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2015 (11) TMI 90 - CESTAT MUMBAI

2015 (11) TMI 90 - CESTAT MUMBAI - TMI - Availment of fraudulent CENVAT Credit - Bogus invoices - Non receipt of actual goods - Held that:- Revenue has produced evidence from the bank of the appellant that no money has been paid to the purported five suppliers of sponge iron. The least that is expected from the appellant was to produce evidence from the banking channels that the money for the so called as sponge iron purchased was indeed paid to the five suppliers, corresponding to the alleged f .....

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ds of duty, interest and penalty, etc. are in order.

The penalty under Section 11AC is correctly imposed as this is a case of fraudulent availment of Cenvat credit, interest under section 11AB would be payable. As far as the appellant No.2 & 3 are concerned; they were the directors at the relevant time. Their conduct during investigation as also the statements made by Shri Naval Kishore Vasu, General Manager and Shri KK Agarwal, authorised signatory leaves no doubt that the fraudulent .....

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i.Ashok Kumar Singh, Advocate For the Respondent : Shri.V.K.Agarwal, Addl. Comm. (AR) ORDER Per: P. K. Jain 1. Brief facts of the case are that the appellants have availed Cenvat credit amounting to ₹ 4,49,99,766/- during the period March 2004 to July 2006, on the purported procurement of sponge iron from (i) M/s.Suryaa Songe Iron Ltd., Jaipur, Orissa, (ii) M/s.Ispat Industries Ltd., Raigad, Maharashtra, (iii) M/s.Ispat Godawari Ltd., Raipur, Chattisgarh (iv) M/s.Nisha Enterprises, Vithal .....

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ce of the appellants in Mumbai was carried out from where certain incriminating documents and 6 Nos. of computers/Hard disc were seized. Examination of documents revealed wrong and fraudulent availment of Cenvat credit and utilisation thereof by the appellants. During search operations at Goa unit, appellant received a courier containing the purported invoices of Surya Sponge Iron Ltd., even though no such goods were received from them. Investigations were further carried out from the purported .....

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sistant Commissioner also sent the copies of the original invoices issued by Surya Sponge Iron Ltd., which were not tallying with the invoices on which appellant took credit. In case of other suppliers, the concerned persons denied having supplied any goods or the invoices. The purchase registers of the main appellant indicated payments for the said invoices of sponge iron through HDFC Bank. Enquiries were made with the HDFC Bank. From the enquiries, it was revealed that no payment has been made .....

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. After going through these documents he submitted that copies of the invoices retrieved from their factory are totally different from the copies of the original invoices. Differences in the invoices recovered from the factory and that received from the jurisdictional authorities were elaborated by Shri Naval Kishore Vasu in his statement. 3.1 Later on a number of summons were issued to the Directors appellants No.2, 3 & 4 of the appellant firm. However, they themselves did not appear for te .....

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he way this activity is carried out he does not know as to how the same is carried. Another person, one Shri KK Agarwal, authorised signatory of the appellant firm, in his statement, recorded on 14/12/2007 stated that he signed all the statutory documents like ER-1, etc. filed with the department. He divulged the details regarding the fraudulent availment of Cenvat credit. He also stated that fictitious transactions were maintained in their Mumbai office under the directions of Shri Darshan Chur .....

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, Chattisgarh (iv) M/s.Nisha Enterprises, Vithal Wadi, Mumbai and (v) M/s.C.J.Enterprises Pvt. Ltd., confirmed that they had not supplied the sponge iron and the invoices were also not supplied. Summonses dated 03/10/2007, 25/10/2007, 07/11/2007 and 14/03/2008 were issued to the Directors of the appellants firm, Shri Darshan Churiwala and Shri Vinod Goel. They did not appear on some or other grounds. They further authorised Shri Naval Kishore Vasu, the General Manager to appear on their behalf. .....

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was cross examined, who stuck to his statement. However, he clarified that he joined the company in October 2006 and whatever has been stated by him is true from that time onwards. 3.5 One Shri BP Singh from M/s.Godawari Power & Ispat Ltd., appeared for cross examination. However, on the said date the Advocate for the appellants did not turn up. Other persons, whose statements were relied upon did not turn up in spite of the notices on three different occasions. 3.6 Keeping in view the repl .....

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the said order, the appellants are before us. 4. The case was heard on 04/06/2015 and also on 30/06/2015. The only contention raised by the learned Counsel for the appellant was that they had requested for cross examination of the persons, whose statements have been relied upon by the Revenue and except one person, other persons were not produced by the Revenue. Since whole case is based upon the oral statements, it is absolutely necessary that these persons should be produced for cross examina .....

