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2016 (2) TMI 534 - CESTAT AHMEDABAD

2016 (2) TMI 534 - CESTAT AHMEDABAD - TMI - Cenvat Credit - clandestine clearance of Inputs - It has been alleged in the show cause notice that the imported inputs so diverted to local markets appears to have been sold in cash to the persons, who did not need Central Excise invoices and no record has been kept by the assessee regarding such transactions. The buyers of such unaccounted raw materials appear to have used it for unaccounted production and clearance of articles of non-ferrous metal. .....

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ds. The investigating officers had not verified the records of the assessee and merely proceeded on the basis of statement of third party. The inference of non-receipt of inputs and denial of Cenvat Credit on the basis of the statements of third party, who had failed to disclose the details of supply of inputs in mid-way, cannot lead any conclusion, the assessee in their statements stated the receipt of the inputs and used in the manufacture of final product and duly recorded in the statutory re .....

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l) And Mr. P.M. Saleem, Hon ble Member (Technical) For the Petitioner : Shri Alok Barthwal, Advocate, Shri R K Jain, Advocate For the Respondent : Shri L Patra, Authorised Representative ORDER Per : Mr. P. K. Das These appeals are arising out of a common order and therefore both are taken up together for disposal. 2. The relevant facts of the case, in brief, are that M/s Sunland Metal Recycling Industries (hereinafter referred to the assessee ), a partnership firm, engaged in the manufacture of .....

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e Intelligence (DGCEI), gathered information that the assessee engaged M/s Pankaj Shipping & Transport Company (in short M/s PSTC) a Customs House Agent (CHA), for clearance of imported goods from the ports, and who was also acted as transporter for transport of the goods from the port to assesses factory at Silvasa. It has received information that certain containers were unloaded in midway at Bhiwandi and from there the same were sold to different customers in cash. The assessee availed ce .....

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ice dtd 6th Sept. 2009 was issued proposing the demand of duty alongwith interest and to impose penalty on the assessee and to impose penalty on Shri Surendra P Kachhara, partner of the assessee, amongst others. By the impugned order, the Adjudicating authority confirmed the demand of Cenvat Credit of ₹ 61,32,005/- alongwith interest and imposed penalty on the assessee, on the ground that the assessee wrongly availed Cenvat Credit on the imported of inputs during the period from Sept. 2004 .....

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aid inputs in their factory and used in the manufacture of final products, cleared on payment of duty and duly recorded in statutory records. The assessee produced the records before the investigating authority. During the investigation and in reply to show cause notice, the assessee categorically stated that some of the documents were seized by the officers of D.R.I and therefore they could not produce all the documents. He further submits that the show cause notice was issued and the adjudicat .....

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e possession of 3rd party (i.e. transporter) The statements of the third party are contradictory to each other, in so far as in the first statement, the transporter had not stated against the assessee, but, the subsequent statement was against the assessee. No cross examination was allowed. He submits that it is well settled by various decisions of the Tribunal and High Court that the allegation of diversion of the inputs cannot be sustained on the basis of the statements and documents of third .....

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ndings of the Adjudicating Authority. He submits that the assessee failed to produce any transport documents in support of receipt of the inputs in their factory. He submits that the investigating authority collected the evidence from the transporters and the statements of the employee of M/s PSTC, transporter and CHA, engaged by the assessee, had stated the diversion of the inputs. He drew the attention of the Bench the relevant portion of the Adjudication order. 6. After hearing both the sides .....

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ent buyers in cash. On 27.11.2006, the Central Excise Officers of DGCEI visited the various premises of M/s PSTC and seized various records and documents. As follow up action, on 1.12.2006 search was also carried out at the factory premise of the assessee and seized the records viz., import files from April to November 2006 RG23, Part I and Part II Register etc. The said officers also recorded the statements of Shri Ashokendu Kumar Gupta, General Manager cum Authorised Signatory of the assessee .....

