Tax Management India. Com
                        Law and Practice: A Digital eBook ...

Category of Documents

TMI - Tax Management India. Com
Case Laws Acts Notifications Circulars Classification Forms Manuals SMS News Articles
Highlights
D. Forum
What's New

Share:      

        Home        
 

TMI Blog

Home List
← Previous Next →

2009 (8) TMI 998

..... hereinafter referred to as the appellant No. 1 ) and Shri Manu Bhatia, Director of Appellant No. 1 (hereinafter referred to as the appellant No. 2 ) against Order-in-Original No. 9-Jt. Commr/2009 dated 27-5-2009 passed by the Joint Commissioner, Central Excise Commissionerate, Kanpur. 2. The brief fact of the case is that appellant No. 1 are engaged in the manufacture of articles of iron & steel and the Appellant No. 1 is availing CENVAT credit on the inputs, i.e. M.S. Ingots, being used in the manufacture of final products. The Commissioner, Central Excise, Kolkata-II Commissionerate vide his letter C.No.V (12) 31/CE/AE/Kol-II/2005 dated 22-6-2006 issued a Alert Circular No. 1/2006 and informed that M/s. M.K. Steels of 77, N.S. Road, Kolkata - 700 001 (ECC No. ADTPG 6484 GXD001, Sales Tax Registration No. PB/6033, CST No. 3598A/PB, Income Tax PAN and GIR No. ADTPG 6484G) passed on Cenvat credit on the basis of fake invoices. The proprietor of this unit, Shri S.K. Gupta, during the course of examination, has admitted as under : (a) He has not purchased any consignment of Central Excise duty paid goods. (b) He is ready to pay penalty as per provisions of Central Excise Rules &am .....

X X X X X X X

Full Text of the Document

X X X X X X X

..... revealed as under : (i) M/s. M.K. Steels have never purchased any duty paid goods from M/s. Jawala Steels Pvt. Ltd., Durgapur. West Bengal and M/s. Sarla Ispat Pvt. Ltd., Durgapur, West Bengal. Evidences collected during investigation in respect of this fact are as under : (a) In his statement dated 8-5-07 of Shri Kuldeep Kumar Kedia, Director, M/s. Jawala Steels Pvt. Ltd., Durgapur, has stated that he did not know and he never sold M.S. Ingots to or through M/s. M.K Steels. The above fact stated by Shri Kedia, was also accepted by Shri S.K. Gupta, Prop, of M/s. M.K. Steels, who in his statement dated 17-7-2007 had admitted that no C. Ex. duty paid goods was purchased from M/s. Jawala Steels & M/s. Sarala Ispat, Durgapur. Further in his statement dated 27-6-07, he has accepted that the premises at 58/3, Netaji Subhash Road, Liluah, Howrah belongs to M/s. M.K. Steels where he is sole proprietor and he had continued business upto year 2005 from this premises. Further he has accepted that he has made business transaction with M/s. Frontier Alloys Ltd., Kanpur and issued invoices to M/s. Frontier Alloys Pvt. Ltd., Kanpur and also signed the chart showing the details of invoices iss .....

X X X X X X X

Full Text of the Document

X X X X X X X

..... these appeal on the following grounds : Grounds of appeal of Appellant No. 1 1. That in the Iron and Steel Industry inputs/ raw materials including the final products is received or sold with the help of brokers who specialize in procuring order for purchase and supply. 2. Because Appellant No. 1 had purchased M.S. Ingots from Kolkata to Rania, Kanpur-Dehat (U.P.) on the strength invoices duly supported with Form 31 and the said Trade tax Form 31 had been duly checked by Trade tax officials of West Bengal, Bihar and U.P. Borders before the final delivery of the Raw Material at the Appellants factory at Rania, Kanpur-Dehat (U.P.) . The said inputs carried by the transporters had entered into the factory, of Appellant No. l, wherein the quantity and the description of the same had been duly recorded in the input records of Appellant No. 1. 3. That after the receipt of the said inputs i.e. M. S. Ingots the same had been used in the manufacture of M.S. Bars which again had been duly recorded in the statutory production records of the appellants and had been cleared on the strength of invoice issued by the appellant under rule 11 of CCR, 2002 and on payment of appropriated duty leviable .....

X X X X X X X

Full Text of the Document

X X X X X X X

..... que to seller will prove his bona fide. 7. Appellants case is squarely covered by plethora of judgments in favour of the appellants and in one of the case of R.S. Industries has also been upheld by Hon ble Delhi High Court. Reliance is placed on :- R.S. Industries v. CCE, New Delhi - 2003 (153) E.L.T. 114 - CCE, Delhi-II v. R.S. Industries - 2008 (228) E.L.T. 347 (Delhi) 8. That it is further on record that RT-12 Returns and/or ER-1 Returns have always been assessed on the bases of which the appellant had availed and utilized the cenvat credit in the removal of M.S. Bars. Therefore the appellant had been able to prove before the adjudicating authority that it had availed the credit in accordance with the provision of Rule 9 of the Cenvat Credit Rules, 2004. 9. The appellant had asked the department as to why it had not recovered the element of duty from M/s. U.K. Ispat Udyog and M/s. Shree Hanuman Co. The supplier of M.S. Ingot to appellants through their invoices and had received the payments by cheque and their proprietor Shri S. K. Gupta during the course of his examination before the Central Excise officers, Kolkata had stated that he is ready to pay the penalty for wrongly pas .....

