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2015 (4) TMI 996 - CESTAT AHMEDABAD

2015 (4) TMI 996 - CESTAT AHMEDABAD - 2015 (328) E.L.T. 429 (Tri. - Ahmd.) - CENVAT Credit - Bogus invoices - 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 - transporters had not availed to route through RTO check post - Held that:- Probative value of the document needs to be established by independent corroboration. In the said case, the Tribunal set-aside the demand of d .....

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ents of the transporter, evidence of third party and the goods were not transported through the check post.

As per Section 14AA, if the Commissioner of Central Excise has reason to believe that the credit of duty availed of or utilized under the rules made under this Act by a manufacturer of any excisable goods; has been availed of or utilized by reason of fraud, collusion or any willful mis-statement or suppression of facts; he may direct such manufacturer to get the accounts of his .....

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n respect of any material gathered on the basis of the audit and proposed to be utilized in any proceeding under this Act or rules made thereunder.

Adjudicating authority had not directed to get the account of Appellant would be audited by a Cost Accountant or a Chartered Accountant as per the provisions of Central Excise Act, 1944. On the other hand, the appellant produced Cost certificate, Chartered Accountant certificate of utilization of input in the manufacture of final product. .....

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, Advocate For the Respondent : Shri K. Sivakumar, Authorised Representative ORDER Per: P.K. Das These appeals are arising out of a common order and therefore, both are taken up together for disposal. 2. The relevant facts of the case, in brief, as per records are that M/s Siddhartha Bronze Products Pvt. (Appellant No.1) are engaged in the manufacture of Copper Scrap, Nickel Scrap, Aluminum Scrap, Brass Scrap and Copper Alloy Scrap, registered with the Central Excise authorities. They are availi .....

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ppliers 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 .....

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ral Excise, Intelligence, Ahmedabad Zonal Unit proposing, to deny the CENVAT Credit amounting to ₹ 5,57,58,449.00 alongwith interest and to impose penalty on the Appellant No.1, on the ground that the Appellant Company wrongly availed the CENVAT Credit, without actual receipt of the inputs in the factory premises at Bhavnagar. It was further proposed to appropriate the amount deposited by the appellants, during investigation. It was also proposed to impose penalty on Shri K.K. Gupta, Manag .....

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ter to the Adjudicating authority to decide afresh after observing the principles of natural justice. By the impugned Order, in de-novo adjudication, the Commissioner of Central Excise & Service Tax, Bhavnagar confirmed the demand of CENVAT Credit of ₹ 5,57,58,449.00 alongwith interest and imposed penalty of equal amount of CENVAT credit on the Appellant Company and also appropriated the amount deposited by the Appellant during investigation. It has also imposed a penalty of ₹ 50 .....

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ttal Appliances, Indore and cleared from ICD Indore. b) Indigenous Copper Ingots procured from M/s Annapurna Impex Pvt. Limited, Ludhiana. c) Copper Ingots purchased from M/s V.K. Metal Works, M/s Jain Metal Works, Delhi/ Jammu based. 5.1 He submits that the Appellant received 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 .....

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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 goods. It is submitted that t .....

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1944 to examine the witnesses. The learned Senior Advocate drew the attention of the Bench to the relevant portion of the Adjudication order and also various documents to substantiate the receipt and utilization of inputs at their factory. The learned Senior Advocate explained the reasons in detail for import of Copper Ingots to convert into scrap and Cost Accountant certificate. They have filed Written Submissions with the compilation of case laws and various documents duly certified by the Cha .....

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r CENVAT Credit Rules, onus lies with the assessee to establish that the duty paid inputs were received in the factory and utilised in the manufacture of the final product. In the present case, it is evident from the records that the Appellant had not received the inputs at their factory premises and therefore, it is not necessary to examine the utilisation of the credit in the manufacture of final product and clearance thereof. He also drew the attention of the Bench to the relevant portion of .....

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less 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 ₹ 5,57,58,449.00 for the period from December 2003 to June 2007, would also be in three parts as under: a) ₹ 3,88,54,105.00 on imported inputs cleared from ICD, TKD and ICD, Indore. b) ₹ 1,39,42,355.00 on indigenous copper ingots cleared from M/s. .....

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d the matter for de-novo adjudication after observing principles of natural justice. The relevant portion of the said order is reproduced below:- 4. Another aspect of the case before us to be noted is that there is violation of principles of natural justice. The Appellant sought cross examination of various persons. The Adjudicating authority gave the cross examination on 12.04.2010 of one of the persons. Subsequent to cross examination, the Appellant filed detailed reply on 20.04.2010. It is se .....

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ore the Commissioner of Central Excise, Bhavnagar that the Appellant requested to allow cross examination of 7 (seven) transporters as mentioned at Para 11 of Show Cause Notice. 8.1 The learned Authorised Representative for the Revenue submits that nowhere in the order of the Tribunal, it was directed to the Adjudicating authority to grant cross examination of all the witnesses, whose statements have been relied upon in the Show Cause Notice. It is submitted that the Adjudicating authority had g .....

