Custom, Excise & Service Tax Tribunal
Ispat Industries Limited vs Nashik on 25 June, 2015
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
WEST ZONAL BENCH AT MUMBAI
APPEAL NOS:
1.
E/1572/2007
2.
E/1573/2007
3.
E/90/2008
4.
E/91/2008
5.
E/1584/2007
6.
E/169/2008
7.
E/170/2008
8.
E/1601/2007
9.
E/1602/2007
10.
E/1469/2007
11.
E/1453/2007
[Arising out of Orders-in-Original No: 29/CEX/2007 dated 07/09/2007 passed by the Commissioner of Customs & Central Excise, Nashik.]
For approval and signature:
Honble Shri P.K. Jain, Member (Technical)
Honble Shri S. S. Garg, 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?
:
No
2.
Whether it should be released under Rule 27 of CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
:
Yes
3.
Whether Their Lordships wish to see the fair copy of the Order?
:
Seen
4.
Whether Order is to be circulated to the Departmental authorities?
:
Yes
1. Jai Prakash Strips Limited
2. Jai Prakash Bhartia
3. Akshar Trading Co.
4. Harkishan B. Soneji
5. Jyoti Products
6. Memon Associates
7. Mohsin H. Memon
8. Arun Acharya
9. Chandrakant Nathwani
10. Ispat Industries Limited
Appellants
Vs
Commissioner of Central Excise & Customs
Nashik
Respondent
APPEAL NO: E/1453/2007 Commissioner of Central Excise & Customs Nashik Appellants vs Jai Prakash Strips Limited Respondent Appearance:
None for appellant No. 1 and 2Shri S.P. Seth, Advocate for the appellant Nos. 3 to 8 None for appellant No. 9 Shri Roshil Nichani, Advocate for the appellant No. 10 Shri V.K. Agarwal, Addl. Commissioner (AR) for Revenue for appellant No. 1 & 2 Shri Rakesh Goyal, Addl. Commissioner (AR) for Revenue for appellant No. 3 & 10 CORAM:
Honble Shri P.K. Jain, Member (Technical) Honble Shri S. S. Garg, Member (Judicial) Date of hearing: 25/06/2015 Date of decision: 06/07/2015 ORDER NO: ____________________________ Per: P.K. Jain:
Brief facts of the case are that M/s. Ispat Industries Ltd., (appellant No. 10) is a manufacturer of H.R. coils having manufacturing units in Kalmeshwar, near Nagpur and Dolvi/Taloja near Mumbai. During the manufacture of such coils trimmings are obtained which are in the form of coil only but of width of 1 to 3. Such H.R. trimmings are used in the manufacture of MS wires. Such wires, in turn, are used for the manufacture of nails, barbing, fencing, etc. The manufacture of MS wires, nails, barbed fencing wires etc. is carried out by large number of small scale units, who are availing SSI exemption. A large number of such units are located in and around Viramgam in the State of Gujarat. Such units are located mainly in Amreli, Keshod, Lakhator, Limbadi, Malpur, Mawa, Mehsana, Vijapur, Watwa, Viramgam, etc. In fact, Viramgam appears to be the main centre.
2. The HR trimmings are sold by appellant No. 10 by online auction process. Such H.R. trimmings are bidded purchased for trading by certain traders based in Viramgam (appellant Nos. 3 to 8). Such HR trimmings are cleared by appellant No. 10 on payment of appropriate Central Excise duty and by issuing corresponding invoices indicating details of duty payments. Since the material is used by small scale industry who are not required to pay excise duty, CENVAT credit of duty paid on such H.R. trimmings are not available to SSI units. Duty paying invoices are therefore not usable by such SSI units. What was therefore, being done was that appellant Nos. 3 to 8 after bidding purchasing the H.R. trimmings from appellant No.10 were in turn selling the same to hundreds of small scale units in and around Viramgam on cash basis and corresponding duty paying invoices were being sold separately to manufacturing units of MS Ingots located in Maharashtra. MS Ingots manufacturing units require iron and steel scrap, which in turn is available in the form of bazaar or scavenger scrap which is non-duty paid. Credit of duty paid on particular goods is available only if the goods covered by the invoice is used by the availer of credit. The invoices issued by appellant No. 10 were therefore, being manipulated to indicate the name of certain manufacturers of MS ingots (in the present case, by the main appellant) or the first stage excise registered dealer (who is in turn would issue invoices in the name of manufacturer of MS Ingots (in the present case, by the main appellant). Thus, the main appellant, in the present case was purchasing the invoices without getting the HR trimmings and such HR trimmings were sold by appellant No. 3 to 8 to 100s of small scale units in and around Viramgam. Further, for selling the invoices, appellant No. 3 to 8 were using the services of brokers based in Mumbai e.g. Shri Manish Ramavtar Agarwal of M/s. Manish Steel Corporation, Shri Pawankumar Agarwal who was controlling two companies in the name of M/s. Surajbhan Rajkumar Pvt. Ltd. and M/s. Shree Durga Iron & Steel Pvt. Ltd., both of which were registered dealer with the Central Excise department. Appellant No. 9 is a transport commission agent based in Nagpur. He was coordinating and ensuring that the goods cleared from appellant No. 10 unit at Kalmeshwar, Nagpur were transported to Viramgam and to the trader/SSI unit or as per the instruction of the broker/traders (appellants Nos. 3 to 8) or brokers/dealers (such as Shri Manish Ramavtar Agarwal and Shri Pawankumar Agarwal). Appellant No. 9 was also ensuring that documents received from Appellant No. 10 are sent to main appellant or broker/dealers. Further, appellant No. 9 was handing over fictitious documents to the driver from Kalmeshwar / Nagpur to Viramgam for any checking during transportation. Similarly, there were transport-commission agent based in Mumbai who was transporting the HR trimmings from appellant No. 10s unit located in Dolvi/Taloja near Mumbai to Viramgam. Further fictitious documents for safe passage from Dolvi/Taloja to Viramgam were also handled by him. Benefit of fraudulently availed credit was distributed between various appellants as also brokers/dealers (such as Shri Manish Ramavtar Agarwal and Shri Pawankumar Agarwal), etc.
3. When the transactions were dealt through the registered dealer, the invoices of appellant No. 10 would indicate the name of the registered dealer and the registered dealer in turn would issue invoices to the main appellant indicating that the goods have been purchased from appellant No.10. Based upon such invoices, main appellant will be able to avail the credit of duty paid on HR trimmings. Brokers who were not registered with the Central Excise department were acting behind the screen inasmuch as the invoices issued by appellant No.10 would indicate the name of the main appellant even though the said broker would coordinate with the bidder who are generally based in Viramgam, get the goods transported to Viramgam and collect the invoices in the name of the main appellant and transmit the same to the main appellant. Further, cash for the HR trimmings will be received from the Viramgam based traders many a times, through angadia services, and there after the said cash will be sent either to the main appellant so that he can issue the account payee cheque/bank drafts to the appellant No.10. Sometime it is also possible that such broker may arrange for bazaar / scavenger scrap in place of HR trimmings and sent the same to the main appellant. Thus, the work of the brokers/registered dealers (such as Shri Manish Ramavtar Agarwal and Shri Pawankumar Agarwal) based in Mumbai was to look for customer for CENVATable invoices to be issued by appellant No.10. Here, the invoices alone were to be sold to such customers while the goods covered by such invoices were to move to Viramgam.
4. Thus, the case of the Revenue is that the main appellant in the present case has availed CENVAT credit on the basis of duty-paying invoices issued by appellant No. 10 without receiving any HR trimmings covered by such invoices. The main appellant was, therefore, not eligible to take the CENVAT credit covered by such invoices, and the act is fraudulent in nature and is therefore liable to pay back the credit so availed, along with interest and penalty. Case against appellant No. 2 to 10 is for penalty.
