TaxTMI 
TaxTMI 
2025 (11) TMI 301
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....000 MT of Pig Iron & 1000 MT of Pig Iron scrap and 2000 MT of Pig Iron scrap, from the Appellant's Daily stock as reported in ER-2 of December 2008 and February 2009 respectively (b) Demand of Rs.5,59,84,382/- attributable to allegedly inadmissible CENVAT Credit availed by the appellant on the strength of invoices issued by its Head Office (an Input Service Distributor), before being registered as such, under Section 11A(1) / 11A(4) of the Act. 2. After due process, the Adjudicating Authority has confirmed the demand proposed in the SCN. Being aggrieved, the appellant is before the Tribunal. 3. The Ld. Counsel, appearing for the appellant, makes the following submissions in respect of the confirmed demand of Rs.3,66,93,067/- on account of alleged clandestine removal: - * That the Appellant ran into rough weather before being operational. At the instance of the creditors, the Hon'ble Delhi High Court appointed an Official Liquidator. When the plant and other assets for the Appellant were in the possession of the Official Liquidator, the Hon'ble Court appointed an expert Committee to commission the Appellant's plant, without handing over the operational contro....
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....tion figures, as the production is only on the estimation basis...... U. C. Das and Puspanjali are looking after the Indirect Tax matter currently........Till today as per our records 3049.035MT of Stock is available at Paradip Port". * As regards the further adjustments of 3000MT in the ER-2 of December 2008 and February 2009, none of the persons whose statements were recorded by the DGCEI could throw any light. Nonetheless, all above adjusted quantities of 4000MT, 1000MT & 2000MT of Pig Cheaps have already suffered the incidence of Central Excise duty at the time of removal thereof to the domestic market. * It is also a matter of record that while the Dy. General Manager (Commercial), Shri Jaywant, stated that 3049.495 MT of Pig Iron could be lying beneath the ground bed level, Mrs. Puspanjanli Mishra, Manager (Finance & Systems), strongly denied that on the ground that the plot at Paradip Port has concrete base. Similarly, said Shri Jayawant applied to the jurisdictional Customs Authority for extension of time to export 3049.495MT of Pig Iron lying at the yard at Paradip Port, while as on that date there was Nil stock of Pig Iron at the said yard. Evidently, th....
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....thereof. The SCN does not name any purchaser of the clandestinely removed goods. Indeed, none of the conditions to establish clandestine removal of 3049.495MT of Pig Iron. * Also, the Ld. Commissioner has referred to the statements of different persons in the impugned Order in a very cursory manner, by deliberately ignoring the relevant portions thereof. To the extent that the Appellant's reiteration to cross examine Shri Pratap Keshari Sahoo has not even discussed by the Ld. Commissioner. On that count also the impugned Order suffers from the infirmity of having violated natural justice. * In the present proceeding the DGCEI recorded the statements of Shri Vaibhav Jaywant, AGM Commercial, Shri Umesh Chandra Das, Jr. Manager (F&A), Shri Bijay Gupta, G.M (Finance), Mrs. Puspanjali Mishra, Manager (Finance & Sys.) and one N. G. Banerjee, Director of the Appellant Company. The Appellant submits that none of the statements as above are reliable and admissible inasmuch as, the mandatory procedure as stipulated in Section 9D of the Act, has not been complied with. * He relies on the following case laws : (a) Continental Cement Company Vs UOI [2014 (309....
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....buted prorate on the basis of the turnover of the concern unit to the sum total of turnover of all the units to which the service relates. Subsequently, the Board issued a Circular No.178/4/2014-S.T., dated 11.07.2014, for the first time, providing therein the more detailed formula for distribution of Input Service Credit. It is a settled law that, in the absence of any specific formula for distribution of input service credit during the relevant period, it was open for the ISD to choose a proper method for distribution of credit. Nonetheless, the formula adopted by the ISD for distribution of credit to the Appellant is well in accordance with the amended provisions of Rule 7 of the CENVAT Credit Rules and so also the Circular dated 11.07.2014 issued by the Board. ❖ The CENVAT Credit was taken during the period 2005 - 2008 and the same was properly recorded in the ER 2 Returns. Since they were already shown in the ER 2 Returns, it was for the Department to scrutinize the ER 2 Return and raise objection, if any, but it was not done in this case. Therefore, the issue raised for the first time by way of the present SCN on 31.03.2012, makes the entire demand time-barred....
