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2015 (11) TMI 373 - CESTAT MUMBAI

2015 (11) TMI 373 - CESTAT MUMBAI - TMI - Availment of fraudulent CENVAT Credit - Bogus invoices - Non receipt of physical goods - the case of the Revenue is that the main appellant has purchased/procured duty paid invoices of Jindals and credit of duty paid indicated in such invoices was taken without receiving the HR trimmings covered by the said invoices and the HR trimmings covered by the said invoices were diverted to Viramgam and nearby areas and there HR trimmings were used by hundreds of .....

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LR or even any document evidencing payment of freight charges to the driver/transporter in respect of each invoice (whether paid in cash or by any other means). - It is a common knowledge that the persons who are familiar with the excise laws and are aware about the violations of excise law, they are indulging in them they do not disclose proper and true facts at the first instance and they tend to give at times misleading explanations. In the present case also, generally the co-noticees ha .....

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other services from Viramgam and nearby area and were being converted into Bank Draft etc. through banking channels either by such brokers or by manufacturers of ingots or was used in cash to purchase bazaari scrap/scavenger scrap. In view of the above position, we have no hesitation in holding that the demand and penalty imposed on the main appellant is correct and the appeal of the main appellant is, therefore, dismissed. - HR trimmings in the coil form is very distinct commodity compare .....

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peal Nos. E/878, 890 to 894 & 895/08-Mum - Order No.A/1906-1912/15/EB - Dated:- 26-6-2015 - Mr. P.K. Jain, Member (Technical) And Mr. Ramesh Nair, Member (Judicial) For the Petitioner : Shri Nikhil Rungta, Advocate & Shri S.P. Sheth, Advocate For the Respondent : Shri Ashutosh Nath, Assistant Commissioner (AR) ORDER Per: P.K. Jain Brief facts of the case are that M/s. Jindal Iron & Steel Co. Ltd., Tarapur and M/s. Jindal Steel & Alloys Ltd., Vasind (hereinafter together referred to a .....

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ire/fencing. The conversion of HR trimmings to wires and thereafter to nails/barbered wire fencing etc. is carried out by a large number of small scale units. There is concentration of such units in and around Ahmedabad, particularly in place like Viramgam. Since this conversion is done by small scale units who are exempt from payment of excise duty, they are unable to avail the credit of central excise duty paid on HR trimmings by Jindals. 2. On the other hand, the main appellant in the present .....

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rom duty paid scrap or non-duty paid scrap. 3. For the Virangam based small scale unit, duty paid invoices of the HR trimmings are of no use as far as availment of credit of duty is concerned. However, such invoices can be made use (though illegal and fraud) by the main appellant (or other M.S. ingot manufacturers) by taking credit of duty paid, particularly for the portion of non-duty paid bazaari/scavenger scrap. 4. In brief, the case of the Revenue is that the main appellant has purchased/pro .....

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mings procured from various manufacturers of HR coils where HR trimmings are produced as a waste or scrap in Maharashtra and credit of the same is taken by the various ingot manufacturers. The main appellant is one of such MS ingot manufacturer. In the present case, appellant No.2 is the Director of the main appellant. Appellant No.3, 4 & 5 are traders/brokers based in and around Virangam, who would receive the HR trimmings cleared from Jindals and in turn, sell the same to various small sca .....

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ppellant. In addition, certain fictitious documents will be created in order to indicate that the goods are being sold from some trader to other persons in Viramgam. These documents will accompany the transport of the goods from Jindals units to the end user. Further, since the goods have gone to Viramgam, the price or the amount relating to such goods will be received through angadia or other sources in Mumbai and will be finally given to the main appellant who would have given the draft or ac .....

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transporters and vehicle owners were recorded and based upon the investigation, a show cause notice dated 3.7.2007 was issued to the appellants demanding an amount of ₹ 72,84,903/- of fraudulently availed cenvat credit and also proposing penalty under Rule 13(2) of the Cenvat Credit Rules, 2002 read with Section 11AC of the Central Excise Act, and interest under Rule 12. In addition, penalty was proposed on appellant No.2 under Rule 13(1) of the Cenvat Credit Rules, 2002. Penalty on appel .....

