TaxTMI 
TaxTMI 
2015 (11) TMI 1039
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.... ORDER Per: P.K. Jain: Brief facts of the case are that M/s. Ispat Industries Ltd., (appellant No. 18) is a manufacturer of H.R. coils having manufacturing units in Kamleshwar, 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. 18 by online auction process. Such H.R. trimmings are purchased by certain traders based in Viramgam (appellant Nos. 11, 12, 13, 14, 15 and 16) and also Indore based traders (appellant Nos. 9 and 10). Such HR trimmings are cleared by appellant No. 18 on p....
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....ash, through angadia service or otherwise and getting the same converted into Bank Draft etc. from appellant No. 1 or themselves in the name of appellant No. 18. Appellant No. 17 is a transport commission agent based in Nagpur. He was coordinating and ensuring that the goods cleared from appellant No. 18 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. 9 to 16) or brokers/dealers (appellant Nos. 4 to 8). Appellant No. 17 was also ensuring that documents received from Appellant No. 18 are sent to main appellant or broker/dealers (appellant No. 4 to 8). Further, appellant No. 17 was handing over fictitious documents to the driver from Kamleshwar/Nagpur to Viramgam for any checking during transportation. Similarly, appellant No.16 is a transport-commission agent who was transporting the HR trimmings from appellant No. 18's unit located in Dolvi/Taloja near Mumbai to Viramgam and the corresponding documents to either appellant No.4 (or his companies) or appellant No. 8 or the main appellant. Further fictitious documents for safe passage from Dolvi/Taloja to Viramgam were also handled by h....
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.... upon detailed investigation, a demand notice dated 03/05/2006 was issued to the main appellant for demand, interest, penalty as also to other appellants for penalty. After receiving the replies, allowing cross-examination, the Commissioner vide the impugned order adjudicated the case wherein he confirmed the demand, interest and imposed penalty on the main appellant. Further penalty was also imposed on all other appellants i.e. appellant No. 2 to 18 for their role in the fraudulent transactions. 6. The main submission of the learned counsel for the main appellant, appellant No. 2, who is the Managing Director of the main appellant and appellant No.3, who is the General Manager of the main appellant is that the statements of certain witnesses, whose statements have been relied upon, did not turn up for cross-examination. The learned counsel's grievance was mainly with reference to Mr. Pawan Agarwal (appellant No. 4) and Mr. Manish Agarwal, (appellant No. 8) as also Shri A.P. Dutta, Investigating Officer of DGCEI, who investigated the present case. The learned counsel further submitted that the statements of witnesses who had not turn up for cross-examination have no evidentiary ....
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....y the appellant and involved in the present case mentions M/s. Sidhivinayaka Road Carriers as transporter. Vehicles mentioned in the statements of Shri Sajjan Singh Ishwar Singh Saini and Shri K.B. Bhatia are not appearing in appellants books. It was also submitted that statements of Shri Pawan Agarwal, Director of appellants No. 5 and 6 are not relevant. It was also submitted that the statements of Viramgam based trader do not have evidentiary value. The learned counsel further submitted that the absence of lorry receipts does not prove that the scrap from Ispat Industries is not received by the appellants. It was submitted that the main appellant availed credit on the basis of valid invoices and nowhere the law prescribes that lorry receipts is a necessary documents. It was submitted that for movement of the goods within the State no lorry receipts is necessary and it is only optional and discretion of the parties. It was submitted that there are many consignments where they did not have lorry receipts and still have availed CENVAT credit and Revenue has not objected the same. It was also submitted that HR trimmings/scrap purchased by the appellants from Ispat Industries are low....
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.... or proposal about the confiscability of any excisable goods in the show cause notice nor any finding in the impugned order. Following case laws were submitted in support of this contention: (i) Castrol India Ltd. vs. Commissioner of Central Excise 2008 (222) ELT 408; (ii) Air Carrying Corporation vs. Commissioner of Central Excise 2008 (229) ELT 80 affirmed by High Court 2009 (248) ELT 175 (Bom.) 10. It was submitted that the appellant No.2 was not looking after the day-to-day affairs of the appellant-company and therefore imposition of penalty on him is incorrect and arbitrary. Further, appellant No.3 has not admitted anything and therefore no penalty should be imposed on him. 11. The learned counsel appearing for appellants Nos., 4, 5 and 6 submitted that there is no findings about the role of the appellants. Further, the department has not investigated the role of Viramgam based broker. It was further submitted that no penalty is imposable under Rule 26 as there is no proposal to confiscate the goods in the show cause notice and in support of the same, the learned counsel submitted the following case laws: (i) Elengo Ravi 2006 (198) ELT 47 (Tri.....
