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2015 (7) TMI 457 - CESTAT MUMBAI

2015 (7) TMI 457 - CESTAT MUMBAI - TMI - Credit on the basis of forged invoice Bogus purchase - Imposition of penalty - Held that:- as the investigation in the present case was started consequent to the investigation against SSMIPL by the jurisdictional Commissioner. We also note that there are some minor differences which have been highlighted by the learned counsels for the appellants. We have given considerable thought to those differences but in our view, those minor differences will not m .....

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e by the appellant themselves was followed. This itself indicates that there was a tactical support from some people within the organization. There is no explanation whatsoever from the appellant s side why the operating procedures prescribed by themselves were not being followed in these cases

It is strange that the appellant has placed order to the three dealers of scrap but all the three dealers of scrap in turn got the invoices of SSMIPL. There are evidences that none of the goods .....

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nsporter and the drivers to prove that the goods have moved from the godown of SSMIPL and not from any other place. This has not been done for obvious reason as the goods have not moved from the godown of SSMIPL but from various other places.

Goods covered by the invoices of SSMIPL have never moved to the main appellant s factory and some other goods have moved. The appellant cannot take the credit of the duty paid shown in such invoices. - Decided against the assessee.

Lev .....

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t was not liable to pay any penalty. - Decision in the case of Bhagwati Steelcast Ltd. vs. CCE, Nashik reported in [2013 (1) TMI 123 - CESTAT MUMBAI] followed - Decided partly in favour of assessee. - Appeal Nos. E/185/11, 1868, 1989, 2084, 2085/10-Mum - Dated:- 6-7-2015 - Hon ble Mr. P.K. Jain, Member (Technical) And Hon ble Mr. S.S. Garg, Member (Judicial),JJ. For the Appellants : Shri Gajendra Jain, Advocate, Shri R.V. Shetty, Advocate, Shri V.S. Sejpal, Advocate, Shri V. Rrama Rao, Advocate .....

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the appellant No.1 but some other scrap was received and since the scrap covered by the duty paying invoices were not received, the appellant is not eligible to take credit of the same. The credit availed is incorrect and is to be recovered, in addition to the interest and penalties. Notices to appellant No.2 who was the then Sr. Vice President of the appellant s unit, appellant No. 3, 4 & 5 who are the dealers in the iron and steel scrap from whom the appellant No.1 has placed orders to pro .....

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ing Pvt. Ltd., Alang, M/s. R.K. Steel & Alloys, Pipavav and M/s. Baldev Ship Breakers Ltd., Alang. On enquiries made with the jurisdictional Superintendent in charge of the said ship breaking unit revealed that these ship breakers were not in existence during the period when the invoices were shown to have been issued by them to SSMIPL. This indicated that the central excise invoices issued by these ship breakers on which SSMIPL took the credit were bogus and fake with no corresponding manuf .....

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l officer of SSMIPL also made enquires with the sales tax check post and RTO check post at Bhavnagar (Gujarat) where the vehicles are checked and assessed by the sales tax authorities of Gujarat to ensure that CST is properly paid. Enquiries revealed that they maintained the particulars of all vehicles passing through the said check post in electronic form on the computer. A scrutiny of the computerized print data indicated that for the period 1.4.2003 to 31.12.2003, no consignment of iron and s .....

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de with about 15 other ship breakers who have purported to have sold the ship breaking scrap to SSMIPL. Enquiries revealed that they have sold the plates obtained from breaking of the ships and such plates are normally used for rerolling or for manufacture of the structural items and such plates are not used for melting purposes. It was also revealed that such plates fetch far higher value compared to the melting scrap. Further, all such plates were sold under Form 45A which implies that these h .....

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made with some of the vehicle owners. These vehicle owners in their statements confirmed that their vehicles were not used for transportation of iron and steel scrap obtained from ship breaking from Gujarat to SSMIPL godown in Mumbai. From the above investigation, it was clear that iron and steel scrap obtained by ship breaking covered by various invoices issued by the ship breaking units were either based upon the bogus/fake invoices or the goods covered by the said invoices never moved out of .....

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eafter delivered to the appellant s factory. A large number of summons issued to various vehicle owners, transporters whose trucks were used to transport the scrap to the appellant, were returned by the postal authorities with the remarks left / not known . In addition to above statements of certain officials in the main appellant s firm as also the three dealers involved in the present case (appellant No.3,4 & 5) were also recorded. Based upon the investigation, a show cause notice dated 4. .....

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t No.2 under Rule 13 of the Cenvat Credit Rules. A penalty of ₹ 10,00,000/- each has been imposed on appellant No.3,4 & 5 under Rule 26 of the Central Excise Rules, 2002. Aggrieved by the said order, the appellants are before this Tribunal. 3. Learned counsel for the main appellant and appellant No.2 submitted that the three ship breakers viz. M/s. R.K. Steel Alloys Industries, M/s. Ajay Alloys Casting (P) Ltd. and M/s. Baldev Ship Breaking, whose factories were closed and whose fake i .....

