TMI Blog2013 (9) TMI 415X X X X Extracts X X X X X X X X Extracts X X X X ..... nit to at least verify the fact of the manufacturing unit who has supplied the goods to them. Be that as it may, since it has been proved beyond doubt that the manufacturer as well as the manufacturing unit have availed Cenvat credit based on only documents and reversal thereof is not seriously challenged, it would amount to availment of Cenvat credit wrongly in contravention of provision of Cenvat Credit Rules. It is also not disputed that the extended period of limitation will apply in this case as the entire modus operandi of passing on the credit by M/s. Itisha, without having manufacturing unit, only on documentary evidence and even without paying the same to Government of India, has been un-earthed after detailed investigation, a fraud committed by M/s. Itisha. It is well settled that fraud vitiates everything and disadvantage of such fraud cannot be taken by anyone. Once there is no dispute as regards ineligible Cenvat credit availed by the manufacturers and manufacturing units and the same being reversed on being pointed out, the penalties on the manufacturing unit and the manufacturer under the provisions of Rule 15 of Cenvat Credit Rules, 2004 are correctly fastened on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nting, Shri Goutham N. Pal would issue self-bearer cheques, withdraw the same in cash but would account the same in his books of accounts as if he had made payments to the buyers for the inputs purchased by him. The investigation lead to the conclusion that M/s. Itisha had facilitated availment of wrong credit totaling to Rs. 1,93,03,365/-. It is also on record that M/s. Itisha had maintained proper accounts, made some payments through PLA and also submitted returns on a regular basis and M/s. Itisha had shown even clearance of slag and ash etc. which arise as a result of manufacture of Aluminium Ingots from Aluminium Scrap. The investigators also found that one vehicle was used for transporting almost 95% of the Aluminium Ingots and the driver of the vehicle stated that he had not transported all the goods shown as per Central Excise record and the number of actual transportations was much less. One of the other vehicles which was found to have been used for transportation on verification with RTO turned out to be an earth mover and not capable of transporting Aluminium Ingots at all. Based on the investigation, a show cause notice was issued which culminated in the impugned adjud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubmitted that he would like to make written submissions and the written submissions were received from him on 7-10-2008. On behalf of the appellants also Shri S.R. Dixit and Shri P.M. Dave have made written submissions after the hearing. Since several parties were involved and they were represented by different advocates and several arguments were put forward, the points put forth by the appellants are listed out below and instead of separately discussing submissions by each Advocate, the points are taken up for discussion and the submissions from both the sides examined to arrive at a conclusion. 4. The points put forth are as under : (a) In the case of M/s. Sampath Aluminium Pvt. Ltd., the demand was held to be time-barred on the ground that there was not fraud, suppression or mis-declaration etc. and the OIA passed by the Commissioner has been accepted by the Department and no appeal has been filed. Therefore, the demands have to be held as time-barred in view of the fact that on the same issue, the Department has already accepted the OIA. (b) The main allegation against the buyers and the job workers is that they did not take reasonable steps to ensure that the duty was p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cture a maximum of 80 kgs. of Aluminium Ingots per day. No challenge has been made on the evidence brought out by the Revenue that invoice relating to supply of raw materials recovered from the residence of Shri Goutam Pal on 28-3-2005 were all bogus, created by Shri Goutam Pal himself as admitted by him and corroborated by the suppliers. On the basis of the records maintained by Shri Goutam Pal and the fake invoices recovered from him, it has been found that Itisha had taken Cenvat credit to the tune of around Rs. 1.85 crores. Further Shri Goutam Pal had admitted that only on some occasions he had supplied Aluminium Ingots by making purchase from the open market. Commissioner has observed in para 39.3 that the persons who sold the Aluminium Ingots admitted that they had sold Aluminium Ingots on cash basis but the collective capacity of all these sellers would never be equal to the quantity of Aluminium Ingots sold by Shri Goutam Pal to various buyers during the relevant period. Shri Natwarsingh Chavda is the Driver of Tempo No. GRU-4118. This vehicle has been used for transportation of almost 95% of the Aluminium Ingots sold by Shri Goutam Pal. He has clearly admitted that most