Custom, Excise & Service Tax Tribunal
Bhavnagar vs Arsh Alloys on 2 November, 2023
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL,WEST
ZONAL BENCH : AHMEDABAD
REGIONAL BENCH : COURNO -1
EXCISE Appeal No. 12638 of 2019-DB
WITH
EXCISE Appeal No. 12639 of 2019-DB -E/CO/10139/2021
EXCISE Appeal No. 12640 of 2019-DB -E/CO/10140/2021
EXCISE Appeal No. 12641 of 2019-DB --
EXCISE Appeal No. 12642 of 2019-DB --
EXCISE Appeal No. 12643 of 2019-DB -E/CO/10141/2021
EXCISE Appeal No. 12644 of 2019-DB -E/CO/10041/2020
EXCISE Appeal No. 12645 of 2019-DB --
EXCISE Appeal No. 12646 of 2019-DB --
EXCISE Appeal No. 12647 of 2019-DB --
EXCISE Appeal No. 12648 of 2019-DB --
EXCISE Appeal No. 12649 of 2019-DB --
EXCISE Appeal No. 12650 of 2019-DB --
EXCISE Appeal No. 12651 of 2019-DB --
EXCISE Appeal No. 12652 of 2019-DB --
EXCISE Appeal No. 12653 of 2019-DB -E/CO/10144/2021
EXCISE Appeal No. 12654 of 2019-DB -E/CO/10145/2021
EXCISE Appeal No. 12655 of 2019-DB --
EXCISE Appeal No. 12656 of 2019-DB E/CO/10146/2021
EXCISE Appeal No. 12657 of 2019-DB -E/CO/10112/2020
EXCISE Appeal No. 12658 of 2019-DB -E/CO/10094/2020
EXCISE Appeal No. 12659 of 2019-DB -E/CO/10147/2021
EXCISE Appeal No. 12660 of 2019-DB -E/CO/10147/2020
EXCISE Appeal No. 12661 of 2019-DB -E/CO/10148/2021
EXCISE Appeal No. 12662 of 2019-DB --
EXCISE Appeal No. 12663 of 2019-DB --
EXCISE Appeal No. 12664 of 2019-DB --
EXCISE Appeal No. 12665 of 2019-DB
EXCISE Appeal No. 12666 of 2019-DB -E/CO/10149/2021
EXCISE Appeal No. 12667 of 2019-DB ---
EXCISE Appeal No. 12668 of 2019-DB --
EXCISE Appeal No. 12669 of 2019-DB -E/CO/10138/2021
EXCISE Appeal No. 12670 of 2019-DB --
EXCISE Appeal No. 12671 of 2019-DB --
EXCISE Appeal No. 12672 of 2019-DB --
EXCISE Appeal No. 12673 of 2019-DB -E/CO/10137/2021
EXCISE Appeal No. 12674 of 2019-DB
EXCISE Appeal No. 12675 of 2019-DB -E/CO/10136/2021
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EXCISE Appeal No. 12677 of 2019-DB -E/CO/10150/2021
EXCISE Appeal No. 12678 of 2019-DB --
EXCISE Appeal No. 12679 of 2019-DB --
EXCISE Appeal No. 12680 of 2019-DB --
EXCISE Appeal No. 12681 of 2019-DB -E/CO/10116/2021
EXCISE Appeal No. 12682 of 2019-DB
EXCISE Appeal No. 12683 of 2019-DB
EXCISE Appeal No. 12684 of 2019-DB -E/CO/10117/2021
EXCISE Appeal No. 12685 of 2019-DB --
EXCISE Appeal No. 12686 of 2019-DB --
EXCISE Appeal No. 12687 of 2019-DB --
EXCISE Appeal No. 12688 of 2019-DB --E/CO/10152/2021
EXCISE Appeal No. 12689 of 2019-DB --
EXCISE Appeal No. 12690 of 2019-DB
EXCISE Appeal No. 12691 of 2019-DB -E/CO/10042/2020
EXCISE Appeal No. 12692 of 2019-DB --
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EXCISE Appeal No. 12693 of 2019-DB
EXCISE Appeal No. 12694 of 2019-DB -E/CO/10098/2020
EXCISE Appeal No. 12695 of 2019-DB --
EXCISE Appeal No. 12696 of 2019-DB -E/CO/10118/2021
EXCISE Appeal No. 12697 of 2019-DB --
EXCISE Appeal No. 12698 of 2019-DB -E/CO/10119/2021
EXCISE Appeal No. 12699 of 2019-DB -E/CO/10120/2021
EXCISE Appeal No. 12700 of 2019-DB -E/CO/10121/2021
EXCISE Appeal No. 12701 of 2019-DB -E/CO/10122/2021
EXCISE Appeal No. 12702 of 2019-DB -E/CO/10123/2021
EXCISE Appeal No. 12703 of 2019-DB --
EXCISE Appeal No. 12704 of 2019-DB --
EXCISE Appeal No. 12705 of 2019-DB -E/CO/10115/2021
EXCISE Appeal No. 12706 of 2019-DB --
EXCISE Appeal No. 12707 of 2019-DB -E/CO/10114/2021
EXCISE Appeal No. 12708 of 2019-DB -E/CO/10125/2021