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ce (DRI) since 26.4.2006 and furnished copies of Panchnama dtd 25.4.2006 and another one dtd 25.4.2006 at the factory premises of the assessee at Silvasa. The assessee in their reply to show cause notice also stated in detail, as under: (i) It is alleged that our firm diverted some imported scrap consignments into the local market and took credit of CVD paid on these goods in our CENVAT account without actually receiving them in our factory. I deny these allegations made against us. The conclusi .....

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s to our factory premises in Silvassa. (ii) Statement of our Manager, Shri Ashokendu Kumar Gupta was also recorded wherein he has categorically stated that the firm took credit of CVD only after receipt of the impugned goods in the factory premises. The records maintained by us also show that the impugned imported goods were received in our factory premises and final products were manufactured from these inputs. (iii) The show cause notice has not identified a single party to whom the impugned g .....

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plicable. Also, in the case of Hiren Aluminium Ltd. Reported in 2009 (245) ELT 386 (Tri-Ahmd.) the Hon ble CESTAT has observed that the (Adjudicating authority) has further observed that an inference can be drawn in view of the documentary evidence that the inputs in question might have been diverted in open market by all the 4 dealers in connivance with Hiren for which no documentary evidence has been produced by them, otherwise the same could have been recovered by the search party during the .....

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for the period March, 2004 to 11.05.2006 were seized earlier by the officers of DRI, Surat Regional Unit. Non-submission of these records by us to the officers of DGCEI cannot lead to a conclusion that the impugned goods were not received in our factory. They ought to have obtained the records from DRI in order to clarify their doubts in the matter. (v) The so called evidence relied upon in the SCN is not admissible for arriving at a conclusion that the impugned goods were diverted into the loc .....

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le. Before taking credit of CVD we stamp the Bill of Entry for having taken the credit. Besides the 8 impugned consignments of scrap we have imported numerous other consignments of scrap and followed the same procedure fore taking credit of CVD; the Central excise authorities have had no objection in respect of the same. Therefore we cannot be faulted for maintaining our records in the same manner in respect of the impugned 8 consignments also. (vii) I reiterate that the impugned goods were rece .....

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thout actually receiving them in our factory is not correct and is not proved. 7. It has been alleged in the show cause notice that the imported inputs so diverted to local markets appears to have been sold in cash to the persons, who did not need Central Excise invoices and no record has been kept by the assessee regarding such transactions. The buyers of such unaccounted raw materials appear to have used it for unaccounted production and clearance of articles of non-ferrous metal. And the inpu .....

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ments of the assessee before the investigating officer and reply to show cause notice as quoted above that the assessee submitted copy of panchnama to substantiate that the documents were seized by D.R.I. This fact was not disputed by the Adjudicating Authority. So, the denial of credit on this ground is not justified. 8. It is noticed that the Central Excise Officers recovered Daily Loading Reports (DLRs) during the course of search from the premises of M/s PSTC. The DLRs had been prepared by t .....

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asd R Dubey, Proprietor of M/s PSTC. We find that the proprietor of M/s PSTC in his initial statement had not stated the diversion of the goods. Subsequently, it has stated the diversion of goods in midway, but, it was not disclosed to whom the goods were delivered by them. The subsequent statements of the proprietor of M/s PSTC are contradictory to the initial statement. The other statements of employees of M/s PSTC had not disclosed any material to whom the goods were delivered. Hence, it is d .....

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r statements that they availed cenvat credit on the inputs after receipt in their factory and duly recorded in the statutory records. Hence, the demand of duty alongwith interest and penalty on the assessee and imposition of penalty on the partner of the assessee cannot be sustained. 9. The other aspect of this matter is that on the basis of the same investigation another proceeding was initiated by the officers of the DGCEI against M/s Sunland Alloys and others (sister concern of the present as .....

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findings of the Tribunal in the case of M/s Sunland Alloys (supra), as under: Heard both sides to these appeals and perused the case records. The case is made against the main appellant M/s Sunland Alloys for clandestinely taking Cenvat Credit on imported scrap of copper without receipt of inputs in appellants factory. It is the case of the Revenue that copper scrap imported under the bills of entry have been diverted at Bhiwandi as per the statements of Shri Rajeshwar Prasad R Dubey, Proprieto .....

