9911796707
TMI Blog2013 (3) TMI 604X X X X Extracts X X X X X X X X Extracts X X X X ..... m during April, 2002 to September, 2003 in respect of certain invoices supplied by registered dealer viz. M/s. International Steel Corporation (hereinafter referred to as ISC). Interest and penalty were also proposed to the appellant. In addition, penalties were proposed to certain officials of the appellant, M/s. ISC and M/s. SKM Steel Ltd. During the search in the factory premises, it was found that there were 26 heaps of the scrap and each heap of the scrap has individual and distinction material receipt voucher (MRV) number indicated on a metal plate. The MRV number had cross reference to the invoice of the supplier on the basis of which they were availing the Cenvat credit. It was found that the description of the scrap as mentioned in the MRV/Central Excise invoice vis-a-vis. the actual scrap was at variance. The details have been listed out in the show cause notice as also Para 4 of the impugned order. In respect of certain heaps the variance in the description was glaring/very-very different e.g. in respect of MRV Nos. 1476, 1412 and 1084 the goods actually available were "assorted mixed scrap" while the description in the MRV/invoice was "S.S. Bright Bar Rejected" (in resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eived by the appellant is described in the invoices as "S.S. Bars/Rods Rejected", "S.S. Pipe Secondary Defective", "S.S. Angle Rejected", "CRSS-Sheet second", etc. and the department has denied the credit availed on such invoices assuming that it is non-duty paid bazzar scrap. The main contention of the learned Advocate is that the bars, rods secondary defective pipes, SS Angles, CRSS-Sheets second, etc., being rejected quality goods, department have conveniently omitted the word "Rejected". The contention is that the said goods are not prime quality goods and hence are nothing but imported scrap. Just because the scrap has been differently described in the excise invoices, no adverse inference can be drawn against the appellant. The learned Advocate also argued that the department has not proved that the scrap received by them is non-duty paid. Ld. Advocate also argued that in the show cause notice the word rejected has been omitted to give the impression that the invoices are for the prime quality goods. The other contention of the learned Advocate is that even if it is assumed that the scrap is bazaar scrap, department has not proved that the scrap is non-duty paid. If the scrap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of importer or manufacturer of the scrap. The learned Advocate also drew attention to the statement dated 25-11-2003 of Mr. Arifbhai Adhiya, Proprietor of M/s. ISC. According to learned Advocate his statement is in favour of the appellant. It was also argued that the entire demand is barred by limitation as there is no suppression of facts on the part of appellant. 6. Ld. Advocate for the appellant No. 3 (M/s. SKM) stated that they were financer to M/s. Facor Steel Ltd. They were not dealing in the scrap/goods directly. They were paying to scrap supplier as per the directions of M/s. Facor and receiving payments on the sale of final products. They have not only financed transactions of M/s. ISC but of others scrap supplier against whom no irregularity has been found by the department. They were not aware of any irregularity on the part of M/s. Facor or M/s. ISC therefore, penalty should not be imposed on them. 7. Additional Commissioner (AR) on the other hand argued that nobody would use the stainless steel pipes secondary/defective as scrap as such pipe can be used for the normal purpose after suitable cutting. Similarly bright bars defective would normally be recti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... if such goods were received there was no reason to take 10/15 samples for testing. Number of samples only prove that consignments were heterogeneous mixture of scrap. He further stated that whole case is of the fraudulent availment of credit on the invoices without actually receiving the goods covered by the invoices. The goods received were totally different than that described in the invoices. No manufacturer would accept such consignments. Such things can happen only if manufacturer is in collusion with the supplier. Keeping in view nature of fraud, extended period is undoubtedly applicable. Penalty imposed on all the appellants is fully justified. 8. We have considered submission of both the sides. 9. Modvat Credit scheme was introduced in 1986. In order to facilitate the trade, manufacturer were allowed to take credit of duty paid on inputs, on their own. However, they were required to inform the department before arrival of the inputs to the Central Excise who had a right to visit the factory and inspect the goods on which credit was being taken. Manufacturers were expected to keep the goods for the prescribed period for inspection of the Central Excise Staff. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v) a first stage dealer or a second stage dealer, in terms of the provisions of Central Excise Rules, 2002; (b) a supplementary invoice, issued by a manufacturer or importer of inputs or capital goods in terms of the provisions of Central Excise Rules, 2002 from his factory or from his depot or from the premises of the consignment agent of the said manufacturer or importer or from any other premises from where the goods are sold by, or on behalf of, the said manufacturer or importer, in case additional amount of excise duties or additional duty of customs leviable under Section 3 of the Customs Tariff Act, has been paid, except where the additional amount of duty became recoverable from the manufacturer or importer of inputs or capital goods on account of any non-levy or short-levy by reason of fraud, collusion or any wilful mis-statement or suppression of facts or contravention of any provisions of the Act or of the Customs Act, 1962 or the rules made thereunder with intent to evade payment of duty. Explanation.