TaxTMI 
TaxTMI 
2015 (7) TMI 457
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....not received, the appellant is not eligible to take credit of the same. The credit availed is incorrect and is to be recovered, in addition to the interest and penalties. Notices to appellant No.2 who was the then Sr. Vice President of the appellant s unit, appellant No. 3, 4 & 5 who are the dealers in the iron and steel scrap from whom the appellant No.1 has placed orders to procure the said scrap and are not registered with the Excise department, are issued for imposition of penalty. The case was investigated on the basis of an information and perhaps as a consequence to another investigation undertaken against SSMIPL by the other jurisdictional Commissionerate. 2. Investigation by the jurisdictional Commissionerate of SSMIPL revealed that the said dealer has availed cenvat credit on central excise invoices by various ship breakers which included M/s. Ajay Alloys Casting Pvt. Ltd., Alang, M/s. R.K. Steel & Alloys, Pipavav and M/s. Baldev Ship Breakers Ltd., Alang. On enquiries made with the jurisdictional Superintendent in charge of the said ship breaking unit revealed that these ship breakers were not in existence during the period when the invoices were shown to have been issu....
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....regarding the vehicle numbers mentioned in various invoices. It was revealed that some of the vehicle numbers mentioned in the invoices were that of tankers, motor cycles, tourist cars, delivery vans etc. which are not capable of consigning MS scrap. Further investigations were made with some of the vehicle owners. These vehicle owners in their statements confirmed that their vehicles were not used for transportation of iron and steel scrap obtained from ship breaking from Gujarat to SSMIPL godown in Mumbai. From the above investigation, it was clear that iron and steel scrap obtained by ship breaking covered by various invoices issued by the ship breaking units were either based upon the bogus/fake invoices or the goods covered by the said invoices never moved out of the State of Gujarat to SSMIPL based in Mumbai. Since the scrap covered by such invoices have not been received by SSMIPL, they could not have sold the same to the various persons including the present appellant. Enquiries were also made about the movement of goods from SSMIPL s godown to the present appellant. Enquiries with various truck drivers indicated that they were not aware of any godown of SSMIPL or lifted fr....
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.... reported in 2005 (192) ELT 806 (T), (ii) Lloyds Metal Engg. Ltd. vs. CCE reported in 2004 (175) ELT 132 (T). 3.2 The learned counsel further submitted that the next objection of the Revenue is that even some of the representatives of the ship breakers have stated that they have sold heavy plates to SSMIPL, which were not meant for melting purpose but for structural purpose. It was submitted that this statement is in favour of the appellant as this proves that SSMIPL has indeed shifted goods from ship breakers and the same was subsequently supplied to the appellant. It was also submitted that re-rollable scrap can also be used for melting purpose and the furnace employed in the appellant s factory is capable of melting all types of scrap and, therefore, even if in case SSMIPL has procured metal plates from ship breakers and supplied the same to them, the same would have been used by the appellant as normal melting scrap. It was also submitted that statements of Shri Bansal and other ship breakers were not made part of RUD and, therefore, these statements are not sustainable under the law. It was also submitted that the appellant has taken a total credit of Rs. 20,85,497/- only re....
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....ludes invoices and supporting documents like vehicle numbers, delivery challans, weighment slips etc. and, therefore, the said contention is not relevant. It was also submitted that some of the vehicle owners have denied of transporting any goods from Gujarat. It was submitted that as far as they are concerned, they have received the goods. It was also submitted that the Revenue has pointed out 10 specific invoices in respect of which vehicle owners have denied transport of goods from SSIMPL to the appellant. It was submitted that copies of nine invoices along with all supporting documents have already been submitted by them and for invoice No.722 dated 29.8.2003 mentioned at serial No.2 of the table, they have not received any material under the said invoice and have not availed any credit on the same. 3.5 As far as Revenue s contention that key person and employees of the appellant have admitted that they have not received ship breaking scrap in their factory, it was submitted that they never placed orders for ship breaking scrap as is evident from the purchaser order and, therefore, employees statements are correct. The fact is also evident from the central excise invoices rece....
