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TMI Blog2010 (10) TMI 398X X X X Extracts X X X X X X X X Extracts X X X X ..... on recovery thereof till the disposal of these appeals. 2. The facts leading to filing of these appeals and stay applications are, in brief, as under : 2.1 Appellant No. 1 are a private limited company engaged in manufacture of CR coils/strips chargeable to Central excise duty under Chapter 72 of the Central Excise Tariff. They were availing the facility of Cenvat credit of duty on inputs used in the manufacture of their finished products under Cenvat credit Rules, 2002/2004 (hereinafter referred to as CCR, 2002/2004). Shri Upender Goel (Appellant No. 2) is the Director of the Appellant No. 1 and Shri Yashpal Sharma (Appellant No. 3) is a Dy. G.M. working for the Appellant No. 1. The main raw material used by the Appellant No. 1 is HR coils, which was being purchased from SAIL stock yard at Ghaziabad. 2.2 On receipt of an intelligence that the Appellant No. 1 are taking Cenvat credit on the basis of the invoices for HR coils while the HR coils are sold outside without being used in the manufacture of CR coils, the premises of Appellant No. 1 were searched by the officers of the Directorate General of Central Excise Intelligence (DGCEI) on 16-12-05 and inquiries were co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ember 2003 - 20-12-05 period, there was no production of CR Coils due to absence of electricity connection and generators and some HR coils had been sold after pickling, but still during this period, they had shown the production and sale of CR strips and scrap; (d) no CR strips had been sold to M/s. Bhagwati Trading Co. and M/s. Ashushi Steel and only invoice had been issued to them; and (e) with regard to outstanding amounts totalling about Rs. 43 crores lying in the name of some companies (Rs. 15,50,03,094 shown as due from M/s. Bhagwati Trading Co. for 1-4-02 - 31-3-05 period, Rs. 24,27,23,778/- shown as due from M/s. Ashushi Steel for 1-4-02 - 31-3-05 period and Rs. 1,15,56,144/- shown as due from M/s. Om Iron & Steel for 2002-2003), his clarification is that Appellant No. 1 had raised only the invoice in the names of these companies and no material had been supplied to them and hence neither they asked for money from them parties nor those parties made any payments. Shri Sharma also gave the details of - (a) production of CR strips/coils shown in their records during 2002-03 - 2005-06 period; (b) &nbs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t No. 1, M/s. D.V. Steel, M/s. S.P. Sales and M/s. Mittal Steel started giving pay order to SAIL on behalf of Appellant No. 1; (f) Since M/s. D.V. Steel, M/s. S.P. Sales and M/s. Mittal Steel was purchasing HR coils from SAIL in the name of Appellant No. 1, the HR coils was being sold by these parties in the market after being cut ; and (j) Appellant No. 1, in order to show the consumption of HR coils purchased in their name, were showing the manufacture and sale of CR strips and scrap by issuing invoices/sale bills without actually selling any material to various parties and thereby enabling them to avail Cenvat credit and on the invoices of CR strips and scrap, imaginary vehicle number were being written 2.7 Shri Pramod Gupta, Partner M/s. S.P. Sales in his statement dated 10-1-08 recorded under Section 14 of the Central Excise Act, 1944 admitted selling the consignments of HR coils of Appellant No. 1 to M/s. IED, Ghaziabad. 2.8 In view of the above facts, a show cause notice dated 8-5-08 was to the Appellants and six other persons for - (a) recovery of irregularly availed Cenvat credit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e factory of appellant No. 1 is incorrect, that the appellant No. 1 were bound by their contract with SAIL to lift the contracted quantity of HR coils, which was being purchased by them, that to the extent the HR coils could be used for manufacture of CR strips, the same were being so used and the CR strips manufactured alongwith the scrap, if any, were being cleared on payment of duty, that some HR coils were being cleared as such or after pickling and in such cases, the Cenvat credit was being reversed, that for manufacture of CR strips, the HR coils were being got slitted through the cutters on job work basis, that the statement of Shri Yashpal Sharma, Dy. G.M. of the appellant No. 1 having been recorded under the threat of arrest, is false and baseless, that the appellant had requested for cross-examination of Shri Yashpal Sharma to establish as to whether his statement was voluntary but the same was not allowed, that the statement of Shri Upender Goel has also been recorded under threat of arrest and hence the same has no evidence value, that the factory of the appellant had been visited on numerous occasions by Central excise officers, audit teams of the department as well as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e HR coils purchased from SAIL