5. The case was initiated based upon intelligence and was investigated by the Central Excise intelligence. A number of places were searched and statement of various appellants as also other persons were recorded. During searches, certain incriminating documents were recovered, particularly from appellant No. 9s premises in Nagpur. The investigation also revealed that the name of a fictitious transporter i.e. Sidhivinayaka Road Carriers, Raipur was also being used by the two transporters to show as if some of the consignments were being handled by the said transporter. Investigation revealed that no transporter with the said name at the said place existed. Investigation also revealed that registration numbers used in some of the invoices are of three wheelers, autorikshaws, oil tankers or Government vehicles which would not be suitable for transporting scrap. Statements of few vehicle owners were also recorded which indicated that they did not transport any HR trimmings from Kalmeshwar / Dolvi to the main appellants factory in Nasik. Investigation also revealed that vehicles of M/s. Nar Narayan Transport of Ahmedabad were used for transporting H.R. trimmings from Kalmeshwar to Viramgam. Most of the H.R. Trimmings were transported using the vehicles having Gujarat registration number. Such vehicles are not allowed to transporting freight within Maharashtra i.e. in this case, from Nagpur to Nasik or Dolvi to Nasik. Such vehicles can only carry freight from Maharashtra to Gujarat. Statements of various persons confirmed that HR trimmings were sent to Viramgam and nearby areas and only invoices are made in the name of main appellant.
6. Based upon detailed investigation, a demand notice dated 05/06/2006 was issued to the main appellant for demand, interest, and penalty as also to other appellants for penalty. The said notice required all the noticees to file the defence reply within 30 days. Para 30 of the said notice specifically directed the noticees that they, if desired, to have inspection of documents relied upon in the case, or to take photocopies thereof, they may approach the office of DGCEI on any working day with prior intimation. Some of the noticees replied to the said notice. However, the main noticee neither requested the DGCEI for copies of the relied upon documents nor collected the relied upon documents or conducted any inspection of the record. It is to be mentioned that the crux of the statements as also various other relied upon documents were already elaborated in the notice.
7. Letter dated 13/11/2006 fixing the personal hearing on 15/12/2006 to the main appellant was received back unserved with postal endorsement as not claimed, sent to sender. Further, the main appellant vide their letter dated 15/12/2006 i.e. on the date of personal hearing requested for fixing another date of hearing as one of the Director was suffering from cancer and two other Directors were with him at Delhi. Another date of hearing was fixed on 17/01/2007 which was adjourned to 20/02/2007 again at the request of the main appellant because of the continued illness of the Director. Another date of personal hearing was fixed on 19/02/2007. It is in this hearing that the advocate of the main appellant sought adjournment on the ground that he has not received the relied upon documents from DGCEI. Obviously the applicant had not approached the DGCEI for inspection of the records relied upon or for the collection of photocopies thereof, in terms of para 30 of the notice dated 15/06/2006. Another date of personal hearing was fixed on 18/05/2007. Neither any reply was filed nor anybody appeared on the said date. Another date of personal hearing was fixed on 25/06/2007. The advocate vide letter dated 12/06/2007 informed the Commissioner that he could not get any response from the client and withdrew the Vakalatnama from the above case. This shows the casual approach by the main appellant towards the case. Advocates for other noticees, however, replied and attended the hearing also. Keeping in view the fact that as per proviso to Section 33A of the Central Excise Act, 1944 no adjournment shall be granted more than three times to a party during the proceeding, and after receiving the replies from other noticees and hearing them, the Commissioner vide the impugned order adjudicated the case wherein he confirmed the demand and imposed penalty on the main appellant. Further penalty was also imposed on all other appellants i.e. appellant No. 2 to 10 for their role in the fraudulent transactions.
8. Aggrieved by the said order of the Commissioner, some of the noticees have filed appeal and are before this Tribunal. Revenue has also filed an appeal against the order of the Commissioner. Revenues appeal is on the ground that even though the show cause notice proposes recovery of interest from the main appellant, however, Commissioner in her order has not given any finding on direction on the said issue and has not confirmed the same.
9. The case was posted for hearing on number of occasions by this Tribunal. However, there was no representation from the main appellant and appellant No. 2 and in the interest of justice, case was adjourned number of times. Advocates for other appellants, however, did appear on such dates. Thereafter it was decided to serve the hearing notice through the office of the jurisdictional Excise authorities. Hearing notice for hearing before this Tribunal on 29/04/2015 was served by pasting on the door of the factory and drawing a panchanama dated 28/04/2005 as per Section 35C of the Central Excise Act by the jurisdictional excise authorities. On the date of hearing on 29/04/2015. A fax was received requesting for adjournment so as to enable them to find the papers and appear before this Tribunal for arguments. Keeping in view the request of the main appellant and appellant No.2 the case was adjourned for 12/05/2015 and the hearing notices were again served through the jurisdictional Excise authorities. As neither there was representation, nor any request for adjournment, appeals in respect of the co-noticees were heard on 12th May, 2015. Around the time when the hearing of the co-noticees was over, a fax was received from the main-appellant and appellant No.2 indicating that they are in the process of appointing an advocate and hence the case may be adjourned. Keeping in view the said request, as far as main appellant and appellant No.2 are concerned, the matter was again adjourned for 28/05/2015. On the said date, again in the afternoon a fax was received from the main appellant stating that they have appointed an advocate and requested that the matter may again be adjourned as a last opportunity. Keeping in view the said request, the matter was again adjourned for 25/06/2015. On 25/06/2015 a fax was received stating that the working of the Company was looked after only by the Director, who was not keeping good health and he is not a position to travel to Mumbai. It was also requested that the appeal may be decided on merits based on various grounds mentioned in the appeal memorandum. It was submitted that they were not granted proper opportunity to present their case before the adjudicating authority and the order was ex-parte. Hence the case may be remanded. It was also stated in the said letter that they had also requested for return of the seized documents which have not been complied with.
10. The main appellant/appellant No.2 has filed the present appeal on the ground that denial of relied upon documents and return of non-relied upon documents is violative of principles of natural justice. In support of their contention they quoted the judgment of Jayantilal A Shah vs. Commissioner of Central Excise, Mumbai VI reported in 1999 (34) RLT 466 (CEGAT). It was further submitted in Memorandum of appeal that denial of cross-examination amounts to violation of principles of natural justice. It was also submitted that Shri Shailesh P. Sheth, their advocates letter dated 12/06/2007 withdrawing his Vakalanama has been taken by the Commissioner to conclude that the appellant have not made any efforts to collect the documents either directly from his side or through the advocate and to file their reply and that the appellant have not cooperated with their advocate appointed for defending their case. It was stated that, it is the responsibility of the department to supply the relied upon documents along with show cause notice and non-relied upon documents within a reasonable period of six months. It was further submitted that the Commissioner in his finding has stated that scrap was indeed received by the appellant from M/s. Shree Durga Iron & Steel Company Pvt. Ltd., Mumbai; M/s. Surajbhan Rajkumar Co. Pvt. Ltd., Mumbai and M/s. Jai Ambe Steel Co., Mumbai, all of them are registered dealers. It was submitted that from the above it is clear that it is not the case of the department that no scrap was received from the registered dealers, and credit cannot be denied to the appellant when such credit was taken based on invoices issued by the dealers. In support of their contention, this Tribunals judgment in the case of R.S. Industries vs. Commissioner of Central Excise 2003 (153) ELT 114 and Bhairav Exports vs. Commissioner of Central Excise 2007-TIOL-160-CESTAT-MUM were quoted. It was further submitted that the appellant have taken reasonable steps contemplated in law and, therefore, they are entitled for the credit.
