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Ajay kumar G. Baheti, Manish Agarwal, Mohammad A. Master, Harshadbhai R. Desai, Chandrakanth Nathwani, JSW Steel Ltd, Ispat Industries Ltd, Sampatraj Ladha Versus Commissioner of Central Excise And Customs, Nashik

2015 (8) TMI 345 - CESTAT MUMBAI

Denial of SSI Exemption - Manipulation of invoices - Availment of fraudulent CENVAT Credit - Held that:- Appellant No. 3 and 4 are based in and around Viramgam and are trading in HR trimmings. They have been bidding for the same on the online auction. From the investigation it is very clear that the HR trimmings so bidded were transported to Viramgam. It is obvious that the HR trimmings covered by the invoices was purchased by them and thereafter sold by them. They have definitely involved in th .....

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liable to confiscation and the appellants No. 3 and 4 have dealt with such H.R. trimmings and were concerned with such goods and were in the knowledge that such goods are liable to confiscation. Under the circumstances, the penalty imposed on them is correct. Penalty imposed is also not on the higher side. - goods were being transported in the Gujarat registered vehicle while the consignee name and address is that of Maharashtra, and such vehicles cannot take such freight. We also note that fro .....

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erent State, the HR trimmings cleared have therefore become liable for confiscation as discussed earlier and they are liable to penalty. - Decided partly in favour of assessees. - Appeal Nos. E/889/2008, E/746/2008, E/745/2008, E/1039/2008, E/748/2008, E/732/2008, E/753/2008, E/888/2008 - Dated:- 9-7-2015 - P K Jain, Member (T) And Ramesh Nair, Member (J),JJ. For the Appellant : Shri S P Seth, Adv. Shri Nikhil Rungta, Adv. Shri Sachin Chitnis, Adv. Shri Roshil Nichani, Adv. For the Respondent : .....

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of 1 to 3 . Such H.R. trimmings are used in the manufacture of MS wires. Such wires in turn, are used for the manufacture of nails, barbing, fencing, etc. The manufacture of MS wires, nails, barbed fencing wires etc. is carried out by large number of small scale units, who are availing SSI exemption. A large number of such units are located in and around Viramgam in the State of Gujarat. Such units are located mainly in Amreli, Keshod, Lakhator, Limbadi, Malpur, Mawa, Mehsana, Vijapur, Watwa, V .....

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required to pay excise duty, CENVAT credit of duty paid on such H.R. trimmings are not available to SSI units. Duty paying invoices are therefore not usable by such SSI units. What was therefore, being done was that appellant Nos. 3 and 4 after bidding/purchasing the H.R. trimmings from appellant Nos. 6 and 7 were in turn selling the same to hundreds of small scale units in and around Viramgam on cash basis and corresponding duty paying invoices were being sold separately to manufacturing units .....

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. Ltd., whose appeal is dismissed under Section 35F of the Central Excise Act, 1944). Thus, M/s. Silver Ispat Pvt. Ltd, was purchasing the invoices without getting the HR trimmings and such HR trimmings were sold by appellant No. 3 to 4 to 100s of small scale units in and around Viramgam. Further, for selling the invoices, appellant No.3 and 4 were using the services of brokers based in Mumbai e.g. Shri Manish Ramavtar Agarwal of M/s. Manish Steel Corporation and appellant No.2. Appellant No.5 i .....

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g over fictitious documents to the driver from Kalmeshwar / Nagpur to Viramgam for any checking during transportation. Similarly, there were transport-commission agent based in Mumbai (M/s. Diamond Roadways) who was transporting the HR trimmings from appellant No. 6 and 7's units located in Dolvi/Taloja near Mumbai to Viramgam or from Vasind/Boisar to Viramgam. Further, documents for safe passage from Dolvi/Taloja to Viramgam or from Vasind/Boisar to Viramgam were also handled by him. Benefi .....

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ld locate the buyers of invoices such as M/s. Silver Ispat Pvt. Ltd. in the present case, thereafter ensure that the invoices issued by appellant No. 6 and 7 would indicate the name of M/s. Silver Ispat Pvt. Ltd., the said broker would coordinate with the appellant No. 3 and 4 i.e. bidder who are generally based in Viramgam, get the goods transported to Viramgam and collect the invoices in the name of M/s. Silver Ispat Pvt. Ltd., and transmit the same to M/s. Silver Ispat Pvt. Ltd. Further, cash .....

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n Mumbai was to look for customer for CENVAT Table invoices to be issued by appellant Nos. 6 and 7. Here, the invoices alone were to be sold to such customers while the goods covered by such invoices were to move to Viramgam. 4. Thus, the case of the Revenue is that M/s. Silver Ispat Pvt. Ltd., in the present case has availed CENVAT credit on the basis of duty-paying invoices issued by appellant Nos. 6 and 7 without receiving any HR trimmings covered by such invoices. M/s. Silver Ispat Pvt. Ltd. .....