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.6 and 7. Aggrieved by the said order, the appellants are before this Tribunal. 5. Learned counsel for the main appellant and appellant No.2s main grievance was that the impugned order has been passed in gross violation of the principles of natural justice inasmuch as the appellant s request for cross-examination of various persons was not permitted. It was submitted that the impugned order records the fact that the appellant had asked for the cross-examination which was rejected by the Commiss .....

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Oil Traders vs. CC reported in 2013 (294) ELT 463 (Tri-Del.); (iii) Basudev Garg vs. CCE reported in 2013 (294) ELT 353 (Del). It was further submitted that no reliance could have been placed on the statements of witnesses when cross-examination is not allowed and in support of the same, judgment of the Honble Supreme Court in the case of Swadeshi Polytex vs. CCE reported in 2000 (122) ELT 641 (SC) was relied upon. It was also submitted that the statements of various persons are self-contradic .....

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Transport, is irrelevant as no demand has been raised in respect of the said transporter. Similar is the position in respect of the statement of Shri Praful Jethalal Thanki of Gayatri Transport. It was also submitted that only one invoice of Gayatri Transport is listed among 403 invoices. It was also submitted that similarly the statement of Shri Suresh Jayantilal Vyas, proprietor of Shrinathji Roadways, is relevant in respect of 10 invoices and is not relevant for the remaining invoices. It was .....

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e department, even if assumed to be true, admittedly covers only 224 invoices and therefore the entire demand on 403 invoices cannot be upheld. 5.1 Insofar as appellant No.2, Shri Sandeep Garg, is concerned, it was submitted that Shri Sandeep Garg was not looking after the day-to-day work and whatever wrong was done was not with his knowledge and therefore no penalty can be imposed on him. 5.2 The learned counsel for the other appellants main contention was that there are variations in the stat .....

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e in the adjudication order and his main submission was that the appellants are just trying to find out some or the other reason to discredit the investigation carried out. He further submitted that the appellants have not given any explanation whatsoever or any evidence about the transport and receipt of HR trimmings in their factory. On the contrary, Revenues the case is based mainly on the documents. Learned counsel for the appellants is harping on cross-examination. The learned AR also subm .....

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of the Constitution. The learned AR in support of his contention relating to cross-examination, submitted the following case laws:- (i) Maya Mahal Industries vs. CCE, Meerut reported in 1995 (80) ELT 118 (T); (ii) Jagdish Shanker Trivedi vs. CC, Kanpur reported in 2006 (194) ELT 290 (Tri.-Del.). 6.1 In support of the contention of the learned counsel about penalty under Rule 26, the learned AR quoted the following case laws:- (i) Sanjay Vimalbhai Deora vs. CESTAT reported in 2014 (306) ELT 533 .....

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oods. The learned AR submitted that the Honble High Court of Punjab & Haryana in the case of Indian Special Casting Pvt. Ltd. vs. CCE, Ludhiana reported in 2010 (255) ELT 209 (P&H), has upheld the Tribunals order holding credit availment without receipt of the goods fraudulent and plea on limitation was also rejected. It was also submitted that the appellants plea that they have paid for the goods by cheque and payments to transporter made in cash is not tenable. The learned AR submit .....

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ed the rival submissions. The basic contention of the Revenue is that the main appellant has availed the credit without receiving goods covered by the corresponding invoices. A somewhat similar issue has come up before this Tribunal in the case of Bhagwati Steelcast Ltd. vs. CCE,Nashik reported in 2013 (293) ELT 417. In para 73 of the said order, this Tribunal has explained the scheme of the cenvat credit and is reproduced below for ready reference:- 73. It follows from the above that the? metho .....

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d or deemed to have been paid on the goods used in or in relation to the manufacture of the goods and the credit of service tax leviable under the 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 .....

