TaxTMI 
TaxTMI 
2014 (12) TMI 1035
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....1A of the Central Excise Act, 1944 along with interest thereon under Section 11AB and also imposing equivalent amount of penalty under Rule 13 of the said Rules, 2001/2002 read with Section 11AC of the Central Excise Act,1944. The MS scrap valued at Rs. 10.15 crore (approximately) seized from the premises of the appellant was confiscated along with an option to redeem the same on payment of a fine of Rs. 1,62,39,751/-. In addition, he has also imposed penalties on M/s. Steel India Company, M/s. Mehta Trading Corporation, M/s. Madhuban Trade Steel Pvt. Ltd., M/s. Al-Karim Scrap Traders Pvt. Ltd. and M/s. Singh & Sons who are dealers/brokers for the supply of scrap and Shri Manoj M. Mehta, Director of M/s Mehta Trading Corporation and Shri Pritesh Jain, Director of M/s. Madhuban Trade Steels Pvt. Ltd. Aggrieved of the same, the appellants are before us. 3. The charges against the appellants are that M/s. ISSAL had been availing CENVAT credit on market scrap supplied by registered dealers, namely, M/s. Steel India Company, M/s. Mehta Trading Corporation and M/s. Madhuban Trade Steel Pvt. Ltd. through two brokers, namely, M/s. Al-Karim Scrap Traders Pvt. Ltd. and M/s. Singh & Sons b....
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....reversed the CENVAT credit to the extent of Rs. 10 lakhs. Some of the transporters used for transporting the scrap from the dealers also have admitted that the services of their lorries were used for transportation of bazaar scrap from the market. 3.4. In the light of these evidences notice was issued vide notice dated 15/09/2005 proposing to deny CENVAT credit amounting to Rs. 1,62,39,751/- to M/s. ISSAL and to recover the same along with interest and penalties. The notice also proposed penal action against the dealers/brokers who connived with the main appellant M/s. ISSAL in the fraudulent availment of CENVAT credit on bazaar scrap. The said notice was adjudicated vide the impugned order and the demands were confirmed along with interest and penalties imposed. 4. The learned counsel for the main appellant, M/s. ISSAL submits that they have purchased the scrap for which they paid consideration through cheques. It is also not in dispute that the appellant had received the scrap. Once the dealer issues CENVATable invoices indicating duty payment and consideration is paid through licit channels, then the appellant cannot be held responsible for any fraud perpetrated by the dea....
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....stainable in law. 4.4 The counsel for the brokers namely, M/s. Al-Karim Scrap Traders Pvt. Ltd and M/s. Singh & Sons contend that they are only brokers to the transaction. They receive orders from M/s. ISSAL on commission basis and they pass on these orders to dealers who supply the scrap directly to M/s. ISSAL. They have nothing to do with the actual supply of scrap. They did not have any personal knowledge that the scrap supplied by the dealers were non-duty paid and therefore, the question of imposing any penalty under Rule 26 would not arise at all. Inasmuch as they have no knowledge of the contravention or fraud, it is pleaded that the impugned order imposing penalty is not sustainable. 5. The learned Additional Commissioner (AR) appearing for the Revenue, on the other hand, reiterates the findings of the adjudicating authority. He submits that when the factory of the appellant was visited on 12/08/2002, there was a quantity of 706 MTs of scrap and these were found to be bazaar scrap and not industrially generated scrap. In fact no stock of industrially generated scrap was found to be available with the appellant and on the said bazaar scrap the appellant had taken CENVA....
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.... the cover of documents issued by dealers who are authorised to issue CENVATable invoices. The driver also admitted that the scrap loaded on to the vehicles had been picked up from various places and these were not as per the details given in the cover document. When the officials of the ISSAL were questioned, Shri Pradeep Sengupta, AGM (Steel Melting Scrap) clearly admitted that the scrap used by them in the manufacturing process were odd lots of assorted bazaar scrap collected from various sources in small quantities by kabadis, i.e., miscellaneous scrap gathered by scavengers. Shri Ravindra Pandarinath Zanpure, Manager (Works Accounts) also admitted to receipt of bazaar scrap from various dealers under the cover of CENVAT invoices on which they have been taking credit. Shri R. Kumaar, General Manager of the main appellant also confirmed the statement of Shri Pradeep Sengupta, confirming that the suppliers, i.e., dealers had not sent the scrap ordered for but instead supplied bazaar scrap. Thus, there is a clear evidence from the statements of those officials that what the appellant had been receiving was bazaar scrap on which no excise duty was payable, whereas credit has been t....