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.... not invokable in the facts of the case. There was no suppression of facts on the appellant s behalf with intent to evade payment of excise duty. They were under the bona fide belief that credit of duty paid on the aforesaid inputs received from SSMIPL is correctly admissible to them. In support of their contention, they quoted the following two case laws:- (i) Shabana Steel vs. CCE reported in 2007 (177) ELT 332 (T), and (ii) IDL Chemicals vs. CCE reported in 1996 (88) ELT 710 (T). 3.7 It was submitted that Revenue s reliance in the case of Tigrania Metals & Steel Industries reported in 2001 (132) ELT 103 (T) and Limenabh Chemicals reported in 1999 (68) ELT 77 (Mad.) is incorrect. 3.8 It was further submitted that no penalty is imposable on appellant No.2. 4. As far as appellant No. 3,4 & 5 are concerned, the submission was that they are not registered excise dealers and they have not dealt with the goods in question. It was submitted that they are trader-cum-commission agents for waste and scrap of iron and steel and collect orders from various customers and pass the orders to other traders on a commission margin. It was submitted that they have not issued any cenvat documen....
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....Tribunal in order No. A/517-523/14/EB dated 25.6.2014 in the case of Steel India Co. in similar circumstances, set aside the penalties. 5. Learned special counsel reiterated various findings of the Commissioner. The learned special counsel submitted that SSMIPL was doing only the fake transactions and actually no goods were being supplied by them. In the present case, the three dealers have only procured the invoices from SSMIPL and no goods were procured from them. It is clear from the statements of various transporters that they had not lifted the goods from SSMIPL but the goods were lifted from other places including the dealers, appellant No.3,4 & 5. This itself proves that what was being done was that the bazaari scrap was being procured by appellant No. 3,4 & 5 in order to avail the cenvat credit and invoices were being procured from SSMIPL. SSMIPL was not selling any ship breaking scrap as it has come out clearly in the investigation that no ship breaking scrap crossed the Gujarat border for SSMIPL. Therefore, there is no question of their selling the scrap. SSMIPL has procured some invoices from the ship breaking units. Some of the invoices procured were also fake. Based u....
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....from three unregistered dealers and obtain the invoices of someone else. It cannot be a coincidence that all the three unregistered dealers will get invoices from one source viz. SSMIPL and that too for a period over one year. It was further submitted that the enquiries conducted with the driver and owner of the vehicles whose numbers appeared on the invoices issued by SSMIPL, revealed that none of them have transported material from the godown of SSMIPL to the main appellant. If the transporter had actually transported the scrap from SSMIPL to the main appellant, there was no reason form them to deny the said fact. It was further submitted that the appellants could have produced the drivers of the vehicles to prove that the goods had moved from the godown of SSMIPL to the main appellant. It was submitted that the driver of vehicle No. MCU 2671 had admitted to have delivered scrap to the main appellant. However, he has deposed that he had collected the scrap from the manufacturer in Thane area to the godown of Meegora Steels Pvt. Ltd. at Kalyan and the same was lifted from Meegora Steels Pvt. Ltd. and delivered to the main appellant. This example itself suggests that the scrap was ....
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.... procedures of the company were not followed in respect of the consignments received and covered by the present show cause notice. In view of this factual position, the learned special counsel submitted that the order of the Commissioner is required to be upheld. It was also submitted that Shri S.V. Sirsikar was looking after day-to-day procurement of materials and such a thing cannot happen without his tactical approval and active connivance. Similarly, the three dealers involved in the case might have supplied the scrap from some non duty paid sources and procured invoices from SSMIPL. They are, therefore, concerned with the goods and penalty is imposable under Rule 26 in view of the judgment of the Hon'ble Punjab & Haryana High Court in the case of Vee Kay Enterprises vs. CCE reported in 2011 (266) ELT 436 (P&H) and the said judgment has been followed by the High Court in the subsequent cases also. 6. We have considered the rival submissions. In the present case, Revenue s contention is that the duty paid invoices received from first stage registered dealer cannot be accepted for two reasons. The first reason being that first stage dealer himself has not received the goods men....
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.... 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 c....
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....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 Minister's 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 ne....
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....dhar Enterprises (SE in short) and M/s. Simandhar Steel Movers (India) Pvt. Ltd. (SSMIPL in short). Some of the ship-breakers whose name figures in the invoices issued by the first stage dealers, from whom the ship-breaking scrap was allegedly procured, namely, M/s. R.K. Steel Alloy Industries, Pipavav, M/s. Ajay Alloys Castings Pvt. Ltd. and M/s. Baldev Shipbreakers, Alang had closed down their activities since a long time and hence the invoices said to have been issued by them are not genuine. This fact has been confirmed by the letter dated 5-2-2004 and 15-4-2004 issued by the Superintendent of Central Excise, Alang. Further, enquiries made with the transport authorities in Gujarat regarding transport of goods from Gujarat to Bhiwandi/Mumbai revealed that in some cases, the vehicles used for transportation were motorcycles, tankers, cars, autorikshaws, delivery vans, etc., incapable of transporting iron and steel scrap. The third set of evidence are statements of a few of the transporters who were purported to have transported goods from Gujarat to the premises of dealers at Bhiwandi/Mumbai and who have denied transporting any goods from Gujarat to Mumbai. The fourth set of evid....
