Custom, Excise & Service Tax Tribunal
N D Metal Industries Ltd vs Cgst & Central Excise Daman on 25 November, 2024
Customs, Excise & Service Tax Appellate Tribunal
West Zonal Bench at Ahmedabad
REGIONAL BENCH-COURT NO. 3
EXCISE Appeal No. 10588 of 2024 - DB
(Arising out of Order in Original DMN-EXCUS-000-COM-17-24-25 dated 12/08/2024 passed
by Commissioner of Central GST & Central Excise, Daman)
N D METAL INDUSTRIES LTD ........Appellant
Survey No. 170/1 (Part 1+2) Shed No. 03,
Panchal Udyog Nagar, Bhimpore, Daman,
The Dadra and Nagar Haveli and Daman Diu- 396210
VERSUS
COMMISSIONER OF CGST & CENTRAL EXCISE -
CGST & Central Excise Daman ......Respondent
Customs and Service Tax, Daman, 5th Floor, GST Bhavan, RCP Compound, Vapi, Valsad, Gujarat-396191 WITH EXCISE Appeal No. 10589 of 2024 - DB (Arising out of Order in Original DMN-EXCUS-000-COM-17-24-25 dated 12/08/2024 passed by Commissioner of Central GST & Central Excise, Daman) SHRI AJAY F GARG ........Appellant Managing Director of M/s N D Metals Industries, Survey No. 170/1 (Part 1+2) Shed No. 03, Panchal Udyog Nagar, Bhimpore, Daman, The Dadra and Nagar Haveli and Daman Diu- 396210 VERSUS COMMISSIONER OF CGST & CENTRAL EXCISE -
CGST & Central Excise Daman ......Respondent Customs and Service Tax, Daman, 5th Floor, GST Bhavan, RCP Compound, Vapi, Valsad, Gujarat-396191 APPEARANCE: Shri P P Jadeja, Consultant for the Appellant
Shri R R Kurup, Superintendent (AR) for the Respondent CORAM: HON'BLE MEMBER (JUDICIAL), MR. RAMESH NAIR HON'BLE MEMBER (TECHNICAL), MR. RAJU Final Order No. 12806-12807/2024 DATE OF HEARING: 08.10.2024 DATE OF DECISION: 25.11.2024
2|Page E/10588-10589/2024-DB RAMESH NAIR These appeals are directed against the Order-in-Original DMN-EXCUS- 000-COM-17-24-25 dated 12.08.2024 passed by the adjudicating authority in de-novo proceeding as in the earlier round of appeal before this Tribunal the matter was remanded to the adjudicating authority with certain vital observations.
1.1 The brief facts of the case are that M/s N.D. Metal Industries Ltd. (Appellant) is engaged in the manufacture of articles of Copper and Copper Alloys, Zinc and articles thereof. Appellant imported inputs/raw-materials such as Copper/Brass/Zinc Scrap etc. for use in or in relation to the manufacture of the aforesaid final products; and had availed the Cenvat credit on such imported inputs under the Cenvat Credit Rules. An intelligence collected by the officers of DGCEI indicate that Appellant instead of taking the imported inputs to their factory at Daman for use in or in relation to the manufacture of the final products, had diverted the imported inputs for sale in the market. However, they had taken/availed the benefit of Cenvat credit paid on such inputs on the strength of documents [i.e. on the Bills of Entry] only. The intelligence further indicated that Appellant engaged M/s. Pankaj Shipping & Transport Co. (hereinafter referred to as M/s. PSTC) as the Customs House Agent (CHA) for clearance of the imported goods from Port of import at Mumbai; and also as transporter of the said inputs from the Port of import to their works/factory at Daman. To cover-up the non-receipts of such inputs in the factory premises at daman, and to facilitate availment of Cenvat credit by Appellant, it appeared that Appellant prepared/got prepared forged transportation related documents for the inputs so diverted in connivance with M/s. PSTC and others. The intelligence further indicate that records of entry of the vehicles shown to have transported the inputs to their works/factory at Daman would not be available with Bhilad Check-post or with RTO of Gujarat State.
1.2 Based on the above intelligence, simultaneous searches were conducted by the officers of DGCEI in various premises of M/s. PSTC (CHA & Transporter), and the records/documents maintained by the various functionaries of M/s. PSTC relating to movement of vehicles/transportation of goods such as Daily Loading Reports, Monthly Truck Loading Reports, CHA dockets, Delivery Challan Books, etc. As follow up action, the officers of the Jurisdictional Commissionerate also carried out searches at the factory premises of Appellant at Daman. Certain records/documents were resumed
3|Page E/10588-10589/2024-DB by the officers for further investigation. It was alleged against the Appellant that they have taken the Cenvat credit on the strength of duty paying documents (Bills of Entry) without receiving the goods. Accordingly, the show cause notice dated 07.01.2009 was issued to deny the Cenvat credit to the Appellant and also proposing penalties on other co-noticees. In adjudication, the matter was decided ex-parte vide Order-In-Original dated 19.06.2019. The Learned Commissioner confirmed the Cenvat demand alongwith interest and penalties. Being aggrieved with the said order the appellant approached the Tribunal and vide Final Order dated 01.10.2021, the matter was remanded by the Tribunal to the adjudicating authority to supply the relied upon documents to the appellant and provide sufficient opportunity for filing reply and personal hearing be given before passing a de-novo adjudication order. Subsequent to the remand, the Ld. Adjudicating authority in de novo adjudication again vide impugned Order-In-Original dated 12.08.2024 confirmed Cenvat demand and imposed penalty without providing the documents as directed by the Tribunal in the earlier order. Hence the appellants are once again before this Tribunal.