EXCISE Appeal No. 12709 of 2019-DB
EXCISE Appeal No. 12710 of 2019-DB
EXCISE Appeal No. 12711 of 2019-DB
EXCISE Appeal No. 12712 of 2019-DB -E/CO/10113/2021
EXCISE Appeal No. 12713 of 2019-DB
EXCISE Appeal No. 12714 of 2019-DB
EXCISE Appeal No. 12715 of 2019-DB -E/CO/10129/2021
EXCISE Appeal No. 12716 of 2019-DB
EXCISE Appeal No. 12717 of 2019-DB
EXCISE Appeal No. 12718 of 2019-DB -E/CO/10128/2021
EXCISE Appeal No. 12719 of 2019-DB -E/CO/10127/2021
EXCISE Appeal No. 12720 of 2019-DB -E/CO/10126/2021
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EXCISE Appeal No. 12724 of 2019-DB -E/CO/10130/2021
EXCISE Appeal No. 12725 of 2019-DB -E/CO/10134/2021
EXCISE Appeal No. 12726 of 2019-DB -E/CO/10133/2021
EXCISE Appeal No. 12727 of 2019-DB -E/CO/10414/2022
EXCISE Appeal No. 12728 of 2019-DB -E/CO/10131/2021
EXCISE Appeal No. 12729 of 2019-DB
EXCISE Appeal No. 12730 of 2019-DB
EXCISE Appeal No. 12731 of 2019-DB -E/CO/10046/2020
C.C.E. & S.T.-BHAVNAGAR ...Appellant
-Versus-
ARSH ALLOYS ...Respondents
WITH ...Respondents
MADHAV STEEL
A G ENTERPRISE
UNIQUE SHIP BREAKING CORPORATION
LUCKY STEEL INDUSTRIES
SHREE SAIBABA SHIP BREAKING COMPANY
ARYA SHIP BREAKING COMPANY PRIVATE LIMITED
JSK SHIP BREAKING
MALWI SHIP BREAKING COMPANY
AGRASEN SHIP BRAKERS PRIVATE LIMITED
KHANBHAI ESSOFBHAI
INDUCTO STEEL LTD
ASHISH SHIP BREAKERS P LTD
SHRI AMINBHAI ISMAILBHAI LAKHANI
MADHAV INDUSTRIAL CORPORATION
BHARAT SHIP BREAKING CORPORATION
SHRI JAYPRAKASH SINGH
AKHIL SHIP BREAKING PRIVATE LTD
KIRAN SHIP BREAKING COMPANY
ALANG AUTO & GENERAL ENGINEERING CO. PVT LTD
M K SHIPPING & ALLIED INDUSTRIES PVT LTD
ANUPAMA STEEL LIMITED
R L KALTHIA SHIP BREAKING PRIVATE LIMITED
DIAMOND MARINE
KALIMA STEEL ROLLING MILLS
BANSAL INTERNATIONAL LIMITED
LEELA SHIP RECYCLING P LTD
RAMESHWAR STEELS REROLLING MILL
JALARAM INDUSTRIAL CORPORATION
BANSAL SHIP BREAKNG P LTD
BAIJNATH MELARAM
JAI BAJRANGI SHIP BREAKERS PRIVATE LIMITED
BANSAL SHIPPING P LTD
DYNAMIC RECYCLERS P LTD
AKANSHA SHIP BREAKING P LTD
ASHWIN CORPORATION
BANSAL MARINE
SAUMIL IMPEX PRIVATE LIMITED
J K INDUSTRIES
MAHAVIR SHIP BREAKERS
SHRI SANJEEV PRATAPRAI SHETH
GURU ASHISH SHIP BREAKERS
PVR SHIP BREAKING COMPANY
SHRI SANDEEP RASHMIKANT RAJPURA
SHRI PRIYESH BHARABHAI PAREKH
HARI KRISHNA STEEL CORPORATION
SHANTAMANI ENTERPRISE
SHANTI SHIP BREAKERS PRIVATE LIMITED
PANCHVATI SHIP BREAKERS
SHRI NILESH HIMMATLAL THAKKAR
M V SHIP TRADE PRIVATE LIMITTED
SALASAR BALAJI SHIP BREAKING PRIVATE LTD
MARINE LINES SHIP BREAKERS PVT LIMITED
GK STEEL
MAHADEV STEEL INDUSTRIES
SHREE RAM VESSEL SCRAP PRIVATE LIMITED
MAHAVIR INDUCTOMELT PRIVATE LIMITED
SHREE RAM SHIPPING INDIA PRIVATE LIMITED
MAHADEV SHIP BREAKERS PRIVATE LIMITED
HONEY SHIP BREAKING PRIVATE LIMITED
SHRI KETAN JAYANTILAL SHAH
SHIRI BHARAT MANHARBHAI SHETH
SHRI MINAZ ASGARALI NAYANI
SHRI JAY HASMUKHRAI MEHTA
HATIMI STEELS
PRIYANK SHIP BREAKING COMPANY LIMITED
SHRI KALPESH PRABHUDAS MEHTA
SHETH SHIP BREAKING CORPORATION
HARIYANA SHIP BREAKERS LIMITED
SHRI HETAL NAVNITRAI SHAH
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PRIYA BLUE INDUSTRIES P LTD
GHAZIYABAD SHIP BREAKERS PVT LIMITED
ADITI RE-ROLLING MILLS PVT LTD
SHRI DEEPAK DHRUVJI AGGARWAL
SHRI BIMAL JAIN
BANSAL CASTING PVT LIMITED
NEW SWASTIK RE-ROLLING MILL
SHRI VINOD BHANDARI
SHRI GAUTAM SHIP BREAKING INDUSTRIES PVT
LIMITED
SANJAY TRADE CORPORATION
S E W COMMERCIAL CO. P LTD
RAI METAL WORKS P LTD
UNITED SHIP BREAKING CO.