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....also through other checkposts and, therefore, the letters of the sales tax authorities at Bhilad does not conclusively establish that the scrap has not been received by the aforesaid dealers. Further, doubts have been expressed about the reliability of the records maintained by the sales tax authorities at Bhilad checkpost. It has also been argued that the appellants cannot be asked to prove the impossible about the movement of scrap from Gujarat to Mumbai. It has also been contended that there has been denial of principles of natural justice inismuch as the department has not furnished a copy of the letter written by them to the Sales Tax Authorities in Gujarat and they have reserved the right to cross-examine the Sales Tax Authorities once the copy of the letter written by the department to the said authorities is furnished. Reliance has been placed on the judgments of this Tribunal in the case of Transpek Industry Ltd. v. Commissioner of Central Excise - 2010 (249) E.L.T. 91 and Monarch Metals P. Ltd. v. Commissioner of Central Excise, Ahmedabad - 2009 (95) RLT 334 = 2010 (261) E.L.T. 508 (Tri.-Ahmd.) and the Narmada Bachao Andolan case. 75.2 I have carefully considered the riv....
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.... two-wheelers, three-wheelers, etc., which are incapable of transporting steel scrap. Again in a few cases, statements of the transporters (owners of vehicles which figure in the invoices) were recorded and they have denied transporting any scrap from Gujarat to the dealers in Mumbai/Bhiwandi. These facts have been further corroborated by the letters issued by the checkpost and sales tax enforcement authorities in Gujarat which categorically state that no vehicle carrying scrap from the ship-breakers to the two dealers in Mumbai have crossed the commonly used checkpost at Bhilad during the impugned period. Thus, it is not one single piece of evidence but a series of evidences that have been brought out by the Revenue which corroborate and strengthen each other and which substantiate the fact that from the documents available on record, the scrap claimed to have been received by the appellants are not the same as those supplied by the ship-breakers in Gujarat on which duty has been paid. In other words, the goods said to have been received by the appellants are different from the goods covered by the documents on record. These evidences, unearthed by the investigation, have not been....
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....he Customs Authorities. . The same reasoning applies to the facts of the present case. Therefore, I do not find any merits in this argument adduced by the appellants and reject the same. 75.3 As regards the case laws relating to Transpek Industry Ltd. and Monarch Metals Pvt. Ltd., cited supra, the facts of those cases are different and distinguishable. In Transpek Industry Ltd. s case, the issues related to purchase of capital goods by the appellant therein from a registered dealer on payment of duty. In that case there was no dispute about the goods supplied by the dealer and receipt of the same by the assessee. In that context it was held that the assessee buying goods from a registered dealer cannot be expected to examine as to whether the credit availed by such dealer is in accordance with law or not. In the other case pertaining to Monarch Metals Pvt. Ltd. it was held that transporters incriminating statements being in the nature of statements of the co-accused are not a reliable evidence. In the case before me, the charge against the appellant is that the goods on which they have taken Cenvat credit are not the same as the goods appearing in the invoices and transport docume....
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....e of R.V.E. Venkatachala Gounder v. Arulmigu Viswesaraswami & V.P., (order dated 8-10-2003 in Civil Appeal No. 10585 of 1996) the Hon'ble Apex Court held as follows : Whether a civil or a criminal case, the anvil for testing of proved , disproved and not proved , as defined in Section 3 of the Indian Evidence Act, 1872 is one and the same. A fact is said to be proved when, if considering the matters before it, the Court either believes it to exist, or considers its existence so probable that a prudent man ought, under the circumstances of a particular case, to act upon the supposition that it exists. It is the evaluation of the result drawn by applicability of the rule, which makes the difference. The probative effects of evidence in civil and criminal cases are not however always the same and it has been laid down that a fact may be regarded as proved for purposes of a civil suit, though the evidence may not be considered sufficient for a conviction in a criminal case. BEST says : There is a strong and marked difference as to the effect of evidence in civil and criminal proceedings. In the former a mere preponderance of probability, due regard being had to the burden of pro....