2. Shri P.P. Jadeja, Learned Consultant appearing on behalf of the appellants submits that the Hon'ble CESTAT, vide Final Order dated 08.10.2021 have directed the adjudicating authority to supply all the relied upon documents to the appellant and only thereafter sufficient opportunity for filing their defence and personal hearing be given before passing a de-novo adjudication order. However, the Ld. adjudicating authority has not provided copies of the relied upon documents to the appellant, despite such directions by the Hon'ble CESTAT and requests by the Appellant after the CESTAT directions. However, without receiving RUDs sought, Appellants have filed reply to SCN before the adjudicating authority vide letter dated 12.06.2024 objecting SCN on merits and various other grounds. However, vide impugned order, Ld. adjudicating authority has again confirmed demand without following the directions of the CESTAT. The impugned O-I-O dated 12-08- 2024, having not followed the directions of the Hon'ble CESTAT and mandatory judicial discipline, deserves to be set aside on this ground alone without even going into merits of the case. He placed reliance on the following judgments: -
• RBF RIG Corporation, Mumbai Vs. Commissioner of Customs - 2011 (264) E.L.T. 486 (S.C.) • Triveni Chemicals Ltd. Vs. UOI - 2007 (207) E.L.T. 324 (S.C.)
4|Page E/10588-10589/2024-DB • Nipha Steel Ltd. Vs. CCE, Kolkata -IV - 2016 (342) E.L.T. 463 (Tri-
Kolkata) • Vishnu Kumar Traders (P) Ltd. Vs. CC, Chennai-IV 2019 (369) E.L.T. 1070 (Tri. - Chennai) • CCE Vs. Chandan Steel Ltd. - 2009 (238) E.L.T. 716 (Guj.) • Tribhuvandas Bhimji Zaveri Vs. CCE 1997 (92) E.L.T. 467 (S.C.) • UOI Vs. Kamlakshmi Finance Corporation Ltd.- 1991 (55) E.L.T. 433 (S.C.) 2.1 He also submits that based on investigation of DGCEI revenue alleged that inputs were imported in 20 feet and 40 feet containers at various ports, after their clearance from Customs, the same were, shown transported to factory of Appellant at Daman. However, some of such containers containing imported inputs were allegedly diverted to open market and shown in record by Appellant in RG23A Part-1, as received later on in factory, despite not received and used in manufacture of finished goods. Hence, Cenvat credit availed is irregular and ineligible. Appellant has not accepted such allegations of diversion of imported inputs. Copies of various relied upon documents seized are not provided, despite specific directions by this Hon'ble Tribunal. This is gross violation of principles of natural justice. The O-I-O dt. 12-08- 2024 deserves to be set aside on this ground alone 2.2 He argued that imported inputs were duly delivered and received at their Daman factory and were properly accounted for in Books of Accounts including RG-23 A Part I, which is the register maintained by them for recording receipt and usage of inputs in the manufacturing of finished goods. Appellant have paid duty on inputs at the time of import and received goods in their factory, availed credit used for manufacture of goods, cleared on payment of duty. Revenue has not adduced reliable evidences to deny credit.
2.3 He further submits that said DLRs and MLRs were mentioned at Sr. No. 43 of list of relied upon documents and were not made available to the Appellant and thus no reliance could be placed on the same without supplying copies thereof to the Appellant. DLRs and MLRs are in the nature of rough records written by drivers and on the basis of such third-party records, no adverse inference can be drawn against Appellant. It may also be appreciated that the unsigned, vague and general entries in private records maintained by the staff without corroboration from any tangible evidence cannot be relied upon to prove diversion more so when no statement of the person who
5|Page E/10588-10589/2024-DB maintained such record is brought on record. Merely because the drivers have not accurately maintained the MLRs, no adverse inference can be drawn on against the Appellant on the basis of such third-party records. Thus, the entries made in the DLR/MLR do not prove that the container/ imported inputs were transported only up to the destination given in such DLR/MLR. It is not the entry in the DLR/MLR but the transportation charges which are relevant as these indicate the actual transportation. In fact an alternate route was available for transportation from Mumbai to Daman without Check Post/without RTO check post.
2.4 He also submits that the extract of DLR reproduced in Paragraph 13.3 of SCN does not refer to any consignment pertaining to Appellant. MLRs extract of PSTC captured in Paragraph 13.3 of SCN contains the details of delivery of imported inputs of Appellant to Daman against challan no. 1168. This clearly indicates that the inputs were delivered to Daman. He placed reliance on the decision of this Hon'ble CESTAT in identical case, in 2023 (385) E.L.T. 541 (Tri-Ahmd) - CCE, Daman vs Garg Industries Pvt. Ltd vide Final Order Nos. A/10443-10448/2023-WZB/AHD, dated 14-3-2023 in Appeal Nos E/10151/2020-(DB) with E/10146-10150/2020.
