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2015 (9) TMI 1147 - CESTAT AHMEDABAD

2015 (9) TMI 1147 - CESTAT AHMEDABAD - 2016 (41) S.T.R. 554 (Tri. - Ahmd.) - Availment of CENVAT Credit - fraudulent passing of CENVAT Credit to different buyers - Held that:- Appellant admitted that they have wrongly availed CENVAT credit on the basis of invoices without receipt of the goods, and, therefore, imposition of penalty of equal amount of duty, under Section 11AC of Central Excise Act, 1944 is warranted. Regarding the imposition of penalty on the Appellant No.2, the learned Advocate s .....

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Credit alongwith interest and penalties on the Appellant Company to the extent of CENVAT Credit availed on the basis of invoices as mentioned in the Annexure I to the Show Cause Notice, other than vehicle numbers mentioned Auto Rickshaws, are set aside - Matter remanded back - Decided partly in favour of assessee. - Appeal No. E/176-177/2011-DB - Order No. A /11338-11339/2015 - Dated:- 23-9-2015 - Mr. P.K. Das, Member (Judicial) and Mr. P.M. Saleem, Member (Technical), JJ. For the Petitioner : .....

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received information that two Bhavnagar based registered dealers viz. M/s Good Luck Empire and M/s Jenil Empire were engaged in trading of M.S./S.S./Aluminum Scrap and S.S. Flats, and fraudulently, passed CENVAT Credit to different buyers including the Appellant Company. On 03.12.2007, the Central Excise Officers, Headquarter Preventive, Vadodara-I, visited the factory premises of the Appellant Company and conducted stock verification and no dispute was found. On 03.12.2007, a statement of Shri .....

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2006-07 and 2007-08 and also to impose penalty on Shri Hemant N. Gokhale, Director and Authorised Signatory of the Appellant Company. By the impugned order, the Adjudicating authority disallowed and confirmed the demand of CENVAT Credit of ₹ 71,09,522.00 alongwith interest and imposed penalty of equal amount of CENVAT Credit and also appropriated the amount of ₹ 8,73,012.00 as already paid by the Appellant Company. A penalty of ₹ 5 lakhs under Rule 25 of CENVAT Credit Rules 200 .....

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he issue involved is only of interpretation of the provisions of CENVAT Credit Rules 2004, and therefore, the penalty under Section 11AC of Central Excise Act, 1944 cannot be invoked. 3.1 He further submits that Shri Hemant N. Gokhale, Director & Authorised Signatory of the Appellant Company, (Appellant No.2 herein), in his statement dt.26.05.2008, as per RTO report, as shown by the investigating officer, stated that CENVAT Credit of ₹ 5,49,674.00 availed on the basis of invoices, and .....

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were used in the manufacture of final product, cleared on payment of duty. The Appellant paid the amount to the suppliers through cheques only and duly recorded in the ledger. The learned Advocate drew the attention of the Bench to the relevant portions of the various statements. The reasons for outstanding amount to the supplier were due to financial crisis and the Appellant Company ultimately paid the entire amount to the supplier. It is submitted that as evident from the ST-3 returns for 200 .....

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he findings of the Adjudicating authority. He submits that the Appellant No.2 failed to produce the Lorry Receipts, Consignment Notes. In some cases, the RTO report would show that the vehicle numbers mentioned in the invoices, were Auto Rickshaws, not capable to carry heavy cargo. The Appellant might have co-related the input and output ratio based on the purchasing of the raw material/scrap from the open market. It is further submitted that the outstanding amounts were paid to the supplier, af .....

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he CENVAT Credit on invoices issued by the two registered dealers viz. M/s Good Luck Empire and M/s Jenil Empire; Bhavnagar, without actual receipt of the goods. The learned Advocate contended that no shortage/excess of inputs or finished goods was found during the stock verification. The entire case was made out on the basis of various statements of the Appellant No.2 on different dates and the documents supplied by the Appellant Company. 6. On perusal of the various statements of the Appellant .....

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01.2008, the Appellant No.2 stated that they received all the inputs without any lorry receipts since 2004-05 till date at their factory. In statement dt.04.04.2008, the Appellant No.2 narrated the details of the manufacturing process and the list of machinery installed in their factory for manufacturing of the finished goods. It is categorically stated that the raw material, i.e. S.S.Scrap, Aluminum Scrap etc were received in their factory and fed into the furnace for melting at high temperatur .....