SHREE SAIBABA ISPAT P LTD
SHIRDI STEEL TRADERS
ARSH STEEL
SHRI DEEPANKAR JAIN
HUSSAINSHETH & SONS P LTD
HUSSAIN SHETH ISPAT
SHRI SUDHIR VENILAL MEHTA
VIRENDRA & COMPANY
SHREEJI STEEL INDUSTRIES
HARIYANA SHIP DEMOLITION P LTD
GOYAL TRADERS
Appearance:
Present For the Appellant : Shri Rajesh K Agarwal, Superintendent (AR)
Present For the Respondent: Shri Paresh M Dave, Shri Rahul
Gajera, Advocates
CORAM:
HON'BLE MR. RAMESH NAIR, MEMBER (JUDICIAL)
HON'BLE MR. C. L. MAHAR, MEMBER (TECHNICAL)
FINAL ORDER NO. A/12448-12541/2023
/
DATE OF HEARING:22.08.2023
DATE OF DECISION:02.11.2023
RAMESH NAIR
1. The present appeal is filed by the department against OIO No. BHV-EXCUS-
000-COMM-11-2019-20 by which Learned Commissioner, CGST, Bhavnagar
dropped the Show Cause Notice dated 8.5.2012 issued to M/s. Arsh Alloys,
its Partner, Aminbhai Ismailbhai Lakhani, 16 persons who acted as brokers,
10 re-rolling/furnace units who were the alleged actual buyers of scrap of iron
and steel and 66 ship breaking units who have issued duty paid invoices to
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M/s. Arsh Alloys and made co-noticees by way of issuing Addendum to show
cause notice.
2. Briefly the facts of the case are that respondent-assessee, M/s. Arsh Alloys
("Respondent" herein after) is engaged in manufacture of excisable goods
namely "M.S. ingots" in their Induction furnace unit. For the purposes of
manufacture of the said goods, the Respondent mainly purchased duty paid
inputs such as "waste and scrap of iron and steel". The Respondent availed
cenvat credit of duty paid on the inputs received and used in their factory of
production. During the period April 2007 to August 2010, the Respondent
purchased waste and scrap of iron and steel from various ship-breaking units
who cleared the same ex-factory (ship-breaking yards) on payment of
applicable central excise duty.
2.1 On 21-8-2010, the officers of department carried out search at premises of
Respondent, Ahmed Steel and Shabana Steel Pvt Ltd acting upon intelligence
that these units are engaged in availing cenvat credit without receipt of goods
physically or are diverting the goods removed under the invoices issued by
the ship-breaking units to other units - mainly re-rolling mills situated in or
around Bhavnagar.
2.2 During the search of the office premise of Respondent, documents viz.
purchase bills, freight vouchers, daily production report, note book, loose
papers, loose weighment slips were seized. During the search at the factory
premises of the Respondent, raw material viz. waste and scrap lying in stock
in the factory premises of the Respondent was found and the photographs of
such stock were also taken by the officers of department, which appeared to
be local bazaar scrap and not one obtained from breaking of ship.
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2.3 The officers of department thereafter recorded statement of various ship-
breaking units, re-rolling units, transporters, vehicle owners, brokers, local
traders and partner of the Respondent.
2.4 Based on above material and statements, it was the case of the department
that Respondent fraudulently availed cenvat credit without actual receipt of
waste and scrap of iron and steel from the ship-breakers with the help of
various brokers and to cover up the transaction, the Respondent was
procuring bazaar scrap which is non-excisable waste and scrap purchased
from local traders based at Bhavnagar.
2.5 Accordingly, a Show Cause Notice dated 8.5.2012 was issued for the period
01.04.2007 to 10.08.2010 by which cenvat credit amounting to Rs.
2,30,50,926 was sought to be recovered from the Respondent under Rule 14
of CENVAT Credit Rules, 2004 ("Rules" herein after) read with Section 11A(1)
of the Central Excise Act, 1944 ("Act" herein after). Learned Commissioner
after hearing the parties dropped the show cause notice dated 8-5-2012.
Aggrieved, department is in appeal.
3. Shri R K Agarwal, learned Superintendent (Authorized Representative)
appearing for the department reiterates the grounds of appeal as follows:
3.1 The findings in impugned order that no inquiry was conducted by the
department to ascertain the actual nature of waste and scrap found lying at
the factory premises of Respondent during search and that the panchas were
not expert having any knowledge of the nature of goods given their education
qualification, is not proper; adjudicating authority should have appreciated
that education qualification can't be the only criteria but working experience
can serve the purpose.
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3.2 The finding in the impugned order that it can't be established from the
photographs of waste and scrap taken during the Panchama that the said
waste and scrap were of discarded household items, oil tins, drums, cycle
parts, auto parts, etc. is also not proper; adjudicating authority should have
appreciated that the demand of duty is not restricted to the quantity of stock
of the scrap available as on the date of the search i.e. 21.08.2010 and that
panchnama also records that no goods of ship-breaking yard were physically
available in stock;
3.3 That adjudicating authority has erred in not appreciating the fact that
Respondent was bringing bazaar scrap and not keeping records of it as
required in terms of Rule 10 of Central Excise Rules and that such bazaar
scrap was being brought to cover up the non-receipt of duty paid scrap from
ship-breaking units; that there was no evidence to suggest that bazaar scrap
is being used in the manufacture of the final products in addition to the
quantity procured from the ship-breaking units.