2.5 He also submits that the department's entire case on the assumptions that the appellant has taken Cenvat credit without actually receiving inputs in the factory, whereas the appellant categorically stated that they have made all payments of duty on input at the time of Imports, received such inputs in their factory, used the said inputs in factory, manufactured final products and also cleared the said final products on payment of duty, filed ER-1 returns which have been finally assessed. The Appellant submit that the O-I-O has completely lost track of the following facts which are sufficient to set aside O- I-O and decide Appeals in favour of appellant.
a) The duty paid inputs in question have been used in the manufacture of final products, which have been cleared on payment of duty.
b) The Department has not been able to prove that any other alternative raw material was received and used in the final products.
c) The ER-1 return have been assessed finally by the Range Officer, which contains all the documents including (the invoices under dispute) on the basis of which the Cenvat Credit has been availed and utilized.
6|Page E/10588-10589/2024-DB 2.6 By relying the judgment of M/s Subhnen Decor P. Ltd v/s CCE, Vapi [2010 (251) E.L.T. 105 (Tri. - Ahmd.)] he submits that the Revenue cannot pick and choose evidences which are in its favour and cannot ignore the evidences, which might support the assessee's case. Thus, O-I-O is not justified and is liable to be quashed as the Department has not been able to prove any other alternative raw material was received and used in the final products.
2.7 He also submits that assuming that inputs on which credit is taken have not come in factory then it was obligatory on revenue to have proved as to how the final products were manufactured and cleared on payment of duty. Further, revenue has also not correctly appreciated that transporters' payment has been made by cheque. The O-I-O has not denied these payments. No person with reasonable prudence will accept that someone makes such huge payments by cheque/LC without receipt of goods purchased or without any consideration in return. Thus, impugned O-I-O denying Cenvat Credit based upon misleading investigation is not tenable and not justified, and hence is liable to be set aside. No dispute about quantum of final product which cannot be manufactured otherwise - No other evidence to show that such inputs were not used in manufacture of final products. He placed reliance on the decisions of B.M.A. ZINC PVT. LTD vs CCE, [2005 (191) E.L.T. 792 (Tri- Del).
2.8 He also submits that the adjudicating authority has relied upon statements which are retracted. The evidentiary value of these statements could be only when they have been admitted legally as evidence under section 9D of Central Excise Act. Having not admitted these evidences as required under section 9D of Central Excise Act 1944, O-I-O has not followed provisions and hence this O-I-O also deserves to be set aside. From the reading of the Section 9D ibid, it is clear that it is mandatory to provide the cross- examination of witnesses to appellant against whom the case of clandestine removal was proposed. Section 9D provides that the cross-examination is mandatory and after cross-examination of witnesses, the statements can be admitted as evidence to use against the appellants for adjudication of the show cause notice. It is not choice of Adjudicating Authority to grant or to deny cross examination. It is settled by decisions that without cross- examination of the witness their statements recorded under Section 14 of Central Excise Act, 1944 cannot be accepted and demand on that basis cannot be confirmed on such charges. Department in this case has not proved their case and evidences of retracted statements after search are not taken on
7|Page E/10588-10589/2024-DB record as per Section 9D of Central Excise Act 1944. There is no cogent and tangible evidence on basis of which clandestine removal can be established. The revenue has not proved beyond doubt their case of clandestine removal of goods, hence the impugned order is not sustainable against Appellants. He placed reliance on the following decisions:-
• J&K Cigarettes Ltd. Vs. CCE - 2009 (242) E.L.T. 189(Del.) • CCE Vs. Govind Mills Ltd. - 2013 (294) E.L.T. 361 (All.) • Basudev Garg Vs. Commissioner of Customs - 2013 (294) E.L.T. 353 (Del.).
• Inter Metal Trade Ltd. Vs. CCE - 2014 (308) E.L.T. 481 (Tri. - Del.) • P.M.S. International Pvt. Ltd v/s CCE 2014 (309) E.L.T. 165 (Tri. - Del.) • Agrawal Round Rolling Mills Ltd v/s CCE 2015 (317) E.L.T. 145 (Tri.
- Del.) 2.9 He also argued that it is a settled law by plethora of decisions that third party records cannot be relied upon. Since, entire case is on the third party evidence like DLR/MLR, order dated 12-08-2024 is liable to be set aside. He placed reliance on the following decisions:-
• Gandhi Texturisers reported in 2008 (230) E.L.T. 186 (Tri. - Ahmd.), • R.V. Steels Pvt. Ltd. reported at 2009 (243) ELT 316 (Tri.-Chennai) • Rajaguru Spinning Mills (P) Ltd, reported at 2009 (243) ELT 280 (Tri.- Chennai).
