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2015 (5) TMI 135 - CESTAT AHMEDABAD

2015 (5) TMI 135 - CESTAT AHMEDABAD - 2015 (328) E.L.T. 443 (Tri. - Ahmd.) - Denial of MODVAT Credit - Bogus invoices - MODVAT Credit was denied on the basis of evidence to the extent of the report of RTO that the vehicle numbers mentioned in the invoices are incapable to carry of such huge quantities of the material - Held that:- There is no dispute in the Central Excise invoices are genuine and the goods were cleared from the supplier of inputs accompanied with Central Excise invoices. It is e .....

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d by the Appellant. It is important to note that the supplier of input categorically stated that the goods were transported through the agents/broker of the transporter and the vehicle numbers were mentioned in the invoices at their instance. In such situation, MODVAT Credit cannot be denied merely on the basis of report of RTO. - denial of MODVAT Credit alongwith interest and imposition of penalties cannot be sustained on merit, without going into the submission on limitation of the Appellants. .....

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of the case, in brief, are that M/s SM Energy Teknik & Electronics Ltd (Appellant No.1) was engaged in the manufacture of Industrial Machineries, classifiable under Chapter 84 of the Schedule to the Central Excise Tariff Act, 1985. On 12.04.1999, the office premises of the Appellant were searched by Central Excise officers. They also searched the office premises of two registered dealers viz. M/s Prakash Steelage Ltd and M/s Prakash Steel, both located at Mumbai. The said officers seized sev .....

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rters under Rule 209A of erstwhile Central Excise Rules, 1944. It has been alleged that during the period from April 1996 to November 1998, the Appellant No.1 had wrongly availed MODVAT Credit on the strength of invoices, without physically receiving the raw materials as mentioned in the said invoices. The Adjudicating authority confirmed the demand of MODVAT Credit of ₹ 44,25,049.00 alongwith interest and imposed penalty of equal amount of MODVAT Credit and also appropriated the amount de .....

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by the Central Excise Officers. No dispute was raised. It is further submitted that the Appellant received the goods accompanied with the Central Excise invoices at their factory and used in the manufacture of final product, cleared on payment of duty. The entire transaction is by cheque, duly recorded in CENVAT records. He submits that both the dealers in their statements stated that they have supplied the material to them. The Appellants retracted their statements. The statements relied upon b .....

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r (Appeals). He submits that MODVAT Credit was denied on the basis of evidence to the extent of the report of RTO that the vehicle numbers mentioned in the invoices are incapable to carry of such huge quantities of the material. He submits that in the instant case, both the authorities below has given a clear finding that the cross-examination is not necessary. He relied upon the various case laws as mentioned in the impugned order. 6. After hearing both the sides and on perusal of the records, .....

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cating authority about the retracted statement or the affidavit inspite of specific submission of the Appellant. No finding was recorded by the Adjudicating authority regarding the change in truck number. In de-novo adjudication, the Adjudicating authority again confirmed the demand of MODVAT Credit alongwith interest and imposed penalty of equal amount of MODVAT Credit and appropriated the amount deposited by the Appellant No.1. It has also imposed penalty of ₹ 2.5 lakhs on Shri Manohar N .....

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records. It is also stated that the statement recorded of Appellant No.2 on 30.08.1999 was retracted on 02.09.1999. The said dealers in their statements stated before Central Excise officers that they have supplied the material to the Appellant. It is also recorded that the vehicles were arranged by broker/transporter. 8. It is seen from the show cause notice that Shri A.M. Seth of M/s Prakash Steel, Mumbai, the registered dealer, stated that it is general practice in the Steel market to hire ag .....

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t between the transport broker was that he will arrange the lorries for transportation and present to them the freight bills and lorry receipts wherever applicable to them for payment and that he shall also co-ordinate with the representative of the Appellant office situated at Mumbai. The representative of Mumbai office of the Appellant used to be in touch with the transport broker and he used to send one of the representatives to their godown and the transport broker used to send the lorry hir .....