3.4 The findings in the impugned order that the statements of truck
owners/authorised persons are not enough material and were required to be
supported by other tangible evidences which are absent is also not proper;
adjudicating authority erred in not appreciating that the truck
owners/authorised representatives in their statements have confessed that
the name of drivers appearing in the freight vouchers who collected the
inward transportation charges have never worked with them; that
adjudicating authority has failed in noticing from the annexures to the show
cause notice that in certain cases the person's name, who collected the
transportation charges, have been changed though the vehicle number
remains the same; adjudicating authority has not considered the fact that the
owners of some of the vehicles have given name of specific units for which
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their trucks were plying instead of M/s. Arsh Alloys and have even produced
evidences thereof; that Proprietor of M/s. R.K. Roadways, Bhavnagar in his
statement dated 22.11.2011 furnished the details of the movement of their
trucks viz., GJ4V-2784, GJ4V-2457, GJ4V-5846, GJ4V-5057 and GJ4X-5013
which were engaged by other parties for the transportation of their goods on
the particular date when their vehicles were shown to be transporting goods
to M/s. Arsh Alloys;
3.5 The adjudicating authority could not have accepted the argument of the
Respondent that illiterate/semi-illiterate truck drivers may have erroneously
written incorrect truck registration numbers, particularly because invoices
were prepared by the person working with the ship-breakers whereas,
corresponding inward transport charge vouchers were prepared by person
sitting at the premise of M/s. Arsh Alloys; that in order to arrive at the net
weight of the goods the vehicles are required to be taken to the weighbridge
for ascertaining tare weight and gross weight and hence wrong mentioning
of registration numbers is illogical in both the occasions; that, apart from the
above, the case of the department was also supported by the statements of
the brokers, ship-breakers and the Regional Transport Authority reports.
3.6 The findings in the impugned order that the investigation has failed to bring
on record the flow back of cash and source of non-duty paid bazaar scrap
worth crores of rupees is not proper; adjudicating authority erred in not
appreciating that the broker namely Kalpesh Mehta and Priyesh Bharatbhai
Parekh in their statements stated 16.03.2012 have identified certain cash
transactions mentioned against the names in the Note book seized from the
factory premises of M/s. Arsh Alloys and confirmed that the details thereof
were of the amounts returned in cash against the payments made in cheques
against some of the invoices without the delivery of goods by the ship-
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breakers. As regard the source of non-duty paid bazaar scrap, most of the
traders of non-duty paid bazaar scrap in their statements have confirmed
having supplied the goods regularly in the last three years to M/s. Arsh Alloys.
The adjudicating authority has failed to consider the fact that 3 drivers of
tempo who were caught during transit checks, in their statements had also
confirmed that they had regularly supplied non-duty paid bazaar scrap to M/s.
Arsh Alloys.
3.7 The adjudicating authority has also failed to consider the fact that 10
owners/authorized representatives of the re-rolling mills/furnace mills whose
names were disclosed by the brokers, have admitted in their statements that
they have received consignments diverted by the brokers/Arsh Alloys without
any invoice and paid the proceeds in cash.
3.8 The adjudicating authority has failed to consider the statements of all 17
brokers appearing in the sales invoices more precisely (i) 729 invoices out of
842 covered in Annexure B1.1, (ii) 36 invoices out of 62 covered in B2.1 and
(iii) 55 invoices out of 68 covered in B3.1 to the SCN, whereby upon perusing
the respective invoices they had (i) agreed to the fact that the consignments
have been diverted or were just paper transactions (ii) provided the names
of re-rolling mills/furnace units to where the consignments were diverted (iii)
even confirmed the details of cash transactions jotted down in the note book
seized from the factory premises of M/s. Arsh Alloys.
3.9 The adjudicating authority erred in not considering certain important facts
brought before him that no Chantiwala was engaged by Arsh Alloys as
confirmed by Shri. Aminbhai Ismailbhai Lakhani, partner in his statement
dated 18.11.2010 which has also reconfirmed by ship breakers, brokers in
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their respective statements, and that indicates that such service required
were not hired.
3.10 The adjudicating authority has erred in not considering the fact that as per
invoices against which cenvat credit was taken by Arsh Alloys shows that as
many as 910 out of 972 consignments were loaded with above 10 MT scrap,
whereas the loading capacity below 10 MT are allowed by the local transport.
3.11 The adjudicating authority has erred in not considering the fact that the
owners/authorized representatives of re-rolling mills/furnace mills in their
statements have confirmed to have acquired excisable scrap removed by ship
breaking units under the invoices issued in favour of M/s. Arsh Alloys and the
consideration towards such diverted goods were paid in cash and that they
have returned back the invoices issued by the ship breaking units to the
representatives of brokers/Arsh Alloys and no documents in respect of this
transaction were maintained.
3.12 As regards, 66 ship breakers, arrayed as respondents, it was submitted on
behalf of the department that they were actively involved by way of issuing
cenvatable invoices without actual dispatch of goods, diversion of excisable
goods, by way of quoting varied vehicle registration numbers which were
turned out to numbers of the vehicles which did not operate in Alang area or
were incapable of carrying the load/quantity of goods mentioned in such
invoices and that these parties have collected the amounts mentioned in the
invoices through banking channels and returned the amount in cash to M/s.
Arsh Alloys/re-rolling mills after deducting their charges for issuing paper
invoices which resulted into fraudulent availment of cenvat credit by M/s.
Arsh Alloys.