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ons of the learned Senior Advocate as the decision is not applicable in the present case. The said decision of the Hon'ble Delhi High Court is in respect of constitutional validity of Section 9D of the Central Excise Act, 1944. He submits that it is not necessary to grant the request for cross examination, which is recklessly made. He relied upon the following decisions:- i) M/s Fortune Impex Vs Commissioner of Customs 2001 (138) ELT 556 (Tri-Kolkata) ii) M/s Kanugo & Co. Vs Commr. of Cu .....

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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 est .....

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Delhi High Court in the case of M/s Basudev Garg vs. Commissioner of Customs 2013 (293) ELT 353 (Del.), following the earlier decision in the case of J.K. Cigarettes Limited (supra), held that the statement against the assessee cannot be used without giving them opportunity of cross examining the deponents. It is observed that cross examination is a valuable right of the accused/noticee in quasi judicial proceedings which can have adverse consequences for them. In the case of Commissioner of Cus .....

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liance is placed on the provisions of Rule 9D of the Act in respect of any particular witness, any intimation of the same is required to be given to the Respondent and it would open to the Respondent to approach the High Court against the order made by the authority in that behalf. The Hon ble Delhi High Court in an Income Tax matter in the case of Commissioner of Income Tax vs. M/s S.M.C. Share Brokers Limited - (2007) 288 ITR 345 (Delhi), held that the Tribunal is right in his view that in abs .....

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ovo adjudication after observing the principles 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 be .....

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ailable 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 submits that during investigation various evidences were unearthed to prove that the appellant had not received the inputs in their factory, such as; (i) No manufacturing activities was found during visit on 09.1.2007. No documents was produced for lower elect .....

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i Ashok B. Bafna, broker of AIPL stated that he had supplied only invoices without any goods to the appellants and payment received by cheques, which were returned by cash. This is corroborated with the documents of M/s. AIPL. (v) Shri Bipin M. Joshi, Joint Accountant of the Appellant Company in his statement dated 09.01.2007 admitted the allegation of the Revenue. (vi) Two buyers namely M/s. Shah Alloys Limited and M/s. Red Strips Limited in their statements stated that they were not aware that .....

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rap:- a) Heavy Capacity Band Saw Cutting Machines (4 Nos.) b) Low Capacity Band Saw Cutting Machines (6 Nos.) c) Two Lathe Machines (non working in unused condition) d) Portable Welding Machine. e) Crane (60 MT Capacity Movable) f) Wire Cutting Machine 10.1 Thereafter, on 09.01.2007, the Central Excise officers of DGCEI visited the factory premises of the Appellant Company and prepared Panchnama dated 09.1.2007 and seized several records and documents. It was recorded that there was physical sto .....

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fficient 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 adjudicatin .....

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p. So, there is no scope to doubt that machineries were installed in the appellants factory for manufacturing Scrap up to 10.02.2006. Further, there is no material available on record and no enquiry was conducted by the Department that the appellants removed the machineries after 10.02.2006. So, there is no force in the submission of the learned Authorised Representative that there was no machinery installed in the factory for manufacturing Scraps. 11. The appellants refuted the evidences placed .....

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. Bafna would also be of no assistance for substantiating the case of the Revenue because the appellant had no direct connection with Shri Ahok B. Bafna. In fact, as regards the goods purchased from AIPL, Ludhiana, the said transactions were through broker named Jayant Bhai based in Mumbai, who used to send the goods alongwith invoices of AIPL. The appellant had never been in touch with the personnel of AIPL. We find that the appellant purchased the Copper Ingots from M/s. AIPL, Ludhiana in Febr .....

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the shortest and more appropriate route for transporting goods from Delhi, Indore and Ahmedabad is alone the NH No.8, which enters into Gujarat from Shyamlajee check post and that since the Lorry Receipt under 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 t .....

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r 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 at the check posts, Computerized System at the check posts did not have database creation or .....

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. Delhi and Indore. The appellant could not change it. Further reliance on the deposition made by the representatives of Custom House Agent would also be of no assistance to substantiate the case of the Revenue. It is submitted that merely because clearance of the goods taken place at ICD TKD and the same were initially transported locally by local transporters does not lead to the conclusion that the goods have been sold in Delhi. No evidence has been given by the Revenue to show that the goods .....

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cted his statement by letter dated 13.01.2007. It is submitted that the buyers had not disputed the purchase of Scrap and the buyer is not supposed to know the raw material (i.e. Ingot). 12. We find that on the basis of evidences unearthed during investigation, the Adjudicating authority presumed that the appellant availed CENVAT credit on the basis of the invoices without receiving the goods. But, the presumption was rebutted by appellant before the Adjudicating authority, as recorded from the .....

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ived 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 th .....