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....such heavy penalty. For the reasons mentioned for the earlier appellants penalty under Rule 26 cannot be imposed on them. 15. Learned counsel for appellant No. 8 submitted that his client has carried out work of commission agents for finding customers for the excise invoices of goods so sold in on-line auction process. He further submitted that his role was only for finding customers who required Central Excise invoices and he has to pay by Demand Draft on their behalf to appellant No. 18. He further submitted that he has only helped in the sale of excise invoices or transfer of funds through angadia services and he has not dealt with the physical delivery of the goods. It was submitted that since his client has dealt with only invoices and payments he is not concerned with the excisable goods so cleared and, therefore, there is no question of imposition of penalty under Rule 26. Rule 26 was amended w.e.f. 01/03/2007 and for the prior period the same cannot be applied. 16. The learned counsel on behalf of appellant No. 9 submitted that they are trading in iron and steel and participated in online auction and appellant is only a bidder and not buyer or receiver of the said goo....
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.... client is only a commission agent and he gets a fixed amount for arranging the truck. He has no role in actual transportation of the goods or in any other manner. Since he is only a commission agent no penalty can be imposed on him under Rule 26 even the goods have been held to be confiscable and hence no penalty is even otherwise imposable under Rule 26. 20. The learned counsel for appellant No. 18 submitted that his client has paid the duty on the H.R. Trimmings and have followed all the excise laws strictly and the goods have been cleared after payment of appropriate duty and the goods are therefore not liable to confiscation under Rule 25 and therefore, there is no question of any penalty on his client under Rule 26. The learned counsel also quoted few judgments in their own case wherein no penalty was imposed on his client. 21. The learned Additional Commissioner (AR) reiterated the various points made in the investigation. The learned ARs first submission is that the learned counsel for the main appellant has not stated anything in defence of the allegation made against the main appellant but has only attempted to find out some imaginary missing links in the investiga....
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....3 started claiming that they were paying the freight charges. However, except making bald statements no consignmentwise details of the freight amount paid and the corresponding documents such as voucher, etc. have been produced at any point of time, either during adjudication or before this appellate Tribunal. The learned AR further submitted that Rule 7 of the CENVAT Credit Rules cast obligation on the appellant to prove that the CENVAT availed by him is corresponding to the goods received by him. The learned AR further submitted that the department has permitted cross-examination of all the persons including investigating officer and it is only a few people who did not turn up when the cross-examination was carried out. The main person Shri Chandrakant Nathwani, appellant No. 17 who has transported more than 90% of the goods stood to his statement. The learned AR further submitted that even without the cross-examination of the said official and other persons case stands on its own leg and therefore no harm or prejudice has been caused to the main appellant. 22. As far as appellant No. 2 and 3 are concerned the learned Additional Commissioner (AR) submitted that these people we....
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....l scale units. There was, therefore, no reason for them to indicate that the consignees as the units located within Maharashtra. In fact from the documents recovered during the search, it is very clear that at one time due to heavy rain in the Viramgam area, they did not get good biddings. This itself shows that they were fully aware that their HR trimmings are being used in the Viramgam units and, therefore, the name of the consignee should have been some units based in Viramgam. But their document/invoices showed Maharashtra based Ingot manufacturers / steel furnace units. Further, almost all invoices indicate Gujarat registered vehicle who are not permitted to move freight from one place to other in Maharashtra. Some of the vehicles were three wheelers, oil tankers, etc. In view of the said fact, penalty is impossible on appellant No. 18. The learned AR relies on the judgment of this Tribunal in the case of main appellant Bhagwati Steelcast Ltd. vs. Commissioner of Central Excise, Nashik 2013 (293) ELT 417 (Tri.Mumbai.). The learned AR further submitted following case laws in support of his various contentions: (a) Sanjay Vimalbhai Deora vs. CESTAT 2014 (306) ELT 533 (G....
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.... 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 Serv....
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....t 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 need to be modified. They should encourage voluntary compliance with tax laws by ....
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....e 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. 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. We are not convinced that any manufacturer will receive goods worth crores and crores of rupees without any transport documents whatsoever. The main appellants claim that he has paid for the transportation of the goods, but during the original adjudication as also before this Tribunal, main appellants has not produced consignmentwise details supported by any voucher etc. of any amount paid to any transporter of such H.R. Trimmings. In fact, if the H.R. Trimmings were received by them, there was no reason that the appellant could not have produced such transportation details during the adjudication of the case or before this Tribunal. It is strange that the General Manager of the main appellant in the initial statement claimed that the transportation is being arranged by M/s. Ispat Industries an....
