TaxTMI 
TaxTMI 
2020 (2) TMI 2
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.... cenvat credit on the eligible inputs received along with the duty paying documents. The appellant maintains proper records of the transactions including availing of the cenvat credit and its usage, as required under the provisions of law. 2. The raw materials received by the Flavour Division mainly are - Henna, Attar Mehandi, F.Fbase, G.R. Compound, Sandal Wood Oil/Compound, etc. The appellant filed regular returns with the Department showing their duty liability on the output and their cenvat credit eligibility. The records of the appellants are audited by the Central Excise Authorities from time to time. 3. The Directorate General of Central Excise Intelligence ("DGCEI‟ for short) initiated an investigation in October/ November, 2015 in respect of CENVAT credit availment under Cenvat Credit Rules, 2004 by the appellant at its both locations. DGCEI alleged that the appellant company is claiming inadmissible cenvat credit on inputs received by it because of irregularities committed by its suppliers and discrepancies found at the supplier end. 4. During the course of investigations in October/November, 2015, DGCEI searched residential premises of the Senior Officers ....
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....e adamant on seizing the cash. (vi) The officers of DGCEI issued indiscriminate summons one after another and recorded involuntary statement of employees of appellant, suppliers of appellant and other persons connected with the transaction by resorting to beating, mental torture and by applying undue pressure which is evident from following. (a) Mr. Rajesh Kumar who visited the office of DGCEI on 30.11.2015 on his own under a summons, was detained for long hours and was arrested in the early hours of 1.12.2015. (b) FIR dated 02.02.2016 registered under the order of Metropolitan Magistrate dated 01.02.2016. (c) Anticipatory bail order dated 07.01.2016 of Mr. Vinod Kumar Gupta narrating the incident of beating of his son and accountant by officers of respondent. (d) Petitioner has been coerced to make a deposit in crores without issuance of SCN and without adjudication of case. (e) The petitioner has written several letters to DGCEI seeking relief from tortuous and illegal investigation, but has not got any relief. 5. That under the continued pressure and undue influence exerted by the officers, the appellant deposited Rs. 75 c....
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.... as well as per various rulings." (emphasis supplied) 7. In response to the letter dated 23.05.2016 by the appellant, they received reply no.208/INT/DGCEI/HQ/2015 dated 20.06.2016 stating that the appellant has received invoices only without physically receiving the inputs/goods, which is quoted herein for clarity: "Please refer to your company‟s letter dated 23.05.2016, wherein you have referred to the above instructions of CBEC and volunteered to pay the entire duty, interest and penalty @ 15% of duty. 2. As requested by you, the duty liability of M/s Dharampal Satyapal Ltd. (Flavour Division) at (I) C-11-12-13, Sector-67, Noida, UP (Central Excise Registration No. AAACD0132HEM046) and (ii) 98, Okhla Industrial Estate Phase-III, Behind Modi Mill, New Delhi (Central Excise Registration No. AAACD0132HXM020), arising out of irregular availment of cenvat credit on the strength of invoices issued by 13 raw material suppliers, without actual receipt of goods, is furnished in the enclosed annexure "A‟, supplier-wise. The inadmissible cenvat credit availed by M/s Dharampal Satyapal Ltd., Okhla, New Delhi and Noida, U.P., has been quantified on th....
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.... no further correspondence will be required and matter can be resolved through oral communications and on the basis of discussions held with you after your above reference dated 20.06.2016." (emphasis supplied) 9. Thereafter, the appellants deposited the balance amount as advised by the DGCEI for conclusion of the dispute raised by the Revenue as regards the cenvat credit amounting to Rs. 95,38,33,657/- (in respect of both the units at Delhi and Noida), by their letter dated 20.07.2016 mentioned therein that they have been informed of their duty liability, interest and penalty on account of irregular cenvat credit (due to procedural lapse of the suppliers). Further, referring to the earlier correspondence stated that according to the grounds and evidences of procedural lapse, shown by the Sr. Intelligence Officer, DGCEI, and waive their right to a written 'show cause notice', in terms of the CBEC instructions dated 18.08.2015. It was specifically mentioned that they have made the payment of amount of cenvat credit in dispute, interest and penalty, as quantified by the Department and there is excess payment of Rs. 14,55,97,964/-, with respect to their Noida Unit, which was pra....