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3. Shri Paresh M. Dave, learned Counsel appearing on behalf of M/s. Arsh Alloys
urged that adjudicating authority after examining all the material above viz.
the documentary evidences as well as the statements of various person and
against that the evidences lead by the Respondent in the form of statutory
registers like RG 23 part-I and II and records to prove that there was no case
of non-receipt of inputs. After considering these evidences adjudicating
authority has held that goods were actually supplied by the input suppliers to
the respondent and the respondent was eligible to claim the cenvat credit of
duty paid on the said inputs. Respondent-assesse has mainly submitted as
below:
4.1 There is no evidence on record that the respondent has availed any cenvat
credit on any bazaar scrap and there is also no demand of cenvat credit in
respect of the quantity of goods found at the premises of the Respondent; it
is not shown by the department that the panchas shri chotubhai temubha
rana and shri vamanbhai kababhai were having any qualification or any
working experiences to give any opinion about the nature of scrap found at
the premises of the respondent; that photographs were taken but it was only
visible inspection and no inspection regarding quantity and nature of the
scrap was done.
4.2 The adjudicating authority has held that statements relied upon by the
department are not supported by any tangible evidence; the adjudicating
authority has formed an opinion under section 9D of the Act which has not
been challenged by the department in the present appeal. As per section 9D
of the Act, the examination-in-chief of the witnesses whose statements are
recorded during investigation is to be done and if the adjudicating authority
is of the opinion that statements of the witnesses are admissible, then cross-
examination is required to be offered to the assessee. In the present case,
the adjudicating authority after considering the statements made by the
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witnesses has formed the opinion that the statements cannot be relied upon
in absence of the corroborative evidences. Therefore, the cross-examination
was not granted to the respondent. The respondent submitted that
statements recorded by the department are inadmissible as evidence and no
reliance can be placed on such statements. In this regard, the respondent
relied upon the following decisions:
i. JP Iscon Pvt. Ltd. - 2022 (63) GSTL 64.
ii. Forward Resources Pvt. Ltd. - 2023 (69) GSTL 76.
iii. Shree Hari Steel Industries & Others Vs. Commissioner, Bhavnagar -
2022(8) Tax Management India 1251.
iv. Patidar Products Vs. Commissioner, Bhavnagar - Final Order No.
A/11216-11224/2022 dated 18.10.2022.
v. M/s. Bajrang Castings Pvt. Ltd./Motabhai Iron and Steel Industries -
2015 (316) ELT 374 (Guj.)
4.3 It was submitted that there is no evidence on record to substantiate that
maximum 10MT scrap can be transported in one truck. If there is any circular
issued by the municipal corporation regarding permissible limit of scrap
transportation, then such circular has not been brought on record by the
appellant. It is merely a ground for argument without any substance. No such
ground was raised in the show cause notice. The appellant cannot be
permitted to improve upon the show cause notice at the appellate stage.
4.4 It was further submitted on behalf of Respondent that adjudicating authority
has righty held at para 29.13 that it is not correct to allege that the goods
were not delivered when the invoices issued by the suppliers are genuine and
the raw materials were duly accounted for in their raw material stock register
in RG 23A Part I showing receipt and utilization of inputs in the manufacture
of final product; that adjudicating authority has rightly held in para 29.26 that
it is not even suggested in the show cause notice that the statutory
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records/registers were fabricated or manipulated or that the Range and
Divisional officers who verified and scrutinized such statutory records and
registers of the Respondent as well as that of manufacturers of the inputs viz.
Ship Breakers have noticed any manipulations or falsifications while finalizing
the assessments; that such documentary evidence unless proved to be
falsified or manipulated has to be given due weightage.
4. On behalf of ship breakers, arrayed as respondents, it was submitted that
they have denied the allegation of having not delivered the scrap under the
invoices in question. It was submitted that they have cleared scrap on
payment of applicable duty on ex-factory basis through brokers/buyers and
transportation was therefore not responsibility of seller; price of such goods
is received from the buyers by cheque; that once goods left premises at Alang
yard, the ownership stands transferred to the buyers and sellers have no
authority, interest or obligation in respect of the said goods. It was further
submitted that they have been wrongly joined as co-noticee by way of
addendum which cannot be treated as show cause Notice. None represented
on behalf of 10 re-rolling mills/furnace mills.
5. We have carefully considered the submissions made by both the sides and
perused the records. The present case involves the disputed quantity of
inputs of 9.857 MTs waste and scrap purchased by the Respondent, Arsh
Alloys from various ship breaking units during the period from April 2007 to
August 2010. The Respondent had purchased duty paid inputs in 1366
consignments, out of which, 663 consignments of inputs are disputed by the
department. It is the case of department that Respondent has received only
invoices from ship breaking units without actual receipt of inputs; that bazaar
scrap was procured by the Respondent in cash for replacement of duty paid
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inputs and that respondent has wrongly availed Cenvat Credit of Rs.
2,30,50,926/-.
5.1. It can be seen that case of the department is not solely based on statements
of various third parties but also other material viz. bazaar scrap, note book
showing details of transactions with the ship breakers found at the premises
of Respondent and discrepancies noticed in transport documents viz. quantity
transported beyond permissible limit and absence of chantiwala (scrap sorter)
engaged by the Respondent.