• Premium Packaging Pvt. Ltd reported in 2005 (184) E.L.T165 (Tri.- Del.) • Shri Chakra Cements Ltd, Guntur reported in 2008 (231) ELT 67 (Tri
- Bang) • Premium Packaging Pvt. Ltd, Kanpur reported in 2005 (184) E.L.T. 165 (Tri. - Del.) • Ram Shyama Papers Ltd vs. CCE Lucknow reported in 2004 (168) E.L.T. 494 (Tri. - Del.) • Charminar Bottling Co. (P) Ltd. vs C.C.E. reported in 2005 (192) E.L.T. 1057 (Tri.- Del) • Oudh Sugar Mills Ltd Vs. Union of India reported in 1978 (2) E.LT (J172) (S.C.) • International Computer Ribbon Corpn -2004 (165) E.L.T. 186 (Tri-
Chennai)
8|Page E/10588-10589/2024-DB • CCE vs Rajaguru Spinning Mills (P) LTD.-2009 (243) E.L.T. 280 (Tri.
- Chennai) • Rama Shyama Papers Ltd. Vs. CCE - 2004 (168) E.L.T. 494 (Tri. - Del.) • Rutvi Steel & Alloys Vs. CCE, Rajkot - 2009 (243) E.L.T. 154 (Tri. - Ahmd.) • Rhino Rubbers Pvt. Ltd. Vs. CCE, Banglore - 1996 (85) E.L.T. 260 (Tribunal) • T.G.L. Poshal Corporation Vs. CCE - 2002 (140) E.L.T. 187 (Tri. - Chennai) -
• Synergy Steel Ltd. Vs. CCE, Alwar - 2020 (372) E.L.T. 129 (Tri. - Del.) 2.10 On limitation he also argued that the show cause notice dated 07-01- 2009 is not sustainable on time limitation as the pre-requisite conditions and ingredients like fraud, collusion, willful misstatement or suppression of facts, with intent to evade payment of duty, for invoking extended period are not existing in the facts of this case, extended period for demand of duty is not available in terms of Section 11A of Central Excise Act, 1944. The question of invoking extended period of time limitation is a mixed question of facts and the law. Since Appellant have not suppressed any facts with intent to evade any duty, such SCN dt 07-01-2009 for demand issued for 2003 to 2006 is not sustainable on time limitation. The duty demand with interest, and penalties confirmed by the impugned O-I-O dated 12-08-2024 requires to be dropped on this ground of time limitation alone. He placed reliance on the following decisions:-
• Cosmic Dye Chemical - 1995 (75)ELT 721 (SC) • CCE vs. H.M.M. Limited - 1995 (76) ELT 497 (SC) • Padmini Products- 1989 (43) ELT 195 (SC) • Tamil Nadu Housing Board vs CCE 1994 (74) E.L.T. 9 (SC) • CCE vs. Chemphar Drugs & Liniments -1989 (40) ELT 276 (SC) • CCE vs. Reliance Industries Ltd.- 2023 (385) E.L.T. 481 (S.C.) 2.11 He also submits that the impugned order has also erred in imposing penalty on the Director without giving justifiable finding for imposing such penalty. There is no cogent and reliable finding to justify imposition of any penalty on any Appellant and Director therefore, no penalty can be imposed in facts of case, merely on assumptions and presumptions. Adjudicating Authority has given finding which are only allegations made in SCN, have been
9|Page E/10588-10589/2024-DB re-written in O-I-O dt. 12-08-2024 only on assumptions and without adducing any valid evidence acceptable as per the settled law.
3. On other hand, Shri R R Kurup, Learned Superintendent (AR) appearing on behalf of the Revenue reiterates the findings of the impugned order.
4. We have heard both the sides and perused the records. We find that in first round of litigation this Tribunal vide Final Order No. A/12420-12421/2021 dated 08.10.2021 have directed the adjudicating authority to supply all the relied upon documents to the appellant and only thereafter sufficient opportunity for filing their defence and personal hearing be given before passing a de-novo adjudication order. The relevant observation in the said Tribunal's remand order is reproduced below: -
"04. We have carefully considered the submissions made by both the sides and perused the records. As per the submissions from both the sides the preliminary issue to be decided by us is that whether there is a violation of Principle of natural justice in passing the adjudication order. We were invited the attention by the Learned Counsel to various correspondence to submit that it is established that all the documents relied upon in the show cause notice were not given to the appellants. We find that there is a chain of correspondence between appellant and department which are listed below:-
• Department's letter dt. 08.11.2010 • Appellant's letter dt. 29.11.2010 • Appellant's letter dt. 18.01.2011 • Appellant's letter dt. 24.01.2011 • Department's letter dt. 23.11.2011 • Department's letter dt. 07.01.2014 • Appellant's letter dt. 10.01.2014 • Department's letter dt. 05.06.2015 • Appellant's letter dt. 18.06.2014 • Department's letter dt. 11.09.2017 • Appellant's letter dt. 20.09.2017 • Department's letter dt. 21.09.2017 • Department's letter dt. 21.10.2017 • Department's letter dt. 05.12.2017 • Appellant's letter dt. 20.12.2017 • Department's letter dt. 15.06.2018 • Appellant's letter dt. 26.06.2018 • Department's letter dt. 13.07.2018 • Department's letter dt. 10.08.2018 • Appellant's letter dt. 17.08.2018 • Appellant's letter dt. 10.09.2018 • Department's letter dt. 12.03.2019 • Appellant's letter dt. 26.03.2019 • Department's letter dt. 27. 03.2019 • Appellant's letter dt. 02.04.2019 • Appellant's letter dt. 16.04.2019 • Department's letter dt. 23.04.2019 10 | P a g e E/10588-10589/2024-DB 4.1 On going through the above correspondence, we find that it is not only the correspondence between the appellant and DGCEI and the adjudicating authority but there are also number of letters written by the office of the adjudication authority to the DGCEI for supplying the required documents. This itself shows that the appellant have not been given all the relied upon documents at any point of time. Since, there is no dispute that the appellant were not supplied the relied upon document as mentioned by them, the adjudication should not have taken place in absence of providing the said documents to the appellant. In this fact which is not under dispute there is a gross violation of principle of natural justice on the part of the adjudicating authority. It is a settled law that principles of natural justice is the foremost requirement to be complied with before passing the adjudication order. The various judgments cited by the Learned Counsel on the point of principles of natural justice directly supports their case.