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....l Excise Commissionerate (both units together hereinafter referred to as M/s.DSL). M/s.DSL are engaged in the manufacture and clearance of excisable goods, namely, Flavours & Fragrances etc. falling under Chapter 33 of the First Schedule to the Central Excise Tariff Act, 1985. 2. On the basis of specific information that M/s.DSL were taking inadmissible CENVAT credit on the basis of invoices of some suppliers of sandalwood oil /compound and other raw material 'without physical receipt of such inputs in their factories' searches were conducted on 29.10.2015 and 03.11.2015, by the officers of DGCEI(HQ)at the factories of M/s.DSL and their suppliers as well as other related premises and various incriminating documents related to irregular availment of inadmissible cenvat credit by M/s.DSL, were recovered. Statements of the concerned persons were also recorded under Section 14 of the Central Excise Act, 1944. 3. During the investigation, it was revealed total CENVAT credit of Rs. 96,00,83,657/- taken by M/s.DSL on the basis of the invoices of 13 suppliers/manufacturers/dealers (M/s. Prayag Industries, Roorkee; M/s. Shiv Shakti Industries, Haridwar; M/s.Saraswati Indus....
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....0000000 411111971 37008263 61666796 509787030 DSL, Okhla 0 548971686 548971686 207531082 82345753 838848521 Total categorywise 351111971 608971686 960083657 244539345 144012549 1348635551 7. M/s.DSL also waived their right to a written show cause notice and confirmed that the grounds of and the evidences establishing their duty liability, have been explained to them and accordingly, they have paid the duty, interest and penalty in terms of CBEC Circular No.137/46/2015-ST dated 18.08.2015. 8. The proceedings in respect of fraudulent, availment/utilisation of inadmissible CENVAT credit by M/s. DSL to the tune of Rs. 96,00,83,657/- (Rs. 41,11,11,971/- of Noida Unit & Rs. 54,89,71,686/- of Okhla Unit) on the basis of invoices of 13 supplier firms during the period May, 2012 to 30.10.2015 has been concluded in terms of CBEC Circular F.No.137/46/2015-ST dated 18.08.2015. Out of this total CENVAT Credit of Rs. 96,00,83,657/-, the unutilized credit to the tune of Rs. 35,11,11,971/- taken by M/s. DSL, Noida, on the basis of the invoices of 13 suppliers covered by DGCEI investigation, has been disallowed by debiting/reve....
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....ts/discrepancies - (i) Credit was denied on the sole ground of non-physical receipt of inputs and no other ground. (ii) It was wrongly mentioned that the appellant has accepted the grounds and waived its right to show cause notice, with respect to its right; (iii) The case was not closed in its entirety as prayed by the appellant vide their letter dated 23.05.2016, rather it was limited to only civil liability and that too, credit part alone. 13. Thereafter, it is stated that the appellant wrote several letters to the Department (including letter dated 08.08.2016) stating that the said letter of Revenue dated 29.07.2016, stating wrongly that the appellant have received only invoices without physical receipt of the inputs in their factory, needs to be withdrawn or modified. However, there was no response from the DGCEI. The appellant further by their letter dated 8.2.2017 reasserted their initial offer dated 23.05.2016 stating that they have never admitted any fraud and have actually received the inputs along with the duty paying documents. The appellant has never admitted any fraud and further requested for complete closure of all civil as well a....
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....y to avoid further consequences of continued harassment, and payments so made cannot be treated as voluntary deposits. The Hon‟ble High Court observed that when offer is made in the circumstances outlined before a criminal court for payment of alleged service tax arrears, without even a show cause notice issued in this regard, it is evident that the offer is made only to avoid further consequences of continued detention. The High Court further observed that without even a show cause notice being issued and without there being any determination of amount of tax arrears, the resort to the extreme measure of arrest followed by detention was impermissible in law. The said ruling of Delhi High Court was affirmed by the Apex Court by order dated 29.01.2019 in Civil Appeal No.8080802/2018. 16. Ld. Counsel further urges that mere deposit even if voluntary, does not amount to acceptance of grounds/allegations of the Department and does not give right to the Department to retain the money without issuing show cause notice and without proper adjudication. It has been held by the Hon‟ble Supreme Court in the case of State of West Bengal Vs. Mohd. Khalil - (2004) 4 SCC 594, where....
