TMI Blog2014 (6) TMI 454X X X X Extracts X X X X X X X X Extracts X X X X ..... ccounts were opened in Mumbai/Navi Mumbai for the purported buyer in different parts of the country (mostly non existent). How a huge amount were deposited in cash and thereafter transferred to the appellant as payments towards the Beesol, their final product. No meaningful explanation has been given by them in respect of 22 customers who have purported to have purchased Beesol indicated either such customers are non existent or they have not purchased Beesol or any other solvent from the appellant at all baring two cases wherein the customers have stated that they have purchased, except saying that the said units might have closed down or some of them being traders have stopped the business or taking central excise registration was not essential. The details found during investigation and confronted to appellant are required to be refuted on the basis of solid evidence by the appellant. In the absence of any such refutal, the allegations made by the revenue about the non existence or non purchase by these 22 units have to be upheld. In the event of not using the inputs in the manufacture of dutiable final products for whatever reason the credit alongwith interest is required ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 000 and Beesol-7100. The main input for the manufacture of the said solvent is Naphtha. The appellants procure Naphtha from various oil refineries. The case of the Revenue is that eh appellants have fraudulently availed Modvat credit of duty paid on the Naphtha either without actual receipt of the same in the factory or without consuming the same for manufacture of solvent. Naphtha which is used for adulteration of petrol, diesel etc) was illegally diverted and the appellants have manipulated their records to indicate that said Naphtha have been used in the manufacture fo solvents, (which is essential condition to avail the credit). The allegation of diversion of Naphtha is based upon non-production of final product viz. solvents, which in turn is based upon three main evidences. The first evidence is that 22 out of 45, purported purchasers of solvent were found to be non-existent or if in existence they in their statements have said that they never purchased solvent from the appellant. Only in one case, purchaser has stated that he bought one consignment (against many consignments shown in the records). The second evidence is that number of bank accounts were opened in Mumbai/Navi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 (273) ELT 280 (T); (iv) Anutone Acoustics Ltd vs. CCE 2013 (298) ELT 246 (T); (v) Hind Motors sales India Pvt Ltd. Vs. CCE - 2013-TIOL-1232-CESTAT-MUM; (vi) Deioners Speciality Chemicals (P) Ltd vs CCE 1997 (96) ELT 659 (T); (vii) CCE vs Piramal Spinning Weaving Mills Ltd. 2002 (49) RLT 741 (T); (viii) Singh Scrap Processors Ltd vs CCE 2002 (143) ELT 619 (T); (ix) PSL Holding vs Commissioner of Central Excise, Rajkot 2003 (156) ELT 602; (x) Systematic steel Inds Ltd vs. CCE 2005 (191) ELT 663; (xi) Parakh Food Ltd vs CCE - Final Order No. A-1589-1591/WZB/05/EB/C-II dated 10.11.2005; (xii) CCE vs Narayan Polyplast 2005 (179) ELT 20 (SC); (xiii) CCE vs Narmada Chematur Pharmaceuticals Ltd 2005 (179) ELT 276 (SC); (xiv) Stumpp Scehule and Somappa Ltd vs CCE 2005 (69) RLT 786 (T); (xv) Regal Crimptex Pvt LTd vs CCE 2004 (167) ELT 324 (T); (xvi) CCE vs M.P. Telelinks Ltd 2004 (178) ELT 167 (T); (xvii) Silvassa Wooden Drums vs CCE 2005 (184) ELT 392 (T); (xviii) Shivali Udyog (I) Ltd vs CCE 2006 (204) ELT 94 (T); (xix) Creative Enterprises vs CCE 2004 (60) RLT 342 (CESTAT-M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Polyset Plastics Ltd vs CCE- 2006 (205) ELT 372 (t); (iv) Dutta Metal Industries vs Commissioner - 2007 (217) ELT 306 (T); (v) Hindustan Petroleum Corporation vs CCE - 209 (243) ELT 104 (T); (vi) Ispat Profiles India Ltd vs CCE - 2007 (215) ELT 255 (T); (vii) CCE vs National Leather Cloth Mfg Co- 2009 (246) ELT 336 (T) (viii) Wipro Ltd vs CCE - 2001 (135) ELT 1337 (T); (ix) Dow Chemical International Pvt Ltd vs Commissioner - 2008 (226) ELT 146 (T) (x) Birla Corporation Ltd vs CCE - 2008 (224) ELT 567 (T) (xi) BASF India Ltd vs CCE - 2010 (261) ELT 368 (T) (xii) Tata Motors Ltd vs CCE 2007-TIOL-46-CESTAT-MUM; (xiii) Surindra Engg Co Ltd. vs Commissioner 2007 (210) ELT 287 (T) 6. The learned counsel also relied upon the Board's Circular dated 18.10.2000 reported in 2000 (41) RLT M-129. 7. As far as the various factual points made in the Show Cause Notice and the impugned order are concerned, there were not much of a refutal for the same. It was stated that the allegation that some of the buyers were not inexistence or fictitious cannot automatically lead to the conclusion that Naphtha was not received and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se in Automobiles) Order, 2000 is required to be followed. It is in this background this case has to be seen. 9. In the present case, the appellants have fabricated a large number of documents so as to indicate that Naphtha procured was purportedly used in the manufacture of solvents and thereafter solvents have been sold. The learned Commissioner (AR) stated that in the present case the appellant did purchase Naphtha from the refinery, and it was purported to have been used in the manufacturing activity in their factory but in reality the same was diverted into the illegal market. This is evident from the fact that the invoices of the final product