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TaxTMI 
TaxTMI 
TaxTMI 
2018 (5) TMI 1512
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....ijay Kumar In the first place we would dispose of first batch of appeals No. 55986-55989/2013- Ex (DB) which are mentioned at Sr No. 1 to 4 hereinabove. The fact of the case are as under: 1. M/s V.K. Metal Works (hereinafter referred to as VKM) having their factory at SIDCO Industrial Complex, Bari Brahmana, Jammu Tawi, (J&K) are a manufacturer of Copper Ingots from Copper Scrap. They started their manufacturing operations in December 2004. The Units located in the area specified in Annexure-II to the Notification No. 56/02-CE and the goods manufactured by the unit - Copper Ingots are also not in the negative list of the items mentioned in Annexure-I of the Notification. Accordingly, VKM had filed the required declaration for availing of the duly exemption under Notification No. 56/02-CE and were availing of the same. During the period of dispute, that is, from December 2004 to November 2006, the goods manufactured by a manufacturer, availing of this exemption Notification were exempt from the duties of excise leviable under Section3 of the Central Excise Act, 1944 and the additional duty of excise leviable under Additional duty of Excise (Goods of Special Importance Act 1957 [AE....
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....mpressor, 26 Moulds rails fixed on the ground for movement of moulds, one electronic weighing machine, One 62.5 KVA DG Set, Two winch machines, and two oil tanks for storage for Light Diesel Oil were also found. 3. On scrutiny of the records recovered, it was found that VKM were purchasing copper scrap from the following suppliers:- (1) M/s Vikash Trader, E-631, RIICO Industrial Area, Phase-I, Bhiwadi, (2) M/s BhartiyaTrade Linkers, D-68, Govind Marg, Adarsh Nagar, Jaipur (3) M/s Shi Krishna Traders, Vikash Nagar, Pilani Road,Chirwa, Jhujhunu. (4) M/s Ganpati Sales Corporation, 25/97-98 A, Gali No. 14, Vishwas Nagar, Shahdra, Delhi (5) M/s Hari Overseas, B-39, Ganpati Plaza, BhiwadiDistt.,Alwar. (6) M/s Sai Nath Enterprises, KabdiGali, New Bus Stand, Behror, Distatement. Alwar (7) M/s Jain Sales Corporation, A-4, 1st Floor, Oberoi Building, Dilshad Garden, Delhi. (8) M/s V K Metal Works, 9/84, ShastriGali, Vishwas Nagar, Delhi and (9) M/sSurya Traders, 15, Kanchan Nagar, Nimbahera, Chitorgarh, Rajasthan 4. On enquiry in respect of M/s Bhartiya Trade Linkers, M/s Shi Krishna Trader, M/s Hari Overseas, M/s Sai Nath Enterprises, M/s Ganpati Sales Corporation, M/s Ja....
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....s involving 212.41MT of scrap, the transporters stated that their trucks had not been used for such transportation. Similarly on inquiry with the transporters in respect of 27 consignments involving 247.880 MT of copper scrap, it was found that the vehicles in which the goods were claimed to have been transported were Auto Rikshaws, LCVs, Tempos, Tankers etc., in which the goods claimed to have been transported could not be transported. 8. Transportation from Delhi to Jammu has been shown through two transporters - M/s Kanpur Kashmir Roadways (hereinafter referred to as KKR) and M/s Upkar Goods Transport Company (P) Ltd., (hereinafter referred to as UGTCPL) both based in Delhi. On inquiry with UGTCPL both based in Delhi. On inquiry with UGTCPL, they confirmed having transported the consignments of scrap from Delhi to VKM's Factory in Jammu and also they confirmed the transportation of ingots from Jammu to Delhi and other places. However, so far as the transportation by KKR is concerned, it was found that which they have an office in Delhi, that they do not have any office in Jammu. Statement of Shri Manoj Yadav, proprietor of KKR was recorded on 16.03.2010 wherein he stated that t....
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....9. There is another statement of Shri Shankar Lal Gupta was recorded on 09.02.2009 wherein he once again stated that the statement dated 21.01.2009 written by him in his own hand writing is his correct statement. However, by letter dated 10.02.2009 the statementdated09.02.2009 was retracted. 10. During investigation, it was also found that the Govt.of J & K had announced a scheme of incentives to the new Industrial units to be set up in the state and as per this scheme 30% capital investment subsidy was available to the Industrial units set up in the backward blocks, subject to certain conditions specified in the policy. However, it was found that VKM, while setting up this unit, had not availed this capital subsidy, which gave rise to suspicion that the purpose of setting up this unit was not the production of copper but only, the misuse of the exemption Notification No. 56/02-CE and to passed on bogus credit to manufacturers of various other copper products. 11. It is in view of the above Investigations that a Show Cause Notice dated05.01.2010 was issued to VKM, Shri Shankar Lal Gupta, Devendar Kumar Jain, M/s Vikash Traders, UGTCPL, KKR and others for - a) Recovery of Centra....
