the department has failed to conduct any enquiry in this direction. There are no statements taken from drivers of the trucks. The transactions entered in the statutory records of the appellant are supported by proper banking channel. Though the department alleges that there was cash flow in return for the fraudulent activity, which was unaccounted, there is no evidence in this regard. When the statutory records are proper and appellant has manufactured the final products and cleared them by paying duty, then the burden rests heavily upon the Revenue to establish with cogent evidence that the goods were not actually received in the factory. In the totality of facts and evidence, paced before me, I find that revenue has miserably failed to establish the allegations raised in the show cause notice.
11. In view of the above, I find that the impugned orders upholding the disallowance of credit availed is not sustainable.
12. In the result, the impugned orders are set aside and appeals are allowed with consequential relief, if any.
(Pronounced onin open court) ( SULEKHA BEEVI.C.S.) MEMBER (JUDICIAL) DKS 11