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submitted that the letter dated 24.5.2004 showing details for the period 2003-04 was not made part of RUD and, therefore, no reliance can be placed on the said letter. It was submitted that octroi details cannot be a basis either to demand duty or to deny credit in view of the following two decisions:- (i) Raj Petroleum Products vs. CCE reported in 2005 (192) ELT 806 (T), (ii) Lloyds Metal Engg. Ltd. vs. CCE reported in 2004 (175) ELT 132 (T). 3.2 The learned counsel further submitted that the n .....

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furnace employed in the appellant s factory is capable of melting all types of scrap and, therefore, even if in case SSMIPL has procured metal plates from ship breakers and supplied the same to them, the same would have been used by the appellant as normal melting scrap. It was also submitted that statements of Shri Bansal and other ship breakers were not made part of RUD and, therefore, these statements are not sustainable under the law. It was also submitted that the appellant has taken a tot .....

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ices issued by SSMIPL. It was submitted that the appellant has placed purchased order on M/s. Meegora Steel Pvt. Ltd., M/s. Lachhmidhar Kashiram, M/s. Al Karim Scrap Traders Pvt. Ltd. for supply of heavy melting scrap. These suppliers have indeed supplied the goods through SSMIPL. SSMIPL in turn represented the goods after sold by them as duty paid in their invoices and gave reference to the dealers. It was submitted that the payment has been made through account payee cheque issued in favour of .....

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proceed against SSMIPL and not against them and in support of the same, following case laws were quoted:- (i) State of Madras vs. Radio & Electricals reported in 1966 (18) STC 222 (SC); (ii) SRF Ltd. vs. CCE reported in 2000 (124) ELT 448 (T); (iii) CCE vs. Sadashiv Casting reported in 2005 (187) ELT 381 (T); (iv) CCE vs. Genesis reported in 2004 (176) ELT 496 (T); (v) Haryana Steel Alloys vs. CCE reported in 2002 (148) ELT 377 (T); (vi) CCE vs. Ashok Leyland Ltd. reported in 2001 (127) ELT .....

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very challans, weighment slips etc. and, therefore, the said contention is not relevant. It was also submitted that some of the vehicle owners have denied of transporting any goods from Gujarat. It was submitted that as far as they are concerned, they have received the goods. It was also submitted that the Revenue has pointed out 10 specific invoices in respect of which vehicle owners have denied transport of goods from SSIMPL to the appellant. It was submitted that copies of nine invoices along .....

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the purchaser order and, therefore, employees statements are correct. The fact is also evident from the central excise invoices received and it is not possible for anybody to identify the origin of scrap. It was submitted that none of the employees have stated that they have not received scrap under the cover of the impugned invoices or that the appellant had procured commercial non-duty paid scrap from the market. It was also submitted that Revenue has not brought out any evidence to support t .....

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ture and it was not of the nature that it could arouse suspicion in the appellant s mind and the appellant had taken all reasonable steps before purchasing the scrap from registered dealer. Under the circumstances, denial of cenvat credit is incorrect. In support of the contention, the following case laws were submitted:- (i) RS Industries vs. CCE reported in 2003 (153) ELT 114 (T); (ii) CCE vs. Shakti Roll Cold Strips reported in 2007 (80) RLT 267 (T); (iii) CCE vs. Neepaz Steels reported in 20 .....

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the inputs manufactured were non-existent entities. It was also submitted that the Hon ble Gujarat High Court in the case of Prayagraj Dyeing & Printing Mills Pvt. Ltd. reported in 2013 (290) ELT 61 (Guj.), has held that once the receipt of goods by person taking credit on the basis of necessary invoice is not disputed, then the person is eligible to take credit provided he had taken reasonable steps as described under Rule 7(2) of the Cenvat Credit Rules. 3.6 It was further submitted that e .....

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(88) ELT 710 (T). 3.7 It was submitted that Revenue s reliance in the case of Tigrania Metals & Steel Industries reported in 2001 (132) ELT 103 (T) and Limenabh Chemicals reported in 1999 (68) ELT 77 (Mad.) is incorrect. 3.8 It was further submitted that no penalty is imposable on appellant No.2. 4. As far as appellant No. 3,4 & 5 are concerned, the submission was that they are not registered excise dealers and they have not dealt with the goods in question. It was submitted that they a .....

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sale in transit to the main appellant, Khopoli. The goods have moved directly from the godown of SSMIPL to the main appellant under the central excise first stage dealer invoice of SSMIPL. It was submitted that did not receive any complaint from the main appellant about the quality of the scrap. No penalty can be imposed on them under Rule 26 of the Central Excise Rules. It was submitted that their explanation has not been brought out in the show cause notice and no contradictory evidence has be .....

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ing incorrect availment of cenvat credit by the main appellant and if at all there is any contravention at their end, it has to be under Cenvat Credit Rules and, therefore, there is no question of imposing penalty under Rule 26. It was also submitted that under Rule 26 as was prevailing before 1.3.2007, penalty could have been imposed only if they are concerned with acquiring possession of or was in any way concerned in transporting, removing, dealing, selling or purchasing any excisable goods f .....