of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... one. As regards M/s. Sampat Aluminium Pvt. Ltd. case, the Commissioner (Appeals) had held that extended period cannot be invoked in view of the fact that in the show cause notice dated 29-1-2007, the proviso to Section 11A(1) of the Central Excise Act, 1944 was not invoked against the appellant and there was no allegation of fraud or suppression of facts or wilful contravention of rules with an intention to evade payment of duty or avail credit wrongly against the appellant. Therefore, he held that the demand of Rs. 83,939/- in relation to invoice No. 126 dated 7-1-2004 is time-barred. The show cause notice issued to M/s. Sampat Aluminium Pvt. Ltd. is not the one which has been issued to the other appellants. This was a separate proceedings initiated by the Revenue at the level of Asst. Commissioner in-charge of the Division and the adjudication was completed at the level of Asst. Commissioner. Even though the facts are same, in the absence of specific invocation of proviso to Section 11A, Commissioner (Appeals) has rightly held that extended period cannot be applied. Therefore the fact that Revenue has not filed an appeal against this order does not help the appellants. Therefore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dealer has maintained records indicating the fact that the inputs or capital goods were supplied from the stock on which duty was paid by the producer of such inputs or capital goods and only an amount of such duty on pro rata basis has been indicated in the invoice issued by him. (4) The manufacturer of final products shall maintain proper records for the receipt, disposal, consumption and inventory of the inputs and capital goods in which the relevant information regarding the value, duty paid, the person from whom the inputs or capital goods have been purchased is recorded and the burden of proof regarding the admissibility of the CENVAT credit shall lie upon the manufacturer taking such credit. 8.2 Non-fulfilment of requirement of steps to be taken to ensure that duty has been paid has been elaborately discussed in the order-in-original and what emerges is that in respect of every appellant, there was a clear admission that no steps were taken by the buyers as contemplated under Rule 7 cited above. In the case of M/s. Meghmani Organics Ltd., Shri Ashish Soparkar, Managing Director admitted that he had not met Shri Goutam Pal during the past 5 years and had not taken any ste ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /s. Mansi Industries. Proprietor of M/s. Akik Dye Chem. also admitted that he had neither met Shri Goutam Pal nor visited the factory and got Aluminium Chloride out of Aluminium Ingots manufactured on job work basis from M/s. Sun Chloride Pvt. Ltd. The job workers M/s. Mansi Industries, M/s. Sun Chloride Pvt. Ltd., M/s. Sun Chlorochem also admitted that they had not taken any steps contemplated under Rule 7. Partner of M/s. Sun Chlorochem, M/s. Anmol Chlorochem also admitted that they did not have any weighment slips corresponding to the invoices received. However, all of them in their defence subsequently contended that it is not necessary that they should produce evidence to show that steps have been taken. Their contention is that regular supplies were made and there was no complaint and goods were received under proper invoice and therefore, their obligations are fulfilled. It is to be noted that in this case it is not only the case of the Department that M/s. Itisha did not manufacture the goods but it is also the case of the Department that substantial portion of Aluminium Ingots were never supplied and in support of this, the Revenue has the statements of Aluminium Ingot sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M/s. Itisha even though legally it cannot be admissible in view of the fact that Aluminium Ingots were actually admitted to be non-duty paid. But a claim could have been made by the appellants that being bona fide buyers and having received the goods under a valid Central Excise invoice, they are entitled to credit which creates doubts about their own credibility. None of the appellants have chosen this course. Another point that supports the case of the Department is the fact that not only none of the appellants chose to show that goods have been actually received but also they paid the Cenvat credit wrongly taken by them during the course of investigation before issuance of show cause notice. Different amounts have been paid by different appellants but a significant point that has been brought out in the adjudication order and in the submission of the ld. DR. In the adjudication order in para 39.4 and 39.5, Commissioner has observed that all the appellants deposited the money with the Government not out of their own funds but out of amounts which were due to be paid to Itisha. In his statement dated 27-1-2005 which has not been retracted and which has not been contested, Shri