- For removal of doubts, it is clarified that supplementary invoice shall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... strength of a certificate issued to the manufacturer or the supplier, as the case may be, by the Superintendent of Central Excise within whose jurisdiction such manufacturer has his factory or the supplier has his place of business, and where the identity and address of the manufacturer or the supplier is satisfied on the strength of a certificate, the manufacturer or producer taking Cenvat credit shall retain such certificate for production before the Central Excise Officer on demand. (3) The Cenvat credit in respect of inputs or capital goods purchased from a first stage or second stage dealer shall be allowed only if such dealer has maintained records indicating the fact that the inputs or capital goods were supplied from the stock on which duty was paid by the producer of such inputs or capital goods and only an amount of such duty on pro rata basis has been indicated in the invoice issued by him. (4) The manufacturer of final products shall maintain proper records for the receipt, disposal, consumption and inventory of the inputs and capital goods in which the relevant information regarding the value, duty paid, the person from whom the inputs or capital goods hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ective pipes are also not used or traded as scrap but these are cut and used thereafter as pipes only. Similar is the situation for bright bars. The prices of goods as indicated in the invoices are much higher than that of the scrap. These facts are not disputed by the appellant. No manufacturer would use such items for melting when he is in a position to get the scrap at 1/4th or 1/5th of the price of such goods. It does not make any economic sense for a manufacturer to use such goods for melting. Appellants have not given any explanation for using such expensive material for melting. Stainless steel products have various grades such as 304, 310, 316, 410, etc. Prices varies with such grades. Items like S.S. rods/pipes, bright bars, etc., are invariably described with reference to grade including the defective/rejected goods. We note that no such grade is mentioned in the invoices. In view of above, appellants contention that the scrap has been described in the invoices in a different way does not impress us and is rejected and is untenable. The goods described in the invoices cannot be considered to be "assorted mixed scrap". Other contention of the appellant is that the departme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unit and being Manager of Lab/Quality Control Department, would understand it to be with reference to defective/rejected goods and not of prime quality goods. We also note that the Statement of Mr. Milind Tijare has never been retracted till date. There is no allegation that it was taken under duress. Under the circumstance, we reject appellant's contention and accept that the statement as stating that S.S. rods/pipes/bright bars, etc., were never received in the factory. 13. We also note that during the search of the supplier's office and godown viz. M/s. ISC, it was found that as per the records a large quantity of closing stock of SS Bright Bars was available but in the godown no such SS Bright bars were found. The explanation given by Shri Arifbhai Adhiya Proprietor of M/s. ISC was that such bright bars has been sold without Cenvat/modvat. However, no commercial invoice issued by M/s. ISC was also found. We also note that during the search, nature of scrap specifically available were as under: "(i) metal dust in gunny bags, (ii) turning and boring scrap in HDPE gunny bags, (iii) discarded industrial machinery like vessels, flanges, rings, propellers, and (iv) uten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... detected in respect of the branch office and activities of the branch office and H.O. were not the same. It is in these circumstances the Hon'ble Supreme Court that extrapolation cannot be done. In the impugned case no such extrapolation has been done. On the contrary, demand is limited to the invoices wherein evidences were collected. In the case of Truwoods Pvt. Ltd. v. CCE - 2005 (186) E.L.T. 583 (Tri.-Del.) under valuation was deducted in certain period. Thereafter, department has issued another Show Cause Notice for the subsequent period without any further investigation. In our case the demand has been issued for the disputed period alone after investigation and therefore the facts are clearly distinguishable. In the case of Garlon Polyfab Industries Ltd. v. CCE, Rampur reported in 2006 (198) E.L.T. 471 (Tri.-Del.) department has production slips only for 14 months for comparisons with figures in RG-1 register no evidence was brought on record by Revenue for period prior to that. In the impugned case, the demand is only for the period investigated and evidences are available for that period. In the case of Alfa Ceramics Industries v. CCE - 2002 (145) E.L.T. 454 (Tri.-Del.) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arly, facts in the Business Combines Ltd. v. CCE, Nashik reported in 2005 (190) E.L.T. 67 (Tri.-Mumbai) as also M/s. Mahindra & Mahindra v. C.C.E, Mumbai vide order Nos. A/1402-1411/WZB/2005/CII/EB are distinguishable and clearly very different. In view of above, we hold that the case laws quoted are distinguishable and not applicable in the facts of the impugned case. 17. Another contention of the appellants is that extended period is not invocable in this case. We have already come to the conclusion that goods described in the invoices were not received in the appellant's unit. Such a thing cannot happen without active connivance of appellant and undoubtedly is a case of fraudulent availment of credit. We therefore reject this contention of the appellant and hold that extended period is rightly invoked. 18. Having come to the conclusion that this is a case of fraudulent availment of Cenvat credit we hold that penalty under Rule 13(2) of Cenvat Credit Rules, 2001/2002 read with Section 11AC of the Central Excise Act, 1944 is justified. 19. The second appellant in this case is Shri Deepak W. Ashtikar, Senior Manager, Purchase of M/s. FACOR at the relevant time. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ravention of any of the provisions of the Act or the rules made there-under with intention to evade payment of duty, then, the manufacturer shall also be liable to pay penalty in terms of the provisions of Section 11AC of the Act. (3) Any order under sub-rule (1) or sub-rule (2) shall be issued by the Central Excise Officer following the principles of natural justice." We note that sub-rule (1) of Rule 13 is applicable to any person while sub-rule (2) of Rule 13 which is applicable to manufacturer alone. The term any person would include appellant Shri Deepak W. Ashtikar, who was a senior officer of M/s. FACOR and responsible for the purchase of scrap and therefore, dealt with the scrap. He has admitted that sometime scrap received may be different that in the invoice. As a senior officer in the organization, such a thing can be permitted by him only if he has active connivance in the fraud. We therefore, do not find any merit in the contention of ld. Advocate to appellant Shri Deepak Ashtikar that "mens rea" is absent. Case here is that goods covered by the invoice never reached the factory. In the circumstances, we hold that appellant is liable to penalty under Rule 13 of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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