11. It was submitted in the grounds of appeal that Explanation to sub-rule (2) of Rule 7 of the CENVAT Credit Rules, 2002, elaborates what are reasonable steps to be taken for availing CENVAT credit and in their case those steps were taken and, therefore, under the circumstances, credit of duty cannot be denied. They further quoted the following case laws in support of their contention.
a) Vimal Enterprises vs. Union of India 2006 (195) ELT 267 (Guj.);
b) SRF Ltd. vs. Commissioner of Central Excise, Indore 2000 (124) ELT 448 (Tri.);
c) Commissioner of Central Excise, Jaipur vs. Shree Ram Vinyl & Chemicals Inds. Ltd. 1999 (105) ELT 294 (Tri.);
d) Commissioner of Central Excise, Chandigarh vs. Shakti Roll Cold Strips Pvt. Ltd. 2007 (80) ELT 267, etc.
12. It was further submitted that invoking the larger period of limitation is incorrect as there was no fraud, collusion or any willful mis-statement or suppression of fact or contravention of any of the Central Excise provisions with the intention to evade payment of duty. They have paid full purchase value of the inputs along with the full duty element and they would have gained nothing in making themselves a party to the fraud.
13. It was also submitted that the input of 1210.950 MT involved in the case cannot have confiscated under Rule 13(1) of the CENVAT Credit Rules, 2002 as the goods were never seized and are also not available for confiscation. It was further submitted an exorbitant penalty of ` 10 lakhs cannot be imposed under Rule 13(1) of the CENVAT Credit Rules, 2002 on the appellant as the show cause notice proposed penalty equivalent to the Central Excise duty determined to be payable under Section 11AC of the Central Excise Act, 1944 read with Rule 13(2) of the CENVAT Credit Rules, 2002. It was further submitted that no penalty and interest is imposable on the appellants.
14. On behalf of appellant No. 3, M/s. Akshar Trading Company, learned counsel submitted that it is a partnership firm and is doing trading in HR Trimmings, etc., and that they participated in the online auction conducted by M/s. Steel RX Corporation Ltd. for M/s. Ispat Industries Ltd. (IIL). The appellants were only a bidder, neither buyer nor receiver of the goods. They never received any goods from M/s.IIL nor sold any HR trimmings to the main appellant and they never availed any CENVAT credit on the goods invoiced by M/s. IIL. They have sold their right to take delivery at the auction price to other companies by issuing the change of name letter. It was further submitted that the customers found by the commission agent Shri Manish R Agarwal and the lifting of HR trimmings under cover of excise invoice of M/s. IIL from their factory and its onward deliveries were made by Shri Chandrakant Nathwani, proprietor of M/s. Shri Khodiyar Transport as transport booking agent. It was further submitted that the appellants were only selling their right to lift the goods in favour of the buyer which the commission agent brought and they were only receiving a commission of ` 150/- to ` 200/- PMT. It was further submitted that the demand consist of four parts and they are concerned only with the first part and the demand in the first part amounts to ` 5,15,511/-. It was further submitted that even this part of the demand was based upon not only them but along with 5 to 6 other Gujarat based bidders. Thus, the said amount of ` 5,15,511/- was for all the six bidders. As against the demand of ` 5,15,511/- the adjudicating authority has imposed a penalty of ` 5 lakhs each under Rule 26 for the partner as well as on the partnership firm ignoring the role played by any one of them and the nature of contravention or the amount of CENVAT credit involved. It was also submitted that Rule 26 visualise a maximum penalty equal to duty involved and a penalty of ` 5 lakhs therefore cannot be imposed. It was further submitted that they have never lifted any consignment from M/s. IIL nor they have purchased any goods from M/s. IIL nor they have availed CENVAT credit and hence no penalty under Rule 26 can be imposed. The appellant has not dealt with goods which are liable for confiscation with the knowledge that such goods were liable for confiscation and hence there is no case for imposing penalty under Rule 26. It was submitted that it would be seen from the Commissioners finding in para 161, the penalty has been imposed for issuing letters to M/s. IIL for change in billing address. It was further submitted that the matter pertains to period prior to 01/03/2007 when Rule 26(2) was not in existence and, therefore, subject sub-rule is not applicable. In support of their contention they quoted the judgment of Commissioner of Central Excise vs. Anshul Steel Scrap Corpn. 2011 (264) ELT 535 (Tri.-Del.) and Commissioner of Central Excise vs. Mini Steel Traders 2014 (309) ELT 404 (P&H). It was further submitted that there was no proposal in the show cause notice for holding the goods liable for confiscation and there is no finding or conclusion for the said purpose. It was further submitted that it would be seen from the order-in-original that the proposal and confiscation order is for the inputs i.e. scrap which is used by M/s. JSPL on which no duty was paid. There was no proposal for confiscation of HR trimmings which were cleared from the factory premises of M/s. IIL for which the address was changed in the bill. Since it had not been proposed to confiscate HR trimmings no penalty under Rule 26 can be imposed on the appellant. It was submitted that the appellant has not dealt with the goods which had been held to be liable to confiscation under Rule 15 of CENVAT Credit Rules, 2002/2004 and accordingly no penalty under Rule 26 can be imposed.
15. Learned counsel for the appellant No. 4, Shri Harkishan B. Soneji who is partner in M/s. Akshar Trading Company (appellant No.3) submitted that their company would give up the right to lift the goods by giving a change in billing address on a letter to M/s. IIL and the company has never taken the delivery of the goods from M/s. IIL. The customers were found by Shri Manish Agarwal and the delivery was made to the ultimate buyer through Shri Khodhiyar Transport of Shri Chandrakant Nathwani. It was submitted that the appellant has explained in his statement the said position about the participation in auction and transferring the rights to procure the goods at fixed price by issuing a letter to change in name which is permitted under the said auction scheme and is a regular business practice. The appellant has therefore neither dealt with the goods physically nor they have dealt with any excise invoice and in view of the said position no penalty under Rule 26 can be imposed. It was further submitted that the amendment made from 01/03/2007 cannot be made applicable in this case as the matter pertains to a period prior to 01/03/2007. The two case laws quoted in the case of appellant No.3 were reiterated. It was also submitted that the penalty has been imposed on the partnership firm as well as on the individual partner. It was submitted that the partnership firm does not have independent existence separate from partner, therefore, penalty should not be imposed on both of them. In support of this contention they relied upon the following judgments:
(a) Commissioner of Central Excise, Surat vs. Alfa Synthetics 2009 (241) ELT 480 (Tri.-Ahm);
(b) Moontex Dyeing & Printing Works vs. Commissioner of Central Excise, Surat 2007(215) ELT 46 (Tri.-Ahm.);
(c) Harish Dyeing & Printing Works vs. Commissioner of Central Excise, Surat 2001 (138) ELT 772 (Mum.);
(d) Vinod Kumar Gupta vs. Commissioner of Central Excise, 2013 (287) ELT 54 (P&H).