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....in his subsequent statement dated 04.01.2008 he stated having issued bogus invoices regarding supply of copper scrap to VKM, statement04.01.2008 was retracted by him on 05.01.2008, that though subsequently Shri D.K. Jain, again in his statement dated 28.01.2008 reiterated the statement dated 04.01.2008 , but in course of his cross examination during adjudication proceedings on 12.10.2011, he again retracted his statement dated on 28.1.2008, that in view of frequent changing of statements by Shri DK Jain, he has to be treated as an unreliable witness and hence his statements have no evidentiary value. II. That as regards the other suppliers he took us through certificate of Registration of Sai Nath Enterprises, invoices of suppliers which duly mention TIN No. of the said supplier and computer printouts which mention TIN No. of these suppliers along with the location zone i.e. zone, circle and ward under which these premises were registered with VAT Authorities. According to the Ld Advocate no, enquiries were conducted from the VAT Authorities regarding non-existence of these suppliers. III. That all payments to the suppliers were made through banking channels. The counsel took u....
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....by UGTCPL under their GRs from Jammu to Delhi and other destinations. VIII. That as regards the GRs issued by KKR regarding transportation of copper scrap from Delhi to Jammu and transportation of Copper Ingots from Jammu to Delhi and other places, the Department heavily relied on the fact that there was no office of this transport company at "53 Transport Nagar, Jammu" and in this regard the Department relied upon the statement of Shri Kulwant Singh, proprietor of M/s Rein Road Carrier, 42 Transport Nagar, Jammu wherein he has stated that though about two years back he had allowed Shri Manoj Yadav, Proprietor of KKR to use his address and telephone number in its GRs, but no such firm had existed at 53 Transport Nagar, Jammu address and that Shri Manoj Yadav used to hand over the GR books to the factory owners, that the Department has ignored the statement of Shri Manoj Yadav dated 16.3.2010, which was recorded when investigations were conducted against recipients of ingots which were cleared by VKM from their factory, wherein he had stated that though initially he had set up an office Jammu but he has closed the same, and that he had handed over the GR books to Shri Shankar Lal ....
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....d at check posts in Rajasthan and Haryana, copies of GRs VAT58 way bills which were duly stamped and signed at J&K border at Lakhanpur, weighment slips at the said check posts which are known as Toll Post which are issued by the J&K Govt, exemption certificates which were duly stamped by the Deputy Commissioner Executive Jammu. VKM has also brought on record a chart obtained from ICC Madhopur (Punjab) under RTI a perusal of which reveals that each vehicle transporting copper scrap from Delhi to VKM Jammu passed through the state of Punjab and entered state of J&K. This chart contains details of each invoice and vehicle number. XII. That the Ld Advocate also took us to the minutes of cross examination of Central Excise Officer Offices of District Industry Centre wherein they had verified the consignments of Copper scrap and Copper Ingots. XIII. That during the period of dispute and even after that every month, the Assistant Commissioner was passing a specific order regarding sanction of refund of the duty paid through PLA in terms the exemption Notification No. 56/02-CE and only on the basis of the order passed by Assistant Commissioner, VKM was taking the self credit in the PLA....
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....e two hydraulic cylinders, one each blower and chimney, on pusher machine, one EOT crane, one air compressor, rails fixed on the ground for movement of moulds, 26 moulds, one electric weighing machine, two winch machines, two hydraulic oil tanks of 12,000 Liters and 10,000liters capacity and one DG Setof 625 KVA capacity had been found, XVIII. That in course of manufacture of copper ingots from copper scrap, a waste called "keeth" arises, that VKM was clearing keeth on payment of duty by classifying the same under heading 2620 and were claiming exemption under Notification No. 56/-02-CE, that subsequently, the Department issued a Show Cause Noticedated 28.5.2009 to them alleging that keeth is not excisable and hence, no duty is payable and for the reason the refund by the way of self credit taken in respect of this item is not admissible under Notification No. 56/02-CE and accordingly, theShow Cause Notice sought recovery of the duty refund claimed in respect ofkeeth, XIX. That when the Department in May 2009 issued a Show Cause Notice to the assessee for recovery of the refund claimed by them in respect of keeth, and thereby, the Department acknowledged the production of keeth....