05. Accordingly, the impugned order, since passed without observance of principles of natural justice, shall not sustain and accordingly we set aside the impugned order.
06. The adjudicating authority is directed to supply all the relied upon documents to the appellants only thereafter sufficient opportunity for filing their defence and personal hearing be given before passing a denovo adjudication order. The appeals are allowed by way of remand to the adjudicating authority."
4.1 However it was noticed that the Ld. adjudicating authority and department despite the direction of this tribunal failed to provide the copy of relied upon documents to the appellant. We also have gone through the finding of impugned order and find that Ld. Commissioner also mentioned that letters dated 22.09.2022 and 17.04.2023 were issued to DGGI, MZU to supply the requisited documents to the appellant and in response, the DGGI, MZU has not given any reply of the said letters. However, Ld. Commissioner by relying the letter dated 05.01.2018 of DGGI, MZU held that relied upon documents have been provided to the appellant alongwith SCN on 07.01.2009 and the same were duly acknowledged by the authorized signatory of appellant. We find that the said disputed acknowledgement of relied upon documents with SCN has already been disputed by the appellant before this Tribunal in first round of litigation and after that considering all the facts and correspondences, this tribunal has remanded the matter to adjudicating authority with the specific direction to supply the relied upon documents to the appellant. It is undisputed that the said dispute related to acknowledgment of relied upon document on 07.01.2019 was considered by the Final Order No. A/12420-12421/2021, dated 08.10.2021, whereby this Tribunal remanded the matter to the Ld. Adjudicating Authority with specific directions to provide the copies of relied upon documents to the appellant and which was accepted by the department and thus became final. Therefore, it was not open for the 11 | P a g e E/10588-10589/2024-DB Ld. Commissioner to pass the order ignoring the remand direction of their higher authorities and confirming the demand on the same grounds as taken in the first round which was set aside by the Tribunal.
4.2 We also find that the remand order of this tribunal duly accepted by the department. The department have not questioned the final order of the Tribunal dated 08.10.2021, which order has attained finality. We further find that in the case of RBF RIG Corporation, Mumbai v. Commissioner of Customs (Imports), Mumbai, (2011) 3 SCC 573 (Para-25) = 2011 (264) E.L.T. 486 (S.C.), Hon'ble Supreme Court laid down the law that if for any reason, the subordinate authority is of the view that the directions issued by the Court are contrary to statutory provision or well established principles of law, it can approach the same Court with necessary application/petition for clarification or modification or approach the superior forum for appropriate reliefs. Clearly, in the present case, the department have not questioned the final order of the Tribunal dated 08.10.2021. In such circumstance without providing the copy of relied upon documents to the Appellant and by relying the old disputed acknowledgment the impugned order passed by the Ld. Commissioner in the present matter clearly violation of judicial discipline.
4.3 On perusal of the adjudication order and correspondences on various dates between appellant and department we find that in the present matter appellant have made several correspondences with department and adjudicating authority even then the documents were not supplied to them. We find that even the direction of this tribunal to adjudicating authority to provide the copy of relied upon documents, who has not supplied the documents to Appellant. But the Ld. Commissioner observed that the documents were supplied with the show cause notice, which is totally mis- conceived, inconsistent and contradicting. We find that the entire Cenvat demand without supply of relied upon documents is against the principles of natural justice and hence the show cause notice stands vitiated. For this reason itself, the Cenvat demand and penalty cannot sustain. In Tribhuvandas Bhimji Javeri v. Collector of Central Excise, 1997 (92) E.L.T. 467 (S.C.), the Hon'ble Apex Court held that non-return of the documents by the authorities may severely prejudice the right of the party to offer the proper explanation and to that extent the principles of natural justice may stand violated. In absence of supply of the copies of the documents a party may be deprived of from leading proper evidence and he may not be able to give proper answer 12 | P a g e E/10588-10589/2024-DB of the case against him by adducing positive evidence in support of his own case together with the right to contradict all other allegations. Deciding a case without furnishing proper documents by the Revenue ignoring the essentials of justice, may render the order a nullity. In this context we also find support from following decisions: -
(i) In the matter of Commissioner of Central Excise & Customs Vs. Chandan Steel Ltd.- 2009 (238) E.L.T. 716 (Guj.) , the Hon'ble Gujarat High Court held that - Natural justice - Relied upon documents - Non-
supply of - Impugned Tribunal order allowing appeal by assessee on the ground of violation of natural justice - Adjudication order passed without supply of copies of documents asked for by assessee - Order-in-appeal granting inspection of relied upon documents - Tribunal order noting that relied upon documents not supplied to assessee despite repeated written requests - Request of Department to provide another opportunity, not grantable as more than 10 years lapsed since initiation of proceedings - Substantial question of law not arises - Section 35G of Central Excise Act, 1944
(ii) Further in the matter of Tribhuvandas Bhimji Zaveri v. CCE [1997 (92) E.L.T. 467 (S.C.)] supra - The Hon'ble Supreme Court has held that when relied upon documents are not furnished, the right to offer proper explanation is severely prejudiced. Failure to supply copies of documents has caused prejudice and the principles of natural justice are violated. Impugned order is set aside and appeals are allowed.