5.2. As regards, bazaar scrap found during search at the premises of Respondent,
learned Commissioner has observed that it is not possible to identify the
nature of scrap from the photographs and that Panchnama does not disclose
educational qualification and work experience of witnesess and hence they
could not have been considered as experts for forming opinion on the nature
of scrap. He further observed that although Respondent has admitted that
they do purchase bazaar scrap and do not account such small quantity on
which they cannot avail cenvat credit, nevertheless, type of scrap and
quantity was required to be identified by the officers of department to arrive
at any conclusion therefrom. It can be seen that working experience of
panchas can be a valid ground to test the admissibility of their opinion, but
their working experience is not shown by department at any stage of the
investigation. That apart there is no evidence mentioned in the appeal that a
small quantity of goods found at the respondent's premises was actually in
the nature of bazaar scrap. In that view, opinion of panchas cannot be relied
upon to hold that the entire stock of inputs found at the premises of the
Respondent was in the nature of bazaar scrap and hence ground of appeal
that working experience would serve the purpose cannot sustain. Mere fact
that Respondent has also been buying bazaar scrap on which no duty is paid
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itself is not enough to hold that all 1366 consignments of duty paid inputs
were not received by the Respondent during the period April 2007 to August
2010 and that the final products cleared during this period on which duties
were admittedly paid were entirely manufactured out of bazaar scrap.
5.3. As regards Respondent having not engaged any chantiwala (scrap sorter) the
show cause notice in para 6.3.21 relies upon the statement of brokers which
are found to be not reliable by the commissioner in absence of any
corroborative evidence and further, some have been retracted/sought to be
corrected by brokers by way of filing affidavits. Be that as it may, no question
was put forth to the partner of Arsh Alloys in the statements dated
18.11.2010 and 13.03.2012 that in absence of Chantiwala having been
engaged how they were able to purchase the scrap. (On the other hand, as
can be seen from the statement of ship breakers, for instance M/s. G K Steel
that information of transport and chantiwala are sent by the brokers. It
appears from the statements of ship beakers that brokers manage significant
part of the transaction between ship breakers and buyer of scrap. In that view
no inference can be drawn on that basis to hold that inputs in question were
not received by the Respondent.
5.4. The next contention of the department is that evidence of cash flow back viz.
note book has not been considered by the Learned Commissioner. Reliance
has been placed by the department on the statements dated 7-9-2011, 16-
3-2012 and 16-4-2012 of broker namely Kalpesh Prabhudas Mehta who
appears to have confirmed that the said entries in the note book pertain to
cash amount paid back to the ship breakers against cheques issued by
Respondent. In this regard, it can be seen from the statement of partner of
Respondent that question was posed to partner of the Respondent regarding
the amount and against that, name of the broker in note book page number
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2 and it was answered that the same pertained to cheque issuance details to
ship breakers. Further, upon perusal of the statement of Kalpesh Prabhudas
Mehta, it appears that there exist apparent self-contradictions; for example,
in answer to question no. 7 he states that he acted as broker in respect of
invoices issued by the ship breakers and in answer to question no. 8 after
perusing statements of vehicle owners/authorized persons he states that
most of the transactions were not real, in the sense that actual goods
mentioned in the invoice were never transported. He states the same in
subsequent statement dated 16-3-2012 in answer to question no. 4 after
referring to note book entries. It is not understood, how both the facts co-
exist at the same time; if he has acted as broker in a transaction of purchase
and sale of scrap then goods were indeed delivered and if goods were diverted
to other unit, he would be in position to specify as to where the said goods
were delivered. There is no investigation undertaken or evidence gathered at
the premises of re-rolling mills to whom goods were allegedly diverted.
Similarly, reliance has been placed on the statement dated 16-3-2012 of
broker named Priyesh Bharatbhai Parekh is also misplaced which in first place
does not refer to the Respondent but Ahmed steel. It appears, the brokers
have opined based on the statement of vehicle owners and entries of the note
book and not based on perusal of the records of transaction maintained by
them. There are otherwise no records of brokers investigated. Since, the
statements are not supported with records maintained by the brokers with
regard to the transactions in question; not even one entry in the note book
stands corroborated with the records of the brokers, such statements of
brokers were rightly discarded by the Learned Commissioner.
5.5. For the above reasons, Learned Commissioner has also discarded the
statements of owner of vehicles and statements of authorized persons of re-
rolling mills being inadmissible evidence on account of absence of any
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investigation or records of such third parties brought in support of their
statements. He has held that statements of individual vehicle
owners/authorized persons were recorded; no statement of driver of truck
was recorded to ascertain truth of transportation of goods. He has further
held that possibility of incorrect vehicle numbers/incorrectly mentioned in the
invoice in respect of some of the cases cannot be ruled out given the nature
of transport industry and that by itself is not enough to hold that goods were
actually not delivered. It is settled law as laid down in decision of
Commissioner Versus Motabhai Iron Steel Industries upheld by Hon'ble
Gujarat High Court as reported in 2015 (316) ELT 374, that no reliance can
be placed on statements of third party without tangible corroborative
evidence. This judgement is accepted by the department and is part of the
board circular No. 1063/2/2018-CX dated 16.2.2018.
5.6. Significantly the case in the show cause notice is built on the basis of thirty
party statements of vehicles owners/transporters, brokers and authorized
person of re-rolling mills, which themselves are not evidence of non-delivery
of goods or replacement of goods or diversion of goods in absence of any
corroborative tangible evidence to prove the content of such statements.
Learned commissioner has formed an opinion that the statements relied upon
by the department are not relevant and these statements cannot be admitted
without corroborative evidence. It can be seen that department has not
challenged the said opinion formed by learned commissioner under section
9D of the Act, in that view decisions cited by the Respondent supra are
applicable.