Go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atsoever. Not only the appellants were aware that goods were not received in all the cases but they were also aware that the credit taken by them was wrong and may have to be paid back in case it was found by the Department that goods were not received. The contentions of the appellants that they had paid for the goods received is totally baseless in view of the evidence gathered by the Revenue in the form of statement of the Driver, statements of suppliers of Aluminium Ingots, statements of raw material suppliers and the fact that there was no factory at all. 10. We find that the contentions on behalf of the job workers were the same before the Commissioner also. He has clearly dealt with this issue. It cannot be said that the job workers have not dealt with the goods since it is the case of the appellants themselves that goods have been received but it is the Department which says that in all cases goods were not sent. The fact remains that the job workers did deal with the goods. Even though in the case of job workers, the documents may not be relevant, the fact remains that in their case also they have not produced evidence that they have received goods in respect of the invo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and recovery of interest. In this case also the respondents had received the raw materials from Itisha through M/s. S.R. Enterprises, Vadodara, a dealer. In this case, admittedly the assessee has produced goods receipt note, invoices, stores, acceptance report and details of entries in RG23A Part-I and Part-II registers. The Vice-President of M/s. Panchmahal Steels Ltd. had admitted that they had purchased the goods from M/s. S.R. Enterprises, Vadodara and they did not know anything about Itisha. The defence of the respondents is that they had received the goods and it is not the allegation of the Department that they were not aware of M/s. S.R. Enterprises. The Commissioner (Appeals) has held that the invoices issued by M/s. S.R. Enterprises have not been found to be fake or forged. Further the Department has not shown that the goods have not been received. He has also held that fact that the supplier of the said goods Itisha has issued forged invoices is not sufficient evidence to show that M/s. Panchamahal Steels Ltd. also had colluded in the said fraud in the absence of any documentary or other corroborative evidence. He found that wrong availment of Cenvat credit with intent t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned by the Central Excise Officer, but for this sub-section. The amount paid by the respondents in this case has to be treated as paid under the provisions of Section 11A(2B). There is no dispute that the goods had not suffered duty in view of the fact that as far as Itisha is concerned the matter stands finally decided. In this case, Commissioner (Appeals) has already held that extended period cannot be invoked, but in view of the provisions of Section 11A(2B), the amount paid towards duty can be appropriated towards the actual liability. Further as already mentioned in the case of others, in the case of M/s. Panchmahal Steels Ltd., an amount of Rs. 7 lakhs was due towards payment for the goods received to Itisha. The amount paid to the Department has come out of this amount only. Even though this cannot be the reason for the conclusion that duty amount can be appropriated out of the amount deposited, it is a very important factor under the circumstances. Therefore, the appeal filed by the Revenue is allowed to the extent of amount appropriated towards duty out of the amount deposited by the party. 12. As regards invocation of extended period, it is quite clear that, none of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cept that of dealer are rejected and the appeal of the Revenue in the case of M/s. Panchmahal Steels Ltd. is allowed to the extent of appropriation of duty out of the amount deposited by the party only. (Pronounced in Court on ) Sd/- (B.S.V. Murthy) Member (Technical) 15. [Per : Archana Wadhwa, Member (J)]. - After having gone through the order proposed by my learned brother, I agree with him as regards the reversal of the credit, so availed by the manufacturing units, on the basis of invoices issued by M/s. Itisha is concerned. In fact, all such appellants admitted that no duty was actually paid by M/s. Itisha and as such no credit was available to them. As such, the findings of reversal were not seriously challenged by the said appellants. 