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which is not an input, as they were using electric furnace in their factory for manufacturing of their final product. It was also stated that they have availed credit of ₹ 1,90,908.00 due to lack of knowledge. In statement dt.26.05.2008, the Appellant No.2 was shown RTO Report and the Worksheet-II prepared by the Central Excise Officers showing the details of invoices, in which the vehicle numbers mentioned as Auto Rickshaws were not capable of carrying heavy load. The Appellant No.2 acce .....

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consumption of raw material. In statement dt.27.11.2009, the Appellant No.2 explained the reasons for outstanding payments to the supplier of the raw material. In some cases, the supplier supplied inferior quality material at a higher rate and they did not agree on rate, the payment is outstanding for such a long period. In some cases, they did not make the payment due to financial crisis. It is also stated that they utilized the materials in their factory in the manufacture of finished goods. I .....

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CENVAT Credit of ₹ 3,23,328.00 on Furnace Oil and other issues as mentioned in Annexure II of Show Cause Notice, which they have already reversed. They have further reversed the CENVAT Credit of ₹ 5.49 lakhs after going through the RTO report and the worksheets prepared by the investigating officer. The learned Advocate submitted that they paid amount of ₹ 5.49 lakhs and also stated in the statement that they will contest this issue. It is seen from the Annexure I (i) of the s .....

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respect of invoices issued by other dealers/manufacturers. The Appellant No.2 in his statements in respect of invoices issued by 18 dealers/manufacturers as mentioned in Annexure I (iii) of Notice, stated that they received the goods without Lorry Receipts and duly recorded in Raw Material Stock Register in RG 23 A Part I. It is seen from the Adjudication order that a detailed verification was conducted against the invoices issued by the 18 dealers/manufacturers. In all these cases, the concerne .....

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end of the input supplier, as referred in Annexure I(i). On perusal of the Annexure I(i) and Annexure I(iii), we find that there were two types of vehicles mentioned therein. Some vehicles, such as Tata 1613/42, Delivery Van etc, were capable to carry the goods, but, the goods were overloaded (i.e. beyond the capacity). The other types of vehicles Bajaj Auto, Atul Auto etc were not capable to carry the goods. In the case of other types of vehicles, Bajaj Auto, Atul Auto etc, it may be concluded .....

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s by vehicle like Scooters, Motor Cycles, Mopeds, Combines, Jeeps etc, which are incapable to carry goods. The Tribunal held that onus lies with the assessee. In the present case, the Appellant had taken a stand that they have received the goods accompanied with the invoices even the vehicles mentioned as Auto Rickshaws and there are decisions of the Hon'ble High Court and the Tribunal that the CENVAT Credit cannot be denied merely on the basis of the invoices indicating vehicle numbers of A .....

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nd I(iii) is justified. 8. The vehicles such as Tata 1613/42, Delivery Vans etc as mentioned in invoices, are capable to carry the goods. Incidentally, in this case, the goods were overloaded, which is beyond the capacity of the vehicles. In such cases, it is difficult to say that the goods were not delivered. The Central Excise officers made investigation in respect of goods of Annexure I(iii) of show cause notice, it was found that the invoices issued by the suppliers are genuine and the appel .....

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vehicles would not prove non-receipt of goods, unless it is established by other evidences. At least, an enquiry should be made to vehicle owners/suppliers, which was not done in this case. We do not find force in the submissions of the learned Authorised Representative on this issue. 9. It is revealed from the Annexure I(ii) of the show cause notice that CENVAT Credit of ₹ 41,81,587.00 was denied on the basis of invoices issued by the said two Bhavnagar based dealers viz. M/s Good Luck E .....

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and the dispute was raised only for the period 2006-07 and 2007-08. It was contended by the Appellant that there is no material available to show that the Appellant procured the raw materials from outside. The Appellant also submitted the details of month-wise power consumption, in support of the manufacture of the finished goods. The Adjudicating authority observed that their claim is not acceptable as the input-output ratio could have been maintained by them from the material purchased from op .....

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ered dealers fraudulently issued invoices. The input of intelligence must be verified by detailed investigation and by collecting evidences. In the present case, the officers visited the factory premises of the Appellant and recorded several statements of Appellant No.2 on different dates. The Appellants supplied the records and documents for verification. The Appellant No.2 after going through the RTO reports as mentioned in Annexure I(i) and I(ii), stated that they received the goods accompani .....