5.7. On the other hand, it is observed that statements of Partner of Respondent
and ship breakers confirm the fact of physical delivery of goods; further fact
remains undisputed that raw materials were duly accounted for in raw
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material stock register in RG23A Part I showing receipt and utilization of
inputs in the manufacture of final product by Respondent; that it is not even
suggested in the show cause notice that the statutory records/registers were
fabricated or manipulated or that the Range and Divisional Officers who
verified and scrutinized such statutory records of the respondent and of
manufacturers of the inputs viz. ship breakers have noticed any
manipulations or falsifications, while finalizing the assessments. Such
documentary evidence unless proved to be falsified or manipulated has to be
given due weightage. Moreover, it is a settled law that where there are
tangible documentary evidence in favour of the assesse and even there are
overall statements of third party contradicting the documentary evidence,
such tangible documentary evidence must be given primacy over the overall
statements. This is supported by catena of judgements, some of the
judgments are extracted below:
Monarch Metal 2010(261)ELT 508 (Tri-Ahm):
"8. As is clear from the above that the appellate
authority has not considered and appreciated various
evidences on record which stand discussed in detail by the
original adjudicating authority. He has allowed Revenue's
appeal on short ground which was the basis for the
issuance of show cause notice that LR do not bear the
check-post stamp and the statement of the transporter.
The appellants have rightly contended that statement of
the transporter being in the nature of co-accused, cannot
be made the sole basis for holding against the appellant,
unless corroborated with material particulars. I find that
there is no such evidence on record. On the contrary, the
assessee has produced ample evidence in the shape of
documentary record to reflect upon the fact that they had
actually received the inputs from the first dealer and had
made payments to them through Demand Draft. In any
case, the fact of non-stamping of LR is only in respect of
the goods received by the registered dealer. As rightly
observed by the original adjudicating authority, the same
would not reflect upon the fact of non-receipt of the inputs
by the appellant from the dealer inasmuch as the dealer
might have supplied the inputs obtained by him from
other source.
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9. In view of the above, set aside the impugned order of
Commissioner (Appeals) and restore the order of original
adjudicating authority and allow the Appeal Nos. E/686,
693/2009 with consequential relief to the appellants.
Appeal Nos. E/802, 840, 925/09 :
(i) The Modvat credit of Rs. 2,83,191/- stand denied to
M/s. Dhanlaxmi Tubes & Metals Industries (for short
DTMI) along with imposition of penalty upon various
persons on the ground that the inputs such as copper
scrap, copper wire scrap, copper rod etc. have not actually
been received by them and only invoices have been issued
by the dealer PMM. For the above finding, the lower
authorities have, though admitted, movement of trucks to
Nadiad under the cover of LR issued by the transporter,
but have denied the credit on the ground that delivery
register of the transporter showed that the goods were of
miscellaneous nature and not copper. I find that apart
from the above, there is no other evidence to reflect upon
the fact that the inputs were not actually received by the
appellant. In the present case, there is no dispute that the
LRs were issued by the transporter showing the appellant
as the consignee of the goods. However, Revenue has
based his case on the Goods Register maintained by the
transporter indicating the description of the goods as
'Miscellaneous'. This fact, by itself, cannot be held to be
sufficient for arriving at conclusion that the inputs were
never transported to the appellant's factory. All the
documentary evidence on record supports the appellant's
case about the receipt of the input whereas there is no
independent corroborative evidence by the Revenue
produced on record.
(ii) The above findings find support from the Tribunal's
order in case of M/s. Ajay Industrial Corporation v. CCE,
Delhi - 2009 (237) E.L.T. 175 (Tri.-Del.) as also from the
Tribunal's decision in case of M/s. Shree Jagdamba
Castings (P) Ltd. v. CCE, Bhopal, 2006 (206) E.L.T. 695
(Tri.-Del.). It has been held in said judgments that the
credit availed on the basis of invoices issued by the
registered dealer, cannot be denied on the ground that
the transporters have admitted the fact of non-
transportation of the goods and the addresses of truck
owners were found to be fake. Similarly, in the case of
M/s. Malerkotla Steels & Alloys Pvt. Ltd. v. CCE, Ludhiana,
2008 (229) E.L.T. 607 (Tri.-Delhi), it was held that a
manufacturer cannot be denied the credit on the ground
that registered dealer had not received the inputs. The
Tribunal in case of M/s. Lloyds Metal Engg. Co. v. CCE,
Mumbai, 2004 (175) E.L.T. 132 (Tri.-Mumbai) has held
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that burden to prove non-receipt of the inputs is required
to be discharged by Revenue by sufficient evidence.
Where disputed consignments are entered in RG-23A Part
I and Part II in chronological order, the allegations of non-
receipt of the inputs cannot be upheld.
(iii) In view of the above, I find no justifiable reason to
uphold the impugned order and the same is, accordingly
set aside and the Appeal Nos. E/802, 840, 925/2009 are
allowed with consequential relief to the appellants."
Upheld by Guj HC - 2012 (282) ELT 206 (Guj):
"5. A perusal of the order passed by the adjudicating
authority indicates that the officers at the check post had
entered the receipt of copper ingots in their record. Thus,
even the official records maintained at the check post
indicate receipt of copper. Merely because in the record of
the transporter, two types of LRs had been issued in
respect of the goods carried/transported by M/s. Singal
Road Carriers which indicated transportation of
miscellaneous goods and the other which indicated
transportation of copper ingots/wire brass, the
Department has jumped to the conclusion that copper
ingots had not actually been transported. Except for the
aforesaid evidence, there is no evidence whatsoever to
indicate that M/s. Pranav Metal Mart, Nadiad had not
received copper ingots or that the respondent assessee
had not received the ingots along with the invoices. The
statement of Shri Atul Navrattan Lal Sharma, Proprietor
of M/s. Singal Road Carriers indicates that it is the
categorical case of the said party that it had received raw
material at its premises along with the LRs and other
documents. The statement of the partner of the assessee,
Shri Umesh Shah, also indicates that it was the categorical
case of the assessee that it had received central excise
invoices issued by the dealers through the truck driver
who brought the consignments to its premises. In fact,
from the statement of Shri Heda, it is apparent that M/s.
