TMI Blog2015 (8) TMI 22X X X X Extracts X X X X X X X X Extracts X X X X ..... wn to have been transported were reported to be not in existence by concerned RTO authority. In some of the invoices issued by the said dealer to end users vehicles found to be tanker, which are incapable of transporting iron steel scrap. Once the concerned Government authority i.e RTO has given report wherein it was found that vehicle number mentioned on the invoices are not capable of being transporting the goods in question, purchaser if could not give any contrary evidence or he did not discard the evidence provided by RTO with appropriate counter evidences the RTO report has to be taken as correct and the lower authority has rightly used as evidence to hold that there was no transportation of the inputs either from Gujarat to dealer M/s. SSMIPL nor from said dealer to the appellant. It was found that despite all the opportunity given to the director of the appellant by way of recording the statement he could not give a single contrary material/evidence to demolish the evidences gathered by the investigation and relied upon for confirming the demand. It was also observed that on the basis of the investigation that there is no record to show that transportation charges e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t they have not received the input. Secondly no goods were seized and therefore confiscation of the goods not available for seizer cannot be made, on these observations, we are of the view that penalty of ₹ 1,29,51,948/- under Rule 13(1) (correct Rule 15(1)) of Cenvat Credit Rules, 2002 was wrongly imposed. - Decided partly in favour of assessees. - Appeal No. E/382, 383/09 - - - Dated:- 16-6-2015 - P. K. Jain, Member (T) And Ramesh Nair, Member (J),JJ. For the Appellant : Shri Prashant Patankar, Adv. For the Respondent : Shri V K Agarwal, Addl. Commissioner (AR) ORDER Per: Ramesh Nair: These two appeals are directed against order-in-original No. 42/SLM (42) COMMR/RGD/08-09 dated 05/1/2009 passed by Commissioner of Central Excise, Raigad, wherein Commissioner has passed following order; 1. I disallow the Cenvat Credit amounting to ₹ 1,29,51,948/- (Rupees One Crore twenty nine lakhs fifty one thousand nine hundred forty eight only) (the details of which are mentioned in Annexure -I, II III and summarized in Annexure 'B') and order its recovery from M/s. Vipras Castings Ltd under Rule 12 of the Cenvat Credit Rules, 2002 read with pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing under Chapter heading 7204.00. M/s. VCL manufacturing said finished goods from the scrap route, which they purportedly procure from various scrap dealers or from manufacturers generating such scrap and availing Cenvat facility under Cenvat Credit Rules, 2004. Intelligence was received by Headquarters (Preventive) wing of the Raigad Commissionerate that M/s. VCL are indulging in availment of fraudulent Cenvat credit on invoices issued by certain registered Central Excise dealers/ manufacturers without actually receiving the material covered therein. In this connection team of the preventive officer visited factory of M/s. VCL on 31/1/2004 and caused verification in the matter. Documents relevant for the inquiry were submitted by M/s. VCL under letter dated 31/1/2004 in pursuance of summons issued to them. Inquiry at the factory premises and scrutiny of documents revealed that the appellant, inter alia have availed Cenvat Credit on iron and steel ship break scrap, purportedly procured by them, from a Central Excise registered dealer namely, M/s. Simandhar Steel Movers (India) Pvt. Ltd. Mulund, Mumbai falling under the jurisdiction of the Central Excise, Mumbai-III, Commissionarat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k verification in the godown of M/s. SSMIPL conducted on 11/11/2003, it revealed that the book stock was showing 1350 MT as against physical stock of only 9 MT. This shows there is huge shortage of physical stock and it indicates that M/s. SSMIPL had not been receiving any stock from ship breaker at Alang and Bhavnagar and engaged in the paper transaction only in order to pass fraudulent Cenvat Credit. The inquiry officers in their inquires regarding transportation of the impugned ship break scrap from Alang Bhavnagar to Bhivandi and Bhivandi to various destination of actual user including the present appellant M/s. VCL found that goods leaving state of Gujarat and coming into State of Maharashtra are neither on payment of Central Sales Tax or against 'C' form issued by the recipient/buyers of the goods located in Maharashtra. In this connection officers visited Gujarat Maharashtra border on the Bombay-Ahmedabad Highway and gathered all