16. Learned counsel for appellant No. 5, 6 and 7 submitted that appellant No. 7 is partner of the appellant-firms 5 and 6. The two firms are in the business of trading of H.R. trimmings and both the firms have participated in the online bidding conducted by M/s. Steel RX Corporation for M/s. IIL. Learned counsel further submitted that they are only bidders and they were not buyer or receiver of the goods. It was submitted that they never had received any H.R. trimmings from M/s. IIL and they have never availed CENVAT credit on the excise invoices of M/s. IIL and they have never sold such goods and what they have done is to sell their rights to take delivery at the auction price to other companies by issuing change of name letter. It was also submitted that customers were found by the commission agent Shri Manish R. Agarwal and lifting of the goods and delivery of the goods was made by M/s. Shri Khodiyar Transport (appellant No. 9) as transport commission booking agent. It was further submitted that they are concerned only with the first part of the demand amounting to ` 5,15,511/- and are not concerned about the remaining part of the demands. It was further submitted that the bidding for the said goods were done by 5 to 6 Gujarat based traders and keeping in view the duty amount involved, penalty of ` 5 lakhs on each of the appellant is far in excess than what is provided under Rule 26. It was also submitted that penalty should not have been imposed both on the partner as also on the partnership-firm. It was also submitted that penalty has been imposed not for dealing with the goods under sub-rule (1) of Rule 26 but for issuing letters for change in billing address. It was submitted that sub-rule (2) of Rule 26 was introduced w.e.f. 01/03/2007 and are not applicable to the clearance made prior to that period and in support of the contention case law in the case of Commissioner of Central Excise vs. Anshul Steel Scrap Corpn. 2011 (264) ELT 535 (Tri.-Del.) and Commissioner of Central Excise vs. Mini Steel Traders 2014 (309) ELT 404 (P&H). were quoted. It was also submitted that there was no proposal in the show cause notice for holding the goods liable for confiscation and there is no finding for confiscation and hence no penalty can be imposed. It was further submitted that the proposal and confiscation order is for the inputs i.e. scrap which is used by JSPL on which no duty was paid and there is no proposal for confiscation of H.R. trimmings. In other words H.R. trimmings so cleared has not been proposed for confiscation and in view of this fact no penalty can be imposed under Rule 26. For imposition of penalty both on the partner as well as partnership firm case laws were quoted for appellant No.4 were reiterated:
(a) Commissioner of Central Excise, Surat vs. Alfa Synthetics 2009 (241) ELT 480 (Tri.-Ahm);
(b) Moontex Dyeing & Printing Works vs. Commissioner of Central Excise, Surat 2007(215) ELT 46 (Tri.-Ahm.);
(c) Harish Dyeing & Printing Works vs. Commissioner of Central Excise, Surat 2001 (138) ELT 772 (Mum.);
(d) Vinod Kumar Gupta vs. Commissioner of Central Excise, 2013 (287) ELT 54 (P&H)
17. Learned counsel for appellant No. 8 submitted that M/s. Star Corporation is a proprietary concern of Shri Arun Acharya and they are in the business of stock broking and had participated in the auction of H.R. trimmings and they were only bidder and not buyer or receiver of the goods. The appellant never received any consignment of H.R. trimmings from M/s. IIL nor they have ever availed CENVAT credit. They never sold any such HR trimmings to main appellant. It was further submitted that they have issued three letters dated 26/09/2003, 27/09/2003 and 11/10/2003 for change in the billing address to Shri Manish Agarwal. It was further submitted that they are concerned with only the first part of the demand amounting to ` 5,15,511/- as per Annexure I to the show cause notice and the said goods were purchased by 5 to 6 bidders and as against the duty amount of ` 5,15,511/- a penalty of ` 5 lakhs is imposed under Rule 26 on each of the bidders as against the maximum penalty equal to duty under Rule 26. It was further submitted that the appellant has only sold their right to lift the goods by issuing intimation letter for change in the billing address which is a normal practice in the trade. It was further submitted that in view of the said position no penalty can be imposed under Rule 26 on them. It was also submitted that the sub-rule (2) of Rule 26 has been introduced w.e.f. 01/03/2007 and prior to this date penalty on the dealers cannot be imposed as held the cases of Commissioner of Central Excise vs. Anshul Steel Scrap Corpn. 2011 (264) ELT 535 (Tri.-Del.) and Commissioner of Central Excise vs. Mini Steel Traders 2014 (309) ELT 404 (P&H). It was also submitted that there was no proposal for confiscation of the goods and there is no knowledge on the part of the appellant that the goods were liable for confiscation. It was also submitted that the show cause notice or the order-in-original does not propose confiscation of H.R. Trimmings and therefore there is no question of confiscation of the said goods and no penalty can be impose on the appellant.
18. The learned counsel for the appellant No. 9 submitted that his client is only a transport commission agent who arranges transport vehicle for lifting the goods from M/s. IIL. The appellant himself has not carried out any transportation of the goods. The goods which are obtained and transported by the appellant are duty-paid goods and covered under excise invoice and it cannot be said that the goods when dealt by the appellant as transport commission agent are liable for confiscation. For invoking the provisions of Rule 26 itself require that the goods be liable for confiscation and the appellant should be aware that the said goods are liable for confiscation. It was also submitted that they had bona fide belief that the goods which are being dealt by them are duty-paid and not liable to confiscation. It was submitted that, as the transport agent the appellant has taken due precaution to ensure duty paid goods lifted and delivered. This itself shows that there was no mala fide intention on their part and there are no grounds for invoking Rule 26 to impose penalty on them. It was further submitted that there is no proposal and confiscation order for the HR trimmings which are cleared from the factory from the premises of M/s. IIL and for which the address was shown in the bill. Thus, the HR trimmings which should have been diverted has not been proposed to be confiscated nor has it been confiscated under Rule 25 of the Central Excise Rules and accordingly no penalty under Rule 26 can be imposed on the appellant.
19. The learned counsel for appellant No.10 submitted that they have cleared the HR trimmings after bidding as per the directions of the bidder to various buyers. Further before clearance of the goods they have paid the appropriate amount of duty and since they have paid appropriate amount of duty they have not done anything wrong. If the goods have been diverted after clearance they are not responsible for the same and no penalty can be imposed on them. It was further submitted that in their own case, this Tribunal has set aside the penalty in the following cases:
(a) A/198-299/08/WZM/SMB/C-III dated 26/02/2008
(b) A/571-572/09/WZM/SMB/C-IV dated 07/10/2009
20. Learned Additional Commissioner (AR), on 25/06/2015 as far as the appellant No. 1 and 2 are concerned submitted that both the appellants had total non-cooperative approach from the day one. During investigation they did not cooperate. Statement of appellant No.2 Director was recorded on 29/11/2004 after issuing number of summons. Further during the statement he has promised to provide certain information. Thereafter he was summoned on 10/12/2004, 03/01/2005, 18/02/2006, 13/04/2006, 04/05/2006 and 26/05/2006 to submit costing data and respond to the summons. However, he did not cooperate in the investigation.
21. It was further submitted that during the recording of the statement he was shown the records seized from the transporter and the statement of the transporter as also other details and after going through these documents he has admitted incorrect availment of CENVAT credit and agreed to pay back CENVAT credit and in fact, he has paid also a part of the CENVAT credit amounting to ?3.90 lakhs, except this, he did not cooperate or do nothing. It was further submitted that it is not understood what non-relied upon documents were required by him. His premises were never searched. Further, the only relied upon documents which were obtained from the appellant No.1 and 2 is the statement dated 29/11/2004. Other relied upon documents were recovered from other places of other noticees. Extracts or summaries from the relevant portion of these statements and other documents has already been reproduced within the notice. Even then, in para 30, the notice clearly stated that they can take copies of the relied upon documents from the office of DGCEI. However, they have never bothered to either inspect these documents or take Xerox copies of the documents. Now at the Tribunal stage, they are claiming that it is the duty of the department to supply copies of the relied upon documents along with notice. It was further submitted that the advocate of the appellant No. 1 during adjudication proceedings withdrew his vakalatnama and the advocate has stated that he has no instruction as to whether the appellant has made any effort to carry out any inspection of documents or to get copies of the documents. In view of such approach it cannot be said that principle of natural justice had been violated. It was further submitted that even before this Tribunal the conduct of the appellant has been very very poor. He did not respond to the notices sent from the Tribunal. Even after the notice was sent through the jurisdictional Central Excise authorities he has invariably asked for adjournment by sending fax on the date of hearing and though in his fax dated 28/05/2015 he has stated that they have engaged the advocate but on 25/06/2015, they have now stated that the matter may be decided based upon their memo of appeal. Under the circumstances it cannot be said that the principles of natural justice had been violated, particularly keeping in view the fact that the appellant himself in his statement had accepted the violation and agreed to pay back irregular/fraudulent CENVAT credit availed by him. The said statement has not been retracted. It was also submitted that none of the statements, whether in the case of Viramgam based traders or the transport agent or the broker/dealer based in Mumbai have ever been retracted.
