TaxTMI 
TaxTMI 
TaxTMI 
2022 (8) TMI 1252
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....hri Rajkumar Agrawal Penalty under Rule 26 Appeal No. E/12159/2019: 02. The facts of the case are as under :- 2.1 The Appellant M/s Nico Extrusions Ltd. are engaged in the manufacture of Aluminium Alloy ingots, copper zinc base alloys, copper-nickel alloys, copper ingots etc. and was availing the benefit of Cenvat Credit of duty paid on inputs received by them from various indigenous buyers as also imported raw materials. 2.2 The officers of Central Excise & Customs, Vapi, acting upon an intelligence that Appellant were availing the cenvat credit of the duty paid on inputs/ raw materials without physically receiving and using the said goods in their factory and to compensate the same they were showing excess generation of Ash during the manufacturing of their finished products, than that of its actual production, conducted preventive checks/ searches at factory premises, head office of Appellant and premises of transporter. During the course of investigation various incriminating documents / records were seized by the officers. Statements of various persons were recorded including the transporters/sellers of raw materials/ purchaser of finished goods and employees of Appella....
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.... Department had ignored the specification/grade of the Aluminium scrap that had been procured by the Appellant. The Institute of Scrap Recycling Industries, Inc. (ISRI) prescribed the standard specification to assist its members in the buying and selling of the scrap materials. The specification are internationally accepted and are used through out the world to trade the various commodities. ISRI had prescribed around 45 specifications of Aluminium Scrap. The relevant grade for Appellant is "Twitch". Aluminium scrap (Twitch Grade), used to be imported from the overseas suppliers and the specifications of the Aluminium scrap such as "twitch grade" were always declared on the supplier's invoice and the corresponding bills of entry. The finished goods viz. Aluminium alloys ingots were also manufactured of specific grade such LM 4, LM 24, LM 13 ,ADC 12, ALSI132,YMD, AC4B etc. and were primarily supplied to automobile OEMS. Hence it is well established that the appellant was manufacturing specific grade Aluminium Alloys Ingots out of the aluminium scrap of specific grade and hence the SION C-3 which were published with generic input material and generic finished, with no mention of spec....
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....have purity of 83-86% . The department had not even taken efforts to understand that manufacturing process of the Appellant and the nature of the raw material and finished goods. The department had disregarded the facts that Appellant is a remelter and its predominant raw material is Aluminium scrap "Twitch Grade" The department had inferred that the impurities present in twitch grade scrap were 1% zinc + 1% magnesium + 1% analytical Iron + 2% of non-metallic waste, totalling to 5% and therefore the scrap had purity of 95%. The department had stipulated the purity of aluminium scrap in a range of 90 to 97%. From SION C3 wherein 3% wastage was mentioned, purity was derived as 97%. This shows that apathy of the department that the technicalities of the matter had not been given any significance and the entire inferences had been made on some assumptions. Circular of the Director General of Valuation (DGOV) on the valuation of the imported Aluminium scrap that price of Aluminium scraps are derived after discounting the wastages present in the metal scrap. This discount is given based on the extent of metal recovery from such scrap. Accordingly, the price of aluminium scrap of "Twitch ....
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....te & non-metallic waste etc. are of unorganized section. Individuals who come and collect such accumulated waste. They pay the value and pick it up. The appellant had not maintained any data of their name and address. Further the transportation of such waste was always in the scope of such buyers and therefore the Appellant was never concerned with respect to the documentation. 3.5 He further submits that department contended that the appellant had shown the clearances of the finished goods mostly Copper Based Alloys on the value which is very less than the cost of consumed Raw Material in their production, without delivery of the goods from their factory at Silvassa. Department had completely disregarded the purchase price of the metal scrap that had been procured by the Appellant and recorded in the books of accounts. The Department had not taken efforts to analyse any data from the Appellant's record or any other sources such as industry data, technical /commercial supporting etc., It is absurd that on one side the Appellant alleged that Nickel and Copper had not come into the factory and on the other hand acknowledge the fact that the Appellant had supplied Copper Nickel based....