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ufactured by the main appellant and in view of the position, the penalty imposed on them is incorrect. It was also submitted that the Tribunal in order No. A/517-523/14/EB dated 25.6.2014 in the case of Steel India Co. in similar circumstances, set aside the penalties. 5. Learned special counsel reiterated various findings of the Commissioner. The learned special counsel submitted that SSMIPL was doing only the fake transactions and actually no goods were being supplied by them. In the present c .....

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. SSMIPL was not selling any ship breaking scrap as it has come out clearly in the investigation that no ship breaking scrap crossed the Gujarat border for SSMIPL. Therefore, there is no question of their selling the scrap. SSMIPL has procured some invoices from the ship breaking units. Some of the invoices procured were also fake. Based upon such details, SSMIPL has issued invoices in the name of the main appellant as required by appellant No. 3,4 & 5. It was submitted that it is important .....

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ired to be cut in small pieces by cutting through a welding process. This itself will involve cost and nobody would use the plates for melting. Other than plates, during the ship breaking, certain items are obtained such as furniture etc. which are sold as such. Some small quantity of iron and steel scrap of some other fixtures are also obtained. However, such scrap is of very small quantity and these are also segregated in the yard itself and are sold thereafter. It was submitted that the main .....

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that none of the standard operation procedures were followed in respect of the scrap covered by the impugned dispute. There is no explanation whatsoever coming forward from the appellant either during the original adjudication or before this Tribunal why the standard operating procedures were not followed in respect of the receipt of the scrap. This itself shows that the senior officials in the main appellant-company were involved and there was a tactical approval from their side to receive the .....

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t the enquiries conducted with the driver and owner of the vehicles whose numbers appeared on the invoices issued by SSMIPL, revealed that none of them have transported material from the godown of SSMIPL to the main appellant. If the transporter had actually transported the scrap from SSMIPL to the main appellant, there was no reason form them to deny the said fact. It was further submitted that the appellants could have produced the drivers of the vehicles to prove that the goods had moved from .....

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main appellant and invoices were being procured from SSMIPL. It was also submitted that Rule 3(1) of the Cenvat Credit Rules provides for availment of cenvat credit of duty paid on inputs received in the factory. It is, therefore, essential that the inputs should have suffered central excise duty. The provision cannot be construed to interpret availment of cenvat credit on the basis of documents showing payment of duty and receipt of any other material goods as is the case here. Further, the ap .....

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e same investigation, this Tribunal has passed the judgment in the case of Bhagwati Steelcast Ltd. vs. CCE, Nashik reported in 2013 (293) ELT 417. The learned special counsel submitted that this judgment has been passed by a Bench of three Members by a majority decision and this decision is binding on the present Bench. It was further submitted that this case is also the outcome of the same investigations and the same facts have been discussed in the said judgment and all the arguments advanced .....

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ing of SSMIPL. It was also submitted that in the present case the main appellant did not even contact SSMIPL directly but involved three other traders and all the three went to SSMIPL alone and that also for all supplies for over one year. It was again emphasized that there is no explanation whatsoever coming forward why the standard operating procedures of the company were not followed in respect of the consignments received and covered by the present show cause notice. In view of this factual .....

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imposable under Rule 26 in view of the judgment of the Hon ble Punjab & Haryana High Court in the case of Vee Kay Enterprises vs. CCE reported in 2011 (266) ELT 436 (P&H) and the said judgment has been followed by the High Court in the subsequent cases also. 6. We have considered the rival submissions. In the present case, Revenue s contention is that the duty paid invoices received from first stage registered dealer cannot be accepted for two reasons. The first reason being that first .....

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that based upon the same investigation, number of show cause notices were issued to different users of scrap and in fact in respect of five units, the case was decided by this Tribunal in the case of Bhagwati Steelcast Ltd. vs. CCE, Nashik reported in 2013 (293) ELT 417. This Tribunal has observed as under:- 73. It follows from the above that the method of implementation adopted in India is the tax credit method. This economic concept of Value Added Tax has been encapsulated within the framewor .....

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Finance Act, 1994 used in or in relation to the manufacture of excisable goods. 73.2 Rules 11 of the Central Excise Rules, 2002 stipulates that no excisable goods are to be removed from a factory or warehouse except under an invoice signed by the owner of the factory or his authorised agent. Sub-rule (2) of the said Rule stipulates that the invoices shall be serially numbered and shall contain registration number, address of the concerned Central Excise Division, name of the consignee, descript .....

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y mutatis mutandis to goods supplied by a first stage dealer or a second stage dealer. Similar provisions were stipulated in the Central Excise Rules, 2001 and also the Central Excise Rules, 1944 to the same effect. 73.3 The Cenvat Credit Rules, 2004, deal with the procedure relating to availment of credit. As per Rule 3, a manufacturer or a producer of final products or a provider of taxable service shall be allowed to take credit (hereinafter referred to as Cenvat credit) of the duties specifi .....

