TaxTMI 
TaxTMI 
2017 (4) TMI 1325
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....(2) of the Cenvat Credit Rules, 2004, further penalty of Rs. 2 lakhs upon Shri Harpinder Singh Chhatwal Authorized Signatory of M/s Jagdish Rolling Works, Kanpur under Rule 26 of the Central Excise Rules, 2002 and also similar penalty of Rs. 10 lakhs upon Shri Neeraj Agarwal - Authorized Signatory of M/s Kartikeya Enterprises, Kanpur and also similar penalty of Rs. 5 Lakhs upon M/s Kartikeya Enterprises, Kanpur under Rule 26 of the Central Excise Rules, 2002. 2. The issues arising for consideration are: (i). whether Cenvat credit amounting to have been rightly disallowed to appellant M/s JRW, Kanpur, (ii). whether duty amounting to Rs. 1,29,179/-, have been rightly held liable or leviable for the alleged shortage of 45.102 MT of the final product & (iii) whether penalties imposed on all the appellants as mentioned hereinabove, is sustainable. 3. The brief facts of the case are that M/s JRW, Kanpur, a partnership firm was engaged in manufacture of Angles, Rectangular Bars, etc. from inputs being M. S. Ingots and was availing the Cenvat credit on the inputs. They were receiving the raw material from traders/manufacturers, etc. One of the Traders was M/s Kartikeya En....
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....issued by M/s U.K. Ispat & M/s Shree Hanuman Trading Company to M/s KE. The GR/transport documents submitted by M/s KE appeared to be managed by one Shri Mukesh Kumar Agarwal and the corresponding invoices issued by the above stated three traders were fake. The credit of Central Excise duty as mentioned in the invoices of the said three trading firms, was not paid at any stage in the Government account. Further enquiry was made from the named manufactures in the invoices, namely; Sarla Ispat Pvt. Ltd. Durgapur, West Bengal & Jwala Steel Pvt. Ltd. Durgapur, West Bengal. It was reported by manufacturing units, namely; Sarla Ispat Pvt. Ltd., Durgapur, West Bengal & Jwala Steel Pvt. Ltd., Durgapur, West Bengal that they have never sold any excisable goods to the aforementioned three dealers, namely; M/s M.K. Steals, M/s U.K. Ispat & M/s Shree Hanuman Trading Company. Further enquiry was made ICICI bank, with respect to the accounts of the said three traders, clearly show that the funds were received in the said accounts through cheque and they were invariably withdrawn in cash on the following day as the majority of the withdrawal under the category of "with themselves". Further as per....
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....it appears invoices are fraudulently issued by the three trading firms at Kolkata to M/s KE in respect of the goods sold by M/s KE to M/s JRW. Thus, the goods in question not manufactured by either Sarla Ispat Pvt. Ltd., or Jwala Steel Pvt. Ltd., and it also appears that the said goods did not suffer the incidence of Central Excise duty. The details of such goods received by M/s JRW from M/s KE during the period 2003-04 to 2005-06 was prepared, wherein Cenvat credit of Rs. 26,66,972/- & Cess of Rs. 40,134/- had been wrongly availed by M/s JRW. Further enquiry was made from Shri S. K. Gupta, Proprietor of M/s M K steel & M/s UK Ispat, & M/s Shree Hanuman Trading Company wherein he stated that he had not purchased any consignment of Central Excise duty paid goods and he is ready to pay penalty as per provisions of Central Excise Rules & Act for wrongly passing Cenvat credit. He had furnished blank invoices (some of them signed) of the said three trading firms to Shri Mukesh Agarwal. The said bank accounts and invoices of the three trading firms were misused by the said Shri Mukesh Agarwal in collusion with Shri Neeraj Agarwal for their own benefit. Shri Mukesh Aggarwal was a liaison ....
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....09, 16/01/2009, 03/02 2009, 17/02/2009, 16/032009 and by way of last opportunity of hearing on 02/04/2009 the appellants did not file any reply to show cause, nor appeared for personal hearing, save and except seeking adjournments. The Additional Commissioner after going through the facts on record observed that first stage dealer/ trader becomes eligible to pass Cenvat credit of duty paid on goods purchased by him. But in the facts of this case, such traders never purchased any goods from the persons mentioned in the invoice in question. The credit was not admissible to the 3 traders, as they never purchased any goods from the alleged suppliers as mentioned in their invoices. The duty paid nature of the goods is doubtful. An enquiry was conducted by the Department have established that the goods in question were not duty paid for the reason that they were never purchased from the alleged manufacturers as mentioned in the invoices. The basic condition of the Cenvat scheme is that the goods on which the credit is being passed should be duty paid. But in this case a fraud has been committed by the so called dealer just to facilitate others and for personal gain. All the information m....