the transport vehicles entering Maharashtra from Gujarat into Mumbai/Bhivandi destination have to pass through Sales Tax Check Post and R.T.O. check post, both at Bhilad (Gujarat) before entering Maharashtra state. In the verification of Sal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , it indicates that no 'C' form issued by the buyer (M/s. SSMIPL) based in Maharashtra (c) as no CST was paid at the Bhilad Check post in respect of any of the Central Excise invoices of any of the said ship breakers it indicates consigned on paper to M/s. SSMIPL were not actually transported into Maharashtra nor received by the said dealer so as to be eligible to avail the Cenvat Credit of the Central Excise duty and subsequently pass on the same (d) As claimed by the said respective representatives of ship breakers, it is not financially viable to use the goods cleared by them for melting purpose due to higher value thereof as compared to melting scrap. Investigation further proceeds to verify correctness of vehicle registration number mentioned in the Central Excise invoices issued by ship breakers at Alang/Bhavnagar to ascertain whether such vehicles were used for transportation of the goods from Alang/Bhavnagar to Bhivandi i.e from ship breaker's premises to the godown of the said dealer. In this context, details were asked from respective RTOs in respect of randomly selected Central Excise invoices of said ship breakers. As per the information of the RTOs, the veh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the Director of M/s. SSMIPL in C.M.M. Court Mumbai, despite issuance of court summons and search warrant the same could not be executed as Hitesh Shah was absconding alongwith his family. Then court issued Proclamation of absconder against Hitesh Shah on 20/12/2005 which was published by way of advertisements in local news papers but Hitesh Shah failed to respond till date. Similar investigation was carried out in respect of other buyers of M/s. SSMIPL and against cases of fraudulent Cenvat credit of ₹ 10,62,90,504/- by show cause notice dated 31/3/2006 proposing for revocation of its Central Excise dealership registration against M/s. SSMIPL and its sister concern M/s. Simandar Enterprises was initiated. Investigating agency in addition to the verification from sale tax check post of Bhilad also carried out verification from entry point from Songadh and it was found that no vehicle carrying iron and steel scrap from Bhilad and consigned to the M/s. SSMIPL had passed through the said check post. On the basis of further scrutiny of the documents it was seen that the Serial number of invoices issued by M/s. SSMIPL to M/s. VCL and also other manufacturer buyer are same which r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p Breakers, Alang effected last clearance of goods during month of August 2000. Thereafter Gujarat Maritime Board, Alang has taken possession of their plot on 26/9/2001 and allotted plot to M/s. Sachdeva Steel Products. M/s. Ajay Alloys Cast Pvt. Ltd. has made last clearance of goods during the month of Aug 2000 thereafter from September, 2000 to March, 2003 they have not filed returns. Gujarat Maritime Board, Alang has taken possession of their plot on 27/12/2001. Above report shows that no clearance was made by these three ship breaker after April 2000, August 2000 and Aug 2000 respectively. In the statement of Common director / partner of aforesaid firm stated that they have not sold/cleared any goods to M/s. SSMIPL during the month of June 2002 against Central Excise invoices referred in Annexure 'D' verification form. Shri. Kadarbhai K. Pirwani further stated that neither any excisable goods in the form of heavy melting ship break scrap has been generated/manufactured and cleared from his said firms nor any Central Excise duty thereon for such fictitious clearances has been paid on the Central excise invoices purportedly issued by these three units in respect of any of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e notice that the total quantity of 3826.790 MT on which M/s. VCL has availed Cenvat Credit amounting to ₹ 1,29,51,948/- is fraudulent. The show cause notice culminated into adjudication order wherein charges made in the show cause notice have been confirmed after consideration of submissions of the appellant. Aggrieved by the said order the appellant M/s. VCL (formally known as M/s. Goradia Special Steel Ltd.) and Shri. Ashish Goradia are before us. 3. Shri. Prashant Patankar, Ld. Consultant for the appellant made following submission. The appellant received goods covered by the subject invoices which acknowledged by the impugned order but question if the goods received were not the same