were in the name of non existent customers purported to be located all through out the country or to certain persons without their knowledge or purchase order. Appellants after showing the sale of solvent to these non-existent customers themselves opened certain bank accounts in different branches in Mumbai/New Mumbai and operated those bank accounts in the name of such non existent firms. Purported customers located in Chennai, Bangalore etc were shown to have bank accounts in New Mumbai/Mumbai. Large cash amounts were deposited whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Sarathy Industries, Tamil Nadu- Unit not located xviii) M/s Agra Petro Chern, Tamil Nadu - Unit not located xix) M/s Deepak Chemicals, Madras - Unit not located xx) M/s Gem Petrochemicals, Karnataka- No such unit existed. xxi) M/s Arasan Petrochemicals, Vallenkumara, Tamil Nadu- No such unit existed at the given address. xxii) Kothari Chemcials Solents, Shindkedy -Unit was found in existence. No transaction was acknowledged by them. 10. The learned Commissioner (AR) further stated that investigations also revealed that appellant had received payments from the following firms/companies which were floated on paper by one Mr. Arvind Hukkery at the instance of the appellant:- i) Asha Chemine Oil, Pondicherry ii) Abindo Paints Chem Industries, Kolkatta iii) Arasan Petrochemicals, Vallenkumara, Tamil Nadu (iv) Balaji Paints Chemicals, A.P. v) Gem Petrochemicals, Karnataka vi) Sabari Chem Industries, Kerala vii) Sarathy Industries, Tamil Nadu viii) Agna Petro Chem, Tamil Nadu ix) Avon Petrochem, Bengal x) Mevad Chemicals, Rajasthan xi) Mani Paints Chemicals xii ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd pay duty on the final product. In the present case, Naphtha, the input has not been received in the factory, or after receiving the same in the factory was diverted for illegal purposes and not used for the manufacturing process and therefore the credit availed by them is incurred and fraudulent. Transport document available only proves that Naphtha was lifted from Refinery and nothing beyond that. As far as the appellant's plea that the credit availed has been utilized for the clearance of the final product and thus in a way credit has been reversed, the learned Commissioner (AR) argued that this is an incorrect proposition in the facts and circumstances of the case as the invoices issued for the final product Beesol would have found their way into the trade and commerce and therefore some other manufacturer would have already availed the credit of the same. This in reality, the purported tax paid on the Beesol would have not come to the government account but availed as credit by some other unit. Details of such unit cannot be known in the system. The input credit availed by them have been misused in the process and therefore the appellants are required to reverse the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... factory and solvent could be produced therein. From the various documents produced by the appellant it cannot be said that there was no manufacturing facility in the appellant's factory. Revenue has not claimed that appellant did not have a factory. From the documents produced, it appears that some manufacturing activity relating to production of Beesol might have taken place during the relevant period. However, on the other hand, the evidence gathered by the Revenue clearly indicates that the records maintained by the appellants were not truthful and were fabricated on large scale, sales shown to 22 parties were all fabricated and in the absence of any plausible explanation from appellant, this only proves that the Beesol was not manufactured, atleast to the extent that was purported to have been supplied to these 22 customers. we also note that the solvent is purported to be transported through M/s Sai Bulk Carriers again firm controlled by the appellant. Inquiries with owners of tankers etc only goes against appellant. Obviously the transport documents relating to solvents were also fabricated/manipulated. 16. From the demand notice/Show Cause Notice it is not clear what ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nufacture. In such situation Revenue was demanding amount equal to the credit taken. Since the coils after cutting and slitting were being supplied to specific customers, the same would have been supplied by the manufacturer as input cleared as such on reversal of credit and in view of this position, this Tribunal has been taking the said view. The present case is not of this type. Here customers are non-existent, unknown and so called manufacturing is bogus, and transaction are fraudulent. 19. In the case of Ajinkya Enterprise (supra) which was upheld by the Hon'ble Bombay High Court this Tribunal has taken the view that cutting and slitting of HR coils into sheets or strips does not amount to manufacture and under the circumstances as explained earlier, the Tribunal has taken the view that the credit availed was incorrect but it was used for payment of slitted sheets, coils which amounts to reversal of the credit. Similar is the position in the case of Commissioner vs Creative Enterprises (supra) relied upon by the learned counsel for the appellant. In the case of J.K.Files tools Raymonds Ltd. (supra) the situation was almost similar as here assessee appellant was carryi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounsel for the appellant has quoted four case laws as detailed in para 4. We have gone through