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es an invoice issued by a manufacturer, an importer, a first stage dealer or second stage dealer. Sub-rule (2) further stipulates that no Cenvat credit shall be taken unless all the particulars as prescribed under the Central Excise Rules, 2002 or the Service Tax Rules, 1994 are contained in the said document. In case any particulars are missing, Cenvat credit may be taken only with the prior approval of the jurisdictional Asst./Dy. Commissioner of Central Excise, if he is satisfied that the goo .....

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id by the producer of such input or capital goods and only an amount of such duty on pro rata basis has been indicated in the invoice issued by him. Sub-rule (5) further stipulates that the burden of proof regarding the admissibility of the Cenvat credit shall lie upon the manufacturer or provider of output service taking such credit. Similar provisions existed in Rule 57A of the Central Excise Rules, 1944, Rule 7 of the Cenvat Credit Rules, 2001 and 2002. 73.4 From the above provisions of law, .....

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capital goods were supplied from the stock on which duty was paid by the producer of such goods and only an amount of such duty on pro rata basis has been indicated in the invoices issued by him. It is further stipulated that the burden of proof regarding admissibility to Cenvat credit shall lie upon the manufacturer taking such credit. Sub-rule (2) of Rule 7 of the Cenvat Credit Rules, 2001/2002 (as they stood at the relevant time) further stipulated that a manufacturer/producer taking Cenvat .....

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nowledge or on the strength of a certificate given by a person with whose handwriting or signature he is familiar with or on the strength of a certificate issued to the manufacturer or supplier by the jurisdictional Superintendent of Central Excise. 73.5 The Central Excise duty regime underwent a significant change with effect from 1-10-1996. Under the new regime, assessment of the tax liability by the department which hitherto existed was done away with and self assessment facility was extended .....

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red to furnish to the excise department will be a simple Return indicating the duty paid on self-assessment basis. Wherever possible the assessees computers could also be linked to the Department s computers for on line assessment. 135. I also propose to introduce a scheme of selective audit by the excise officers and dispense with the existing scheme of routine examination and checking of returns and documents furnished by the assessees. This scheme would also come into force from 1st October, .....

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lso a matter of concern that there is misuse of the Modvat credit scheme. At present, Modvat invoices can be issued by any dealer registered with the excise department and this facility is reportedly being misused. Therefore, I propose to restrict the issue of Modvatable invoices by dealers up to two stages. Suitable provisions are also being made in the Modvat Rules for charging of interest in the case of wrong availment of Modvat credit and for mandatory penalty for misuse of Modvat facility. .....

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the Revenue is that the scrap has been procured from ship-breakers in Alang/Bhavnagar in Gujarat by the first stage dealers, M/s. Simandhar Enterprises (SE in short) and M/s. Simandhar Steel Movers (India) Pvt. Ltd. (SSMIPL in short). Some of the ship-breakers whose name figures in the invoices issued by the first stage dealers, from whom the ship-breaking scrap was allegedly procured, namely, M/s. R.K. Steel Alloy Industries, Pipavav, M/s. Ajay Alloys Castings Pvt. Ltd. and M/s. Baldev Shipbrea .....

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s, delivery vans, etc., incapable of transporting iron and steel scrap. The third set of evidence are statements of a few of the transporters who were purported to have transported goods from Gujarat to the premises of dealers at Bhiwandi/Mumbai and who have denied transporting any goods from Gujarat to Mumbai. The fourth set of evidence are statements from some of the ship-breakers, namely, Gupta Steel (Ship-breakers), Shirdi Steel Traders, Malwi Ship-Breakers, Panchvati Ship-Breakers and Bansa .....

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ent of iron and steel scrap addressed to the aforesaid two dealers, namely, Simandhar Steel Movers (India) Pvt. Ltd. and M/s. Simandhar Enterprises has crossed the sales tax naka at Gujarat Border during the period 2000-2004 as per the official records. Inasmuch as the goods have not crossed Gujarat border, the above two dealers could not have supplied any ship-breaking scrap to the appellants herein and, therefore, the credit availed on such ship-breaking scrap is not admissible in law. It has .....

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by the appellants are as follows. There is no restriction that the re-rollable scrap received from ship-breakers cannot be used as steel melting scrap and this issue has been settled by the Hon ble Apex Court in the case of Tata Iron and Steel Co. Ltd. v. Commissioner of Central Excise - 1995 (75) E.L.T. 3 (S.C.). It has also been argued that it is not the responsibility of the appellants to ascertain the source of scrap by the dealers and how it has been transported. So long as they have paid t .....

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ecords maintained by the sales tax authorities at Bhilad checkpost. It has also been argued that the appellants cannot be asked to prove the impossible about the movement of scrap from Gujarat to Mumbai. It has also been contended that there has been denial of principles of natural justice inismuch as the department has not furnished a copy of the letter written by them to the Sales Tax Authorities in Gujarat and they have reserved the right to cross-examine the Sales Tax Authorities once the co .....