(iii) In the matter of International Computer Ribbon Corpn. v. CCE [2004 (165) E.L.T. 186 (T)] - The Tribunal held that when directions given by the Tribunal for furnishing copies of the relied upon documents have not been complied with by the Revenue, there is violation of the terms of the remand order. The impugned order is set aside and appeal allowed.
(iv) Similarly, in the matter of Union of India Vs. Lampo Computers (P) Ltd., 2014(305)ELT 214 supra the Ho'ble Karnataka High Court held that
-Adjudication - Readjudication proceedings - Non-compliance with direction in remand order - Natural justice - Despite Tribunal's specific directions in remand order, copies of relied upon documents not provided to appellants - Impugned order deciding the appeal without such documents or without examining whether such documents have 13 | P a g e E/10588-10589/2024-DB any effect on merits of case, set aside - Tribunal directed to decide the case on merits after examining the effect of non-supply of documents relied upon by Department in show cause notice - Section 33A of Central Excise Act, 1944.
4.4 Without prejudice, we also find that the case of the department in the present matter is that the Appellants had imported various consignments of their Inputs like Copper Scrap (including druid, i.e. copper cable scrap), brass scrap, Aluminium Scrap & Zinc Scrap etc., cleared by customs officers at the Ports, on payment of duty. DGCEI Officers, had carried out searches in the premises of Appellants CHA and transporter and records/documents like Daily Loading Reports (DLRs), Monthly Truck loading Reports (MLRs), CHA dockets, Delivery Challans, etc. for the above enquiry were seized and relied upon for Cenvat duty demand. During search of factory premises of Appellant at Daman, it was found that 08 furnaces, 02 pulveriser machines, 01 re-cycling PVC chopper machine, 09 cutting machines, weighing scales and various other ancillary machines were installed. During investigations, various records/documents resumed during searches or under summons were scrutinized. DGCEI officers recorded statements of transports and their staffs and Managing Director, Authorized Signatory, Plant Manager, General Manager and Manager of the Appellant company on various occasions and also transporter and their staff. Based on investigation revenue alleged that inputs were imported in 20 feet and 40 feet containers at various ports, after their clearance from Customs, the same were, shown transported to factory of Appellant at Daman. However, some of such containers containing imported inputs were allegedly diverted to open market and shown in record by Appellant in RG23A Part-1, as received later on in factory, despite not received and used in manufacture of finished goods. Hence, Cenvat credit availed is irregular and ineligible. DGCEI Inquiry for vehicles shown to have transported diverted inputs - consignments unloaded at Bhiwandi, had not crossed the said inter-state check-post as reflected from records maintained with RTO (Gujarat). Accordingly, CENVAT credit availed by Appellant on such diverted inputs appeared to irregular and not admissible. We find that contrary to this evidences/investigations the fact that the Appellant have recorded the receipt of the goods in their Raw materials account i.e. RG-23 Part-I and RG-23 Part- II, the purchase of the imported goods under the Bills of Entry in question were booked in books of account. The Appellant has also shown the use of disputed inputs in their factory premises for manufacture of finished goods, further finished goods were cleared on payment of duty. Even the payment of 14 | P a g e E/10588-10589/2024-DB transportation was also made by cheque. The Revenue could not bring any evidence that the goods covered under the disputed Bills of Entry were diverted to any other place. It is also not the case of the department that the Appellant have procured some unaccounted inputs/raw materials to cover up the quantity of imported input shown in the said Bills of Entry. Moreover in the present matter revenue could not find out any single buyer of the alleged diverted inputs and single alternative raw material supplier of other inputs, if not used the imported input in the production. Apart from the records of RTO and transporters and their statements there is no material evidence brought out by investigation to establish that the goods did not reach the factory of the Appellant. Whereas, all the documentary evidences stand in favour of the Appellant. We also find that there is no evidence that the imported inputs shown in the Bills of Entry received by the appellant were not used in the manufacture of final product. Department has not disputed the correctness of quantity manufactured by the appellant recorded in their daily stock account/production records. There is no allegation by the department regarding the financial flow back that against the diversion of imported inputs for which any cash payment was received by the appellant. The service tax payment in respect of transportation of goods also establish the transportation of goods. With all these undisputed facts, merely on the basis of the third party documents and RTO reports, it cannot be concluded that the inputs were not received by the appellant. Therefore, the facts are established that the appellant have received the inputs in their factory used in the manufacture of final product and same was cleared on payment of duty. In such circumstance the demand of Cenvat credit is clearly not sustainable.