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.... actual receipt and use of the same in their factory, during the period 01.04.2002 to 13.02.2006." The condition for allowing the cenvat credit on inputs used for manufacturing excisable goods are stipulated in Rule 4 of Cenvat Credit Rules 2004. Similarly, the documents on which the cenvat credit be allowed has also been well defined in Rule 9 of Cenvat Credit Rules 2004. In fact, there is no mention of SION norms in the entire Central Excise Act 1944 and Rule framed thereunder and hence any compulsive inference to disallow the admissible Cenvat Credit is untenable. He placed reliance on the decision in Jakap Metind Pvt. Ltd. Vs. Commissioner of Cus. & Central Excise - 2017(356)ELT 279 (Tri. - Mumbai). 3.8 He further submits that demand of Rs. 1,34,26,199/- had been raised in with a heading " Details of the Cenvat Credit wrongly availed by M/s Nico Extrusion Pvt. Ltd., Naroli, Silvassa on the cenvatable goods without actual receipts from M/s Metal Plast and NEPI, Kalyan and without use of the same in their factory." The entire demand had been raised on assumption that the M/s Avadh Transport Service had not transported the raw material from the Appellant's warehouse in Kalyan and....
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....ellant but such goods were delivered in Bhiwandi. Payment from the Appellant had been received through the banking channel. Shri InderPal Singh could not be cross examined by the Appellant as he remained absent during the entire cross examination proceedings. The representative of M/s Haryana Commercial Cargo Carriers, Delhi, Shri Rajesh Kumar Narula, in his statement has stated that they had purportedly issued LRs for 5 Paise/ Kg . to the Appellant. However, when the said transporter was called for cross-examination, no one turned up and the Ld. Commissioner in impugned order mentioned that address of such transporter is not clear. While the department at its own convenience record the statement at the premises of such transporter, and seized their documents, but at the cross examination stage, the address suddenly became vague. The Appellant had made the entire payment to the transporter through banking channel. Thus, it is evident that the statement was recorded under suspicious circumstances, may be under coercion and therefore the cross examination was not conducted. This statement had no relevance in the eyes of law and therefore shall be ignored. The representative of M/s AB....
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....eir transporters. The suppliers of M/s Metec Asia had confirmed their sales to Metec on consignment basis and receipt of payment through banking channel. Further Metec had confirmed that they had sold the goods to the Appellant and all payment towards such sale had been received by them through the banking mode. The factory premises of the Appellant and depot of Metec were located in Silvassa, with a proximity of 10-15 KM. The transportation of goods was the responsibility of Metec and generally such transportation used to happen on the vehicles sourced locally. The revenue had relied on the statements of owners of tempo or other vehicles and inferred that the goods had not been delivered by Metec to the Appellant. However, no corroborative evidence was given by revenue that if such goods were not delivered then how the Appellant had manufactured the finished goods. In most of case the presumption of non delivery of goods to Metec and then Metec to Appellant had been on some purported report of Gujrat RTO. The report of RTO regarding the vehicles is inconclusive and cannot be relied upon considering the inconsistency and misadministration in the department. It is a well acknowledge....
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....Further no evidence had been given by the department or such individuals on whose statements, the contention of non transportation had been relied upon. 04. On the other hand, Shri T.G.Rathod, Learned Additional Commissioner (AR) appeared on behalf of the Revenue reiterates the finding of impugned order. 05. Heard both the sides in detail at length. We find that the main issue to be decided is as to whether the appellant have correctly availed of the Cenvat credit of duty based on the invoices issued by their raw material / inputs suppliers. Before we proceed to decide the matter and to understand this issue in proper perspective, it is imperative to know the relevant cenvat credit provisions. In this context we find that 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 Cen....
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.... stipulated that the burden of proof regarding admissibility to Cenvat credit shall lie upon the manufacturer taking such credit. further stipulated that a manufacturer/producer taking Cenvat credit on inputs or capital goods shall take 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. 5.2 We find that the issues involved in present matter related to admissibility of Cenvat Credit have been categorised into five parts , namely, (1) Cenvat demand of Rs. 7,22,30,953/- on account of alleged non receipt and use of Aluminium wire Rod, Aluminium Ingot, Aluminium Scrap, Copper Ingot and Scrap, Nickel and Zinc Ingot and Scrap etc., ; (2) Cenvat demand of Rs. 1,34,26,199/- on account of alleged non receipts of raw materials from M/s Metal Plant and M/s Nico Extrusions Pvt. Ltd. (3) Cenvat demand of Rs. 2,99,63,292/- on account of alleged non receipts of goods i.e remelted Copper Ingots and Nickel imported through ICD, Tughlakabad, (4) Cenvat demand of Rs. 4,57,79,503/- on account of alleged non receipt and use of goods....