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ll known fact that ship-breaking scrap is a high quality scrap made of marine steel and usually it is a re-rollable scrap which are used by rolling mills and are not used for melting purposes as done by the appellants herein. Reliance placed by the appellants in the case of Tata Iron and Steel Co. cited supra, does not help their case. The dispute in that case related to classification of melting/re-melting scrap and the scrap involved in that case was those generated in the course of manufactur .....

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atements given by the ship-breakers relied upon by the Revenue, it is clear that what was supplied by the ship-breakers were steel plates and re-rollable scrap which are not generally used for re-melting and are generally used by rolling mills. It is further on record that the price of scrap supplied by the ship-breakers to the dealers in the many cases were higher than the prices charged by the dealers to the appellants for the scrap supplied by them which again points to the fact that the scra .....

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een allegedly received by the appellants from the dealers are not the same as what has been received by the dealers from the ship-breakers. This conclusion is further corroborated/strengthened by the reports of the Transport Authorities in Gujarat wherein it was found that some of the vehicles said to have been used for transportation were two-wheelers, three-wheelers, etc., which are incapable of transporting steel scrap. Again in a few cases, statements of the transporters (owners of vehicles .....

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but a series of evidences that have been brought out by the Revenue which corroborate and strengthen each other and which substantiate the fact that from the documents available on record, the scrap claimed to have been received by the appellants are not the same as those supplied by the ship-breakers in Gujarat on which duty has been paid. In other words, the goods said to have been received by the appellants are different from the goods covered by the documents on record. These evidences, unea .....

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urnished to the appellants. In the case of Ralectronics v. UOI [1994 (71) E.L.T. 26 (Kar.)], the Hon ble High Court of Karnataka in a similar issue held that - the requirement is to furnish the copies of the materials relied upon in the show cause notice and not of the documents and other materials just referred. There is a difference between relying upon a document and referring to the same . Further in the instant case, the department has not examined any of the Sales Tax authorities; therefor .....

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s. A similar view was held by this Tribunal in the case of R.K. Mill Board Pvt. Ltd. case [2001 (135) E.L.T. 1296 (Tri.-Del)]. The Hon ble Apex Court in the case of Kanungo & Co. v. CC, Calcutta [1983 (13) E.L.T. 1486 (S.C.)], while dealing with the breach of natural justice held as follows - In the show cause notice issued on August 21, 1961, all the materials on which the Customs Authorities have relied was set out and it was then for the appellant to give a suitable explanation. The compl .....

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the facts of the present case. Therefore, I do not find any merits in this argument adduced by the appellants and reject the same. 75.3 As regards the case laws relating to Transpek Industry Ltd. and Monarch Metals Pvt. Ltd., cited supra, the facts of those cases are different and distinguishable. In Transpek Industry Ltd. s case, the issues related to purchase of capital goods by the appellant therein from a registered dealer on payment of duty. In that case there was no dispute about the good .....

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appellant is that the goods on which they have taken Cenvat credit are not the same as the goods appearing in the invoices and transport documents on which duty has been paid. In other words, the dispute is about the identity of the goods on which credit has been taken and also about the fact whether goods have been received at all by the appellants. Thus, the facts in the case laws relied upon by the appellants are completely different and distinguishable from those involved in the present cas .....

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vat credit lies on the person who is availing the credit. I find that in the instant case, this onus has not been discharged by the appellants at all. On the other hand, I find that reliance placed by the Revenue in the case of Besco Ltd. (supra) [2001 (137) E.L.T. 168 (Tri.-Kol.)] is relevant to the facts of the case. In that case, the issue related to purchase of bazaar scrap and showing the same as having been brought from dealers registered with the excise department who had issued the invoi .....

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nd Sales Tax/Checkpost authorities, and so on to show that the entire transactions were fake and not genuine. 75.5In the case of A.N. Guha & Co. v. Collector [1996 (86) E.L.T. 333], this Tribunal held that it is not necessary for the department to establish a fact with mathematical precision. Once the presumption as to the existence of a fact is raised against the assessee that the input has not been transported in the vehicle mentioned in the invoices, it is reasonable to say that the input .....

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t, or considers its existence so probable that a prudent man ought, under the circumstances of a particular case, to act upon the supposition that it exists. It is the evaluation of the result drawn by applicability of the rule, which makes the difference. The probative effects of evidence in civil and criminal cases are not however always the same and it has been laid down that a fact may be regarded as proved for purposes of a civil suit, though the evidence may not be considered sufficient fo .....

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n criminal cases the prosecution must prove the charge beyond reasonable doubt. (See Sarkar on Evidence, 15th Edition, pp. 58-59) In the words of Denning LJ (Bater V.B, 1950, 2 All ER 458, 459) It is true that by our law there is a higher standard of proof in criminal cases then in civil cases, but this is subject to the qualification that there is no absolute standard in either case. In criminal cases the charge must be proved beyond reasonable doubt, but there may be degrees of proof within th .....