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les (4) to (6) deal with certain procedural requirements relating to invoices and sub-rule (7) provides that the provisions of said Rule shall apply 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 .....

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ice. 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 in the said document. In case any particulars are missing, Cenv .....

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er, 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 provider of output service taking such credit. Similar provisio .....

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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 shall lie upon the manufacturer taking such credit. Sub-rule (2) .....

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imself 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. 73.5 The Central Excise duty regime underwent a significant change with effect from 1-10-1996. Under th .....

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1st October, 1996, assessees would no longer be required to furnish copies of invoices along with the monthly returns. All that they would be required 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 Departments 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 sche .....

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y the scope of eligible capital goods by specifying the heading and sub-headings of the tariff relating to capital goods in the Modvat Rules. It is also 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 i .....

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y by the range Superintendent/Inspector. Later the said conditions were relaxed and a provision was made wherein the range Superintendent and Inspector were required to verify within the stipulated time and after the stipulated time, the manufacturer-assessee was at liberty to use the inputs. Later on, the Government has reposed more faith in the manufacturer-assessees and all such requirements have been done away with. However, reposing the faith on the manufacturer-assessee does not imply that .....

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ile the corresponding invoices were made in the name of the main appellant and the said invoices did not travel along with the goods, but only the invoices were received by the main appellant and they took credit on the basis of such invoices without receiving the HR trimmings. During the investigation, the main appellant and their officials including appellant No.2 were specifically asked whether they have any evidence whatsoever to prove that the goods viz. HR trimmings covered by the said inv .....

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r. We are not convinced with such argument. First of all, payment through banking channel in such manipulated transactions is a part of the manipulation only and it does not prove genuineness of the transaction. We are unable to understand that how the appellant is not able to produce any document relating to transport or receipt of the goods such as goods receipt note, independent weighment slip, gate register, lorry receipt, payment receipts (which are normally given by the drivers of such veh .....

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t in this case. Moreover, HR trimmings in coil form are very different from bazaari/scavenger scrap and can be distinguished by any person in the business. 9.0 In the present case, the Revenue has presented a catena of evidences which include the transporter s record etc. as is evident from para 93 of the impugned order. These include, - (i) v) From certified copies of Annexure-1 and Annexure-2 sent by Sales Tax Officer of Bhilad Check post it was found that vehicle No. GJ 10 U 7985 carrying H.R .....

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tions in Gujarat. The vehicle numbers in the above 84 cases are appearing on the invoices issued by M/s. JISCO & M/s. JSAL in the name of M/s. AIPL. (iii) vii) Vehicle No. GJ 10 U 8157 and GJ 13 T 5226 owned by Shri Suresh Jayantilal Vyas, were appearing on ten invoices of M/s. JISCO & M/s. JSAL which was in fact indicating that the goods i.e. H.R. Trimmings & M.S. scrap were transported to Gujarat and not to the factory premises of M/s. AIPL. (iv) viii) From the records of M/s. Gay .....

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s. Star Industries, Tarapur. (vi) iii) Shri Janedrasingh Ramsingh Sodha residing at Jamnagar, Gujarat vide letter dated 2.8.2004 owner of vehicle No. GJ 10 U 4367 stated that they had loaded the above vehicle from Diamond Transport during the period April, 2000 to December, 2003 for Gujarat. The said vehicle is appearing on following invoices. Sr. No. Name of the supplier Factory location Invoice No. Date 1 Jindal Iron and Steel Co. Shahapur 1202146 11.9.02 2 Jindal Iron and Steel Co. Shahapur .....

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in respect of any of the invoices. In our considered view, the only conclusion to be drawn is that the goods have not been received by the appellant. 9.1 It also defies any logic that the goods such as HR trimmings in the coil form which can be used for the manufacture of items like nails or wires, would be used for melting in the furnace. Even the prevailing prices of such HR trimmings will be much higher compared to normal iron and steel scrap and it does not make any economic sense for a manu .....