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....ons that such reduced penalty is also paid within the period so specified, and all proceedings in respect of the said duty, interest and penalty shall be deemed to be concluded." 19. Thus, in case of the facts as involved in the present case, as alleged, attracting the provisions of Section 11A(4), either an assesee can opt to deposit the tax, interest and the reduced penalty and intimated the same to the Central Excise Officers accepting the allegations in the show cause notice, requesting for closure under Section 11 AC(1)(d), otherwise Central Excise Officer is required to pass a reasoned and speaking order under Section 11 A(10) of the Act. Evidently, the closure of the cases, involving fraud, suppression, etc. under Section 11 AC (1)(d) is contemplated only after issuance of show cause notice and not prior or without the issuance of show cause notice. Without issuance of show cause notice, the provisions of Section 11 AC(1)(d) are not attracted. Thus, in absence of show cause notice, there can be no closure, as prescribed under Section 11 AC(1)(d) of the Act. 20. Ld. Counsel further urges that the appellant has never given any waiver of its right to receive a written of ....
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....eels, the challenge of the demand on the sole ground of non-issuance of written show cause notice was dismissed. 23. Ld. Counsel further draws attention to the provisions of Section 124 of the Customs Act, which has been referred to in the instructions/clarification dated 18.08.2015, which provides for waiver of written show cause notice and issuance of oral show cause notice and further pursuant to oral hearing, an adjudication order has to be passed. Ld. Counsel urges that the said provisions of Section 124 of the Customs Act has been made applicable to the Central Excise Act, vide notification no.68/63-CE, applies only to seizure cases where confiscation is proposed. Further, also urges that Section 11 A of the Central Excise Act deals with the demand of duty and is an independent section, not borrowing any authority from the Customs law. Further, reliance is placed on para 51 of the ruling of the Apex Court in Kranti Associates Pvt. Ltd. Vs. Masood Ahmd. - 2011 (273) ELT 345, where it has been held that reasons are required in both the administrative and quasi-judicial orders, affecting the rights of parties pre-judicially. That reliance is also placed on the following rulin....
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.... Act, as it effects the statutory rights of the appellant, as provided under Section 11 A(4) read with Section 11 A C (1)(d) of the Act. The word "decision" is not defined in the statute and based on the dictionary meaning, the communication dated 29.07.2016, definitely qualifies as the decision of the ADG - DGCEI, and thus appealable. Further, ADG of DGCEI has been appointed as a Central Excise Officer in the rank of the Commissioner, and has been given all the powers of adjudication, including under Section 11 A (10) of the Act. 26. Ld. Counsel in reply to the arguments of the ld. DR that the communication dated 29.07.2016 was essentially an inter-departmental communication and therefore, the said communication cannot be treated as an adjudication order and therefore, the appellant is remediless, and advantage should be bestowed upon the Revenue by not disturbing the settlement/closure, acknowledged by communication dated 29.07.2016. It is urged the stand of the Revenue that decision dated 29.07.2016, has been taken by an incompetent officer (lacking jurisdiction), to appropriate the amount by inter-departmental communication, then there is more reason to set aside the impugne....
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....ute. Further, the inputs received are of a kind to be used in the manufacture of dutiable products and are actually components or inputs in the manufacture of dutiable output, which is also not in dispute. In the facts of the present case, the issue being a contested one and there being a dispute between the parties as to receipt or non-receipt of the inputs in question, therefore, in the facts, an adjudication was required, and there can be no closure in terms of Section 11 AC (1)(d) read with Clarification/Instructions dated 18.08.2015. Reliance is also placed on the ruling of the Hon‟ble Madras High Court in the case of Vikas J. Shah Vs. Commissioner (Appeals) - 2016 (334) ELT 491 (Madras), where the letter(s) written by the Revenue affecting the rights of the assessee, has been held to be appealable. Reliance is also placed on the case of Gurdeep Kaur Vs. Commissioner -2015 (325) ELT 490 (Delhi) and the Commissioner of Customs Vs. S.S. Offshore (P) Ltd. - 2018 (361) ELT 51 (Bombay). 29. Accordingly, ld. Counsel prays for setting aside the impugned order/communication dated 29.07.2016, with further directions, in the interest of justice. 30. Opposing the appeal, ld. ....