16. However, all the appellants strongly contended that the fact that M/s. Itisha was not paying duty, as reflected in the invoices issued by him, came to fore only as a result of investigations conducted by the Revenue. The said appellants have also been the victim of fraud committed by M/s. Itisha and as such, they should not be penalized. In fact, it stand specifically contended before us that neither of the manufacturer-app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed upon them. 18. The second situation, which comes out from the records is that M/s. Itisha was supplying material without actually sending the goods. Larger Bench decision of the Tribunal in the case of M/s. Steel Tubes of India Ltd. as reported in 2007 (217) E.L.T. 506 (LB) has held that where the person has not dealt with the goods, he cannot be met with penalty under Rule 26 of C.E.R. As such, even if the Revenue s stand that only invoices were received by the appellant without corresponding supply of goods is accepted, no penalty would be imposable in view of Larger Bench decision. The ratio of the law as declared by Larger Bench is binding on the Division Bench of the Tribunal. As such, by following the same, I held that no penalty should be imposed upon the appellant. 19. While agreeing with all other findings as recorded by my learned brother, I differ with him on the following point. Sd/- (Archana Wadhwa) Member (Judicial) DIFFERENCE OF OPINION Whether penalties imposed are required to be upheld as observed by learned Member (Technical) or the same are required to be set aside as observed by Member (Judicial). Sd/- Sd/- (B.S.V. Murthy) (Archana W ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were aware of non-payment of duty on the inputs received by them from M/s. Itisha so as to impose penalty upon them. (iii) Whether any penalties required to be imposed upon the manufacturers, even if the inputs have not been received by them, in view of the law laid down by the Larger Bench decision on the case of Steel Tubes of India Ltd. - 2007 (217) E.L.T. 506 (LB). (iv) Whether the penalties imposed upon the manufacturers are required to be upheld as observed by Member (Technical) or the same are required to be set aside as observed by Member (Judicial). 24. Heard all the Advocates appearing on behalf of the appellant manufacturers. The submissions of all the appellant manufacturers are that they had availed Cenvat credit on the invoices raised by M/s. Itisha Aluminium Industries. The said aluminium ingots purchased by them from various manufacturers and dealers and M/s. Itisha Aluminium Industries was one of them. It is the submission that the credit pertaining to duty paid on the aluminium ingots was being availed by all the manufacturers whereas the ingots were being delivered directly to job workers. It is the submission that the invoices received by the appellan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submission that under the circumstances, no fault can be found with the appellant manufacturer. The advocate appearing on behalf of M/s. Sun Chloride Pvt. Ltd. submits that they are job workers of M/s. Parshwanath Dyechem Industries and they have not availed any Cenvat credit on capital goods and hence Rule 7(2) of Cenvat Credit Rules is not required to be followed by them. It is submitted that the impugned order of the Commissioner holds that the job workers are not concerned with the provisions of Rule 7(2) of Cenvat Credit Rules, 2004, but imposed penalties on them. It is submitted that it has been held by the ld. Commissioner that Shri Gautam Pal has misled the Department as well as the customers by regularly filing the monthly returns and issuing Central Excise invoices that he was carrying out genuine legitimate manufacturing business. It is his submission that the appellant had clearly produced evidence with regard to receipt of aluminium ingots and also manufacture of aluminium chloride. It is the submission that in view of the above, the appellant being a job worker is not required to take reasonable steps in terms of Rule 7(2) of Cenvat Credit Rules, 2004 and hence the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have availed the Cenvat credit only on the basis of invoices issued by M/s. Itisha. It is also an admitted fact by both the Members that no duty was actually paid by M/s. Itisha and no credit was available to such manufacturers/manufacturing units. On concurrence of such views with both the Members, it is accepted by both the Members that reversal of Cenvat credit by the manufacturing unit in balance was not seriously challenged and was correctly upheld. It is to be noted that though the provisions of Rule 7 of Cenvat Credit Rules, 2004 cannot be stretched too far, at the same time, it was the preliminary duty of the manufacturing unit to at least verify the fact of the manufacturing unit who has supplied the goods to them. Be that as it may, since it has been proved beyond doubt that the manufacturer as well as the manufacturing unit have availed Cenvat credit based on only documents and reversal thereof is not seriously challenged, it would amount to availment of Cenvat credit wrongly in contravention of provision of Cenvat Credit Rules. It is also not disputed that the extended period of limitation will apply in this case as the entire modus operandi of passing on the credit by ..... X X X X Extracts X X X X X X X X Extracts X X X X
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