22. It was further submitted that the appellant has not stated that whom he wants to cross-examine and what is the purpose of cross-examination. Moreover, most of the persons, whose statements had been relied upon are the co-noticees in the case and they cannot be forced to present themselves for cross-examination as that could be violative of Article 20(3) of the Constitution of India and similar view has been taken by the Tribunal in the case of Maha Mahal Industries vs. Commissioner of Central Excise, Meerut 1995 (80) ELT 118 (Tribunal) and Jagdish Shanker Trivedi vs. Commissioner of Central Excise, Kanpur 2006 (194) ELT 299 (Tri.-Del.).
23. As far as the appellants contention about the reasonable steps to be taken, the learned AR submitted that in all the cases the invoices covered the goods HR trimmings which fetches fairly high price and are therefore not economical for use by melting purpose. Instead of that it is only bazaar/scavenger scrap which is used by the furnace unit. Thus, it is well proved that the invoices were purchased by them to fraudulently avail CENVAT credit. It was submitted that this question was put to the appellant No.2 during statement and he was not able to reply and promised to present the costing data which he had not done. This itself prove beyond doubt that they were aware that the goods covered by the said invoices are being diverted somewhere else and they have purchased only the invoices. It was further submitted that such an act cannot be considered as reasonable steps taken by the appellant. In fact such a conduct clearly indicates that it was fraudulent availment and a fraudulent act can never be a reasonable step.
24. It was also submitted that almost all the vehicle numbers in the invoices are of Gujarat registration and it is the common knowledge that such vehicles are not permitted to carry any freight from one place to another place within Maharashtra. Thus, these vehicles could not have been transported the HR trimmings from Kalmeshwar, Nagpur or Dolvi/Taloja, Mumbai to Nashik. These vehicles could only transport goods from Maharashtra to Gujarat. Further the registration number of vehicles on enquiry with the RTO, it was found some of the vehicles were in fact two-wheelers and three-wheelers or oil tankers or vehicles which are not suitable for transporting scrap. The learned AR also quoted this Tribunals decision in the case of Bhagwati Steel Cast Pvt. Ltd. vs. Commissioner of Central Excise reported in 2013 (293) ELT 417 (Tri.-Mum.) in which case, the Tribunal has analyzed clearly the scheme of MODVAT credit and the steps to be taken by the appellant. In view of the above factual position the appeal of both the appellants are required to be dismissed.
25. As far as appellant Nos. 3 to 10 are concerned, during the hearing on 15/05/2015, the learned AR submitted that para 27 of the show cause notice very clearly states that these appellants were concerned themselves with removing, selling, storing, concealing, transporting and otherwise dealing with the aforesaid HR trimmings in a manner which they knew or had reason to belief were in contravention of the provisions of Central Excise Act, 1944 and CENVAT Credit Rules, 2002 made thereunder and were liable for confiscation and, therefore, appellants are liable for penal action under the provisions of Rule 26 of the said rules. The learned AR submitted that in view of the clear statement in para 27 of the show cause notice, the submissions made by the learned counsel for appellant No. 3 to 8 are incorrect and without any basis. He further submitted that appellant No. 3 to 7 are based in Viramgam and it is an admitted position that they are dealing in HR trimmings. It also came out very clearly in the investigation that HR trimmings were transported to Viramgam and nearby areas and sold there. It is obvious that these appellants have dealt with HR trimmings which are offending goods and are liable to confiscation and therefore penalty under Rule 26 is correctly imposed. It was further submitted that Rule 26 of the Central Excise Rules, provides for penalty on any person not exceeding the duty on such goods. Thus, in respect of any offending goods, there are more than one person involved then penalty equal to the duty can be imposed on each one of them and hence the contention of the appellants are without any basis.
26. As far as appellant No. 8 is concerned he has participated in the bidding and he was in touch with both the traders in Viramgam and also Shri Manish R Agarwal. Obviously he was aware of the whole scheme of the transaction and he cannot take the plea that he has only bidded the document and has not dealt with the HR trimmings or was not concerned with the goods or did not have reason to believe the goods are liable to confiscation, and hence the penalty is rightly imposed. As far as Appellant No. 9 is concerned, he is a transport commission agent who ensured proper liaison with M/s. IIL and the truck owner and thereafter handover the documents for change in consignees name to M/s. IIL and the goods were transported by the truck owner and the invoice issued by M/s. IIL were in turn sent to the main appellant or the broker/dealer based in Mumbai. Therefore, the appellant was clearly knowing that the invoices are being raised in the name of Nasik unit while the goods are actually going to Viramgam. Not only this, he was also making fictitious lorry receipts (LRs) on the name of Raipur based fictitious transport company. Other fictitious documents were also made so as to avail safe passage of the goods from the manufacturing unit to the user in and around Viramgam.
27. As far as appellant No. 10 is concerned it was submitted it is true that they have paid the full duty as per law. However, the fact remains that the goods were transported in vehicles having Gujarat based registration who were not allowed to carry the freight between their units located in Maharashtra to the consignees address which was also located in Maharashtra. Thus, it indicates that they were aware that the goods are going to Viramgam. It was also submitted that during the search, documents were recovered from the appellants office wherein it was indicated that due to rain in Viramgam they were not getting good biddings. This also clearly indicate that they were aware their HR trimmings were used by various units in and around Viramgam. Under these circumstances it was incorrect on their part to change the name of the consignee to the main appellant who was based in Nasik. In view of the above the goods cleared by them were liable to confiscation and hence they are liable to penalty.
28. The learned AR also relied upon the following case laws in support of his contentions:
(a) Commissioner of Central Excise vs. Navneet Agarwal 2012 (276) ELT 515 (Tri.-Ahmd.);
(b) Vee Kay Enterprises vs. Commissioner 2011 (266) ELT 436 (P&H);
(c) Sanjay Vimalbhai Deora vs. CESTAT 2014 (306) ELT 533 (Guj.);
(d) Sanjay Vimalbhai Deora vs. CESTAT 2014 (309) ELT A131 (SC);
(e) Nashik Strips Pvt. Ltd. vs. Commissioner of Central Excise 2010 (256) ELT 307 (Tri-Mumbai).
29. We have carefully considered the rival submissions. First of all we note that the appellant No. 1 and 2s main grievance is about the principle of natural justice not being followed. The learned counsel for other appellants i.e. appellant No. 3 to 10 has not made any such grievance and during the personal hearing they have put forward their submissions for decision by the Tribunal. Normally, we would like to first deal with the principles of natural justice. However, the present case has some peculiarity and, therefore, we consider it appropriate to understand the main issue involved in the present case and thereafter discuss whether principles of natural justice have been violated or not? We have discussed this plea in Para 35 of this order.
30. The main allegation against the appellant is that they have taken the CENVAT credit without receiving the goods covered by the corresponding invoices. A somewhat similar issue has come up before this Tribunal in another case of main appellant viz. Bhagwati Steelcast Ltd. vs. CCE, Nashik reported in 2013 (293) ELT 417. In para 73 of the said order, this Tribunal has explained the scheme of the cenvat credit and is reproduced below for ready reference:-
73. It follows from the above that the? method of implementation adopted in India is the tax credit method. This economic concept of Value Added Tax has been encapsulated within the framework of Central Excise law as follows:
73.1 Under Section 37 of the Central? Excise Act, 1944, the Central Government has been given the power to make rules to carry out, in effect, the purposes of the Act. Clauses (xvi)(a) and (xvi)(aa) of sub-section (1) of the said Section provides for making of rules to provide for mechanism for credit of the duty paid or deemed to have been paid on the goods used in or in relation to the manufacture of the goods and the credit of service tax leviable under the Finance Act, 1994 used in or in relation to the manufacture of excisable goods.