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orry receipts in order that their accounts department of M/s Prakash Steel shall make the payments and therefore it is possible that in some cases the broker might have arranged local lorries for transportation of the goods and given the freight bills/lorry receipts of other transport companies. In order to get the payments from their accounts department, it is possible that since many of the small lorry owners did not prepare lorry receipts and therefore the transport agent might have hired loc .....

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broker, the responsibilities of M/s Prakash Steel ceased to exist and the ownership of the goods as detailed in Annexure-II of this statement had been transferred to Appellant. They had supplied the goods as detailed in Annexure-II and received payment through cheques. He further stated that as far as they are concerned they had made the payments to the broker on presentation of freight bills and lorry receipts as required by their accounts department. 9. The Appellants have argued that all the .....

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(Appeals) in his earlier order, remanded the matter to the Adjudicating authority with certain directions as under:- In this context, I find that it is not in dispute that the entire case of the department regarding wrongful availment of modvat credit on raw-materials/inputs without actual receipt of the consignment is mainly based on the statements given by the Executive Directors/in-charge of the transporters. During the proceedings before the Additional Commissioner, the appellants had made r .....

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lly regarded as forming part of natural justice unless sufficient reasons are recorded. It is also seen that the persons viz. (i) Shri Manohar Naik, Executive Director of the appellants' unit (ii) Shri Mumtaz Ali, in-charge of M/s. Star Transport Corporation (iii) Shri Govind Vishnavi, incharge of M/ s. New Satyapur Transport (iv) Shri M. Insaf Hussain whose statements had been relied upon by the department, had retracted their individual statements immediately after the statements were reco .....

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he Commissioner (Appeals) observed as under:- 5.3 In this regard, it is observed that retraction is not a new phenomena; when a person is caught in the clutches of law, he tries to save his skin; retraction is one such method. The transporters are co-accused in the act of transfer of MODVAT Credit without transporting the goods for which they were paid a sum of ₹ 400/- per bilty. From the Appellants side, it was the Executive Director Shri Manohar Naik, who played the vital role. So, retra .....

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partment had not filed any appeal against the earlier order of the Commissioner (Appeals). Hence, the Adjudicating authority should have followed the direction of the Commissioner (Appeals). The main object of cross-examination is to find out the truth and detection of falsehood in human testimony. The adverse party in a proceeding should have right an opportunity to cross examine the witnesses. The Honble Delhi High Court in the case of Basudev Garg Vs Commissioner of Customs 2013 (294) ELT 353 .....

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hat Shri Govind Vishnoi, in-charge of M/s New Satyapur Transport Company, in his statement dt.13.04.1999 stated that he had not transported the goods and issued the lorry receipts on receipt of consideration of ₹ 200 to ₹ 300 per lorry receipt. It is submitted that the said transport company had not transported even one consignment. Regarding statement of the Executive Director of the Appellant Company, it is submitted that the statement dt.31.08.1999 was retracted by him on 02.09.19 .....

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ed for, was different from that mentioned in the invoices. 13. After considering the overall facts and circumstances of the case and the evidences, I find that there is no dispute in the Central Excise invoices are genuine and the goods were cleared from the supplier of inputs accompanied with Central Excise invoices. It is evident from the statements of the supplier of inputs that the goods were transported through the broker/transporter. The statements of the transporters were heavily relied u .....

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the vehicle numbers were mentioned in the invoices at their instance. In such situation, MODVAT Credit cannot be denied merely on the basis of report of RTO. 14. The Honble Gujarat High Court in the case of Commissioner Vs M/s Motabhai Iron & Steel Industries 2015 (316) ELT 374 (Guj.) on the identical situation, dismissed the appeal filed by the Revenue. It has been held as under:- 19. From the findings recorded by the Tribunal, it is apparent that payment to M/s Vasmin Corporation in respec .....

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Adjudicating authority. None of the consignors of the goods have denied the clearance of goods to the assessee. There was no evidence on record to show that the records maintained by the assessee were not correct. The Tribunal, was accordingly, of the view 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 i .....

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nce 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 of their recording. The Tribunal also noted the fact that the requisite opportunity of cr .....

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