duty paid goods covered by subject invoices or were substituted as per the observations in the impugned order. The appellant acquiring Scavenger scrap from various unregistered dealers without actually receiving goods covered by the subject invoices. This charge of substitution of goods by scavenger scrap is presumptuous and unsubstantiated. For the sake of argument if the goods received by appellant were substituted, they had no reason to know about plausible substitution by the suppl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any opportunity to cross-examination of those transporters. Moreover show cause notice/impugned order does not establish whether these transporters were concerned with any vehicle which delivered the subject goods to the appellant. Appellant also referred the query from the Hon'ble bench regarding classification of the subject goods as ship breaking scrap under head 7230 under Central Excise Tariff Act, in this contest the appellant submits that they purchased - scrap as described under subject invoices and were not responsible for classification of the subject goods. Moreover it is settled principle that the classification could not be question at receiver end. Appellant also submits that they unload the scrap received in factory with magnetic lifting device therefore do not care for the nature of scrap which essentially melting scrap. Ld. Counsel relied on various case laws as referred below: (a) RS Industries vs CCE, New Delhi- I [2003(153) ELT 114 (Tri-Del)] (b) CCE, New Delhi vs. RS. Industries [2008 (228) ELT 347 (Del)] (c) Haryana Steel Alloys vs. CCE, Delhi [2002 (148) ELT 377 (Tri. Del)] (d) S.K. Foils Ltd. vs. CCE, Rohtak [2015(315) ELT 258 (Tri Del.)] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be led by the assessees are the GRNs or the consignee's copy of the transport document. In the case before me, none of the appellants have been able to produce even a single copy of the GRN or the consignee copy even in respect of a single case. Further, it is on record that the appellants have not maintained any gate register or materials inward register which would show the entry of the transport vehicle in the factory premises of the receiver and receipt of the materials in their factory premises. In the present case the appellant have maintained material inward register and placed on record compilation of invoices supported by GRNs and weighment slips. Also in the said case Hon'ble Lordship observed that large number of invoices (306 invoices) were found to be mentioning non transport vehicles (Refer para 74.6). This is not in case in the present matter. In the present case show cause notice seeks to deny Cenvat in respect off 273 (53+207+13) invoices and RTO verification report in 18 of show cause notice refers to 17 vehicles, which cannot be considered to be large number. Moreover the said RTO report as proceeded on the basis of three wrong vehicle number as deta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 11AC read with 13 (2)] would imply that the penalty should not be imposed under both the provisions simultaneously. Even otherwise there no justification for the high quantum of penalty under rule 13(1) when penalty under Section 11AC. Regarding the penalty on Director, Shri. Ashish Goradia it was submitted that there is no evidence about his knowledge or involvement in the alleged irregularity. Neither he nor any of the employees or suppliers have admitted his role in the alleged irregularity. The Ld. Counsel for the appellant relied upon following judgments. (a) B.R. Sule vs. Union of India [1990 (48) ELT 343 (Bom)] (b) Man Industries (I) Ltd. vs. CCE, Indore [2004(175) ELT 435 (T)] (c) Siddharth Agarwal vs. CCE, Delhi I [2003 (160) ELT 195 (T)] (d) Kamdeep Marketing vs. CCE, Indore [2004 (165) ELT 206 (T)] (e) Ramnath Singh vs. CCE, Delhi I [2003 (151) ELT 451 (T)] (f) Cipla Coated Steels Ltd.vs. CCE, Aurangabad [1999 (113) ELT 490 (T)] (g) Godrej Boyce Mfg. Co.Ltd. vs. CCE,Mumbai [2002 (148) ELT 161 (T)] 4. On the other hand, Shri V.K. Agarwal, Ld. Addl. Commissioner (A.R.) appearing on behalf of the Revenue reiterates the findings of the impugn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any ER-1 RETURN since April 2001, which clearly proves that the dealer has not purchased any goods from these units and issued only cenvatable invoices without receiving any goods for passing on the Cenvat Credit. (d) Director of the appellant company, Shri Ashish Goradia could not produce any purchase orders of ship breaking scrap either from the said dealer or directly from the ship breaking units located at Alang, although during investigation, he stated that he will produce the purchase