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missioner (AR) took us through the show-cause notice and the impugned order and submitted that the present case is a case of absolute fraud wherein the appellants created fictitious invoices and took Cenvat credit on the basis of such invoices. No sponge iron as indicated in the invoice was ever received by them. No duty as indicated in these invoices was paid to the Government and, therefore, there is no question of taking the credit. It was further submitted that they have also manipulated the .....

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unt was withdrawn as self in cash. Thus, even in their own ledgers bogus entries were made for payment by the appellants. 5.1 The learned AR further submitted that during the course of investigation, number of summons were sent to the directors/appellant No.2, 3 & 4 to appear on various occasions and they kept on avoiding the same on some or other pretext and thereafter, when the department took approval for the arrest of the directors, they filed anticipatory bail, they did not even honour .....

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ame and presented himself for cross examination. Advocate of the appellants suddenly absented. Even in respect of other persons, the Commissioner had issued notices more than once for cross examination, but they did not appear. Thus, even the conditions stipulated under Section 9D (1) (a) of the Central Excise Act, 1944 are satisfied and hence their statements can be relied upon by the adjudicating authority. 5.3 The learned AR further submitted that the fundamental condition for availment of Ce .....

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adjudication proceedings. But no such thing has been shown or done. If purchases were genuine, they would have paid for the goods. No evidence relating payment or details of bank transactions wherein they have remitted the amount to the purported supplier has been submitted by the appellant at any stage. On the contrary Revenue has produced evidence for bogous/fictitious documentation. 5.4 The learned AR further submitted that duty involvement itself is approximately ₹ 4.5 crore and the va .....

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he show-cause notice. In our considered view this contention cannot be examined in isolation but is required to be examined with reference to the scheme of Cenvat credit. This Tribunal in the case of Bhagwati Steelcast Ltd., Vs. CCE, Nashik reported in 2013 (293) ELT 417 has analysed the scope and purpose of certain rules relating to Cenvat credit. Paragraphs No.73.3 and 73.4 from the said judgement is reproduced below: 73.3 The Cenvat Credit Rules, 2004,? deal with the procedure relating to ava .....

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manufacturer or in the premises of the provider of output service. Rule 9 of Cenvat Credit Rules, 2004 deals with the documents and accounts on the basis of which the Cenvat credit can be taken and this includes 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 i .....

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e allowed only if such first stage dealer or second stage dealer, as the case may be, has maintained records indicating the fact that the input or capital goods was supplied from the stock on which duty was paid 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 p .....

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ould be utilised in or in relation to the manufacture of final products. In respect of inputs received from a first or second stage dealer, an additional condition is stipulated to the effect that the inputs or 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 sh .....

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hall be deemed to have taken reasonable steps if he satisfies himself about the identity, name and address of the manufacturer/supplier issuing the document specified in the said Rule either from his personal knowledge 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. 6.2 As mentioned above, the sub-rule (5) .....

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rocured is recorded and the burden of proof regarding the admissibility of the Cenvat Credit shall lie upon the manufacturer or provider of output service taking such credit . 6.2 The Modvat credit scheme was introduced in 1986 and in the initial phases of the scheme, the manufacturers were required to intimate about the arrival of the raw-materials in the factory to their jurisdictional Central Excise authorities, who in turn were required to verify the inputs received. Further the manufacturer .....

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rs/assesses and the requirements of intimation and physical verification was done away with. The invoices being received with monthly return, above certain specified amounts were being verified from jurisdictional authorities from where such invoices were originated. After some years even the requirement of submitting the invoices relating to the credit were done away with. With the stoppage of getting the copies of invoices, this verification was also done away with. All these procedures have b .....

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sent case also it is the appellants whose responsibility is to produce proof regarding the admissibility of the Cenvat credit. 6.3 As elaborated by this Tribunal in paragraphs 73.3 and 73.4 in the case of Bhagwati Steelcast Ltd., (supra) that the Cenvat credit can be taken only after the receipt of the inputs in the factory. Secondly, such received goods should be covered by a duty paying invoice. In essence, the goods should be received and the goods should be duty paid and there should be evid .....

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r the so called as sponge iron purchased was indeed paid to the five suppliers, corresponding to the alleged fictitious invoices. In addition, the appellant could have produced some transportation documents and the transporter to prove that the goods have been transported from the manufacturers or dealers place to the appellants factory. Since no explanation whatsoever is coming forward from appellant, in our view the case against the appellant stands even if the statements given by seven perso .....

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he adjudication proceedings they want to cross examine the same person. To our mind this implies cross-examining themselves. Another employee Shri KK Agarwal had appeared for cross examination, he stood by his original statement. Shri BP Singh from Godawari Power & Ispat Ltd. appeared for cross examination but the appellants advocate did not turn up. The Commissioner has issued three notices on three different occasions to call all the witnesses but other five witnesses did not respond. Thu .....

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