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.)], the Hon ble Court further held as follows : It cannot be disputed that in proceeding for imposing penalties, under Clause (8) of S.167 to which S. 178-A does not apply, the burden of proving that the goods are smuggled goods, is on the Department. This is a fundamental rule relating to proof in all criminal or quasi-criminal proceedings, where there is no statutory provision to the contrary. But in appreciating its scope and the nature of the onus cast by it, we must pay due regard to other .....

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tion to prove the impossible. All that it requires is the establishment of such a degree of probability that a prudent man may, on its basis, believe in the existence of the fact in issue. Thus, legal proof is not necessarily perfect proof; often it is nothing more than a prudent man s estimate as to the probabilities of the case. The other; cardinal principle having an important bearing on the incidence of burden of proof is that sufficiency and weight of the evidence is to be considered - to u .....

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th being its covering guards, it is impossible for the Preventive Department to unravel every link of the process. Many facts relating to this illicit business remain in the special or peculiar knowledge of the person concerned in it. On the principle underlying S.106, Evidence Act, the burden to establish those facts is cast on, the person concerned; and if he fails to establish or explain those facts, an adverse inference of facts may arise against him, which coupled with the presumptive evide .....

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esumption of fact - Thus the burden on the prosecution or the Department may be considerably lightened even by such presumption of fact arising in their favour. However, this does not mean that the special or peculiar knowledge of the person proceeded against will relieve the prosecution or the Department altogether of the burden of producing some evidence in respect of that fact in issue. It will only alleviate that burden to discharge which very slight evidence may suffice. 75.7 The concepts o .....

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ns arising from the evidence, or from the lack of it, as opposed to mere vague apprehensions. A reasonable doubt is not an imaginary, trivial or a merely possible doubt, but a fair doubt based upon reason and common sense. It must grow out of the evidence in the case. 37. The concepts of probability, and the degrees of it, cannot obviously be expressed in terms of units to be mathematically enumerated as to how many of such units constitute proof beyond reasonable doubt. There is an unmistakable .....

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establish eligibility to the credit is on the appellant-assessee and if they fail to establish or explain the facts established by the department, an adverse inference arises against them coupled with the presumptive evidence adduced by the department. 75.9 The appellants have also argued that if they are required to show that the dealer from whom they purchased the scrap procured the same legitimately, they are being asked to prove the impossible, which is not permissible and have placed relian .....

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ot congenial or consistent with such express intent of Legislature. Hardship or inconvenience cannot alter the meaning employed by the Legislature, if such meaning is clear on the face of the statute. If the statutory provisions do not go far enough to relieve the hardship of the member, the remedy lies with the Legislature and not in the hands of the Court. 75.10 Similarly in the case of India Agencies v. Additional Commissioner of Commercial Taxes, Bangalore [(2005) 2 SCC 129], the Supreme Cou .....

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t. Once the Revenue discharges the burden that the particulars declared in the documents on the strength of which the credit has been availed are not genuine or are fake, then the onus is on the assessee to prove that they have availed the credit correctly and are entitled for the credit. That onus cannot be condoned on the ground of hardship or inconvenience. In the instant case, the appellants have not discharged this onus cast on them by the statute. 75.12 In the light of these judgments of t .....

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sue for consideration is whether the appellants are eligible to avail Cenvat credit on account of duplicate/parallel invoice. 76. 1 The number of invoices involved is 1089 entailing a credit of ₹ 2.44 crore approx. The case of the department is that in the RG-23D account maintained by the dealers, the invoices issued to the appellants are not reflected and invoices bearing the same number are shown to have been issued to other buyers though for a different quantity and value. Further, in m .....

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ceived by the appellants at all. 76.2 In the case of M/s. Amar Ispat Pvt. Ltd., one of the appellants in the present case, Sri Sunil Fakirchand Agarwal, who was working as the General Manager of the said appellant-firm during the material period, in his statement dated 3-8-2006, recorded under Section 14 of the Central Excise Act, 1944, averred as follows :- To-day you have shown me the invoices issued by M/s. Simandhar Steel Movers India Pvt. Ltd. to M/s. Amar Ispat Pvt. Ltd. and the copies of .....

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of the 172 invoices which are appearing on the records of M/s. Simandhar Steel Movers Pvt. Ltd. from the evidences shown by you I agree that the invoices are issued against supply of locally procured iron and steel scrap. In the very same statement, it has been further admitted that the cenvatable invoices, delivery challans and bills were sent directly to the office of M/s. Amar Ispat Pvt. Ltd. at Tulsi Dham, Thane (W) and the invoices were subsequently sent to the factory to make entries in th .....

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plied by them. The above statement of the General Manager has also been corroborated by the Director of the said firm Mr. Sandeep Bhagwandas Garg who in his statement dated 29-7-2006, inter alia, admitted as follows :- Most of the times the invoices were sent to us subsequently by the broker in a large envelop or folder, so most of the times the invoices were not accompanying the trucks, but subsequently handed over by the broker . 76.3 In the case of Jai Prakash Strips, the department had recor .....