73.2 Rules 11 of the Central Excise? Rules, 2002 stipulates that no excisable goods are to be removed from a factory or warehouse except under an invoice signed by the owner of the factory or his authorised agent. Sub-rule (2) of the said Rule stipulates that the invoices shall be serially numbered and shall contain registration number, address of the concerned Central Excise Division, name of the consignee, description, classification and date of removal, mode of transport and vehicle registration number, rate of duty, quantity and value of goods and the duty payable thereon. The proviso to the said rule provides the dispensation of the copies of the invoices i.e., original copy for the buyer, duplicate for the transporter and triplicate for the assessee. Sub-rules (4) to (6) deal with certain procedural requirements relating to invoices and sub-rule (7) provides that the provisions of said Rule shall apply mutatis mutandis to goods supplied by a first stage dealer or a second stage dealer. Similar provisions were stipulated in the Central Excise Rules, 2001 and also the Central Excise Rules, 1944 to the same effect.
73.3 The Cenvat? Credit Rules, 2004, deal with the procedure relating to availment of credit. As per Rule 3, a manufacturer or a producer of final products or a provider of taxable service shall be allowed to take credit (hereinafter referred to as Cenvat credit) of the duties specified therein paid on any inputs or capital goods and received by the manufacturer for use in or in relation to the manufacture of final products. Rule 4 of the said Rule stipulates that Cenvat credit in respect of inputs may be taken immediately on receipt of the inputs in the factory of the manufacturer or in the premises of the provider of output service. Rule 9 of Cenvat Credit Rules, 2004 deals with the documents and accounts on the basis of which the Cenvat credit can be taken and this includes an invoice issued by a manufacturer, an importer, a first stage dealer or second stage dealer. Sub-rule (2) further stipulates that no Cenvat credit shall be taken unless all the particulars as prescribed under the Central Excise Rules, 2002 or the Service Tax Rules, 1994 are contained in the said document. In case any particulars are missing, Cenvat credit may be taken only with the prior approval of the jurisdictional Asst./Dy. Commissioner of Central Excise, if he is satisfied that the goods or service covered by the document have been received and accounted for in the books of account of the receiver. Sub-rule (4) of the said rule further stipulates that the Cenvat credit in respect of input or capital goods purchased from a first stage dealer or second stage dealer shall be allowed only if such first stage dealer or second stage dealer, as the case may be, has maintained records indicating the fact that the input or capital goods was supplied from the stock on which duty was paid by the producer of such input or capital goods and only an amount of such duty on pro rata basis has been indicated in the invoice issued by him. Sub-rule (5) further stipulates that the burden of proof regarding the admissibility of the Cenvat credit shall lie upon the manufacturer or provider of output service taking such credit. Similar provisions existed in Rule 57A of the Central Excise Rules, 1944, Rule 7 of the Cenvat Credit Rules, 2001 and 2002.
73.4 From the above? provisions of law, it becomes evident that to avail Cenvat credit, the inputs or capital goods should have suffered the stipulated duty by the producer/manufacturer of such goods and the goods should be received by the manufacturer availing credit in his factory and the inputs or capital goods so received should be utilised in or in relation to the manufacture of final products. In respect of inputs received from a first or second stage dealer, an additional condition is stipulated to the effect that the inputs or capital goods were supplied from the stock on which duty was paid by the producer of such goods and only an amount of such duty on pro rata basis has been indicated in the invoices issued by him. It is further stipulated that the burden of proof regarding admissibility to Cenvat credit shall lie upon the manufacturer taking such credit. Sub-rule (2) of Rule 7 of the Cenvat Credit Rules, 2001/2002 (as they stood at the relevant time) further stipulated that a manufacturer/producer taking Cenvat credit on inputs or capital goods shall take all reasonable steps to ensure that the inputs or capital goods in respect of which he has taken Cenvat credit are goods on which appropriate duty of excise as indicated in the document accompanying the goods has been paid and the manufacturer shall be deemed to have taken reasonable steps if he satisfies himself about the identity, name and address of the manufacturer/supplier issuing the document specified in the said Rule either from his personal knowledge or on the strength of a certificate given by a person with whose handwriting or signature he is familiar with or on the strength of a certificate issued to the manufacturer or supplier by the jurisdictional Superintendent of Central Excise.
73.5 The Central? Excise duty regime underwent a significant change with effect from 1-10-1996. Under the new regime, assessment of the tax liability by the department which hitherto existed was done away with and self assessment facility was extended to the assessees.
73.6 Paragraphs 134? and 135 of the Finance Ministers Budget Speech for the year 1996-97 lucidly explains the new regime which was introduced.
134.?Our excise procedures are outdated and not in tune with the times. They need to be modified. They should encourage voluntary compliance with tax laws by the tax payers. With effect from 1st October, 1996, assessees would no longer be required to furnish copies of invoices along with the monthly returns. All that they would be required to furnish to the excise department will be a simple Return indicating the duty paid on self-assessment basis. Wherever possible the assessees computers could also be linked to the Departments computers for on line assessment.
135. I also propose to introduce a scheme of selective audit by?the excise officers and dispense with the existing scheme of routine examination and checking of returns and documents furnished by the assessees. This scheme would also come into force from 1st October, 1996. While introducing the new regime, in para 138 thereof, the Finance Minister also observed as follows :
138. The Modvat scheme which provides for duty credit on inputs?and capital goods has been liberalised considerably over the past few years. Still, there are problems about the coverage of certain inputs and capital goods. I propose to clarify the scope of eligible capital goods by specifying the heading and sub-headings of the tariff relating to capital goods in the Modvat Rules. It is also a matter of concern that there is misuse of the Modvat credit scheme. At present, Modvat invoices can be issued by any dealer registered with the excise department and this facility is reportedly being misused. Therefore, I propose to restrict the issue of Modvatable invoices by dealers up to two stages. Suitable provisions are also being made in the Modvat Rules for charging of interest in the case of wrong availment of Modvat credit and for mandatory penalty for misuse of Modvat facility. It is in this background and context, the issues involved in the present case need to be examined.
31. At the outset we observe that the main appellant is engaged in the manufacture of MS ingots for which they require iron and steel scrap. The goods involved in the present case are HR trimmings. These are nothing but HR coils having varying width from 1 to 3. These goods are not iron and steel scrap in the conventional sense. These may be waste and scrap as far as manufacturer M/s. Ispat Industries is concerned but can be used for the manufacture of MS wires which has vide variety of applications like in the manufacture of nails, fencing wire, etc. It is also common knowledge that such HR trimmings fetch higher value than the scavenger scrap or bazaar scrap. There is no reason for any prudent MS ingots manufacturer to use such HR trimmings in coil form for melting. In fact, during the only statement that could be recorded of the appellant No.2, who was the Director of the main appellant-company, this point was raised and it was pointed out that if MS ingot is manufactured using HR trimmings then the cost of production of MS ingots would be much higher than the selling price and therefore no businessman can afford to use HR trimmings for such purpose.
32. The other submission of the appellants is that he wanted to cross-examine various persons. As held by this Tribunal in the case of Maya Mahal (supra) 295 ELT 118 summoning of co-noticee for cross-examination is not proper. Cross-examination of co-noticee can be done only if he wishes. Principles of natural justice not violated by not summoning co-noticee for cross-examination. This Tribunal in the case of Jagdish Shanker Trivedi reported in 2006 (194) ELT 290 (Tri.-Del.) has observed as under:-
7.?We first take up the contention that there was denial of principles of natural justice by not offering the witnesses for cross-examination by the appellant Ashish Kumar Chaurasia, despite his request that all witnesses should be examined. We have already noted that the appellant, Ashish Kumar Chaurasia had cross-examined two officers on 19-6-1995. It also transpires that summons were sent to Ram Avatar Singhal, Ram Kumar Mishra and Ram Bilas Mandal (driver), Jagdish Shanker Trivedi and Dilip Kumar Singhal, who refused to be cross-examined on the ground that they cannot be compelled to give incriminating evidence against themselves in view of their fundamental right guaranted by Article 20(3) of the Constitution under which no person accused of any offence shall be compelled to be a witness against himself. Section 124(c) which provided that no order confiscating any goods or imposing any penalty on any person shall be made under Chapter IV unless the owner of the goods or such person is given a reasonable opportunity of being heard in the matter, does not specify any right of cross-examination.