order. (e) Regarding cost of Transportation of such large huge quantity of iron and steel ship breaking scraps, the supplier of the goods have claimed that the transportation cost was borne by M/s. SSMIPL whereas, Director of the appellant company maintained goods covered under the said invoices were free delivery. Since cost of transportation is neither borne by the manufacturer nor by the appellant, it clearly proves that there was no movement/transportation of the any goods. (f) As per provisions of Rule 7(2) Rule 7(3) and Rule 7(4) of Cenvat Credit Rules, 2001, and Cenvat Credit Rules, 2002 to avail Cenvat Credit, the party must have received the inputs in the factory and it should ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the present case. (j) Ld. A.R. also rely upon this Tribunal judgment in the case of M/s. Steel India Company vs. CCE, Pune -III 2014 (320) ELT 184 (Tri-Mum). (k) Regarding the penalty on the notice Director of the Company Shri. Ashish Goradia, he submits that since he was the part of the conspiracy to defraud the Government and avail Cenvat Credit without receiving any goods in the fraudulent manner and he was actively involved in the whole scheme, the penalty has been rightly imposed on him. (l) Regarding other appeals, this is to submit that penalty has rightly been imposed on all of them, since they were part and parcel of the conspiracy and actively abated the appellant to take Cenvat Credit for he was not eligible. In view of the above submissions, Ld. A.R. prayed that the appeals of the appellant be dismissed and order of the original adjudicating authority be upheld. 5. We have gone through the records, considered overall oral and written submissions made by both sides. 6. The issue to be decided is whether the Cenvatable invoices issued by M/s. SSMIPL o the appellant are genuine or fake/fraudulent invoices. The investigation in the independent case undert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion to pass on such paper credit to various end users to defraud the Revenue. On the verification by the investigating officers glaring evidences were gathered from which it was found that from RG23D register of M/s. SSMIPL with corresponding input invoices submitted by the appellant it was found that the duty debit entry number, page number and particulars etc as per the RG23 D register of M/s. SSMIPL were altogether different from the particulars like duty debit entry number and page number etc. indicated on the input Central excise invoices issued by M/s. SSMIPL to M/s. VCL in the records maintained by the M/s. VCL which clearly substantiates that sale invoices of M/s. SSMIPL found on the records of M/s. VCL were bogus and parallel as corresponding Central Excise duty consignee particulars shown in the dealers RG23D register do not match with details declared in the dealer Central Excise invoices. As regard the procedure for the passing on Cenvat credit of duty paid on the input the dealer is under obligation to maintain correct and true records under RG23D register wherein entry of duty paid invoices is made and entry of sale invoices are also made on face to face so that it c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manufacturers invoices were issued by the ship breaking firms, either were not existing or the same were closed down therefore there is no question that non-existence ship breakers have cleared the goods on payment of duty. The investigation report on the ship breaker clearly revealed that no duty paid clearances were made by them even partner of the ship breaking firm also categorically stated that during the period they have not made any transactions with M/s. SSMIPL. Since this part of the investigation not under dispute then the subsequent issuance of Cenvatable invoices by M/s. SSMIPL and passing on credit on such invoices is nothing but pre-planned fraud only on paper this clearly shows neither there is movement of goods nor there is payment of excise duty. One of the glaring evidence is that on physical verification of stock at M/s. SSMIPL it was found that as compared to the stock of 1350 MT shown in the RG23 D register only 9 MT stock was found, this is very clear indication that since there was no movement of material and only transaction was on paper obviously paper can be found but material cannot be found. It is also observed that for availing concessional rate of sal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ows that such huge transactions without any interaction and without a piece of paper, except fake invoices is absolutely impossible. Appellant submitted that they ordered for iron and steel scrap and they have received the same and