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le material. Both these goods were stored in the same godown at Bhiwandi. The non-cenvatable material covers the scrap material such as pieces of angle-channel, plate cuttings, pieces of pipes etc. On comparison of these two statements with respect to the nature of the materials supplied by the dealer and received by the appellants, it is clear that the material was non-cenvatable material. In other words, non-cenvatable material was supplied under the cover of invoices for cenvatable material, .....

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ule (3) of Rule 7 of Cenvat Credit Rules, 2002 as it stood at the relevant time (as also its predecessor and successor rules) clearly provided that Cenvat credit in respect of inputs or capital goods purchased from a first or second stage dealer shall be allowed only if such dealer has maintained records indicating the fact that the inputs or capital goods supplied from the stock on which duty was paid by the producer of such goods or capital goods and only an account of such duty on pro rata ba .....

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the other parties. If the goods have already been supplied to other parties, the question of issuing invoices bearing the same number to the appellants herein, though for a different quantity and value does not arise. This is a clear pointer to the fact that the invoices issued to the appellants were duplicate/bogus. Otherwise, there was no need to issue invoices at a subsequent date(s) in almost all cases. Thirdly, when stock taking was undertaken in the premises of the dealer both in 2001 and .....

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oices were traded and not goods. Fourthly, the certificate issued by the Nasik Corporation authorities available on record clearly shows that in respect of the appellants situated in Nasik, the goods did not enter the Corporation limits at all. These evidences unearthed by the department clearly reveal that the transactions were bogus and fake. Further, there has been no effective rebuttal of these presumptions raised by the Revenue against the appellants and as per sub-rule (4) of Rule 7 of the .....

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ourt of Bombay on 11th May, 2012 in M/s. Mahalaxmi Cotton Ginning Pressing and Oil Industries v. The State of Maharashtra & Ors. [2012 (191) ECR 0433 (Bombay)] closely resembles the case before me and the ratio decided therein has great relevance. In that case, the constitutional validity of Section 48(5) of the Maharashtra Value Added Tax Act, 2002 was under challenge. If the constitutional validity was upheld, the petitioner sought a mandamus to the State to recover from the vendor tax pai .....

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the supplier and VAT paid on each purchase. The Dy. Commissioner of Sales Tax informed the petitioner a list of dealers from whom the petitioner had effected purchases where the data received was matched or, as the case may be, unmatched. The petitioner was called upon to submit ledger copies and proof of the filing of returns by the dealer in those cases where the data was unmatched. Failing this, it was stated that the ITC of the concerned dealers would be disallowed. The assessing officer dis .....

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an unreasonable classification between the seller and the purchaser. Section 48(5) of the said VAT Act was arbitrary as it contemplates disallowance of ITC claimed by the purchaser if the seller had not deposited tax into the treasury and no provision had been made if tax is recovered from the seller by the State in future. It was also argued that Section 48(5) cast a burden on the purchasing dealer which is impossible to perform since the Act and the Rules do not empower the purchasing dealer t .....

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27. The Legislature did not contemplate the grant of a set-off without any tax being received into the Government Treasury. The grant of set-off without receipt of tax into the treasury would result in a loss of revenue, a consequence which the provision of set-off does not contemplate. 29. A set-off constitutes a concession granted by the Legislature. In the absence of a set-off under section 48(5), the selling dealer would be liable under the charging provision of MVAT Act, 2002 to pay tax on .....

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ue. Hence, in the overall statutory scheme of section 48, sub-section (5) has a rational basis and foundation... In granting a set-off, the Legislature can impose conditions and that imposed in section 48(5) is not lacking in rationality. Moreover, the scheme of set-off in section 48 has to be read in its entirety and as one cohesive whole. The Legislature cannot be compelled to grant set-off, ignoring the conditions which it imposes. The conditions are not severable and are part of one integrat .....

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Credit Rules, 2004, as they stood at the relevant time. Therefore, the ratio decidendi of the above judgment of the Hon ble High Court of Bombay, which is also the jurisdictional High Court for this Bench of the Tribunal, needs to be scrupulously followed. Accordingly, I hold that the appellants herein have not made any case for their eligibility to Cenvat credit on the parallel/duplicate invoices received from the dealers. 77. The last issue that needs to be considered by me relates to applica .....

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When the department has adduced evidence to the effect that documents on the strength of which credit has been taken are fake/bogus, that allegation has to be effectively and successfully countered as the onus is on the person who is availing the credit to prove that he is eligible for the credit. In none of the cases, the appellants have shown any proof of receipt of the material supplied by the dealer. The primary evidence of receipt of goods is the consignee s copy of the transport document .....

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ong as the appellants have not discharged the onus cast on them about the receipt of the materials, the presumption that they have not received the materials remain valid and irrebuttable. In such a situation, the only reasonable inference that can be drawn is that they are also a party to the fraud committed by the dealers. This Tribunal in the case of AIA Engineering Pvt. Ltd. v. Commissioner of Central Excise, Ahmedabad-II - 2006 (195) E.L.T. 154 held that where credit has been availed withou .....