33. In view of the above said position we do not consider that in the facts and circumstances of the case denial of cross-examination has prejudicially affected the rights of the main appellant. We also note that even if the statements are ignored and only documents which have been recovered during the searches are analysed the demand in the case will stand on its own feet.
34. We find that the main appellant has not produced any independent evidence whatsoever to support that the H.R. trimmings covered by the invoices were received by them except the copy of the invoices.
35. Further, we note appellant No.2, when faced with the said question could not give any reply. He submitted that he will check up the position and submit the detailed cost data sheet. However, as mentioned earlier, in spite of six summonses over a period of 1= years, the cost data sheet to justify the use of HR trimmings in the manufacture of ingots was not submitted. Mr. Jaiprakash Bhartia did not even respond to the summons and did not present himself for the investigation for examination. After the issue of show cause notice also, for over eight months he did not ask for the copy of any of the relied upon documents. He did not approach the office of the DGCEI for inspection of the documents, perhaps, keeping in view the fact that gist of some of the statements are already included in the show cause notice and the show cause notice clearly indicated that the goods transported were in the Gujarat based registration number vehicles and other evidences. It was only during the hearing on 19/02/2007 when the advocate for the appellants have asked for copies of some of the documents for which the adjudicating authority asked them to approach the DGCEI. Thereafter, the reply of advocate is self-evident which clearly indicates that appellant did not make any effort to get the copies of the relied upon documents. In the grounds of appeal it is also submitted that non-relied upon documents are required to be returned. From the show cause notice we do not find that the appellants premises were searched or documents were seized. It is not clear which non-relied upon documents the appellant has asked for. The only document that is found in the list of relied upon document is one solitary statement of the Director of the main appellant. Further, it is seen while recording the statement of the other co-noticees the statements like that of the transporter, Viramgam based dealer, etc. were shown and the questions were put up to the main-appellant and after seeing all those documents he admitted of the irregularity. He very clearly stated in his statement dated 29/11/2004 that as per the statement shown to him and the transport documents of M/s. Khodiyar Transport, he agreed that the CENVAT credit passed on to the Jaiprakash Strips Pvt. Ltd. in respect of HR trimmings to M/s. IIL are irregular and inadmissible. Thereafter he agreed to pay the CENVAT credit wrongly taken and utilized by them. It is a well settled law that whatever has been admitted need not be proved. The above mentioned statement of the Director of the main appellant has not been retracted at any point of time and therefore has evidentiary value. Keeping in view the conduct of the main appellant and the appellant No.2 during investigation as also during the adjudication proceedings we are of the considered view that no principles of natural justice had been violated in the facts and circumstances of the case.
36. We find that the main appellant has not produced any independent evidence so as to support that HR trimmings covered by the invoices were received by them and utilized by them except the copy of the invoices. We are not convinced that any manufacturer will receive goods without any transport documents whatsoever. In fact the appellant has not produced any transportation details to support that he has received the goods. On the contrary, there are enough documentary evidence to support that vehicle number mentioned in the invoices were in fact went to Gujarat Viramgam area with the HR trimmings.
37. Further, we find that it is undisputed that consignments were transported through the trucks having Gujarat registration Number. For the transportation of the goods within the State of Maharashtra such trucks cannot undertake this activity. None of the appellants have contradicted this allegation or said anything about this allegation. We also find that the incriminating documents recovered from M/s. SKT i.e. the office of the transport commission agent Shri Chandrakant Nathwani (appellant No. 9) clearly indicates the vehicle number, date, weighment of the goods, the destination where the goods are unloaded and other details. Shri Nathwani in his statements explained the contents of this register and have admitted that consignments were invariable going to Viramgam. It is also clear that in large number of cases Shri Chandrakant Nathwani was coordinating with M/s. Ispat Industries Ltd.s office to get the name of the consignee/buyer changed based upon the letter from the original bidder. The Register A5 and A7 recovered from M/s. SKT are reliable evidences.
38. Similar position has emerged from another transporter i.e. Diamond Roadways who was handling the consignment of Dolvi unit. In view of the above analysis we are convinced that the goods covered by invoices i.e. HR trimmings were never transported to the main appellants factory and the invoices based on which CENVAT credit has been taken were the invoices which were purchased without goods covered by such invoices. We also note the appellants submission about the explanation given in the CENVAT credit Rules. Present case is relating to getting only the invoices without getting the corresponding goods and is a case of fraud which cannot happen without the active connivance of the Director himself. Under the circumstances we hold that the appellant has not only not taken adequate and reasonable care before availing the CENVAT credit but had acted in fraudulent manner to avail the credit. In view of the above position we do not find any strength in the submission of the main appellant.
39. The main appellant has also raised the issue of limitation. The present case is relating to fraudulent availment of CENVAT credit wherein only the invoices were procured and HR trimmings covered by the said invoices were not received but some other scraps were purchased from some other sources. In the facts and circumstances of the case, extended period of 5 years has been correctly invoked and we reject the contention of the main appellant on this ground.
40. Appellant has also submitted that the penalty under Rule 13(1) and Rule 13(2) both cannot be imposed. We have gone through the Rule 13 of the Cenvat Credit Rules, 2002. We do not find any restriction in the said Rules that the penalties cannot be imposed under sub-rule (1) and sub-rule (2) both. Further, the circumstances under which penalty under Rule 13 (1) and 13(2) are imposed are at variation. Hence, this plea of the appellant is rejected and we uphold the imposition of penalty both under Rule 13(1) and 13(2).
41. In the result, we dismiss the appeals filed by the main appellant and appellant No.2.
42. Rule 25 and Rule 26 are as under:
Rule 25 - Confiscation and Penalty.
(1)?Subject to the provisions of Section 11AC of the Act, if any producer, manufacturer, registered person or a warehouse or a registered dealer, -
(a) remove any exciseable goods in contravention of any of the provisions of these rules or the notifications issued under these rules; or
(b) does not account for any exciseable goods produced or manufactured or stored by him; or
(c) engages in the manufacture, production or storage or any exciseable goods without having applied for the registration certificate required under section 6 of the Act; or
(d) contravenes any of the provisions of these rules or the notifications issued under these rules with intent to evade payment of duty, then, all such goods shall be liable to confiscation and the producer or manufacturer or registered person of the warehouse or a registered dealer, as the case may be, shall be liable to a penalty not exceeding the duty on the exciseable goods in respect of which any contravention of the nature referred to in clause (a) or clause (b) or clause (c) or clause (d) has been committed, or [rupees two thousand] whichever is greater.
(2)?An order under sub-rule (1) shall be issued by the Central Excise Officer, following the principles of natural justice. Rule 26. Penalty for certain offences :
(1)?Any person who acquires possession of, or is in any way concerned in transporting, removing, depositing, keeping, concealing, selling or purchasing, or in any other manner deals with, any excisable goods which he knows or has reason to believe are liable to confiscation under the Act or these rides, shall be liable to a penalty not exceeding the duty on such goods or [two thousand rupees], whichever is greater.
(2)?Any person, who issues-
(i) an excise duty invoice without delivery of the goods specified therein or abets in making such invoice; or
(ii) any other document or abets in making such document, on the basis of which the user of said invoice or document is likely to take or has taken any ineligible benefit under the Act or the rules made thereunder like claiming of CENVAT Credit under the CENVAT Credit Rules, 2004 or refund, shall be liable to a penalty not exceeding the amount of such benefit or five thousand rupees, whichever is greater. In the present case, the purported consignee as per the invoice was different from the actual consignee who were Viramgam based traders. Thus, the manipulation in the name of consignee was done with the sole purpose of evading excise duty by mis-using the credit of duty paid on the HR trimmings. In view of the said position, in our view, the goods are confiscable under Rule 25(1)(d) and penalty is also imposable.