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.... payment of excise duty or the additional duty of customs, as the case may be, either- (a) from his personal knowledge; or (b) on the strength of a certificate given by a person with whose handwriting or signature he is familiar; or (c) on the strength of a certificate issued to the manufacturer or the supplier, as the case may be, by the Superintendent of Central Excise within whose jurisdiction such manufacturer has his factory or the supplier has his place of business, and where the identity and address of the manufacturer or the supplier is satisfied on the strength of a certificate, the manufacturer or producer taking CENVAT credit shall retain such certificate for production before the Central Excise Officer on demand." In the present case, from the records it is seen that the appellant did not place orders for the purchase of scrap directly on the manufacturer of scrap or dealer. The orders were placed through brokers such as Al-Karim Scrap Traders Pvt. Ltd., Singh & Sons, Maruti Trading Company and so on. These brokers, who placed the order for the scrap from the dealers and....
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....said decision dealt with a situation where the recipient of the goods who had taken credit had taken all reasonable steps provided for in Rule 7(2). In the present case, as discussed in paras 6.3 to 6.5 above, the appellant did not take adequate precautions and they are, in fact, a party to the fraud. Therefore, the facts involved in the present case are different and distinguishable. Similarly, with regard to the reliance placed on the apex Court's decision in Kay Kay Industries case, the goods were received directly from the manufacturer who had not discharged the tax liability thereon. Therefore, it was held that credit could be allowed. In the facts of the case before us, the appellant has not procured the goods from the manufacturer but from dealers. The dealers also did not supply the duty paid goods but supplied bazaar scrap obtained from traders. In these circumstances, the ratio of the decision in the Kay Kay Industries case would not apply at all and we hold accordingly. 6.7 In the case of A.N. Guha & Co. vs. Collector [1996 (86) ELT 333], this Tribunal held that it is not necessary for the department to establish a fact with mathematical precision. Once the presum....
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....h this statement of law, Hodson, LJ said 'Just as in civil cases the balance of probability may be more readily fitted in one case than in another, so in criminal cases proof beyond reasonable doubt may more readily than in another, so in criminal cases proof beyond reasonable doubt may more readily be attained in some cases than in others.' (Hornal V. Neuberger P. Ltd., 1956 All ER 970, 977)". 6.8 In the case of Collector of Customs, Madras vs. D. Bhoormul - 2002-TIOL-253-SC-CUS cited supra, the hon'ble Court further held as follows: "It cannot be disputed that in proceedings for imposing penalties under clause (8) of Section 167, to which Section 178A does not apply, the burden of proving that the goods are smuggled goods, is on the Department. This is a fundamental rule relating to proof in all criminal or quasi-criminal proceedings, where there is no statutory provision to the contrary. But in appreciating its scope and the nature of the onus cast by it, we must pay due regard to other kindred principles, no less fundamental, or universal application. One of them is that the prosecu....
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....property," though the latter is only a presumption of fact. Thus the burden on the prosecution or the Department may be considerably lightened even by such presumption of fact arising in their favour. However, this does not mean that the special or peculiar knowledge of the person proceeded against will relieve the prosecution or the Department altogether of the burden of producing some evidence in respect of that fact in issue. It will only alleviate that burden to discharge which very slight evidence may suffice." 6.9 The concepts of "reasonable doubt" and "pre-ponderence of probability" have been lucidly explained by the hon'ble apex Court in the case of State of Rajasthan vs. Mohan Lal [2009 (237) ELT 435 (S.C.)] as follows:- "36. Doubts would be called reasonable if they are free from a zest for abstract speculation. Law can not afford any favourite other than truth. To constitute reasonable doubt, it must be free from overemotional response. Doubts must be actual and substantial doubts as to the guilt of the accused persons arising from the evidence, or from the laci of it, as opposed to mere vague apprehe....
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....the scrap procured from other dealers, through brokers, it is seen from the statements of brokers and also the transporters that the scrap was sourced from not the manufacturers but from various traders. In fact Shri Minaz Mohan Masani of Al-Karim Scrap Traders Pvt. Ltd., in his statement dated 04/08/2002 has categorically stated that the scrap purchased from M/s. Simandhar Steel Movers (India) Pvt. Ltd. and M/s. Steel India Company are not supplied to the main appellant M/s. ISSAL but it is some other material procured from the market which was supplied. Similarly, Shri Nilesh P. Jain of Maruti Trading Company has also confirmed that they have supplied non-modvatable scrap to the appellant. Thus, corroborative evidences exist that the scrap received by the ISSAL were not duty paid scrap but non-modvatable scrap. 7. In view of the above evidences available on record, confirmation of demand of CENVAT credit fraudulently taken to the extent of Rs. 1,62,39,751/- along with interest thereon is clearly sustainable in law. The appellant is also liable to penalty for an equivalent amount under Rule 13 of the CENVAT Credit Rules, 2002 read with Section11AC of the Central Excise Act, 194....