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.... (appellant No. 16) who were the transporter in respect of such HR trimmings cleared from M/s. Ispat Industries factory in Dolvi, Taloja. We also note that all the bidders have admitted in their statement that the goods were sold in Viramgam or nearby area and for selling invoices they got in touch with Shri Pawankumar Agarwal or Manish Agarwal i.e. appellant No. 4 and 8, who in turn found the customers for the CENVATable invoices. It is also clear from the statement that many a times the cash was sent to appellants Nos. 4 and 8 to get the same converted into Demand Draft and submitted to M/s. Ispat Industries Ltd. Sometime, even the bidders themselves have got the demand drafts and sent either to these brokers or to Mr. Chandrakant Nathwani. The main submission of the learned counsel that Shri Pawankumar Agarwal, Shri Manish Agarwal and Shri A.P. Dutta, Investigating Officer were not made available for cross-examination, we note that the said persons were called by the adjudicating Commissioner but did not turn up. We note that Shri Pawankumar Agarwal and Shri Manish Agarwal are the co-noticees in this case. Even if we ignore the statements of these two co-noticees, even then whol....
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.... assumption and presumption without corroboration. We are unable to accept this view. In fact we find that the case was very well investigated and is based upon incriminating documents. All the bidders, transporters, brokers, etc. have been covered. Even some of the vehicle owners were called and they have submitted that their vehicles were not used for transportation of HR trimmings from Kalmeshwar/Dolvi to Nasik. We also note that the enquiries with the RTO has indicated the use of oil tankers, autorikshaw, etc. for the transportation of scrap. May be in this particular case, the number of such vehicles are few but the fact is that such modus operandi was being used and few numbers will not make any difference. While it may be true that there is no requirement under the Central Excise Rules to keep the lorry receipts, but when the transportation of the goods is being questioned and the Revenue has been able to produce a catena of evidences, the appellant was required to produce at least some independent evidences relating to the transportation of the goods from Nagpur/Dolvi to their unit. We find that the appellants have not been able to produce any document to support their clai....
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....umar Agarwal and in our view the contention that the statements of Shri Manish Agarwal and Shri Pawankumar Agarwal is of no consequences is required to be outrightly rejected. The fact that the payment to M/s. Ispat Industries is made through Demand Draft does not in any way negate the fact that the goods were not received by the appellant but were diverted to Viramgam. Since M/s. Ispat Industries Ltd. wanted payment through Demand Draft the drafts were made sometime by the appellant after receiving the cash through Angadia services or the Demand Drafts were made by Shri Pawankumar Agarwal or Shri Manish Agarwal, and sometime even the bidder based in Viramgam. Making the payments through banking channel is only part of manipulation to give colours of genuine transaction. 28. The learned counsel's submission that extended period of limitation is not applicable, this contention is required to be outrightly rejected as this is a case of fraudulent availment of CENVAT credit by producing documents without receiving the goods. The fact that the unit was audited will not make any difference as during audit all that is checked up is the invoices with reference to the credit availed. We....
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....side. We do not find any merit in the contention of the appellants. We find that in the present case, Central Excise invoices indicated the name of the main appellant as the consignee which is far from the truth. In all the cases covered, the real consignees were Viramgam based traders. Since the invoices did not reveal the true name of the consignee and the consignee names were got changed with the willful intention to avail the CENVAT credit fraudulently and thereby evade payment of duty, we hold that the goods are liable to confiscation under Rule 25(1)(d) and, therefore, penalties under Rule 26 on appellants No.2 and 3 are correctly imposed and accordingly their appeals are rejected. 31. As far as Shri Pawan Kumar Agarwal, appellants Nos. 4, 5 and 6 are concerned, we note that these appellants were instrumental in finding the buyer of the CENVATable invoices thereby helping in the fraudulent availment of the CENVAT credit by the main appellant. Appellant No. 5 and 6 name were appearing in the invoices of M/s. Ispat Industries Ltd. They were, therefore, concerned in dealing with the excisable goods which they knew are liable to confiscation and therefore, penalty under Rule 2....
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.... 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 ....
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....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. ....
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.... and in view of this fact the penalty imposed on M/s. Diamond Roadways is reduced to Rs. 2 lakhs. 38. As far as penalty on Shri Chandrakant Nathwani, appellant No. 17 is concerned, we find that he was not only arranging the transportation of the goods and he was in full knowledge and was actively involved in getting the name of the consignee changed and sending the CENVATable invoices to Shri Manish Agarwal or Shri Pawankumar Agarwal while the goods were being transported to Viramgam. In view of the said fact the penalty under Rule 26 is correctly imposed on him and we find that the penalty imposed is not on the higher side and we uphold the same. We also keep in mind the judgment of the hon'ble High Court of Punjab & Haryana in the case of Commissioner of Central Excise vs. Deepak Roadways reported in 2010 (254) ELT 26 (P&H). 39. As far as the appellant No. 18, 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 s....