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made to JSL; that the allegation that the noticee had no facility to manufacture is not sustainable for the reason that it is impossible for the noticee to manufacture and clear the goods without having the facility to manufacture scrap; that the allegation that the goods were sold locally in Delhi, is also without any merit as no such buyer had been identified in the Show Cause Notice to whom the goods has been allegedly sold by the Noticee; that the Noticee has in its possession documents sho .....

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not necessary that the route as indicated in the Show Cause Notice should have been the route for transportation of the goods to Bhavnagar, it is always the discretion of the buyer to get the goods transported through a route which is more viable. 12.1 The learned Authorised Representative submits that there are decisions that demand of fraudulently availed CENVAT credit has been upheld on the ground that no inputs were actually received, in a similar situation which is applicable in the present .....

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ve, it has been held that the burden to prove the receipt of goods on assessee comes, when goods not reaching to its destination as evident from check post documents. On perusal of Annexure A-1 to Show Cause Notice, we find that during the period 2003-04 to 2007-08 (up to June 2007), the appellant purchased 77 consignments to the quantity of 11,27,636 Kgs. imported re-melted Copper Ingots/ Wire, involving CENVAT credit of ₹ 3,88,54,105.00. Annexure A-2 of the Show Cause Notice indicates th .....

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involving CENVAT credit of ₹ 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 avai .....

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in conformity with the statutory audit report and evidentiary value of such records can not be discarded on the basis of statements and the evidences of third party, relied upon by the Department which were not testified by allowing cross-examination. Furthermore, after thorough investigation, there is no iota of evidence of cash flow of huge amount involved in the 103 consignment. The adjudicating authority observed that Revenue need not establish its case by mathematical precision. In our con .....

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in the case of Commissioner vs. Motabhai and Steel Industries -2015 (316) ELT 374 (Guj.) held as under:- 19. From the findings recorded by the Tribunal, it is apparent that payment to M/s. Vasmin Corporation in respect of purchases was made through banking channels. Under the circumstance3s, the Tribunal has lightly held that the demand cannot be confirmed against the assessee. The Tribunal has further found that it is an undisputed fact that all the purchases were duly recorded in the statutor .....

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tatements 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 d .....

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re confessional statements of the proprietor and of some of the persons connected with the manufacturing activities and such statements were retracted within no time of their recording. The Tribunal also noted the fact that the requisite opportunity of cross-examination was also not made available so as to bring to the fore the true picture and therefore, it concluded against the Revenue observing that not permitting the cross-examination of a person in-charge of records of M/s. Sunrise Enterpri .....

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f duty and observed that there being a conspicuous absence of actual diversion of the goods in the domestic market and flow-back of funds; a demand of duty cannot be sustained on the basis of mere statements made by the transporters of goods. In the present case, we have already stated that there is absence of evidence of the huge quantity of material of 103 consignments were sold in the open market, flow back of funds, etc. In such situation, CENVAT Credit can not be denied, on the basis of sta .....

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ed adjudication order is reproduced below:- In the instant case, it is surprisingly found that copper scraps were manufactured out of costly imported copper ingots/wires/bars. In fact, copper ingots/wires/bars are intermediatory products used for manufacture of different copper articles out of the same; Whereas, the copper ingots are manufactured out of copper scraps, but copper scraps are not manufactured out of copper ingots in view of the value factor, as the cost of copper ingots/wires/bars .....

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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 va .....

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ed. It is very important to note that the main work is to cut the big pieces of copper into smaller pieces so as to be used by the stainless steel manufacturers and automobile bushes manufacturers. Srilankan origin scrap comes in the form of ingots just to save import duty. The same has to be converted into scrap, if it is to be used by the stainless steel manufacturers and automobile bushes manufacturers. 14.2 During the course of hearing before the Tribunal, the learned Authorised Representati .....

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cords. 14.3 The Appellant, in their Written Submissions explained as under:- It has been explained by the Appellant that the items which have been imported by the Appellant by way of high seas sale were remelted Copper Ingots. There is vast difference between refined Copper and remelted Copper Ingots. As per Note to Chapter Heading 74, the refined Copper means the metal containing at least 99.85% by weight of Copper or metal containing at least 97.5%, by weight of copper, provided that the conte .....

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s, therefore, cheaper than refined copper. Even though the remelted copper ingots are required to be refined, it has a great demand in the market owing to the fact 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 Appellan .....

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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 for this reason, they prefer buying re-melted Copper Ingots rather than the scrap. 14.4 The aforesaid submission was already made by the app .....

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of Chartered Accountant. The appellant submitted that Cost Accountant Certificate. The Deputy Commissioner (O&A) by letter dated 12.11.2013 attempted to ascertain the viability of cost, Profit and Loss only on the basis of 7 invoices of supplier and manufacturer, ignoring the accounting principle, cannot be accepted. 14.5 Section 14AA of Central Excise Act, 1944 was inserted in the statute books providing for Special Audit in certain cases, which is a self contained provisions. As per Secti .....

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