the four judgments. We find none of them is of any relevance in the facts and circumstances of the present case. In the present case, the appellant though they have not manufactured Beesol but issued invoices of the Beesol. Such invoices would have gone into the trade and commerce and some other person would have taken the credit of the same, and therefore the four cases mentioned by the learned counsel for the appellant are not applicable in the present case. In the case of Andhra Pradesh Straw Board Mills (supra), the manufacturer was manufacturing single ply straw board which was captively used for manufacturing multiple straw board which does not amount to manufacture and view of this position the tribunal took a view that he appellant need not pay duty at both the stages. The facts in this case are totally different. In the present case the Revenue's contention is relating to non manufacturing of Beesol. Another case law quoted is Jay Industries (supra). In the said case certain goods were imported and cleared from Bombay Customs House which were classified under particular headi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xcise Rules, 2002 and Cenvat Credit Rules, 2002 and the department cannot issue the Show Cause Notice in 2003-04 invoking earlier rule viz. Rule 57I. 22. The contention of the learned Advocate for the appellant is that in the absence of a saving clause Rule 57I cannot be invoked after the Modvat provisions have been substituted by the Cenvat provisions and in support of the above contention the learned advocate has quoted a lagre number of judgments as detailed in para 5 above. 23. We have considered the submissions. It would be appropriate to see the history of changes in the Modvat/Cenvat Scheme. Modvat Scheme was introduced in 1986 by introduction of Rule 57A onwards under the Central Excise Rules. That Scheme had undergone a number of changes particularly enlarging the scope of the Scheme. In 1994 the Scheme was extended to the capital goods also by introduction of Rule 57Q onwards. In 2000 the name of the Scheme was changed from Modvat to Cenvat even though the basic concept that excise is tax on manufacture continued to be part of the Act. The changes were mainly in nomenclature rather than much of substance. However in 2000, the Rules relating to Modvat were redrafted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in view of General Clause Act - Section 6. There were varying decisions of different High Courts and the matter went up to Supreme Court. 26. In 2000. The Hon'ble Supreme Court in the case of Kolhapur Canesugar Works Ltd. vs UOI 2000 (119) ELT 257 (SC) had taken a view that Section 6 of the General Clauses Act is not applicable to the rules framed under any of the Central Act and in absence of any provision either in Act or new rule or notification saving the earlier rules for the pending proceedings it was not possible to continue with the same proceedings. In this context the Hon'ble Supreme Court has observed as under: 35. For the reasons set forth above we do not accept the view taken in Saurashtra Cement and Chemical Industries Ltd. (supra), in Falcon Tyres Ltd. (supra) and the other decisions taking similar view. It is not correct to say that in considering the question of maintainability of pending proceedings initiated under a particular provision of the rule after the said provision was omitted the Court is not to look for a provision in the newly added rule for continuing the pending proceedings. It is also not correct to say that the test is wheth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a fresh proceeding for the same purpose may be initiated under the new provision. 40. The further question that arises for consideration in this connection is whether the Notification No. 267/77, dated 6-8-1977 by which Rule 10 was deleted contained any provision for continuance of the proceedings already initiated and whether Act 25 of 78 which introduced Section 11A of the Central Excise Act, adopted the legal device of creating a fiction by virtue of which a proceeding under Rule 10 could be deemed to be a proceeding under Section 11A of the Act. If such was the position then it could be argued that the proceeding initiated when old Rule 10 was in force could be continued on the strength of the clause of the notification by which the said Rule was omitted and substituted by a new Rule which in turn was substituted by Section 11A of the Act. 27. Thus in essence the Hon'ble Supreme Court was of the view that either the new Rule itself should say that pending proceedings will continue or there should be some other provisions in law validating the proceedings under the old rules to continue. In 2000 and 2001 the new Rules replaced the Modvat/Cenvat Scheme and sim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... retrospective amendment is not possible. Further to overcome the difficulty to continue the proceedings initiated under the erstwhile MODVAT rules, it has been advised to validate the action initiated by the Department through a separate legislation. In order to continue the proceedings in such demands / show cause notice pending adjudication the Government is considering to promulgate appropriate legislation for validating the action taken under the erstwhile MODVAT rules. It is therefore advised not to finalise any proceedings in matters relating to recovery and imposition of penalty under the erstwhile MODVAT rules that are pending till such time appropriate legislation