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goods, the appellants availed Cenvat credit on the basis of invoices which covered altogether different goods and in many cases the invoices did not accompany the goods and were received separately. These facts were known to the appellants. Yet they connived with the dealer in defrauding the exchequer by claiming cenvat credit on bogus/fake documents. The Hon ble Apex Court in the case of Aafloat Textiles (I) Pvt. Ltd. (cited supra), in Para 11 thereof, has held as follows : 11. Fraud as is well .....

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ding a man into damage by wilfully or recklessly causing him to believe and act on falsehood. It is a fraud in law if a party makes representations, which he knows to be false, and injury ensues therefrom although the motive from which the representations proceeded may not have been bad. An act of fraud on court is always viewed seriously. A collusion or conspiracy with a view to deprive the rights of the others in relation to a property would render the transaction void ab initio. Fraud and dec .....

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In such a situation, extended period of time is rightly invocable and, therefore, I hold that the demand for CENVAT credit wrongly taken invoking the extended period of time is sustainable in law. 6.3 We have gone through the above judgment and we find that the said judgment is squarely applicable to the facts of the present case as the investigation in the present case was started consequent to the investigation against SSMIPL by the jurisdictional Commissioner. We also note that there are some .....

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re placing the order with certain gradation of scrap such as grade I, grade II etc. On receipt of scrap, gradations were analysed and indicated. We note that in respect of the invoices under discussion, none of the standard operating procedures made by the appellant themselves was followed. This itself indicates that there was a tactical support from some people within the organization. There is no explanation whatsoever from the appellant s side why the operating procedures prescribed by themse .....

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at this crucial factor was ignored by the main appellant leads us to the conclusion that there was tactical approval from their side to receive the non-duty paid scrap and receive first stage dealer invoices of duty paid goods. 7. We also note that it is strange that the appellant has placed order to the three dealers of scrap but all the three dealers of scrap in turn got the invoices of SSMIPL. There are evidences that none of the goods have moved from the godown of SSMIPL and on the contrary .....

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ds have moved from the godown of SSMIPL and not from any other place. This has not been done for obvious reason as the goods have not moved from the godown of SSMIPL but from various other places. 8. Keeping in view the overall circumstances of the case, we have absolutely no hesitation in holding that the goods covered by the invoices of SSMIPL have never moved to the main appellant s factory and some other goods have moved. The appellant cannot take the credit of the duty paid shown in such in .....

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,4 & 5 have aided and abetted in this fraud leading to evasion of duty. The appellants counsel has quoted that no penalty can be imposed under Rule 26. We find that the Hon ble High Court of Punjab & Haryana in the case of Vee Kay Enterprises vs. CCE reported in 2011 (266) ELT 436 (P&H) has observed as under:- 6. Alternatively, it was submitted even if the appellant was liable to pay duty it did not stand on the same footing as person who wrongly availed of the credit and doctrine of .....

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r the rival submissions, we may refer to the relevant rules which are as under :- Rule 25-Confiscation and Penalty (1) Subject to the provisions of Section 11AC of the Act, if any producer, manufacturer, registered person or a warehouse or a registered dealer;- (a) remove any exciseable goods in contravention of any of the provisions of these rules or the notifications issued under these rules; or (b) does not account for any exciseable goods produced or manufactured or stored by him; or (c) eng .....

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not exceeding the duty on the exciseable goods in respect of which any contravention of the nature referred to in clause (a) or clause (b) or clause (c) or clause (d) has been committed, or [rupees two thousand] whichever is greater. (2) An order under sub-rule (1) shall be issued by the Central Excise Officer, following the principles of natural justice. Rule 26 :- Penalty for certain offences : (1) Any person who acquires possession of, or is in any way concerned in transporting, removing, de .....

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g such document, on the basis of which the user of said invoice or document is likely to take or has taken any ineligible benefit under the Act or the rules made thereunder like claiming of CENVAT Credit under the CENVAT Credit Rules, 2004 or refund, shall be liable to a penalty not exceeding the amount of such benefit or five thousand rupees, whichever is greater. 7. Learned counsel for the revenue supported the impugned order. 8. Question for consideration is whether penalty could be levied on .....

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. 10. In spite of non-applicability of Rule 26(2), penalty could be levied as the appellant was concerned in selling or dealing with the goods which were liable to confiscation inasmuch as the appellant claimed to have sold the goods in respect of which the cenvat credit was taken. In such a case, Rule 25(1)(d) and 26(1) are also applicable. The person who purports to sell goods cannot say that he was not a person concerned with the selling of goods and merely issued invoice or that he did not c .....

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een affirmed by the Hon ble Supreme Court vide 2014 (309) ELT A131 (SC). In the said judgment, the Hon ble High Court has held that a person would render himself liable for penalty for indulging in activities mentioned in Rule 26 of the Central Excise Rules, 2002, even if goods are not confiscated or have not been rendered liable for confiscation. 10.1 In the present case, undoubtedly, appellant No.2,3,4 & 5 were concerned with the scrap actually sent and the invoices of ship breaking scrap .....

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