TMI Blog2015 (11) TMI 373X X X X Extracts X X X X X X X X Extracts X X X X ..... ny 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 have said in the statements after assessing the information already available with the investigating officers. In the later statements when they were shown more details, they came out with correct facts. - Since the invoices of such HR trimmings were of no use to them, they were trading the invoices through brokers based in Mumbai who in turn were locating the 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/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for getting such scrap. From some of these sources, the scrap is duty paid, for example, shavings left out of mechanical process. In addition to this, scrap is also available from non-duty paid sources such as bazaari or scavenger scrap. Such scrap is non-duty paid. However, the final product of the main appellant, MS ingot, is chargeable to excise duty irrespective of the fact that it is made from 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/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 hundre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tly 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 appellant No.3 to 7 was proposed under Rule 26 of the Cenvat Credit Rules, 2002. The case was thereafter adjudicated vide the impugned order wherein the Commissioner has confirmed the demand, penalty and interest against the main appellant. A penalty of ₹ 10,00,000/- was imposed on appellant No.2 under Rule 13(1) of the Cenvat Credit Rules, 2002. Further, a penalty of ₹ 2,00,000/- each was imposed on appellant No.3, 4 and 5 and penalty of ₹ 7.5 lakhs each was imposed on appellant No.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 re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reliance is placed on the decision of the Hon ble Supreme Court in the case of Kay Kay Industries reported in 2013 (295) ELT 177 (SC). It was also submitted by the learned counsel that the evidence brought forth by the 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 statements given by various persons on different dates and also the statements of one person to the other do not corroborate and hence the statements are not reliable. It was submitted that no penalty can be imposed under Rule 26 on the said appellants as the goods under question are neither liable to confiscation nor held so. Further, the appellants have not dealt with the goods, and demand etc. is for period prior to 1.3.2007. 6. The learned AR, on the other hand, reitera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 submitted this Tribunals decision in the case of CCE, Ludhiana vs. C.L. Engg. Ltd. reported in 2012 (279) ELT 262, wherein the Tribunal has held that manipulated transactions just to take credit - payment for such transaction through cheque is to be considered as part of manipulation only. 6.3 The learned AR further submitted that in view of the overwhelming evidences collected during the investigation, the impugned order is correct and the demand and penalty imposed are in order. 7. We have considered 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? method of implementation adopted in India is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... actory of the 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 in the said document. In case any particulars are missing, Cenvat credit may be taken only with the prior approval of the jurisdictional Asst./Dy. Commissioner of Central Excise, if he is satisfied that the goods or service covered by the document have been received and accounted for in the books of account of the receiver. Sub-rule (4) of the said rule further stipulates that the Cenvat credit in respect of input or capital goods purchased from a first stage dealer or second stage dealer shall be 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 sto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment of the tax liability by the department which hitherto existed was done away with and self assessment facility was extended to the assessees. 73.6 Paragraphs 134? and 135 of the Finance Ministers Budget Speech for the year 1996-97 lucidly explains the new regime which was introduced. 134. Our excise procedures are outdated and not in tune with the times. They need to be modified. They should encourage voluntary compliance with tax laws by the tax payers. With effect from 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 scheme of routine examination and checking of returns and documents furnished by the assessees. This scheme would also come into force from 1st October, 1996. While introducing the new regime, in p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 invoices were transported to their factory and received in their factory. The appellants could not produce copy of the Gate register, goods receipt note or 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). The appellant s main contention was that they have paid for the goods through banking channels and if at all the goods were not supplied, it is because of the manipulation by the supplier. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orted to Satej in vehicle No. GJ 11 W 2910. (v) iv) Further from the records of M/s. Star Industries, Tarapur it was found that goods consigned to M/s. AIPL from M/s. JISCO, Vasind under invoice No. 1306515 dated 11.9.2003 and 1307516 dated 11.10.2003 through vehicle No. MCT 5101 and MCU 1051 respectively were in fact delivered to M/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 1302059 4.6.03 3 Jindal Iron and S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are ignored, the demand will still hold good. If the main appellant would have produced some evidence to contradict Revenues claim, we would perhaps be inclined to hold that denial of cross-examination has prejudiced their case. This Tribunal in the case of Jagdish Shanker Trivedi (supra) has observed as under:- 7. We first take up the contention that there was denial of principles of natural justice by not offering the witnesses for cross-examination by the appellant Ashish Kumar Chaurasia, despite his request that all witnesses should be examined. We have already noted that the appellant, Ashish 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 to be a witness against himself. Section 124(c) which provided that no order confiscating an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re locating the 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 correct and the appeal of the main appellant is, therefore, dismissed. Appellants contention on limitation is also rejected as this is clear cut case of fraud as credit is availed without receiving the duty paid goods covered by the corresponding invoices. 11.1 As far as appellant No.2 is concerned, we find he was the Director of the main appellant-company and was supervising the day-to-day operation. It is incomprehensible that such a thing could happen without his knowledge. In our view, he would 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/br ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther manner deals with, any excisable goods which he knows or has reason to believe are liable to confiscation under the Act or these rides, shall be liable to a penalty not exceeding the duty on such goods or [two thousand rupees], whichever is greater. (2) Any person, who issues- (i) an excise duty invoice without delivery of the goods specified therein or abets in making such invoice; or (ii) any other document or abets in making such document, on the basis 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 goods are confiscable under Rule 25. Further, in our view, the contention of appellant No.3, 4 5 merits outright rejection for the simple reason that all the three persons were concerned in acquiring possession o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 distinction in culpability may be found in person who actually evades the duty and the person who enables the same to be done. This distinction in culpability may be required to be gone into from case to case. The Tribunal does not seem to have been conscious of this issue. 12. The penalty prescribed is admittedly not the minimum. Its quantum will thus be in discretion to be exercised having regard to mitigating or aggravating circumstances. In the context of exercise of discretion of imposition of 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 crite ..... X X X X Extracts X X X X X X X X Extracts X X X X
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