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....basis, believe in the existence of the fact in issue. Thus, legal proof is not necessarily perfect proof; often it is nothing more than a prudent man s estimate as to the probabilities of the case. The other; cardinal principle having an important bearing on the incidence of burden of proof is that sufficiency and weight of the evidence is to be considered - to use the words of Lord Mansfield in Batch v. Archer (1) according to the proof which it was in the power of one side to prove, and in the power of the other to have contradicted . Since it is exceedingly difficult, if not absolutely impossible, for the prosecution to prove facts which are especially within the knowledge of the opponent or the accused, it is not obliged to prove them as parts of its primary burden. Smuggling is clandestine conveying of goods to avoid legal duties. Secrecy and stealth being its covering guards, it is impossible for the Preventive Department to unravel every link of the process. Many facts relating to this illicit business remain in the special or peculiar knowledge of the person concerned in it. On the principle underlying S.106, Evidence Act, the burden to establish those facts is cast on, the....
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.... ... 75.8 From the case laws cited above, the department need not prove the case with mathematical accuracy. So long as the department has established the case with such a degree of preponderance the existence of a fact, it is sufficient. In the instant case, the burden to establish eligibility to the credit is on the appellant-assessee and if they fail to establish or explain the facts established by the department, an adverse inference arises against them coupled with the presumptive evidence adduced by the department. 75.9 The appellants have also argued that if they are required to show that the dealer from whom they purchased the scrap procured the same legitimately, they are being asked to prove the impossible, which is not permissible and have placed reliance on the judgment of the Apex Court in the Narmada Bachao Andolan case. This argument of the appellants has no relevance to the case under consideration. The Hon'ble Apex Court in Shanker Raju v. UOI [2011 (271) E.L.T. 492 (S.C.)] observed thus : "Where the Legislature clearly declares the intent in the scheme of a language of a statute, it is the duty of the Court to give full effect to the same without scanning its w....
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....issued to the appellants are not reflected and invoices bearing the same number are shown to have been issued to other buyers though for a different quantity and value. Further, in many cases, the transporters who are said to have transported these goods from the dealers premises to the appellants have denied transporting these goods. In the case of appellants situated in Nasik, the Municipal Corporation authorities have confirmed that as per their records, escort permits, which are statutorily required for movement of these goods into the Corporation area, have not been issued at all which again corroborates the fact that the impugned goods (melting scrap) have not been received by the appellants at all. 76.2 In the case of M/s. Amar Ispat Pvt. Ltd., one of the appellants in the present case, Sri Sunil Fakirchand Agarwal, who was working as the General Manager of the said appellant-firm during the material period, in his statement dated 3-8-2006, recorded under Section 14 of the Central Excise Act, 1944, averred as follows :- "To-day you have shown me the invoices issued by M/s. Simandhar Steel Movers India Pvt. Ltd. to M/s. Amar Ispat Pvt. Ltd. and the copies of the RG 23D regi....
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....er alia, stated that they were dealing in both cenvatable material as well as non-cenvatable material. Both these goods were stored in the same godown at Bhiwandi. The non-cenvatable material covers the scrap material such as pieces of angle-channel, plate cuttings, pieces of pipes etc. On comparison of these two statements with respect to the nature of the materials supplied by the dealer and received by the appellants, it is clear that the material was non-cenvatable material. In other words, non-cenvatable material was supplied under the cover of invoices for cenvatable material, which once again shows that the documents supplied by the said dealer did not pertain to the goods supplied and the Cenvat credit was transferred fraudulently. 76.4 The appellants contention is that they are not responsible for maintenance of the accounts by the dealer. So long as they have paid consideration for what has been received by them, it is sufficient and they cannot be expected to undertake any responsibility more than this. 76.5 This argument is wrong for the following reasons. Sub-rule (3) of Rule 7 of Cenvat Credit Rules, 2002 as it stood at the relevant time (as also its predecessor and....
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....Credit Rules, as it stood at the relevant time the onus of proving that they are eligible for the Cenvat credit lies on the appellants which they have failed to discharge. Therefore, ratio of the judgment in the cases of D. Bhoormul, cited supra, and A.N. Guha cited supra, apply squarely to the facts of the case and, therefore, even in respect of the parallel invoices/duplicate invoices the appellants are not entitled for the credit. 76.6 The facts of a case decided by the Hon'ble High Court of Bombay on 11th May, 2012 in M/s. Mahalaxmi Cotton Ginning Pressing and Oil Industries v. The State of Maharashtra & Ors. [2012 (191) ECR 0433 (Bombay)] closely resembles the case before me and the ratio decided therein has great relevance. In that case, the constitutional validity of Section 48(5) of the Maharashtra Value Added Tax Act, 2002 was under challenge. If the constitutional validity was upheld, the petitioner sought a mandamus to the State to recover from the vendor tax paid on goods of which a set-off was claimed. Consequential orders of set-off and refund were sought. The petitioner was a re-seller of cotton bales and he filed tax returns and based on the purchases effected, cla....