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tigated by the Central Excise intelligence. A number of places were searched and statement of various appellants as also other persons were recorded. During searches, certain incriminating documents were recovered, particularly from appellant No. 5's premises in Nagpur. Similar documents were also recovered from M/s. Diamond Roadways, Mumbai. The investigation also revealed that the name of a fictitious transporter i.e. Sidhivinayaka Road Carriers, Raipur was also being used by the two trans .....

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from Kalmeshwar/Dolvi to M/s. Silver Ispat Pvt. Ltd.,'s factory in Nasik. Investigation also revealed that vehicles of M/s. Nar Narayan Transport of Ahmedabad were used for transporting H.R. trimmings from Kalmeshwar to Viramgam. Most of the H.R. Trimmings were transported using the vehicles having Gujarat registration number. Such vehicles are not allowed to transporting freight within Maharashtra i.e. in this case, from Nagpur to Nasik or Dolvi to Nasik. Such vehicles can only carry freigh .....

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ce dated 02/01/2007 was issued to M/s. Silver Ispat Pvt. Ltd., for demand of fraudulently availed credit, interest, and penalty as also to present appellants for penalty. 7. learned counsel for appellant No. 8 at the outset mentioned that Shri Sampatraj Ladha, appellant No. 8 and the Director of the M/s. Silver Ispat Pvt. Ltd. has expired on 13/11/2014 and in support of this contention he produced Xerox copy of the death certificate and submitted in view of this position the appeal of Shri Sampa .....

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tral Excise Rules, particularly for period prior to 01/07/2007. 9. Learned counsel further submitted that Shri Manish Agarwal is alleged to be the broker and the primary submission is that in his statement Shri Manish Agarwal has admitted dealing with M/s. Bhagwati Steel Cast Ltd. but he has not admitted dealing with M/s. Ispat Pvt. Ltd. It was also submitted that the show cause notice incorrectly gives the impression as if Shri ManishAgarwal has admitted all the irregularity relating to M/s. Si .....

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t No. 3 and 4 are concerned, they are supposed to be the Viramgam based dealers who used to bid for the goods. There are no evidences that they have physically dealt with any of the offending goods which are liable to confiscation or has been ordered to be confiscated. Under the circumstances no penalty can be imposed on them. 11. The learned counsel for the appellant NO. 5 submitted that his client is only a transport commission agent who arranges transport vehicle for lifting the goods from M/ .....

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It was also submitted that they had bona fide belief that the goods which are being dealt by them are duty-paid and not liable to confiscation. It was submitted that, as the transport agent the appellant has taken due precaution to ensure duty paid goods lifted and delivered. This itself shows that there was no mala fide intention on their part and there are no grounds for invoking Rule 26 to impose penalty on them. It was further submitted that there is no proposal and confiscation order for t .....

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ctions of the bidder to various buyers. Further before clearance of the goods they have paid the appropriate amount of duty and since they have paid appropriate amount of duty they have not done anything wrong. If the goods have been diverted after clearance they are not responsible for the same and no penalty can be imposed on them. It was further submitted that in the case of appellant No.7, this Tribunal has set aside the penalty in the following cases: (a) A/198-299/08/WZM/SMB/C-III dated 26 .....

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herein the same have been sold to 100s of small scale units manufacturing nails, MS wires, barbing, fencing etc. He further submitted that appellant no. 8 and appellant No.1 were Director and General Manager of the company at the relevant time. He further submitted that appellant No. 1 is the son-in-law of appellant No. 8. Thus, he was nor an ordinary employee but was in fact part of the management and would be the direct beneficiary of the irregularities. He further submitted that it is an admi .....

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It was further submitted that under the circumstances it cannot be said that he did not deal physically with the offending goods. The learned AR relied upon the case laws in the case of Dr. Writer's Food Products vs. Commissioner of Central Excise Pune-II reported in 2009 (242) ELT 381 (Tri-Mumbai). 13.1 As far as appellant No. 2 is concerned, learned AR submitted that it is an admitted position that Shri Manish Agarwal was a broker based in Mumbai who used to find buyers for Central Excise .....

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ri Harshadbhai Desai and Shri Chandrakant Nathwani and the role played by him. It was further submitted that even though in his statement, appellant No. 2 has not specifically mentioned about M/s. Silver Ispat Pvt. Ltd. but his statements were general in nature and relating to 1000s of transactions. 13.2 As far as appellant No. 3 and 4 are concerned it was submitted that although both are Viramgam based traders, it is an admitted position that they used to bid for the goods in the online auction .....

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livery of the consignments were also accepted by appellant No. 4. Appellant No. 4 has also stated that he used to issue blank letterheads to Shri Manish Agarwal for giving the same to M/s. IIL, Kalmeshwar. It was also submitted that appellant No.2 has admitted that appellant NO. 4 has visited his office in Mumbai with a proposal to find out customers for the invoices. 13.3 Learned AR further relies upon the judgment in the cases of Commissioner of Central Excise vs. Navneet Agarwal 2012 (276) EL .....