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....DGCEI, wherein they have mentioned in reference to their earlier letters, that they agreed with the grounds and on facts of procedural lapse shown by SIO/DGCEI, in establishing their duty liability under the relevant provisions of the Act, and waived their right to the written show cause notice in terms of the CBEC circular/clarifications. Further, the appellant has acted upon and has deposited the stipulated the amounts along with interest and penalty and has further requested for assurance of letter of acceptance of payment, and issuance of closure certificate. The appellant also reiterated their request for closure of connected proceedings on their Vice Chairman, Directors and staff of the company as well as their suppliers, etc. 32. Ld. Authorised Representative further refers to the letter dated 8.2.2017 written by the appellant to the ADG-DGCEI, wherein they have referred to the correspondence and the impugned letter dated 29.07.2016, they have reiterated their offer letter dated 23.05.2016 and confirmed that they do not have any intention to challenge the closure of proceedings subject to regard of their position, as stated in their letters dated 23.05.2016 and 8.8.2016. ....
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....Under the facts and circumstances, and on reading of the provisions of Section 11 AC (1)(d) of the Act, there being alleging of fraud and extended period involved in the demand, the law as per Section 11 A(4) requires issue of show cause notice which cannot be dispensed with. Further, there is condition precedent in Section 11 AC(1)(d) which provides for settlement of duty demanded in a show cause notice. Thus, the contention of the DGCEI that show cause notice has been rightly waived in the facts and circumstances by the appellant, in terms of CBEC‟s instructions /clarification dated 18.8.2015 is frivolous. Instructions/clarifications by the Board cannot override the provisions of the Act. When the Act requires a particular action to be done in a particular way, it has to be done in that way. Further, reliance has been placed by the Revenue on the ruling of the Hon‟ble Supreme Court in the case of Virgo Steels (supra), is not applicable in the facts of the present case as the said ruling was in respect of Section 28 of the Customs Act as it stood prior to 1990. Whereas in the present case, Section 11 A as substituted by the Finance Act ,2011 w.e.f. 8.4.2011 and further....
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....ot bind the parities into a contract. In the facts and circumstances, the show cause notice is required to be essentially issued, that there is estoppel against law. 35. We further find that the appellant within a few days after issue of the purported closure on 29.07.2016 by their letter dated 08.08.2016, received in the office of the ADG-DGCEI on 10.08.2016, have again drawn attention towards the panchnama drawn and the statement recorded during the course of investigation, reiterating their stand that they have received the goods / inputs and used the same in the production. Such goods/ inputs have been received alongwith the duty paying documents. However, due to discrepancy at the supplier‟s and/or manufacturer‟s end, they have proceeded for settlement. It was also reiterated that the DGCEI has not disputed the records of the appellant as regards the receipt and consumption of the raw materials/ inputs in question. The appellant has further disputed the closure of the dispute and has also raised their doubts as to adverse inference by the other tax departments, and its shareholders, etc. They have also prayed for amendment/ clarification to the closure letter da....
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....ssued without a separate adjudication order. Thus, the said closure dated 29.07.2016 is equivalent to an adjudication order, for all practical purposes. Thus, we find that even instructions dated 18.08.2015 of CBEC have also been circumvented by ADG, DGCEI by issuing the closure letter, instead of a show cause notice, there being non acceptance of the allegation of the Revenue by the appellant / assessee. 38. We find that in somewhat similar circumstances, in Vikas J. Shah vs Commissioner (Appeals) - 2016 (334) ELT 491 (Mad.), where the grievance of the assessee was that their offer of closure of proceedings in terms of the circular, as contained in its letter was conditional and they never agreed to the non payment of duty by the suppliers/ sellers or to non receipt of the goods, but only due to procedural lapse on the part of the supplier. Further, there was no fraud, suppression etc. on the part of the appellant/ assessee. Otherwise also, duty cannot be recovered both at the end of the buyer and the seller for the same transaction. The Hon‟ble High Court found that there cannot be a process which prescribes circumventing of show cause notice as well as adjudication orde....