4.5 We also find that the in the present case allegation are made against the appellant on the basis of documents seized at Transporter's and Appellant location. In the impugned show cause notice, the details contained in DLRs and MLRs which were recovered from the premises of M/s PSTC were discussed. The revenue alleged that the said DLRs and MLRs reflected the correct details regarding the destination or place of unloading of imported inputs. However in this context we agree with the arguments of the appellant that said DLRs and MLRs were mentioned at Sr. No. 43 of list of relied upon documents and were neither supplied by the revenue nor adjudicating authority and thus no reliance could be placed on the same without supplying copies thereof to the Appellant. We also find that the DLRs were prepared by supervisors of M/s. PSTC located at Panvel-Uran highway open space. Further, if the trailer-trucks transporting the imported inputs continued the transport 15 | P a g e E/10588-10589/2024-DB beyond the destination given in DLR, the DLR may not have been updated with the final destination. Thus, the entries made in the DLR/MLR do not prove that the container/ imported inputs were transported only up to the destination given in such DLR/MLR. It is not the entry in the DLR/MLR but the transportation charges which are relevant as these indicate the actual transportation. As observed the above, the veracity of the said documents recovered from the premises of the third party i.e. M/s PSTC, is not known. Hence, it cannot be the sole basis for alleging diversion of imported inputs by Appellant. Additionally, it is important to note that the basis of preparation of said documents has not been made available to the Appellant, therefore, it would be a miscarriage of justice if such unsubstantiated documents are used as evidence against the Appellant. We also find that said DLRs and MLRs are in the nature of rough records written by drivers and on the basis of such third-party records, no adverse inference can be drawn against Appellant. The unsigned, vague and general entries in private records maintained by the staff without corroboration from any tangible evidence cannot be relied upon to prove diversion more so when no statement of the person who maintained such record is brought on record. Merely because the drivers have not accurately maintained the MLRs, no adverse inference can be drawn on against the Appellant on the basis of such third-party records. Further, we also find that the denial of Cenvat credit on the basis of the investigations conducted at the third party end cannot be adopted as the sole basis for denial of credit. We also find that the Tribunal in the case of M/s. Siddhartha Bronze Products (P) Ltd [2015 (328) ELT 429 (T)] (supra) it was held that "merely because the RTO record of Check Post do not show the entry of the invoices or the same do not bear the stamp of RTO Check Post the same cannot prove that the inputs have not been received in the factory and thus the impugned order is totally erroneous and is thus required to be set aside."
4.6 We also noticed that in the present case the department for denying the Cenvat Credit placed reliance on third party evidence i.e. transporters documents /statements and RTO records. It is necessary to check the evidentiary value of the third party evidence as held in the judgments in the case of Bajrangbali Ingots & Steel Pvt. Ltd. & Suresh Agarwal v. CCE, Raipur [Appeal Nos. E/52062 & 52066/2018], which is as follows:-
"9. The law i.e. as to whether the third party records can be adopted as an evidence for arriving at the findings of clandestine removal, in the absence of any corroborative evidence, is well established. Reference can be made to 16 | P a g e E/10588-10589/2024-DB Hon'ble Allahabad High Court decision in the cases of Continental Cement Company v. Union of India - 2014 (309) E.L.T. 411 (All.) as also Tribunal's decision in the case of Raipur Forging Pvt. Ltd. v. CCE Raipur-I - 2016 (335) E.L.T. 297 (Tri. - Del.), CCE & ST, Raipur v. P.D. Industries Pvt. Ltd. - 2016 (340) E.L.T. 249 (Tri. - Del.) and CCE & ST, Ludhiana v. Anand Founders & Engineers - 2016 (331) E.L.T. 340 (P & H). It stand held in all these judgments that the findings of clandestine removal cannot be upheld based upon the third party documents, unless there is clinching evidence of clandestine manufacture and removal of the goods."
4.7 In the matter of Commissioner of C. Ex., Indore v. Parag Pentachem Pvt Ltd. Reported in 2018 (360) E.L.T. 1025 (Tri. - Del.) the Tribunal observed as under: -
"'CENVAT credit - Bogus transactions - Invoice only received without goods - Evidence - Third party evidence - Revenue, inter alia, relying on written slops/entries of laptop seized from residence of cashier of dealer issuing invoices, alleging that these contain details of cash transaction in respect of goods not of business - The seized records therefore are third party records - Settled law in catena of decisions including that of Apex Court in 1998 AIR SC 1406 that third party records alone cannot be relied upon as admissible piece of evidence - Further, even in these records there is no identification of person to whom said alleged cash transaction belong - Said entries having not been corroborated by any independent evidence, not reliable - On same facts and investigations, credit allowed in respect of another party and no appeal filed against such order - Denial or credit on the basis of these entries not sustainable - Rule 3 of CENVAT Credit Rules, 2004. [paras 21, 22, 23, 24, 26]."