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arently, the Adjudicating authority proceeded on the basis that the Appellant manufactured the final product on the basis of the raw material purchased from the open market. But, there is no iota of evidence that the Appellant procured the raw materials from the open market. It is significant to note that during stock verification of inputs and finished goods, no discrepancy was found. On the contrary, the Appellant No.2 in his various statements had categorically stated that they received the i .....

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nexure I(ii) of show cause notice. 11. In the case of M/s Banian and Berry Bearings Pvt. Ltd. Vs Commissioner of Customs, Ahmedabad, the Tribunal, vide Final Order No. A/171 to 181/WZB/AHD/2008, dt.06.02.2008, observed that no reliable evidence of actual diversion of the goods has been noticed. Many discrepancies which throw suspicion have been noticed. However, the same have not been followed up for further investigation and the Tribunal allowed the appeal of the Assessee. The Hon'ble Gujar .....

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h Court observed that the principles laid down by Punjab & Haryana High Court would squarely apply to the facts of the present case and rejected the appeal filed by the Revenue. 12. In the case of CCE Ludhiana Vs Talson Mills Store - 2015 (315) ELT 415 (P&H), the Hon ble Punjab & Haryana High Court observed that the Revenue was required to hold an independent enquiry against the respondent and dismissed the appeal filed by the Revenue. In the case of CCE Vs Saakeen Alloys Pvt.Ltd - 2 .....

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se duty, much less than the retracted statement. In the present case, there is no evidence available on record that the Appellant procured the goods from the open market for manufacture of final product. 13. The main contention of the learned Authorised Representative for the Revenue is that in some cases, the Appellant had paid the outstanding amount to the supplier after issue of show cause notice. It is noticed that the Appellant No.2 in his statement explained the reasons for delay of paymen .....

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the purchase order for purchasing the CI scrap. They received the CI scrap accompanied with invoices indicated as CI scrap. Rule 9(3) of the Cenvat Credit Rules as it stood at the material period provides that the manufacturer of excisable goods taking Cenvat credit on inputs shall take reasonable steps to ensure that the input or capital goods in respect of which he has taken the Cenvat credit on which the appropriate duty of excise as indicated in the documents accompanying the goods has been .....

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in existence in their address. There is no material available that the Cenvat invoices accompanied with goods are not genuine. So, in my considered opinion, the appellant had satisfied the conditions as provided under Rule 9(3) of the said Rules. Hence, there is no reason to deny the credit on the appellant. The dispute raised by the Revenue of value of the goods, cannot be reason for denial of Cenvat credit subject to fulfilment of condition of Cenvat Credit Rules. Apart from that, the transact .....

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uts were used for the final product and statutory returns were filed, the lethargy of the Revenue officers in not verifying the relevant statutory records and invoices, as to what exact quantity of raw materials was used in the final product and that in how many final products such inputs could have been used, altogether create a doubt as to the correctness of the contents of the statements. The preponderance of probabilities in the context of all other evidences vis-a-vis the confessional state .....

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ustified. Similarly in the case of CCE, Jalandbar v. Bhawani Shanakar Castings Ltd. [2006 (200) E.L.T. 540 (Tri. - Del.)], it was held that merely because wrong vehicle numbers were given in the invoices, the same cannot be held to be fake and non-receipt of inputs under the cover of the same cannot be upheld. Further, we find that the Tribunal in the case of CCE, Chandigarh v. Shakti Roll Cold Strips Pvt. Ltd. [2007 (80) RLT 267 (CESTAT-Del.), by taking note of the earlier decisions of the Trib .....

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njab & Haryana, who vide their judgment as reported in 2008 (229) E.L.T. 661 (P&H) = 2008 (87) RLT 793 (P&H) rejected the same. Similarly in the case of M/s. Steel Tubes of India Ltd. v. CCE, Indore [2008 (87) RLT 630 (CESTAT-Del.)], it was held that merely because vehicle numbers mentioned in some of the invoices are not of transport vehicles, the same is not sufficient to deny the credit when there is evidence of receipt and utilization of inputs and no evidence of diversion is ava .....

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of the goods has denied the clearance of goods to M/s. Bajrang. There is no evidence which can show that the records maintained by the Appellant are not correct. Only on the basis of statement of some of the transporters, the huge credit is sought to be disallowed whereas the statements are in isolation with no corroboration. I therefore hold that the impugned order for disallowance of credit to the Appellant is not sustainable. Accordingly the demands are set aside. In the peculiar facts and c .....

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