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....ere never reviewed and have attained finality, the question of demand of duty could not arise. Further the provisions of Section 11A are not applicable to where the refund has been sanctioned under Notification No. 56/02-CE dated 13.11.2002. In support of this contention, he relied upon certain judgements. XXIV. Ld Advocate therefore pleaded for setting aside of the impugned order and allowing the appeal filed by VKM. 14. Shri Prabhat Kumar, Advocate the Ld. Counsel representing KKR and Shri D.K. Jain of M/s Vikash Traders, pleaded that so far as Shri D.K. Jain of M/s Vikash Traders is concerned though, initially Shri Jain in his statementdated4.1.2008 had admitted to have issued bogus invoices, he vide his letter dated 5.1.2008 had retracted his statement, However, subsequently vide his statement dated. 28.1.2008, he again reiterated his statement dated. 4.1.2008. In course of his cross examination, during the adjudication proceedings on 12.10.2011, he retracted from his statement dated 28.1.2008. That since his statement is not corroborated by any other evidence on record, it cannot be concluded that he had issued bogus invoices, more so, when there are entries at the check po....
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....11 that his statements dated04.01.2008 and 28.1.208 had been recorded under duress, is not acceptable. II. that in addition to M/s V.K. Traders, there are eight other suppliers all of whom have been found to be non-traceable that when out of nine suppliers, one supplier M/s Vikash Traders has stated that he had issued only bogus invoices and other eight suppliers have been found to be non-existent, the only conclusion which can be drawn is that no copper scrap had been received by VKM from the 9 suppliers, III. that the Department has also conducted inquiry regarding transportation of scrap, claimed to have been received from the suppliers in Rajasthan, that in this regard on inquiry with 19 transporters who had transported24 consignments of scrap weighing 212.41 MT it was revealed that those transporters had not transported any scrap and similarly inquiry in respect of 27 consignments involving 246.880 MT of scrap revealed that the registration no. of vehicles claimed to have been used for transportation were Auto Rickshaw, LCVs, Tempos, Tankers etc., in which the goods covered under invoices could not have been transported; that when there was no supply of scrap from the scra....
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....t he had retracted his statements dated 04.01.2008 on 05.01.2008 and in the course of his cross examination during adjudication proceedings he again stated that his earlier statements dated04.01.2008 and 28.01.2008 had been given under pressure and are not his voluntary statements. In view of the changing statements of Shri DK Jain, it would not be correct to place absolute reliance on the same without corroboration from some other evidence. In this regard, we find that these statements of Shri D.K. Jain are not corroborated by any other independent evidence, in as much as the consignments of scrap from Delhi to Jammu had been transported by using two transporters KKR and UGTCPL. In fact two statements of Sh. D.K Jain dated 4.1.2006 and 28.1.2008 are contrary to documentary evidence which is being discussed hereunder. In respectof UGTCPL, the Commissioner himself in para 95 of the impugned order has stated that there is not sufficient evidence to prove that the GRs issued by them were bogus, and that they have not transported any material. This portion of the order has not been reviewed by the Department and hence has attained finality. Similarly, in respect of the scrap transport....
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....rap to VKM. This fact also stands proved from the TIN Numbers of these suppliers which is mentioned on each invoice. There is no evidence that these TIN Numbers were falsely obtained by the respective suppliers. Moreover, the Department's allegation that no copper scrap was being received in the factory of VKM is also not compatible with the statement of Shri Shankar Lal Gupta dated 21.01.2009 wherein he had stated that copper scrap received was being returned back under the invoice of copper ingots. 18. Though, it is seen that the payments by cheques made by VKM to M/s Vikash Traders, for supply of copper scrap were being deposited in the M/s Vikash Traders' Bank account in Krishna Nagar, Delhi Branch of UTI Bank and on the same day these amounts were being transferred to M/s Garima International and M/s Agarwal Sales Corporation were the companies floated by Shri Vinod Kumar Jain, proprietor of VKM. Similarly, we have already noted that the remaining eight suppliers of copper scrap were very much in existence and the copper scrap supplied by them was being transported by two transporters, namely, GCTCPL and KKR, and there is record of entry and exit of the trucks at checks posts....