4.8 We have also gone through the judgments relied upon by the appellant in this context. In the said decisions it has been consistently held that demands of whatever nature cannot be confirmed solely on the basis of third party's evidence/records.
4.9 We also find that during the disputed period Appellant have paid the duty from PLA/Cash. If the allegation of department accepted and appellant has availed the Cenvat credit without receipts of the goods, than the duty payment on finished goods during the disputed period by the appellant could not be made from the PLA/cash. In such cases where the Cenvat credit was availed without receipt of the goods the Cenvat Credit should be accumulated in Cenvat credit ledger. However in the present case this is not a situation. Copy of PLA, Excise duty payment ledger submitted by the Appellant clearly show 17 | P a g e E/10588-10589/2024-DB the duty payment by cash during the disputed period. In such circumstances huge Cenvat credit demand only on the basis of third party documents and statement of persons without corroborative evidence is clearly not sustainable.
4.10 We also find that in the present matter Ld. Commissioner by relying the statements of various persons and statements which are retracted confirmed the cenvat demand. In our view the said statements cannot be relied upon as admissible evidence in terms of the provisions of Section 9D of the Act. The provisions of Section 9D are reproduced as under: -
"9D. Relevancy of statements under certain circumstances. - (1) A statement made and signed by a person before any Central Excise Officer of a gazetted rank during the course of any inquiry or proceeding under this Act shall be relevant, for the purpose of proving, in any prosecution for an offence under this Act, the truth of the facts which it contains, -
(a) when the person who made the statement is dead or cannot be found, or is incapable of giving evidence, or is kept out of the way by the adverse party, or whose presence cannot be obtained without an amount of delay or expense which, under the circumstances of the case, the Court considers unreasonable; or
(b) when the person who made the statement is examined as a witness in the case before the Court and the Court is of opinion that, having regard to the circumstances of the case, the statement should be admitted in evidence in the interests of justice.
(2) The provision of sub-section (1) shall, so far as may be, apply in relation to any proceeding under this Act, other than a proceeding before a Court, as they apply in relation to a proceeding before a Court."
4.11 The above Section deals expressly with the circumstances in which a statement recorded before a gazetted officer of Central Excise (under Section 14 of the Act) can be treated as relevant for the purposes of proving the truth of the contents thereof. Reliance is placed on the ruling of the Hon'ble Punjab & Haryana High Court in the case of Jindal Drugs (Infra), 2016 (340) E.L.T. 67 (P & H) wherein the Hon'ble High Court laid down the detailed procedure, inter alia, providing for cross-examination of the witness of the Revenue by the Adjudicating Authority and thereafter, if the Adjudicating Authority is satisfied that the statement of the witness is admissible in evidence than the Adjudicating Authority is obligated to offer such witnesses for cross- examination by the other side/assessee. Such view has also been affirmed by 18 | P a g e E/10588-10589/2024-DB the Hon'ble Supreme Court in the case of Andaman Timber (Infra) - 2015 (324) E.L.T. 641 (S.C.) = 2017 (50) S.T.R. 93 (S.C.).
4.12 We further find that Hon'ble Punjab & Haryana High Court in the case of Sukhwant Singh - (1995) 3 SCC 367 it has been observed as under :-
"8. It will be pertinent at this stage to refer to Section 138 of the Evidence Act which provides :
"138. Order of examinations. - Witnesses shall be first examined-in-chief then (if the adverse party so desires) cross-examined, then (if the party calling him so desires) re-examined. The examination and cross-examination must relate to relevant facts but the cross-examination need not be confined to the facts to which the witness testified on his examination-in-chief.
Direction for re-examination. - The re-examination shall be directed to the explanation of matters referred to in cross-examination; and if new matter is, by permission of the Court, introduced in re-examination, the adverse party may further cross-examine upon that matter."
9. It would, thus be seen that Section 138 (supra) envisages that a witness would first be examined-in-chief and then subjected to cross-examination and for seeking any clarification, the witness may be re-examined by prosecution. There is, in our opinion, no meaning in tendering a witness for cross- examination only. Tendering of a witness for cross-examination, as a matter of fact, amounts to giving up of the witness by prosecution as it does not choose to examine him in chief. However, the practice of tendering witness for cross-examination in session trials had been frequently resorted to since the enactment of the Code of Criminal Procedure, 1898."
4.13 In view of above it is clear that in adjudication, the adjudicating authority is required to first examine the witness in chief and also to form an opinion that having regard to the facts and circumstances of the case, the statements of the witness are admissible in evidence. Thereafter, the witness is offered to be cross-examined. We find that in the present matter Ld. Adjudicating Authority failed to do such exercise. Therefore, following the ruling by above judgments, we hold that none of the statements were admissible evidence in the present case and no Cenvat demand is sustainable on the basis of statements of persons.
19 | P a g e E/10588-10589/2024-DB
5. In view of our above observations and findings, we are of the view that the Cenvat demand confirmed against Appellant is not sustainable. We therefore set aside the impugned order and allow the appeals with consequential reliefs to the Appellant.
(Pronounced in the open court on 25.11.2024) (RAMESH NAIR) MEMBER (JUDICIAL) (RAJU) MEMBER (TECHNICAL) Raksha