X X X X X X X

Full Text of the Document

X X X X X X X

..... travention of the provisions of the Cenvat Credit Rules, 2002/2004. 2. That by holding the authorized signatory of Appellant No. 1 instrumental in the offence and imposing on him the penalty of Rs. 2,00,000/- is patently wrong and illegal unless and until it is proved that the appellant had personal knowledge or reasonable belief that the goods were liable to be confiscated as has been held by the Hon ble Tribunal in the matter of M/s. Bindu S. Mehta v. CCE, Rajkot 2000 (121) E.L.T. 281 (Tri.-Del.). 3. That the provisions of Rule 13 of Cenvat Credit Rules, 2002 and Rule 15 of Cenvat Credit Rules, 2004, can be invoked against the person acquiring the goods from the factory and dealing in the manner specified in that Rule with the knowledge that the goods with which they are dealing are non duty paid and are liable to confiscation. The said Rule is not applicable against Director of the Company of the company who had not been found involved in any of the activity specified in the Rules ibid. 4. That since the provisions contained in Rule 13 of Cenvat Credit Rules, 2002 and Rule 15 of Cenvat Credit Rules, 2004 were inapplicable against Appellant No. 2 and the finding that the Appellan .....

X X X X X X X

Full Text of the Document

X X X X X X X

..... an endorsement entered by the appellant in current dates showing the connection/correctipn/correlation with annexure to the show cause notice on which the subjected demand of duty by way of reversal of credit has been made. (b) Copy of GR s evidencing receipt of goods in the factory. (c) Ledger account evidencing payments of cheque made to M/s. M. K. Steels, Hawarah, in most of the circumstances payments of the goods have been made only after receipt of goods. (d) Evidence of payment of Trade Tax for the consignment received and put to use in the manufacture of final products. (e) Copies of Form 48 issued under the West Bengal Rules, 1995. In the light of above findings I have to decide that - (i) Whether demand of Rs. 20,76,493/- are sustainable against appellant No. 1? (ii) Appellant No. 1 is involved in collusion and fraud and liable for penal action. (iii) Who are liable to pay duty forfeited by fraud? (iv) Whether penalty of Rs. 2 lacs is sustainable against appellant No. 2? (i) The records placed before me proves the following facts :- Appellant No. 1 have received all the disputed goods on invoices of trading firms under cover of Form 48 issued under the West Bengal Ru .....

X X X X X X X

Full Text of the Document

X X X X X X X

..... raw material was used in the final products. Department has failed to do so thus, it again proves that Appellant No. 1 have received the alleged goods on the invoices. The other allegation of the department is that the above trading firm have extended the cenvat credit to the appellant without their being any duty paid mother invoices and Appellant No. 1 had not taken all reasonable steps to ensure that inputs in respect of which they had taken cenvat credit were goods on which appropriate duty of excise as indicated in the invoices accompanying the goods was paid and violated Rule 7(4) of Cenvat Credit Rules, 2002 and Rules 9(5) of the Cenvat Credit Rules, 2004. The issue has to be examined that whether appellant No. 1 have taken the reasonable steps. It is contention of the Appellant No. 1 that they have received the goods on the invoices of the above trading firm, placed their orders for procuring of raw materials through brokers. This practice is very much prevalent in trade of Iron & Steel. It is proved by the document that they have received the quantity mentioned in the invoice in their unit and have made payments through cheques thereafter. On the contrary department ha .....

X X X X X X X

Full Text of the Document

X X X X X X X

..... (d) Bhuwalka Steel Industries Ltd. v. CCE - 2007 (212) E.L.T. 63 - Default in payment of duty by input manufacturer - Credit availed by appellant sought to be reversed as duty - Precedents and CBEC Circular holding credit not deniable on default in duty payment by input manufacturer - Reasonable precautions taken by appellant before availing credit, invoices containing all particulars as prescribed in Rules - Credit taken on bona fide belief of duty payment - Documents evidencing payment of excise duty amount to supplier by appellant - Precedent and DBEC Circular applicable - Cenvat Credit admissible - Rule 3 & 4 of Cenvat Credit Rules, 2004. (e) CCE v. SPIC Pharmaceuticals Division - 2006 (l99) E.L.T. 686 - Duty not paid by input supplier - As there is no dispute of receipt of inputs, which were dutiable goods, under invoices issued by input-supplier carrying duty payment particulars, the credit of such duty can be taken. (f) R.S. Industries v. CCE - 2003 (153) E.L.T. 114 (CEGAT), the manufacturer supplied goods to buyer on duty paying document. The manufacturer had availed cenvat credit on inputs fraudulently. It was held that the buyer is not responsible for fraud of suppli .....

X X X X X X X

Full Text of the Document

X X X X X X X

..... r able to prove that any other raw material was received and used by the appellant for production of their final product. In my opinion if department is of the view that it was only a paper transaction then it should have proved that there was flow back of money from trading firm to the Appellant No. 1. On the contrary records produced by the Appellant No. 1 shows bona fide transaction on their part. Thus the contentions of the adjudicating authority in absence of any positive and tangible evidences are not tenable. Therefore the Appellant No. 1 is not liable for penal action. (iii) Now I take up the third issue, it is categorically mentioned in CBEC Circular No. 766/82/2003-CX., dated 15-12-2003 that if the manufacturer-supplier has received payment from the buyer in respect of goods supplied including excise duty, action should be initiated against manufacturer-supplier u/s 11D and 11DD. Further, the Hon ble CESTAT in case of Bharav Exports v. CCE - 2007 (210) E.L.T. 136 had held that Credit to the appellants on the basis of invoice issued by input manufacture not deniable - However, department can book a fraud case against the party who issued bogus invoices and can confirm .....

X X X X X X X

Full Text of the Document

X X X X X X X

 

 

← Previous Next →

 

 

|| Home || About us || Feedback || Contact us || Disclaimer || Terms of Use || Privacy Policy || Database || Members || Refer Us ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.
|| Blog || Site Map - Recent || Site Map ||