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TMI Blog2011 (1) TMI 1243X X X X Extracts X X X X X X X X Extracts X X X X ..... aged in the manufacture of 'Power Cords', "Connectors' and 'PVC Wire' falling under Chapter No. 85 of the Central Excise Tariff Act, 1985 and is also availing Cenvat credit on inputs used in the manufacture of their final product. The appellant had allegedly availed Cenvat credit amounting to Rs. 10,69,107/- on the strength of the invoices, as detailed below, issued by M/s. V.K. Metal Works, lane No. 6, Phase-II, SIDCO Industrial Complex, Bari Brahmna, Jammu Tawi, J & K (herein-after referred as M/s. VKMW, for the sake of brevity) without receipt of any material :- Sl. Invoice Cenvat credit (in Rs.) RG 23 Pt. II Credit No. No. Date BED Ed. Cess entry No. 1 00106 16-2-2005 255715 5114 313, dated 26-2-2005 2 00103 15-2-2005 255859 5117 304, dated 26-2-2005 3 00314 16-11-2006 545394 1908 406, dated 30-12-2006 Total 1056968 12139 2.2 The above allegation were levelled against the appellant in view of an investigation carried out by the Directorate General of Central Excise Intelligence, New Delhi (hereinafter referred to as 'DGCEI' for the sake of brevity) against M/s. VKMW alleged supplier of the goods to the appellant. During the course of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Cenvat Credit Rules, 2004 read with Section 11A(1) and proviso to sub-section (1) of Section 11A(1) and Section 38A of the Central Excise Act, 1944; (ii) Interest on the said amount under Section 11AB of the Central Excise Act, 1944 read with Rule 14 of the Cenvat Credit Rules, 2004 should not be demanded and recovered from them from the date of credit availment; and (iii) Penalty under Section 11AC of the Central Excise Act, 1944 read with Rule 16 of the Cenvat Credit Rules, 2004 should not be imposed on them for the violations discussed in the show cause notice. 2.3 The adjudicating authority, after considering the submissions made passed the following orders :- (i) Confirmed demand of Cenvat of Rs. 10,69,107/- under Rule 14 of Cenvat Credit Rules, 2004 read with proviso to Section 11A(1) and Section 38A of Central Excise Act, 1944 along with interest on the said Cenvat credit of Rs. 10,69,107/- chargeable from the appellant under Section 11AB of the Central Excise Act, 1944 read with Rule 14 of Cenvat Credit Rules, 2004; and (ii) Imposed a penalty of Rs. 10,69,107/- on the party (appellant) under Secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s which are still under judicial proceedings. In this context the appellant had requested in their reply dated 14-5-2010 filed before the adjudicating authority wherein it was stated that the show cause notice issued to them is based on assumptions which have no legal stand. The appellant placed reliance on the following case law :- (i) Oudh Sugar Mills Ltd. v. UOI - 1978 (2) E.L.T. (J172) (S.C.) (ii) Nutech Polymer Ltd. v. C.C.E., Jaipur-II - 2004 (173) E.L.T. 385 (Tri.-Del.) (iii) Associated Cylinder Inds. Ltd. v. C.C.E. - 1990 (48) E.L.T. 460 (Trib.) (iv) Simplex Castings Ltd. v. C.C.E., Indore - 1994 (72) E.L.T. 585 (Trib.) (v) Bihariji Mfg. Pvt. Ltd. v. C.C.E., Delhi - 2005 (186) E.L.T. 587 (Tri.-Del.). 3.3 That as per the panchnama dated 11-2-2010 made by the central excise officers on the spot it is clear that while taking the visit of the factory premises along with the Director Mr. Bimal Sharma it was found that the factory was engaged in the manufacturing and sale of power cords, connectors, PVC wires, etc. The desired documents as demanded by the Central Excise Officers were sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er intimated that practically it is not feasible to check contents as per documents with the goods loaded in each and every vehicle. Further, Commissioner of Commercial Taxes, Govt. of J & K vide his letter dated 21-12-2009 (RUD 107) informed that as a matter of test check only 4-5 vehicles are subjected to physical verification daily it means that if the each and every vehicle was not checked by the concerned department it is not the liability on part of the appellant party that they have not received the goods physically in their factory. It is also not mentioned anywhere in the show cause notice issued by the DGCEI to M/s. VKMW after conducting whole of their enquiry that the mentioned invoices and vehicle Nos. through which the goods were supplied to the appellant were fake of fraudulent one. 3.6 That after the receipt and entering in the records, the said processed inputs i.e. copper ingots into copper wire/wire roads, the same had been used in the manufacture of insulated copper wires, cords 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 appellants under Rule 11 of CC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... moval of their final products. 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. 3.12 That it is on record that appellant entered the goods in their statutory records when the same had been physically delivered to them, this fact is also not in dispute, it is well settled by the catena of decisions that suspicion and presumption howsoever grave is not a substitute of proof. Consequently, the allegation has no force in the absence of any material placed on record. 3.13 That it is well settled by catena of decisions that penalty is imposable on the act or omission or deliberate violation with disregard to the statute and in absence of any allegation made in the show cause notice regarding the activity/involvement of the Company penalty cannot be imposed on the appellant. Reliance is placed on the decision of Hon'ble Supreme Court in the case of Hindustan Steel Ltd. v. State of Orissa reported in 1978 (2) E.L.T. (J159) (S.C.). 3.14 That the provisions of Rule 13 of Cenvat Credit Rules, 2002 & Rule 15 of Cenvat Credit Rules, 2004 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issued fraudulently by their supplier, M/s. VKMW not accompanying the goods mentioned thereon and born out by the investigation by the DGCEI, M/s. VKMW had allegedly been found to be issuing bogus invoices without manufacturing any goods. Accordingly the issue of imposing the penalty upon the appellant also needs deliberation in the backdrop of the above allegations. 5.3 A perusal of the impugned order reveals that the entire case pertains to disallowance of Cenvat credit and consequently the imposition of penalty on the appellant company and is based on the allegation of availment of Cenvat credit and its utilization on the strength of the fake invoices issued by their supplier, M/s. VKMW without manufacturing any goods in their factory. 5.4 It is observed that the crux of the allegation is based on the show cause notice issued by the DGCEI to M/s. VKMW wherein it has been alleged that M/s. VKMW had no manufacturing activity in their factory premises and showed fictitious production of copper ingots (finished goods) in their unit, paid Central Excise duty on the bogus clearances of finished goods. Thus M/s. VKMW issued invoices fraudulently to their buyers/customers a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of procurement of such copper ingots. The provisions governing the availment of the credit envisages that the assessee availing the credit should ensure that the inputs should have suffered duty at the hands of the manufacturer and the inputs covered under the invoices have been received and the same have been utilized in the manufacture of their final goods. In the instant case, the appellant has purchased the copper ingots from M/s. VKMW, a registered manufacturer of the excisable goods by making payments through banking channel and the goods (copper ingots) are received by the appellant's job workers on behalf of the appellant. The job workers converted the said ingots into copper wire/rod and after conversion returned it to the appellant and the same have been used by the appellant in the manufacture of their final goods; and contrary to which there is no evidence. Thus the appellant therefore, cannot be asked to go beyond the duty payment document in his hand. The appellant had checked the authenticity of the invoice issued by the manufacture and the latter is registered with the Central Excise. Thus, I find that the appellant have taken due care while procuring the duty pai ..... X X X X Extracts X X X X X X X X Extracts X X X X
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