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render himself liable for penalty under Rule 26 of the Central Excise Rules, 2002 even if the goods are not confiscated or have not been rendered for confiscation. The SLP to appeal against the said order was dismissed by the Hon'ble Supreme Court. It was also submitted that the present case is on far better footing than the case of Sanjay Vimalbhai Deora (supra) as the order-in-original clearly speaks of confiscation of 3462.610 MTs of HR trimmings. 13.4 In so far as appellant No.5 was conc .....

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tant touch with Viramgam based traders as also the brokers based in Mumbai e.g., Shri Manish Agarwal, appellant No. 2 in this case. It was also submitted the records recovered from his office indicated the actual destination as also the purported destination of the goods. Further, fictitious LRs in the name of Sidhvinayak Road Carriers, Raipur were also recovered. In view of these facts, appellant No.5 was concerned with the physical transportation of goods and hence is liable to penalty under R .....

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that such vehicles cannot transport goods from one point to another point within Maharashtra. Still the appellants loaded the goods on such vehicle. They knew use of H.R. trimmings, still they changed the name to Ingot manufacturers. As far as appellant No. 7 is concerned documents had been recovered from them which indicated that they were fully aware that their goods are going only to Viramgam for further manufacture of nails, barged wires, fencing etc. Under the circumstances they have helped .....

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of Nashik Strips Pvt. Ltd. vs. Commissioner of Central Excise 2010 (256) ELT 307 (Tri-Mumbai) involving exactly same issue of clearance of HRT by JISCO involving Viramgam based dealers such as M/s. Akshar Trading Companies, M/s. Umiya Corporation, M/s. Master Traders and M/s. Memon Associates by employing the same modus operandi involving the same parties as in the present case. It was submitted that in the said case it was also held that penalty under Rule 26 is imposable on the Directors even .....

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Shri Sampatraj Ladha, Director of M/s. Silver Ispat Pvt. Ltd. Thus, the main beneficiary in availment of the fraudulent CENVAT credit was M/s. Silver Ispat Pvt. Ltd. Therefore, appellant No. 1 was one of the main beneficiary. It was also admitted position that he was looking after the day-to-day working of the factory and it would not have been possible to carry out such a fraud without his active connivance. During investigation he has promised to produce the LRs of the goods received. However, .....

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ore, dismiss the appeal of the appellant No.1. 16. As far as appellant No.2 is concerned, he is a Mumbai based broker. His role was to find suitable customers who are interested in purchasing the invoices without receiving the corresponding goods. Even though in his statement, appellant No. 2 has not specifically mentioned about M/s. Silver Ispat Pvt. Ltd., Shri Sampatraj Ladha has narrated about one person with the name Chandresh. The person named Chandresh could not be located. Viramgam based .....

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17. As far as appellants No. 3 and 4 are concerned, the main contention of the advocate for the appellants was that they are only the bidder and they are neither purchaser of the goods nor handled the goods in any way. We are not convinced with such a submission. It is an admitted position that appellant No. 3 and 4 are based in and around Viramgam and are trading in HR trimmings. They have been bidding for the same on the online auction. From the investigation it is very clear that the HR trim .....

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chasing or in any other manner deals with any excisable goods which he knows or has reason to believe are liable to confiscation. As mentioned earlier, the traders were actively involved with the goods. They were also actively involved in getting the names of the consignee changed to the M/s. Silver Ispat Pvt. Ltd., with an idea that the M/s. Silver Ispat Pvt. Ltd., can avail the CENVAT credit. Further, since the invoices were not indicating their name but were indicating the name of the M/s. Si .....

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said Rules. H.R. trimmings so diverted to Viramgam were undoubtedly liable to confiscation and the appellants No. 3 and 4 have dealt with such H.R. trimmings and were concerned with such goods and were in the knowledge that such goods are liable to confiscation. Under the circumstances, the penalty imposed on them is correct. Penalty imposed is also not on the higher side. Appeals are therefore dismissed. 17.1 We also note that the Hon'ble High Court of Gujarat in the case of Sanjay Vimalbh .....

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possible without their active participation and connivance with each other. We also note that the said judgment of the Hon'ble Gujarat High Court has been upheld by the Hon'ble Supreme Court as reported in 2014 (309) ELT A131 (SC). Further, the Hon'ble Punjab & Haryana High Court in the case of Vee Kay Enterprises vs. CCE reported in 2011 (266) ELT 436 (P&H), held as under:- 9. As regards applicability of provisions introduced on 1.3.2007 to alleged acts committed prior to th .....

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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 contravene a provision relating to evasion of duty. The appellant issued invoices without delivery of goods with intent to enable evasion of duty to which effect a finding has been recorded and which finding has not been challenged. We are, thus, unable to hold that appellant was no .....

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or the M/s. Silver Ispat Pvt. Ltd. Under the facts and circumstances of the case, penalty is correctly imposed and the penalty imposed is also not on the higher side. Appal is therefore dismissed. 19. As far as the appellants No. 6 and 7 viz. M/s. JSW Steel Ltd. and M/s. Ispat Industries Ltd. are concerned, while we note that before clearing the goods they have paid the appropriate amount of duty. However, we also note that the goods were being transported in the Gujarat registered vehicle while .....

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