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....ment Treasury. The grant of set-off without receipt of tax into the treasury would result in a loss of revenue, a consequence which the provision of set-off does not contemplate. 29. A set-off constitutes a concession granted by the Legislature. In the absence of a set-off under section 48(5), the selling dealer would be liable under the charging provision of MVAT Act, 2002 to pay tax on the sale consideration. There is no independent right to a set-off apart from section 48. The entitlement to a set-off is created by the taxing statute and the terms on which a set-off is granted by the legislation must be strictly observed. 42...Moreover, the concept of a set-off presupposes that tax has been paid in respect of the goods in respect of which a set-off is claimed. To allow a set-off though the tax has not been paid actually would be to defeat the legitimate interests of the Revenue. Hence, in the overall statutory scheme of section 48, sub-section (5) has a rational basis and foundation... In granting a set-off, the Legislature can impose conditions and that imposed in section 48(5) is not lacking in rationality. Moreover, the scheme of set-off in section 48 has to be read in its....
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.... not submitted any such proof or maintained any such records showing the receipt of the materials. In a few cases there is a clear admission that the documents on the strength of which credit was availed was not accompanying the goods said to have been received but were received separately. So long as the appellants have not discharged the onus cast on them about the receipt of the materials, the presumption that they have not received the materials remain valid and irrebuttable. In such a situation, the only reasonable inference that can be drawn is that they are also a party to the fraud committed by the dealers. This Tribunal in the case of AIA Engineering Pvt. Ltd. v. Commissioner of Central Excise, Ahmedabad-II - 2006 (195) E.L.T. 154 held that where credit has been availed without actually receiving any duty paid inputs and the same has been corroborated by the statement of dealers, extended period of time is rightly invocable. Revenue has also relied on the decision of the Hon'ble Apex Court in the case of Commissioner of Customs (Preventive) v. Aafloat Textiles (I) Pvt. Ltd. - 2009 (235) E.L.T. 587 (S.C.). In the case before me, the transaction undertaken by the appellant i....
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....able to the facts of the present case as the investigation in the present case was started consequent to the investigation against SSMIPL by the jurisdictional Commissioner. We also note that there are some minor differences which have been highlighted by the learned counsels for the appellants. We have given considerable thought to those differences but in our view, those minor differences will not make any difference in the conclusion. In fact we also note that in the present case, the appellant is a very well established company and producers of various steel and alloy steel items and, therefore, they would have far better knowledge about different types of scrap and it also appears that they are placing the order with certain gradation of scrap such as grade I, grade II etc. On receipt of scrap, gradations were analysed and indicated. We note that in respect of the invoices under discussion, none of the standard operating procedures made by the appellant themselves was followed. This itself indicates that there was a tactical support from some people within the organization. There is no explanation whatsoever from the appellant s side why the operating procedures prescribed by ....
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....ve not got through without his tactical support for the wrongs. 10. Similarly, appellant No.3,4 & 5 have aided and abetted in this fraud leading to evasion of duty. The appellants counsel has quoted that no penalty can be imposed under Rule 26. We find that the Hon'ble High Court of Punjab & Haryana in the case of Vee Kay Enterprises vs. CCE reported in 2011 (266) ELT 436 (P&H) has observed as under:- "6. Alternatively, it was submitted even if the appellant was liable to pay duty it did not stand on the same footing as person who wrongly availed of the credit and doctrine of proportionality was required to be applied by taking into account the extent of culpability. In this regard reliance has been placed on order of this Court dated 5-7-2010 in CEA No. 125 of 2010, Commissioner of Central Excise, Chandigarh-I v. M/s. Lalit Steel and Agro Industries making distinction in the matter of quantum of penalty between person who wrongly availed of the cenvat credit and the person who merely issued invoice on the basis of which cenvat credit was wrongly availed. To consider the rival submissions, we may refer to the relevant rules which are as under :- "Rule 25-Confiscation and Penalty....
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.... the person who did not actually deliver the goods and merely issued a fake invoice which enabled wrong availing of cenvat credit and the extent of penalty which could be levied. 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. In spite 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....