to validate the action is enacted. (Departmental Instruction No. 18/GL-18/2000 GIMF (DR)'s F.No. 275/126/2000-CX.8A dated 18.10.2000) 28. Keeping in view the Hon'ble Supreme Court's decision, the Government in the Budget 2001 through Finance Bill/Act introduced Section 38A and also validation section. This section is pari material to Section 6 of the General clauses Act for Rules, Notification, Order etc. The relevant Provisions are as under: 38A Where any rule, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r order, shall be deemed to be and shall be deemed to always have been, as validly taken or done or omitted to be done as if the amendment made by section 125 of the Finance Act, 2001 had been in force at all material times; (b) no suit or other proceedings shall be maintained or continued in any court, tribunal or other authority for any action taken or anything done or omitted to be done, in respect of any goods under any of such rule, regulation, notification or order, and no enforcement shall be made by any court, of any decree or order relating to such action taken or anything done or omitted to be done as if the amendment made by section 125 of the Finance Act, 2001 had been in force at all material times; (c) recovery shall be made of all such amounts of duty or interest or penalty or fine or other charges which have not been collected or, as the case may be, which have been refunded, as if the amendment made by section 125 of the Finance Act, 2001 had been in force at all material times. Explanation.- For the removal of doubts, it is hereby declared that no act or omission on the part of any person shall be punishable as an offence which would not have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e does not contain any provision saving any actions initiated under Rule 57U of the said Rules. Though Section 125 of the Finance Bill, 2001 seeks to introduce such a provision in the Central Excise Act and Section 126 seeks to introduce in the Act provisions for revalidating, inter alia, actions taken under the said Rule 57U after 31-3-2000, neither of the two sections has become law hitherto. Contextually, I also note that the above provisions of the Finance Bill, 2001 were not before the SRB when it passed order in Wipro (supra). 2. When the matter came up for hearing, both the sides duly represented by Shri Bipin Garg, learned Advocate and Shri Rajeev Tandon, learned SDR agreed that the Finance Bill, 2001 has become the Finance Act, 2001 on 11-5-2001. As per Section 131 of the Act, a new Section 38A has been introduced with the provision that the same shall be deemed to have been inserted on or from 28th day of February, 1944. The effect of insertion of the said section is to the effect that repeal of Modvat provisions w.e.f. 1-4-2000 will not affect the previous operation of the rules and the right, privilege, obligation or liability acquired, accrued or incurred or incurr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... With great respect to the said Bench we are unable to agree with both the contentions. There were no concessions granted by the appellant in the case of Kisan Sahkari Chini Mills Ltd. The concessions are normally granted in facts and not on the point of law. In any case the matter was referred to the Larger Bench for a decision on a point of law and not deciding a particular case. The second reason mentioned was that the decision in the case of Kolhapur Canesugar Works Ltd was not brought to the notice of the Larger Bench. As enumerated earlier, Section 38A was introduced only to plug the legal loopholes pointed out by the Hon'ble Supreme Court in the case of Kolhapur Canesugar Works Ltd. We also note that it is not that the Hon'ble Supreme Court stated that there can be no action once a particular rule is substituted or amended. All that the Hon'ble Supreme Court has said is that there has to be a provision in the law to continue proceedings under the old Rules. The Hon'ble Supreme Court gone even to the extent of holding that even while amending the rules the new rules can state so. We are also of the view that if for any reason the said Bench was of the view that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e met by (i) disallowing the credit of Naphtha taken which is estimated (based upon input/output ratio) to have been used in the manufacture of Beesols the solvents purported to be sold to the 22 buyers (excluding the few consignments of two of such buyers who have admitted to have purchased one or two consignments); (ii) in respect of the remaining customers, appellants may be given last chance to produce all the invoices as also transport documents and ledger account detailing the banking transaction to enable verification of money trail. Revenue may verify these details about the correctness and authenticity and based upon such verification allow the credit of Naphtha taken on the estimated quantity which have been used in the manufacturing of the Beesol. Needless to say that appellant will produce all the relevant documents without further delay as the case is very old and in any case within three months from the date of receipt of the order. Revenue would expeditiously complete the verification process and thereafter decide the liability. We note that during arguments appellants have produced electricity, purchase bills and bank statements to prove their points. It should ther ..... X X X X Extracts X X X X X X X X Extracts X X X X
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