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....over a period of three financial years and running into few crores. Accordingly, the Additional Commissioner held that Cenvat credit of Rs. 27,07, 106/-, had been wrongly availed on the basis of fake documents and the same is inadmissible and liable to be recovered with interest from M/s JRW. So far the shortage of 45.102 MT of final products detected in the factory premises on inspection it was observed that the Authorized Signatory have admitted the shortage involving duty of Rs. 1,29,179/- as the goods being removed without preparation of invoice and accordingly same was held recoverable. It was also observed that appellant M/s JRW being a registered manufacturer dealer the Department had knowledge that the registration number to the manufacturer and/or dealers are allotted on the basis of pan number. First pan of 10 digits is written and then the 5 digit number suffix to the pan number and accordingly 15 digits number allotted to the assessees by the Central Excise Department. M/s JRW could very easily notice the difference in the registration number of the three traders mentioned in the invoices, but due to negligence, they failed to notice the same, which raises a strong susp....
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....enquiries. So far M/s KE is concerned it is not disputed that they are registered with the Central Excise Department and have been filing returns. The Id. counsel for the appellants relied on the recent ruling of this Tribunal in the case of M/s Premier Ispat Ltd. & its director - Amit Jain being Final Order No.71108-71109/2016 dated 01/12/2016 wherein under similar facts where M/s Premier Ispat Ltd. had manufactured MS Bars, Rounds, SS Flats & other products and had procured the raw material through M/s M. K. Steels and the said raw materials were received by M/s Premier Ispat Ltd. in its factory under the cover of Form 31 (road permit) issued by the Trade Tax Department and later it was found that M/s M. K. Steels Pvt. Ltd. had issued the same invoices (parallel). In many cases an investigation was carried out. In the similar cases relying on the ruling of Commissioner of Customs, Central Excise & Service Tax Versus Juhi Alloys Ltd. reported at 2014 (302) E.L.T. 487 (Allahabad) wherein Hon'ble High Court of Allahabad had observed that: - "the assessee has taken reasonable steps to ensure that the inputs in respect of which he has taken the Cenvat credit are goods on which ....
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....voices was found to be non-existent. (ii) Whether on the facts and in the circumstances of the case, the CESTAT was justified in law in rejecting the appeal of the Appellant/ Revenue, even when the Respondent/ Assessee have not taken due care for receiving the goods and violated the provisions of Rules 3, 9(3) & 7 of the Cenvat Credit Rules, 2004. The facts in the case of Juhi Alloys Ltd., were that the assessee was engaged in manufacture of MS Bars, Rounds, SS Flats & other products and were registered dealer and had procured raw material from M/s M. K. Steels Pvt. Ltd., Kolkata. The goods covered by the invoices raised by M/s M.K. Steels Pvt. Ltd., Kolkata when received by the assessee were entered in the Cenvat credit account. Inputs were used for the manufacture of final products, which were cleared against payment of duty. On enquiry by the Assistant Commissioner, Central Excise, Bolpur it was found that the original manufacture of MS Ingots, namely; M/s Sarala Ispat (P) Ltd., Durgapur, was non-existent. The assessee availed of the Cenvat credit on the strength of invoices, which were issued by M/s M. K. Steels Pvt. Ltd., which was the first stage dealer. A notice to sho....
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....t of which he has taken the Cenvat credit are goods on which the appropriate duty of excise as indicated in the documents accompanying the goods has been paid. The Hon'ble High Court further observed that the assessee had received the inputs along with the duty being documents and the goods were demonstrated to have travelled to the premises of the assessee under the cover of Form 31 issued by the Trade Tax Department and the ledger account as well as the statutory records establish the receipt of the goods. In such a situation, it would be impractical to require the assessee to go behind the records maintained by the first stage dealer. The assessee, in the said case, was found to have duly acted with all reasonable diligence in its dealings with the first stage dealer (M/s M. K. Steels Pvt. Ltd.). The Hon'ble High Court further observed in Para 8 of Juhi Alloys Ltd., order as follows:- "8. In terms of the provisions of Rule 7 (4) of Cenvat Credit Rules, 2002 & Rule 9(5) of Cenvat Credit Rules, 2004, a manufacturer is required to check the particulars as mentioned in the invoice issued by the first stage dealer end he should be familiar with him. As rightly ....