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....n the assurance of the Appellant company to deposit a lump sum amount (Rs.98,66,311/-), the Hon'ble High Court of Delhi in the said C.P No.337 directed that upon deposit of the said amount, the Order dated 19.09.2012, appointing Official Liquidator shall stand recalled and the Official Liquidator was directed to hand back all records and assets in its possession, if any to the Appellant Company. 17.02.2010- The Appellant Company was searched by the Directorate General of Central Excise Intelligence (DGCEI), consequent upon which a Show Cause Notice dated 31.03.2012 (Page- 55 to 156 of the Paper book) was issued to the Appellant by the Additional Director General, DGCEI, Kolkata (relevant period 2005-06 to May 2009). 6.2. The alleged clandestine removal has happened on account of removal of 2661.600 MT of Pig Iron from the Appellant's yard at Paradip Port, adjustment of 4000 MT of Pig Iron & 1000 MT of Pig Iron scrap and 2000 MT of Pig Iron scrap, from the Appellant's Daily stock as reported in ER-2 of December 2008 and February 2009. During this period and even subsequently till 27.09.2011, the effective control of the company was with the Official Liquidator of the com....
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....wed in terms of Section 9D of CEA 1944, has not been followed. 7.2. The Hon'ble Punjab and Haryana High Court in the case of G. Tech Industries Vs. UOI [2016 (339) E.L.T. 209 (P&H)], has held as under: - "16. Clearly, therefore, the stage of relevance, in adjudication proceedings, of the statement, recorded before a Gazetted Central Excise officer during inquiry or investigation, would arise only after the statement is admitted in evidence in accordance with the procedure prescribed in clause (b) of Section 9D(1). The rigour of this procedure is exempted only in a case in which one or more of the handicaps referred to in clause (a) of Section 9D(1) of the Act would apply. In view of this express stipulation in the Act, it is not open to any adjudicating authority to straightaway rely on the statement recorded during investigation/inquiry before the Gazetted Central Excise officer, unless and until he can legitimately invoke clause (a) of Section 9D(1). In all other cases, if he wants to rely on the said statement as relevant, for proving the truth of the contents thereof, he has to first admit the statement in evidence in accordance with clause (b) of Section 9D(1). For....
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....atement of witnesses are recorded under section 14 of the Central Excise Act and section 9D of the Central Excise Act deals with relevancy of these statements under certain circumstances. 15. The statement of witnesses are recorded under section 108 of the Customs Act, 196223 and section 138B of the Customs Act deals with relevancy of statements under certain circumstances. ..... 21. It would be seen section 14 of the Central Excise Act and section 108 of the Customs Act enable the concerned Officers to summon any person whose attendance they consider necessary to give evidence in any inquiry which such Officers are making. The statements of the persons so summoned are then recorded under these provisions. It is these statements which are referred to either in section 9D of the Central Excise Act or in section 138B of the Customs Act. A bare perusal of sub-section (1) of these two sections makes it evident that the statement recorded before the concerned Officer during the course of any inquiry or proceeding shall be relevant for the purpose of proving the truth of the facts which it contains only when the person who made the statement is examined as a wi....
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....d stage, the adjudicating authority has to form an opinion, having regard to the circumstances of the case, whether the statement should be admitted in evidence in the interests of justice. The judgment further holds that in adjudication proceedings, the stage of relevance of a statement recorded before Officers would arise only after the statement is admitted in evidence by the adjudicating authority in accordance with the procedure contemplated in section 9D(1)(b) of the Central Excise Act. The judgment also highlights the reason why such an elaborative procedure has been provided in section 9D(1) of the Central Excise Act. It notes that a statement recorded during inquiry/investigation by an Officer of the department has a possibility of having been recorded under coercion or compulsion and it is in order to neutralize this possibility that the statement of the witness has to be recorded before the adjudicating authority. .... 24. The Punjab and Haryana High Court in Jindal Drugs that was decided on 21.06.2016 also held that unless and until one of the circumstances contemplated by clause (a) of section 138B(1) of the Customs Act applies, the adjudicating autho....