for production of CR strips, that the statements of the transporters Shri Amarjit Singh and of Shri Yashpal Sharma, Deputy GM of the appellant No. 1's factory show that there was no manufacturing in the factory of the appellant No. 1 and the entire quantity of the HR coils being purchased from SAIL, after being slitted, was being sold to three dealers M/s. S.P. Sales, M/s. Mittal Steel and M/s. D.B. Steel, who, in turn were selling the same in the market and Cenvat credit in respect of HR coils was being taken without actual receipt and consumption of any such coils in the factory, that the production and sale of CR strips shown by the appellant No. 1 in their records was bogus, that the fact that the sale of CR strips was bogus is clear from the fact that there were huge outstandings to the tune of about Rupees 43 crores due from their customers, in respect of which Shri Yashpal Sharma in his statement has clarified that these are not real outstanding as neither any sales had been made nor any amount is due, that the statement of Shri Yashpal Sharma is fully corroborated by the statement of Shri Upender Goyal, Director of the appellant No. 1, and als ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in view. 12. As noted above there are two important expressions in Section . One is undue hardship. This is a matter within the special knowledge of the applicant for waiver and has to be established by him. A mere assertion about undue hardship would not be sufficient. It was noted by this Court in S. Vasudeva v. State of Karnataka and Ors. (AIR 1994 SC 923) that under Indian conditions expression "Undue hardship" is normally related to economic hardship. "Undue" which means something which is not merited by the conduct of the claimant, or is very much disproportionate to it. Undue hardship is caused when the hardship is not warranted by the circumstances. 13. For a hardship to be 'undue', it must be shown that the particular burden to have to observe or perform the requirement is out of proportion to the nature of the requirement itself, and the benefit which the applicant would derive from compliance with it. 14. The word "undue" adds something more than just hardship. It means an excessive hardship or a hardship greater than the circumstances warrant. 15. The other aspect relates to imposition of condition to safeguard the interest of revenue. This is an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ual scenario involved. Merely because this Court has indicated the principles, that does not give a licence to the forum/authority to pass an order which cannot be sustained on the touchstone of fairness, legality and public interest. Where denial of interim relief may lead to public mischief, grave irreparable private injury or shakes a citizens' faith in the impartiality of public administration, interim relief can be given." 5.4 Thus, principles for granting waiver from the requirement of pre-deposit of duty demand, interest and penalty which emerge from the above-mentioned judgments of Hon'ble Supreme Court and High Courts are that for granting waiver the appellant must establish a prima facie case or must establish that looking to the conduct of the appellant, the requirement of pre-deposit of the duty demand, interest and penalty would cause hardship. The present applications have to be examined from the above criteria laid down by the Hon'ble Supreme Court and the High Courts. 6. Coming to the question as to whether the appellant have established prima facie case in their favour, we find that the allegation against the appellant is of various serious nature that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reater detail the modus operandi of taking bogus Cenvat credit and passing on the same. The huge outstanding of sale proceeds to the tune of Rs. 43,00,00,000/- due from only two buyers - M/s. Bhagwati Trading Co. and M/s. Ashushi Steel are clear indications that the sales of CR strips by the appellant No. 1 to these companies were not genuine sales and, therefore, we have no reason to disbelieve the statements of Shri Yashpal Sharma and Shri Upender Goyal in this regard. 6.1 As against the above evidence against the appellant Nos. 1, 2 and 3, no concrete evidence has been produced by them in support of their claim that the Department's allegations are incorrect or that they were indeed manufacturing the CR strips out of the HR coils being purchased by them. 7. In view of the above, we hold that the appellant have not been able to establish prima facie case in their favour and as such it is the Department which has a strong case against them. As regards the conduct of the appellants, the nature of the allegations against them, which prima facie appear to be supported by concrete evidence on record, are of very serious nature and amount to a massive fraud. In view of thes ..... X X X X Extracts X X X X X X X X Extracts X X X X
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