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ew that no prejudice has been caused to the appellants, particularly keeping in view the fact that they themselves did not produce a single evidence that the HR trimmings were transported to their factory and were received in their factory. They have also not given any explanation with reference to the records recovered from various transporters. Thus, even if the statements of the co-noticees are ignored, the demand will still hold good. If the main appellant would have produced some evidence t .....

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sh Kumar Chaurasia had cross-examined two officers on 19-6-1995. It also transpires that summons were sent to Ram Avatar Singhal, Ram Kumar Mishra and Ram Bilas Mandal (driver), Jagdish Shanker Trivedi and Dilip Kumar Singhal, who refused to be cross-examined on the ground that they cannot be compelled to give incriminating evidence against themselves in view of their fundamental right guaranted by Article 20(3) of the Constitution under which no person accused of any offence shall be compelled .....

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e gone through the statements. While there are some variations in the statements, in our considered view, these variations are not fatal in the facts and circumstances of the present case. It is a common knowledge that the persons who are familiar with the excise laws and are aware about the violations of excise law, they are indulging in them they do not disclose proper and true facts at the first instance and they tend to give at times misleading explanations. In the present case also, general .....

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atements of various persons particularly the brokers in Mumbai, transporters in Mumbai/Nagpur and the traders based in Viramgam have been recorded by Central Excise Intelligence and with reference to other cases. These persons are common in all such investigations. Few days back, we have decided a similar case in respect of Bhagwati Steelcast Ltd. wherein also some of the appellants are common and there the statements given by the appellants were more to the point. We have absolutely no hesitati .....

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he furnace units who could fraudulently avail the credit based on such invoices. The cash amount of HR trimmings being sent through angadia or other services from Viramgam and nearby area and were being converted into Bank Draft etc. through banking channels either by such brokers or by manufacturers of ingots or was used in cash to purchase bazaari scrap/scavenger scrap. In view of the above position, we have no hesitation in holding that the demand and penalty imposed on the main appellant is .....

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ould be main beneficiary. We also note that in his initial statement, he denied the things but on showing the statement of other persons, he tried to take a stand that the suppliers/brokers might have substituted the goods without their knowledge. We are unable to appreciate such a contention. HR trimmings in the coil form is very distinct commodity compared to the bazaari/scavenger scrap and if they were receiving invoices for the HR trimmings, there was no reason for them to accept the bazaari .....

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imposed on them. Rule 25 and Rule 26 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) engages in the manufacture, .....

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n 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, depositing, keeping, conceal .....

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sis 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. In the present case, goods were not transported to consignee as per duty paying invoice and this was done to evade duty by availing credit fraudulently, thus .....

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vailing inadmissible cenvat credit. In view of the said position, the penalty imposed under Rule 26 on the appellants 3, 4 and 5 is in order. We also note that the penalty imposed is not on the higher side and, therefore, their appeals are dismissed. We also note that the Hon ble High Court of Gujarat in the case of Sanjay Vimalbhai Deora vs. CESTAT reported in 2014 (306) ELT 533 (Guj.), has held that a person would render himself liable for penalty for indulging in activities mentioned in Rule .....

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he 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), has held as under:- 9. As regards applicability of provisions introduced on 1-3-2007 to alleged acts committed prior to the said date, the matter is covered by orders of this Court referred to above which are not shown to be distinguishable. Accordingly, we hold that the amended provisions will .....

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d 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 not liable to pay any penalty. 11. As regards alternative submission of the appellant, that even if there is jurisdiction to levy penalty equal to the amount of duty evaded dis .....

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appropriate sentence, it was observed in State of Karnataka v. Puttaraja, AIR 2004 SC 433 :- 10. It has been very aptly indicated in Dannis Councle MCGDautha v. State of Callifornia, 302 US 183 : 28 LD 2nd 711, that no formula of a foolproof nature is possible that would provide a reasonable criterion in determining a just and appropriate punishment in the infinite variety of circumstances that may affect the gravity of the crime. In the absence of any foolproof formula which may provide any ba .....

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