invoices also shown the description as iron and steel scrap and the said scrap is unloaded by way of magnetic lifter. It is observed that the appellant, according to the process of their manufacturing needs melting scrap however invoices of M/s. SSMIPL are in respect of ship breaking scrap which according to ship breaker's firm they only supply plates out of ship breaking scrap which is not meant for melting. The details of manufacturer given in the invoices in respect of ship breaking scrap and classification of the ship breaking scrap shown in the manufacturer's details. It is beyond the imagination that plates are used for melting purpose therefore it is very clear that appellant even as per the statement of their director used melting scrap which cannot be ship breaking scrap which clearly established that the invoices received by the appellant is in respect of ship breaking scrap and the scrap used by the appellant in their manufacturing pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Authority recorded the findings that the Appellant acquired the scavenger scrap from various unregistered dealers, this Ld. Counsel countered that this observation is presumptuous and unsubstantiated. In this regard, we observed that when it became clear that the invoices on which the cenvat credit was passed on is admittedly in respect of ship breaking scrap which is not in the nature of melting scrap and the same is not capable of being used by the melting unit, obviously the scrap which was used by the Appellant would undoubtedly is scavenger scrap. Even if it is presumably not correct, the fact that the goods covered by the cenvatable invoices were neither received nor used by the Appellant, thereafter even it is accepted the goods is received but it is different goods, the cenvat credit can not be allowed as the very same goods covered by the invoices were not received. The revenue heavily relied upon the judgment of Bhgwati Steelcast Ltd. In this case also the similar modus operandi was involved and the Cenvat invoices issuing person is same i.e. M/s. SSMIPL. Ld. Counsel tried to distinguish the said judgment mainly on the ground that in the said judgment there was finding of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th mathematical precision but what is required 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. It is undisputed facts that whatever investigation / inquiries made from various authorities such as RTO, sales tax, transporters vehicle owners and ship breaking firm all have confirmed that goods were not transported to M/s. SSMIPL and subsequently to the appellant. The appellant not in single case could demolish the evidence with their counter evidence therefore even if inquiry was not conducted for 100% transactions, out of the total transaction, in part of the transaction inquiry was made and it was proved against appellant, it is not necessary that inquiry of 100% transaction should have been made. From entire investigation it has been conclusively proved that M/s. SSMIPL was fraud company and they were exclusively operating only for passing fraudulent Cenvat Credit by issuing fake invoices therefore no doubt can be raised that in some of the cases transaction are genuine and in some of the case it is not. Therefore we are of the view that the investigation conducted in respect of whatever numb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e have taken view that order passed by the Ld. Commissioner is maintainable therefore ratio of the judgments relied upon by both rivals cannot be directly applicable. In our above observations the demand for extended period is legally maintainable, penalty under Section 11AC also does not require any interference. However, we are of the view that if the penalty under Section 11AC which is equal to the Cenvat amount has been imposed, separate penalty of similar amount imposed under Section Rule 13(1) of Cenvat Credit Rules, 2002 was not warranted. Moreover penalty of ₹ 1,29,51,948/- was imposed under Rule 13(1) towards confiscation of the 3826.790 MT on which fraudulent Cenvat credit was availed. First of all, the case of the Revenue is that that Cenvat Credit to the appellant is not admissible on the ground that they have not received the input. Secondly no goods were seized and therefore confiscation of the goods not available for seizer cannot be made, on these observations, we are of the view that penalty of ₹ 1,29,51,948/- under Rule 13(1) (correct Rule 15(1)) of Cenvat Credit Rules, 2002 was wrongly imposed. Therefore, we waive the said penalty, however the demand ..... X X X X Extracts X X X X X X X X Extracts X X X X
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