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....invoices of copper ingots. We have already noted above that the copper scrap was duly transported to the factory of VKM at Jammu for which sufficient documentary evidence is available on record. Hence there could not been any flow back of cash back to VKM. 19. Next comes the question as to whether the Department's allegation that there was no manufacturing activity in the factory of VKM is not sustainable or not. In this regard the Department heavily relies upon the statement dated 21.01.2009of Shri Shankar Lal Gupta, coupled with the fact that there were no stock of copper scrap and no used burner blocks. In our view, just because there were no used burner blocks and there was no copper scrap on the day of the officers visit, it cannot be inferred that there was no manufacturing activity. The shortage of copper scrap even otherwise is doubtful as there is no rebuttal of letter dated 5.12.2006 along with a duly sworn Affidavit filed by Sh Shankar Lal Gupta before the Deputy Director DGCEI wherein he had obtained the quantity of short found copper scrap was used in the semi-finished goods which were lying in the factory and were not taken into account while preparing the panchnama ....
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....ow cause notice at page 44 a chart of service record of Genset is appended a perusal of which shows that up to 7.3.2006 the running hours of the said DG Set are compatible with the production of copper ingots and meter reading upto 7.3.2006 is 7825-7 hours. But in subsequent months from April 2006 up to October 2006 the total meter reading only got increased by 225 hours. The working hours per day range from 9 minute per day to 4.22 hrs per day. Shri Shankar Lal Sharma in his statement dated 29.11.2006 stated that the Gen set was being used for the power supply to the Guest house located at the first floor of the unit for an average of 2 ½ hrs daily since December 2004. That going by the statement of Shri Shankar Lal Sharma the service record of DG Set should have shown per day working of atleast 150 minutes or 21/2 hours per day. This fact itself is sufficient to hold that the DG Set meter had developed fault since March 2006, and was not showing the correct working hours. We have been shown the expenses increased on the diesel during the financial years 2004-05, 2005-06 , 2006-07 which are compatible with the quantity of production of each year 20. During the period of di....
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....same is not excisable and hence, no duty was required to be paid. The issue of Show Cause Notice dated 28.5.2009 indicates that the Department acknowledges that there was manufacture of Copper Ingots from copper scrap, as once the Department accepts that VKM were clearing copper keeth, the Department cannot take the stand that there was no manufacturing activity. 23. It is also seen that while the present Show Cause Notice dated 05.01.2010 alleges that during the period from December 2004 to November 2006 there was no manufacturing activity and on this basis seeks to recover the refund of Rs. 42,37,24,491/- from the appellant, for subsequent months, that is, for the period from December 2006 to August 2008, the Department has sanctioned the refund by different orders and for that period to Show Cause Notice has been issued. We are of the view, that Department cannot take contradictory stand for the period from December2004 to November 2006 and for period from December 2006 to August 2008 when the machinery installed and the staff employed was the same. 24. The allegation against VKM is showing bogus receipt of copper scrap and bogus manufacture and clearances of copper ingots wit....
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....2018 in the case of M/S Bharat Box Factory Ltd. In view of the above, we hold that VKM did not contravene the provisions of Notification No. 56/02-CE, as held by the Commissioner. They were also correctly granted the benefit of the said Notification No. 56/02-CE hence question of recovery of duty under provise to Section 11A does not arise. Consequently the confirmation of duty demand and imposition of penalty upon VKM is required to be set aside. 26. The Commissioner has also imposed penalties upon other appellants under Rule 26 of Central Excise Rules. This penalty has been imposed mainly on the ground that these appellants colluded with VKM in helping them either in issuing the bogus invoices, or issuing bogus GRs or actively conniving with VKM in the availment of erroneous refund under Notification No. 56/02-CE. Since we have already held that VKM had duly received copper scrap in their factory and manufactured copper ingots question of grant of erroneous refund does not arise. Hence we set aside the penalties imposed under Rule 26 of Central Excise Rule upon all the appellants. In view of the above, we set aside the impugned order and allow all the appeals. Second batch of....
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....om denial of cenvat credit on copper ingots which were received from VKM another issue of confirmation of duty demand on higher consumption of electricity is also involved in the appeal filed by M/S Ganpati Rollings(P) Ltd. This duty demand is for the period 2005-06 to 2007-08 on the ground that during some months the consumption of electricity for the production of 01 MT copper rods/strips was varying between 311.40 units to 382.30 units whereas during some months its consumption was raised to 935.34 units for producing 01 MT of finished goods. The department took 382.30 units of electricity for producing 01 MT of finished goods during the financial year 2005-06 and 311 units during the years 2006-07 and 2007-08. He pleaded that no enquiries were conducted with regard the reasons for variation in consumption of electricity. It is his contention that during investigations of their case a statement of Shri Sushil Kumar Jain, Director was recorded on 5.5.2010 which related only to receipt of copper ingots from VKM during the disputed period. He relied upon the judgement of this Tribunal rendered in the case of R A Castings (P) Ltd v/s CCE Meerut reported in 2001 (237) ELT 674(T). Thi....