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....Act and section 138B(1)(b) of the Customs Act have been held to be mandatory and failure to comply with the procedure would mean that no reliance can be placed on the statements recorded either under section 14D of the Central Excise Act or under section 108 of the Customs Act. The Courts have also explained the rationale behind the precautions contained in the two sections. It has been observed that the statements recorded during inquiry/investigation by officers has every chance of being recorded under coercion or compulsion and it is in order to neutralize this possibility that statements of the witnesses have to be recorded before the adjudicating authority, after which such statements can be admitted in evidence. ..... 34. The confirmation of demand of central excise duty to the extent of Rs. 3,04,24,623/- is based on the statements of persons who were not examined by the department before the adjudicating authority. This examination was absolutely necessary in terms of the provisions of section 9D of the Central Excise Act. In the absence of examination of such persons before the adjudicating authority and in the absence of admission of such statements in ev....
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.... "12. Further, unless there is clinching evidence of the nature of purchase of raw materials, use of electricity, sale of final products, clandestine removals, the mode and flow back of funds, demands cannot be confirmed solely on the basis of presumptions and assumptions. Clandestine removal is a serious charge against the manufacturer, which is required to be discharged by the Revenue by production of sufficient and tangible evidence. On careful examination, it is found that with regard to alleged removals, the department has not investigated the following aspects : (i) To find out the excess production details. (ii) To find out whether the excess raw materials have been purchased. (iii) To find out the dispatch particulars from the regular transporters. (iv) To find out the realization of sale proceeds. (v) To find out finished product receipt details from regular dealers/buyers. (vi) To find out the excess power consumptions. (vii) Several decisions have been given by the Tribunals which have been confirmed by the High Courts that electricity consumption alone if adopted as a basis of the demand, the same is n....
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.... upon the allegation that much less salary has been paid to the employee and the unit is running in losses. All these are nothing but the possibilities, for clandestine removal, but, for proving the clandestine removal, the substantive piece of evidence is must. Few such evidences have been referred by this Court. The list of these evidences is not exhaustive. The department should have collected the proof of amount received from the consignees, statement of consignees, receipts of sale proceeds by the consignor and its disposal" [Emphasis supplied] 8.6. The Hon'ble Allahabad High Court in the case of Continental Cement Company Vs Union Of India [2014 (309) E.L.T. 411 (All.)], has held as under:- "12. Further, unless there is clinching evidence of the nature of purchase of raw materials, use of electricity, sale of final products, clandestine removals, the mode and flow back of funds, demands cannot be confirmed solely on the basis of presumptions and assumptions. Clandestine removal is a serious charge against the manufacturer, which is required to be discharged by the Revenue by production of sufficient and tangible evidence. On careful examination, ....
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....cturing unit was in existence, they have passed on the CENVAT Credit to that unit. This is not a case, where the appellant was operating under multiple units, requiring them to follow procedure to pass on only the proportionate credit. It is also not the case of the Revenue that the services in question were not utilized by the appellant or the Invoices of the service providers is not in order. Therefore, the issue is more in the nature of procedural error on the part of the appellant, who should have obtained the ISD while passing on the CENVAT Credit to their manufacturing unit. 10.2. We find that this issue is no more res integra. The Hon'ble Karnataka High Court in the case of Commissioner of C. Ex., S.T. & Cus., Bengaluru Versus Hinduja Global Solutions Ltd. [2022 (61) G.S.T.L. 417 (Kar.)], has held as under:- "8. The dispute involved herein is no more res integra in view of the judgment of the Hon'ble High Court of Gujarat in the case Dashion Ltd., supra which has been accepted by the Department in terms of the Circular dated 16-2-2018. The relevant paragraphs of the judgment of Dashion Ltd., supra is quoted hereunder for ready reference : "7. The second ....