43. As far as appellant No. 3 to 8 are concerned the main contention of the advocate for the appellants was that they are only the bidder and they are neither purchaser of the goods nor handled the goods in any way. We are not convinced with such a submission. It is an admitted position that appellant No. 3 to 7 are based in and around Viramgam and are trading in HR trimmings. They have been bidding for the same on the online auction. From the investigation it is very clear that the HR trimmings so bidded were transported to Viramgam. It is obvious that the HR trimmings covered by the invoices was purchased by them and thereafter sold by them. They have definitely involved in the sale, purchase and transportation of HR trimmings there can be no doubt that they actively handled the consignments. Rule 26 of the Central Excise Rules are applicable to any person who acquires possession of or in any way concerned in transporting, removed, depositing, keeping, concealing, selling or purchasing or in any other manner deals with any excisable goods which he knows or has reason to believe are liable to confiscation. As mentioned earlier, the traders were actively involved with the goods. They were also actively involved in getting the names of the consignee changed to the main appellant with an idea that the main appellant can avail the CENVAT credit. Further, since the invoices were not indicating their name but were indicating the name of the main appellant the goods are liable to confiscation as this contravenes Rule 25. Another submission of the learned counsel was that the show cause notice or the impugned order does not propose confiscation of the goods or held liable to such confiscation of such goods, we are unable to appreciate this position. Para 27 of the show cause notice, proper confiscation of HR trimmings and, therefore, appellants at sr. No. 3 to 8 are liable for penal action under the provisions of Rules 26 of the said Rules. We have no doubt that the HR trimmings so diverted to Viramgam were liable to confiscation and the appellants Nos. 3 to 8 have dealt with the goods and were concerned with such goods and were in the knowledge that such goods are liable to confiscation. Under the circumstances, the penalty imposed on them is correct.
44. We also note that the Honble High Court of Gujarat in the case of Sanjay Vimalbhai Deora vs. CESTAT reported in 2014 (306) ELT 533 (Guj.), has held that a person would render himself liable for penalty for indulging in activities mentioned in Rule 26 of the Central Excise Rules, 2002, even if goods are not confiscated or had not been rendered liable for confiscation. We also note that as in that case, even in the present case all the appellants have full knowledge about every stage of removing, keeping, selling, concealing the excisable goods and the same would not have been possible without their active participation and connivance with each other. We also note that the said judgment of the Honble Gujarat High Court has been upheld by the Honble Supreme Court as reported in 2014 (309) ELT A131 (SC). Further, the Honble Punjab & Haryana High Court in the case of Vee Kay Enterprises vs. CCE reported in 2011 (266) ELT 436 (P&H), has held as under:-
9. As regards applicability of provisions introduced on 1-3-2007 to alleged acts committed prior to the said date, the matter is covered by orders of this Court referred to above which are not shown to be distinguishable. Accordingly, we hold that the amended provisions will not apply to the acts committed prior thereto.
10. Inspite of? non-applicability of Rule 26(2), penalty could be levied as the appellant was concerned in selling or dealing with the goods which were liable to confiscation inasmuch as the appellant claimed to have sold the goods in respect of which the cenvat credit was taken. In such a case, Rule 25(1)(d) and 26(1) are also applicable. The person who purports to sell goods cannot say that he was not a person concerned with the selling of goods and merely issued invoice or that he did not contravene a provision relating to evasion of duty. The appellant issued invoices without delivery of goods with intent to enable evasion of duty to which effect a finding has been recorded and which finding has not been challenged. We are, thus, unable to hold that appellant was not liable to pay any penalty.
45. Learned counsel has also submitted that while the duty involved is only little over ?5 lakhs but the penalty imposed on each of the appellants is ?5 lakhs. We agree with the contention of the learned AR that penalty equal to the duty involved can be imposed on any number of persons who were concerned in any way with the goods liable for confiscation. However, we find force in the contention of the learned counsel for the appellants that few bidders put together have bidded for the goods on which duty involved is ? 5,15,511/- and, therefore, the penalty imposed upon each of the individual should be on the lower side. We also observe that the individual appellants have not furnished any detail about the exact quantum of duty relating to the goods dealt by them.
46. Appellant has also contended that the penalty cannot be imposed on partner as well as on the partnership firm. We find that this issue is dealt by this Tribunal in appellants own case in the case of Nasik Strips Pvt. Ltd. vs. 2010 (256) ELT 307, specifically in para 6(c) of the order. Therefore, we do not find any need to again discuss the issue. However, keeping in view the overall facts and circumstances of the case, we reduce the penalty on appellant No. 3 to 8 from ? 5 lakhs each to ? 1 lakh each.
47. As far as appellant No.9 is concerned, he was the main transporter and was actively aware that the invoices are for various persons within Maharashtra while the goods have to go to Viramgam. Not only this he was also made fictitious LRs in the name of fictitious transporter based in Raipur and fictitious documents were prepared for safe passage of goods. The original documents, after procuring from M/s. IIL were handed over to the broker/dealer in Mumbai or the main appellant. Under the facts and circumstances of the case, penalty is correctly imposed. However, we reduce the penalty from ? 5 lakhs to ? 2 lakhs keeping in view the CENVAT credit involved in the present case.
48. As far as the appellant No. 10, M/s. Ispat Industries Ltd. is concerned, while we note that before clearing the goods they have paid the appropriate amount of duty. However, we also note that the goods were being transported in the Gujarat registered vehicle while the consignee name and address is that of Maharashtra, and such vehicles cannot take such freight. We also note that from the documents recovered from their premises, that they were fully aware that the HR trimmings were consigned to Viramgam based bidder and are being used by SSI units there. Under these circumstances, it was incorrect on their part to indicate the name and address of the main appellant or first stage dealer as consignee who were based in Mumbai. Since they have changed the name of the consignee in spite of the fact that the goods were being transported to Viramgam or nearby area in different State, the HR trimmings cleared have therefore become liable for confiscation as discussed earlier and they are liable to penalty. We have also gone through the few judgments quoted by learned counsel in their own case. These judgments were passed by the Single Member of this Tribunal. More over the said judgments have been passed before the judgment of honble Punjab & Haryana High Court in the case of Vee Kay Enterprises vs. Commissioner of Central Excise reported in 2011 (266) ELT 436 (P&H) as also in the case of M.S. Metals vs. Commissioner of Central Excise, Haryana 2014 (309) ELT 241 (P&H). Keeping in mind the over all facts and circumstances of the case, particularly that they paid correct amount of duty, and also some of the judgments quoted by them, we reduce the penalty imposed to ` 50,000/-.
49. We note that both the sides have quoted number of judgments in support of their contention. We had gone through the said judgments. The present case is a fact based and we find that the facts of the present case are very different compared to the facts involved in various judgments quoted and we do not consider it necessary to discuss each of these judgments.
50. Appeal of the Revenue is on the ground that the Commissioner has not passed any order relating to interest under Section 11AB of the Central Excise Act, 1944. As we have confirmed the duty amount, it goes without saying that the appellant will be required to pay interest as per the provisions of Section 11AB of the Central Excise Act, 1944. The appeal of the Revenue on the said count is allowed.
51. In the result the appeals are dispose of as below:
Appeal No. Name of the Appellant Final Order
1.
E/1572/2007 Jai Prakash Strips Limited Appeals rejected
2. E/1573/2007 Jai Prakash Bhartia
3. E/90/2008 Akshar Trading Co.
Penalty reduced to ` 1 lakhs each
4. E/91/2008 Harkishan B. Soneji
5. E/1584/2007 Jyoti Products
6. E/169/2008 Memon Associates
7. E/170/2008 Mohsin H. Memon
8. E/1601/2007 Arun Acharya
9. E/1602/2007 Chandrakant Nathwani Penalty reduced to ` 2 lakhs
10. E/1469/2007 Ispat Industries Limited Penalty reduced to ` 50,000/-
11. E/1453/2007 Commissioner Appeal allowed.
52. Appeals disposed of in the above terms.
(Pronounced in Court on 06/07/2015) (S. S. Garg) Member (Judicial) (P.K. Jain) Member (Technical) */as 4