Pranav Metal Mart, Nadiad, had even shown receipts of
copper consignments and entered such receipts in the RG
23D registers. Likewise, the assessee had also recorded
receipts of the raw materials in RG 23A Part-I record.
6. A bare perusal of the orders made by the adjudicating
authority as well as the appellate authority clearly
indicates that neither of the said authorities have
discussed the evidence in detail and have merely placed
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reliance upon the report of the transporter for the purpose
of holding that the assessee had in fact not received the
goods referred to in the invoices and that only invoices
had been issued to it and, therefore, the credit was not
admissible to the assessee.
7. As can be seen from the impugned order of the
Tribunal, the Tribunal after appreciating the evidence on
record has recorded that there is no evidence to reflect
upon the fact that the inputs were not actually received
by the assessee; there was no dispute that the LRs were
issued by the transporter showing that the assessee is the
consignee of the goods; the case of revenue was based
on the goods registers maintained by the transporter
which indicates the description of the goods as
"miscellaneous". According to the Tribunal, this fact, by
itself, could not be held to be sufficient for arriving at the
conclusion that the inputs were never transported to the
assessee's factory. The Tribunal found as a matter of fact
that all documentary evidence on record supported the
assessee's case about the receipt of inputs, whereas there
was no independent corroborative evidence produced on
record by the revenue in support of its case."
Raj Petroleum 2005(192) ELT 806:)
"---------
---------
-------
(ix) The notice seeks and subjects to rely on the statements of the 3 Directors of RPM along with the statements of the Production Supervisor (Anil Lad) and Chemists (Prakash Suryavanshi) as also the Manager (Dungar C. Chothani alias Kakubhai). These statements cannot be read in isolation and when read in the context of the Gate Register and Lab Register as found above are not relevant for establishing clandestine removal. Force is found in this submission. As the documentary evidence does not establish clandestine removal, the oral statements based thereon, which travel beyond the documentary evidence have to be viewed with suspicion and in the event of a conflict, the documentary evidence should prevail; thereby when documentary evidence does not establish clandestine removal, the statements based thereon cannot prove [see R.P. Industries v. Collector, 1996 (82) E.L.T. 129]. Besides, these statements are qualified and conditional. The statements have to be read together and as a whole are not in part and pieces, when 22 E/12638-12731/2019-DB so read, the statements do not establish clandestine removal."
Upheld by Bombay High Court in Santogen 2017 (347) ELT-
581(Bom):
"30. It appears that the conclusion arrived at by the CESTAT is solely on two factors : (i) on the basis of a statement of the estranged brother of one of the Directors of the appellant who stated that his firm never carried out any job work for the appellant; and (ii) on the basis of the statements recorded of the transporters of the 14 suppliers who stated that they had transported the raw material only upto Bhiwandi. We find that the heavy reliance placed on these statements, and ignoring everything else, is wholly incorrect and erroneous for more than one reason. Firstly, it is not in dispute and in fact even admitted by the appellant that the transporters of the suppliers had transported the raw materials only upto Bhiwandi. It is the specific case of the appellant that this raw material was thereafter transported by the appellant to their factory in their own transport vehicles and this is why there is no proof regarding transport of the said raw materials from Bhiwandi to appellant's factory. However, the voluminous documentary evidence read with the statements of the Excise Inspectors referred to by us, clearly indicates otherwise. Secondly, the evidence (documentary and oral) would clearly go to indicate that the stand of the Revenue that no raw material ever reached the appellant's factory cannot be sustained. It is not the case of the Revenue that the Excise Inspectors who were in-charge of the appellant's factory and who have signed the various statutory registers and documents in anyway connived with the appellant. Neither is it the case of these Officers that they were misled in putting their signatures on various documents that indicate that the raw materials reached the appellant's factory, and were not diverted. In view of this voluminous documentary evidence read with the statements of the Excise Inspectors recorded under Section 14 of the Act, we are clearly of the view that the reliance placed by the CESTAT as well as the Revenue only on the oral statements of an estranged brother of one of the Directors of the appellant as well as the transporters of the suppliers (to come to the conclusion that the raw material - yarn had been diverted), was wholly erroneous and contrary to all well-known settled legal principles. It is now trite law that documentary evidence has far greater weightage against oral evidence especially when the oral evidence is contrary 23 E/12638-12731/2019-DB to the documentary evidence. This position in law is very well settled but if one needs to refer to any authority on the subject, it would be apposite to refer to a decision of the Privy Council in the case of Ramdhandas Jhajharia v. Ramkisondas Dalmia and Others [AIR 1946 Privy Council page 178], wherein their Lordships have inter alia held that in a case where oral testimony is of an unreliable and untrustworthy character, the safest policy would be to let the documents speak for themselves. Where the oral evidence is unreliable and contradictory, the Court cannot safely depart from the written evidence of the documents."
5.8. In view of above, we are of the considered view that there is no infirmity in the Order of Learned Commissioner and the same has to be upheld. In the result, impugned order is upheld and appeals of the appellant/revenue are dismissed. Cos also stand disposed of.
(Pronounced in the open Court on 02.11.2023) RAMESH NAIR MEMBER (JUDICIAL) CL MAHAR MEMBER(TECHNICAL) PALAK