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.... supplier of the goods/ raw material, nowhere admitted that, they have not supplied the goods to appellant and any evidences in relation to diversion of disputed raw materials. When the inputs are used in the manufacture of dutiable final products, the benefit of cenvat credit in respect of such input cannot be denied. There is no provision in the Central Excise Law and Cenvat Credit Rules for determination of Cenvat amount on the basis of SION norms. In this context we also draw the attention to the provisions of Section 3A of the Central Excise Act, 1944 read with Rule 96ZO and 96ZP of the Central Excise Rules, 1944 whereby the production was determined on the basis of capacity of the furnace and capacity of the rolling mill. There was specific provision in the Act and the Rules for determination of capacity of production on the basis of capacity of furnace and rolling mill. Since there was no similar provision in the law for determination of cenvat amount on the basis of SION norms, the entire proceeding in the impugned matter is void. 5.4 In the case of M/s. Suzlon Fibres Ltd. [2008 (230) E.L.T. 166 (Tri. Ahmd], it was observed that the case of clandestine removal cannot be ma....
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....availing the credit, the same stand removed by them in the open market. Further in the entire case there is no admission in the statements of Appellant's directors or employees to the effect that the raw materials were not actually received by them and they were showing excess consumption of the raw materials to accommodate such non-receipted raw materials. There is also no admission in the said statements to the effect that raw materials stand diverted in the open market. We further take note of the fact that no efforts were made by the Revenue to ascertain the fact whether the buyers of the goods have actually received the goods or it is merely paper transactions to clear the goods and when cleared goods have not been received by the buyers premises and how they procured the goods which have been used in the manufacture of dutiable goods cleared on payment of duty. In that circumstances, credit cannot be denied to Appellant merely by relying the SION norms and transporters statements. All these factors lead to show that the findings, arrived at by the adjudicating authority are on the basis of assumptions and presumptions and in the absence of any independent evidence, cannot be ....
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....ued by ICD. The said allegation is based on the records of transporter and their statements. We find that the basis for denial of such substantial amount of Cenvat credit on imported raw materials is totally unsustainable and beyond reason. There is no other corroboration of such allegation. Here, again it has not been proved, if such quantities of imported raw materials were diverted without receipts in the factory and use of the same in manufacturing of finished goods, how there be production of given quantity of final product. Department in the present matter nowhere produced any corroborative evidences related to the diversion of imported raw materials/ substitute of imported raw material in factory/ any buyer of imported raw material who admitted that the Appellant had delivered the said imported goods to them. Moreover in the said matter Transporters did not turne up for cross-examination, hence their statement cannot be relied upon. During the investigation the transporter admitted the payment from the appellant towards transportation, high seas sale supplier had also confirmed the sale to the appellant. The bills of entry filed by the Appellant and clearances of the goods f....
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....has not disputed the correctness of quantity manufactured by the appellant recorded in production records. There is no allegation by the department regarding the financial flow back that against the said goods for which the payments were made through cheque, any cash payment was received by the appellant. With all these undisputed facts, merely on the basis of the transporter statements, it cannot be concluded that the inputs were not received by the appellant. Therefore the facts are established that the appellant have received the inputs in their factory used in the manufacture of final product and same was cleared on payment of duty. Therefore, there are no substantial evidence which result the disallowance of credit. The evidences placed by department before us are not cogent to establish that appellant is guilty of fraudulent availment of Cenvat credit. Mere suspicion or assumptions and presumptions cannot be the basis for such serious allegation of fraudulent availment of credit. From the facts and evidences placed before us, we are of the view that impugned demand alleging fraudulent availment of credit is not sustainable. 5.11 The last issue for consideration is regarding ....
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....nvestigation cannot be relied upon, unless procedure prescribed under Section 9D of the said Act is scrupulously followed. Such statement would have no evidentiary value if the person making it is not subjected to examination-in-chief before the adjudicating authority and also not produced for cross- examination as stipulated under Section 9D(1)(b) of Central Excise Act, 1944.From the chart produced by the Appellant we find that in almost cases the witnesses have not been examined by the Adjudicating authority and such statements cannot be admitted as evidence. The demand confirmed alleging fraudulent availment of Cenvat credit on strength of invoices without receiving inputs can not be held sustainable solely based on statements of transporters and their records to the Appellant inasmuch as the suppliers in their statements had admitted supply of goods on duty paying documents and Appellant also produced documentary evidences in respect of receipt of inputs, use thereof in manufacture of final product, statutory records showing manufacture and clearance of final product on payment of duty. Since the Revenue failed to prove alternative source of receipt of raw materials and also mo....