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....ible under Cenvat Credit Rules, 2004. The assessee had five manufacturing units and had its registered office at Vatva, Ahmedabad. The assessee was also providing several taxable services such as erection and commissioning, repairing and maintenance of water treatment plant, etc. 2.3 The revenue authorities, during scrutiny of the records of the assessee, noticed that it was availing the credit of service tax paid for various services by one unit for the purpose of clearance of other unit. After gathering details from the assessee, the adjudicating authority issued show cause notice calling upon the assessee as to why the Cenvat credit of service tax on input service should not be recovered with interest and penalties. In the show cause notice itself, the adjudicating authority had referred to sub-rule (3) of Rule 15 of the Rules of 2004 as basis for such proposal. Two primary objections of the Department were that the assessee had not registered itself under the Service Tax (Registration of Special Category of Persons) Rules, 2005 and that the tax credit from one unit was utilized for discharging tax liability of another unit instead of pro rata distribution amongst diffe....
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.... Central Excise v. Dashion Ltd. [2016 (41) S.T.R. 884 (Guj.)] wherein, the Court held as follows :- The second objection of the Revenue as "7. noted was with respect of non-registration of the unit as input service distributor. It is true that the Government had framed Rules of 2005 for registration of input service distributors, who would have to make application to the jurisdictional Superintendent of Central Excise in terms of Rule 3 thereof. Sub-rule (2) of Rule 3 further required any provider of taxable service whose aggregate value of taxable service exceeds certain limit to make an application for registration within the time prescribed. However, there is nothing in the said Rules of 2005 or in the Rules of 2004 which would automatically and without any additional reasons disentitle an input service distributor from availing Cenvat credit unless and until such registration was applied and granted. It was in this background that the Tribunal viewed the requirement as curable. Particularly when it was found that full records were maintained and the irregularity, if at all, was procedural and when it was further found that the records were available for the Revenue to ....
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....ng the same No. 150 was prepared for removal of 500 MT of Pig Iron. But the Bond Register records removal of 850.800 Mt and also 500 MT against the same ARE-I number twice. Thereby the Bond Register records excess removal of 850.800 MT of Pig Iron. (ii) For the Year 2007-08 :- On 29.03.2008 490.470 MT of Pig Iron was returned to the factory for reprocessing, but the Bond Register does not take that into account. Accordingly, the stock in the Bond Register remained inflated by 490.470 MT. - It has been informed by our Sales Department that during the period 24th to 30th September another 500 MTs of Pig Iron was returned to factory on account of non-availability of Railway Rakes. But the Bond Register does not take that into account. Accordingly, the Stock in the Bond Register remained inflated by 500 MT. Details of this return of material is not reflected in the enclosed statements since the Sales department could not give the details till the enclosed statements were prepared. However, efforts are being made to fax this detail separately during this week. . During the year 2007-08 2400 MT of Pig Iron was diverted from the stock at Paradin Port for sale in DTA on payment....
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....he discrepancy, if any, as has been pointed by you are purely on account of inadvertent error of oversight and/or erroneous accounting by the concerned employee maintaining the Bond Register. Kindly appreciate that the alleged discrepancy in stock to the extent of 3049.495MT is fictitious and far from truth. As regards the error in availing apportioned input service credit, we are working out our eligibility correctly and we shall reverse the excess credit, if any found to have been availed and utilized by us, with interest thereon. Thanking you You Sincerely; For M/s Mideast Integrated Steels Ltd. For MIDEAST, INTEGRATED STEELS LTD. torino Signatory LE Authorised Signatory . Mesco Towers : 3915, Lewis Road, Kedar Govi" Square, Bhubaneswar - 751014, Orissa (India) Tel. : 0674-2432759, 2432755. 2433* 21, 2433124, Fax : 0674-2432256 Steel Plant : Kalinga Nagar Industrial Complex. ( -_ "unli, P.O-Danagadi-755026, Dist .- Jajpur, Orissa Tel. : 06726-266042-45, 067* - 2353100, Fax : 06726-266041, Paradeep Port : H.B-9, Gaurab Vihar, Ne s' Jagannath Temple Paradeep-754142 Telefax : :: 22-221630 Mumbai Corporate Off. : Mesco Heliport. Juhu Aerodrome, S.V. Road, Mumbai-40....