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TMI Blog2015 (4) TMI 996X X X X Extracts X X X X X X X X Extracts X X X X ..... g industry was experiencing recess, the appellant had to search a alternative source of raw material for manufacturing Scrap. Then, they started to procure duty paid inputs viz. Copper Ingots /Wire Bars, Nickel Ingots, Aluminum Ingots, Copper Alloy, Ship Breaking material etc from the indigenous manufacturers or imported from oversea suppliers either directly or through purchase of high sea sales and traders. The appellants have been manufacturing Scraps and supplied to the various customers namely, M/s. Jindal Stainless Steel Limited, M/s. Alcobex Metals Limited etc. on payment of Central Excise duty. 3. On 09.01.2007, the Central Excise officers of Directorate General of Central Excise Intelligence (DGCEI) visited the Appellant s factory and searched the premises and also seized several records and documents. As a follow-up action, investigation were conducted at various places at check post of the Commercial Tax Department, Rajasthan, Custom House Agents, suppliers of raw materials, the appellant s Delhi and Gurgaon office etc. The said officers recorded the statements of various persons including employees and Directors of the Appellant and also the transporters of the input m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the inputs in their factory premises and used in the manufacture of final product and duly recorded in their statutory records such as CENVAT Account, RG-1 register etc. The Appellants cleared the goods to various reputed Companies viz. M/s Jindal Stainless Steel, M/s Alcobex Metals etc. There is no dispute that the Appellant paid duty on final product upon utilisation of CENVAT Credit to their renowned buyers. The entire investigation was conducted under impression that it is not commercially viable for any manufacturer to manufacture copper scraps out of copper ingots/ wires/ bars. They had produced Cost Accountant certificate to substantiate the viability of costing of final product, which was not disputed by the Adjudicating authority and the entire demand of duty is liable to be set-aside on this ground alone. 5.2 CENVAT Credit was also denied on the ground that the transporters had not availed to route through RTO check post. The various statements were recorded of the transport companies. He drew attention of the Bench to the Report for avoiding RTO check post and this cannot be a ground for denial of CENVAT credit as it is evident from records that they received the goo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... availing CENVAT Credit facilities on the inputs under CENVAT Credit Rules. The main buyers are M/s Jindal Stainless Steel Limited, M/s Stainless India Limited, M/s Alcobex Metals Limited, M/s Shah Alloy Limited, Ahmedabad and other companies. The learned Senior Advocate submitted that they procured inputs from three sources. The denial of CENVAT Credit of total amount of Rs. 5,57,58,449.00 for the period from December 2003 to June 2007, would also be in three parts as under: a) Rs. 3,88,54,105.00 on imported inputs cleared from ICD, TKD and ICD, Indore. b) Rs. 1,39,42,355.00 on indigenous copper ingots cleared from M/s. V.K. Metal Works/ M/s. Jain Metal Works Delhi and Jammu. c) Rs. 29,61,989.00 on indigenous copper ingots cleared from M/s. Annapurna Impex Pvt. Limited (AIPL), Ludhiana. 8. The learned Senior Advocate submitted that the Adjudicating authority had not allowed cross examination of several persons as prayed for, despite the order of the Tribunal. It is a second round of litigation. The Tribunal by Final Order No.A/1672-1673/WZB/ AHD/2011, dt.28.09.2011, M/1788/WZB/AHD/11, dt.28.09.2011, remanded the matter for de-novo adjudication after observing principles of natu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ii) M/s Kanugo & Co. Vs Commr. of Customs & Others 1983 (13) ELT 1486 (SC) iii) M/s Debu Saha Vs Collr. of Customs 1990 (48) ETL 302 (Tri) iv) M/s Onida Saka Limited Vs CCE 2011 (267) ELT 101 (Tri-Del.) 8.2 We are not able to accept the contention of the learned Authorised Representative. It is observed by the Hon ble Delhi High Court in the case of M/s J.K. Cigarettes Limited (supra) that right of cross examination in quasi-judicial proceedings can be taken away in certain exceptional circumstances as specified under Section 9D of the Central Excise Act, 1944. The Hon ble Delhi High Court in the case of M/s J.K. Cigarettes Limited (supra) held as under:- "32. Thus, we summarize our conclusions as under :- (i) We are of the opinion that the provisions of Section 9D(2) of the Act are not unconstitutional or ultra vires; (ii) while invoking Section 9D of the Act, the concerned authority is to form an opinion on the basis of material on record that a particular ground, as stipulated in the said Section, exists and is established; (iii) such an opinion has to be supported with reasons; (iv) before arriving at this opinion, the authority would give opportunity to the affected p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es of natural justice, which would include the cross examination of the witnesses. In view of that, there is no need to discuss the case laws relied upon by the learned Authorised Representative. 8.4 In the present case, the Adjudicating authority observed that the statements of the transporters are not the only evidences to level the allegations of non-receipt of the cenvatable inputs to registered factory premises of the Appellant. It has further been observed that from the documentary evidences placed on record that the Show Cause Notice is issued after bringing on record various corroborative evidences to justify the allegation and considering all the evidences including the versions of the transporters. In view of that, the Adjudicating authority observed that the cross examination of the transporters is not found mandatorily required to be granted as requested by the noticee and the matter may be decided on the basis of evidences as available on record. In our view, there is no need to remand the matter again for cross-examination, and it may be decided on the basis of evidences, as held by the Adjudicating authority. 9. Learned Authorised Representative for the Revenue sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d condition, and the adjacent shed 2 very old wire winding machine covered with plastic sheet. Outside of the said shed, 3 small manually operated old machines which were used for conventional method for melting of the metals were found. 10.2 On the basis of the said Panchnama dated 09.1.2007, it has been alleged in the Show Cause Notice that the appellant were not having sufficient machineries installed and infrastructure available in their factory for manufacture of Scraps of various metals. The appellant stated that as recorded from Panchnama dated 10.02.2006, they had sufficient machineries installed in their factory and the Department had not disputed Panchnama dated 10.02.2006. But, the appellant disputed the preparation and authenticity of Panchnama dated 09.01.2007. They also requested for cross-examination of Panchas, which was not allowed. The adjudicating authority observed that both the Panchnamas were drawn on different dates and there is no contradiction in each other and were prepared in the presence of independent witnesses. 10.3 We find that the matter may be decided without going into the controversies of preparation of Panchnama dated 09.7.2007. The demand of d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der which the inputs were received by the appellant did not bear the seal of the said Check Post, it must be held that the inputs did not travel from Delhi and Indore to the appellant s factory in Gujarat. The appellant contended that the alternative route was taken by the transporter while travelling to Gujarat. There is no logic in the conclusion drawn by the adjudicating authority that the goods would travel by the only route indicated by the department. The transporters for their own reason may not declare the entire goods loaded in the truck that they are carrying or transporting. They may do so for avoiding local RTO taxes or National Permit expired. Moreover, for safety reason also the transporters deliberately may not declare the entire goods loaded in the truck owing to fear of being stolen during transportation of goods to Gujarat. The mere fact that Lorry Receipt did not bear the stamp of the authorities at Check Post is not a ground to presume that the goods had never been transported to the appellant s factory. There was no efficient checking in the Inter State Check Posts of Gujarat Border. This would be clear from the survey report of 2003 regarding checking of goods ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... buyers. These documents are submitted to support the contention that finished products had actually been cleared by the Noticee to the said buyers, which was not possible if no inputs had been received by the Noticee [referred by the Noticee as Annexure M-1 to M-3]. The noticee has also produced documents as per Annexure M-4 to M-14 to support the contention that the inputs were actually received from the suppliers and payment made therefore through normal banking channels. The Noticee has further produced the documents as per Annexure M-15 to M-17 relating to payment of duty on finished products cleared under Bond without duty, details of payment of Central Excise duty through PLA for the year 2003-04 to 2007-08 and Audit Reports for the relevant period. 49. I find from the written submission dated 18.3.2012 filed by the Noticee contending that present submissions may be read alongwith the submissions made by them before the predecessor, who adjudicated the case earlier and further went on contending that during the period in dispute, the majority of goods were cleared to M/s. Jindal Stainless Steel Limited (JSL); that the Show Cause Notice no where disputes the said clearances ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re-melted Copper Ingots/ Wire, involving CENVAT credit of Rs. 3,88,54,105.00. Annexure A-2 of the Show Cause Notice indicates that during the period 2003-04 to 2005-06 (up to 04.4.2005), the appellant purchased 6 consignments to the quantity of 71,164 Kgs Copper Ingots, from M/s. Annapurna Impex Pvt. Limited, Ludhiana, involving CENVAT credit of Rs. 29,61,982.00. As revealed from the Annexure A-3 to the Show Cause Notice, during the period 2006-07 to 2007-08 (Up to May 2007), the appellant purchased 20 consignments to the quantity of 2,15,276 Kgs of Copper Ingots from M/s. V.K. Metals Works/ Jain Metals Works, Jammu, involving CENVAT credit of Rs. 1,39,42,355.00. Thus, the present case relates to purchase of 103 consignments. 13.1 The appellant submitted the Chartered Accountant certificates that the above materials were purchased by the appellant and duly recorded in their books and accounts and CENVAT records and also reflected in their audited Balance Sheet. It is also certified the consumption of material in the finished goods are in conformity with statutory Audit Reports. There is no material available on record that such huge quantity of inputs of 103 consignments were sol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ew that on the basis of statements of some transporters which were not corroborated by any material on record, a huge credit could not be disallowed. It is under these circumstances that the Tribunal has set-aside the demands and the penalties imposed upon the assessee and the co-noticees. 13.3 The Hon'ble Gujarat High Court in the case of Commissioner of Central Excise vs. Saakeen Alloys Pvt. Limited 2014 (308) ELT 655 (Guj.) held as under:- "7. As can be noted from the decision of the Tribunal, it has extensively dealt with the entire factual matrix presented before it. The Tribunal rightly concluded that in the case of clandestine removal of excisable goods, there needs to be positive evidences for establishing the evasion, though contended by the Revenue. In absence of any material reflecting the purchase of excessive raw material, shortage of finished goods, excess consumption of power like electricity, seizure of cash, etc,, the Tribunal noted and held that there was nothing to bank upon except the bare confessional statements of the proprietor and of some of the persons connected with the manufacturing activities and such statements were retracted within no time ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ially viable for any manufacturer to make copper scraps out of costly imported copper ingots/wires/bars. Hence, it appeared that the duty paid raw materials as shown in the duty paying documents were not physically received in their factory for being used in or in relation to the manufacture of final products and as such the CENVAT Credit, where inputs were actually not received and not used in the manufacture of final products and only duty paying documents were being received, is not admissible to them. 14.1 The appellant in their reply to show cause notice submitted that a certificate issued by Cost Accountant would show the costing of the scrap out of imported Ingots from Srilankan origin vis-`-vis scrap obtained from local/ domestic market. The certificate of Cost Accountant is prepared on the basis of their accounts and as per the standard accounting principles. The cost of production per unit is less than the sales value realized during the year 2003-04 and similar is the position in the rest of the years. It may be appreciated that in one year the cost of product is more than the value realized, it can be said that the Company has occurred loss in that particular year. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct that certain metal elements present in the said remelted Copper Ingots would be of great use for company manufacturing steel. Since the Appellant s majority of the sale was to Steel Industry, it was economically viable for the Appellant to import remelted Ingots and convert the same into scrap and send it to their buyers. The Appellant sends re-melted scrap without melting. It is further important to note that there is a difference between re-melted Ingots and Scrap because re-melted Ingots are free from impurities like Plastics, Woods, Rubber etc. The Steel Industry can straight away use the remelted Ingots. They do not have to undergo the process of removing impurities like Rubber, Wood etc. If the scrap is imported, it will not be economically viable for the Appellant and its buyers for the following reasons:- (a) As per SAARC Treaty, the import duty has to be paid on the scrap but no duty was payable on the re-melted Ingots. (b) If scrap is imported, and then sent to the Steel Industry, the said industry will first have remove the impurities and only thereafter use for manufacturing steel. It would not be economically viable for the buyer to engage in such a process. It is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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