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ia, that imported scrap is first taken to the godowns in Bhiwandi and unloading of the imported Cargo from the container is done for the further transportation. That at Bhiwandi godown the imported goods were not only unloaded from the container but also stacked in there godown till further transportation were made. In the subsequent statement dated 19/12/2008, after three months Shri Rajeshwar Prasad R Dubey gives a different version that the hired transporter never transported any imported goo .....

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ches but it was confirmed that Cenvat Credit was taken by the main appellant after goods were received at their factory. In these circumstances when the same person Shri Rajeshwar Prasad R Dubey was giving contradictory statements regarding transportation of imported goods from Bhivandi to appellant s factory, it was necessary to grant Cross Examination of this person who was a third party witnesses. This was more so required when the importer and user of inputs has never confessed to have not r .....

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es Ltd. Vs. [2009 (242) E.L.T. 189 (Tri.-Del)], held that statement against the assessee connot be used without giving them an opportunity of Cross Examination. Hon ble Delhi High Court made following observations in para-10 and 14: 10. Insofar as the general propositions are concerned, there can be no denying that when any statement is used against the assessee, an opportunity of cross-examining the persons who made those statements ought to be given to the assessee. This is clear from the obse .....

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gs under this Act shall be relevant, for the purpose of proving, in any prosecution for an offence under this Act, the truth of the facts which it contains:- (a) When the person who made the statement is dead or cannot be found, or is incapable of giving evidence, or is kept out of the way by the adverse party, or whose presence cannot be obtained without an amount of delay or expense which, under the circumstances of the case, the Court considers unreasonable; or (b) When the person who made th .....

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ed that the right of cross-examination in any quasi judicial proceeding is a valuable right given to the accused/Noticee, as these proceedings may have adverse consequences to the accused, at the same time, under certain circumstances, this right of cross-examination can be taken away. The court also observed that such circumstances have to be exceptional and that those circumstances have been stipulated in Section 9D, of the Central Excise Act, 1994. The circumstances referred to in Section 9D, .....

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ed upon even in quasi judicial proceedings. The Division Bench also observed as under:- 29. Thus, when we examine the provision as to whether the provision confers unguided powers or not, the conclusion is irresistible, namely, the provision is not uncanalised or uncontrolled and does not confer arbitrary powers upon the quasi judicial authority. The very fact tat the statement of such a person can be treated as relevant only when the specified ground is, it is obvious that there has to be objec .....

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cording of reasons are inherent in the exercise of powers. The aggrieved party is not remediless. This order/opinion formed by the quasi judicial authority is subject ot judicial review by the appellate authority. The aggrieved party can always challenge that in a particular case invocation of such a provision was not warranted. 5. The same view was taken by us in the case of Sakeen Alloys Pvt Ltd. Vs. CCE Ahd,[2013 (296) E.L.T. 392(Tri-Ahmd.)]. Revenue did not accept this order and filed appeal .....

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actory and Cenvat Credit was taken only on the basis of Bills of entry. Shri Rajeshwar Prasad R Dubey has given contradictory statements and being third party witness his cross-examination was must. On the issue of taking of Cenvat Credit on an allegation that inputs were not received by an asessee Gujarat High Court in the case of Commissioner Vs. Motabhai Iron and Steel Industries 2015(316) E.L.T. 374 (Guj.) made following observations in para-15, 17 and 19:- (15) Thus, the demand of ₹ 3 .....

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error can be found in the findings recorded by the Tribunal so as to warrant interference. (17) Thus, from the evidence on record, it appears that all the goods supplied by M/s. Motabhai Iron & Steel had nowhere admitted that the assessee was issued only invoices and that there was no delivery of goods to the assessee. Besides, all the payments that were made to M/s. Motabhai Iron & Steel were made through bank drafts. The Tribunal has also noted that, in all, demand was made in respect .....

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parent that payment to M/s. Vasmin Corporation in respect of purchases was made through banking channels. Under the circumstances, the Tribunal has lightly held that demand cannot be confirmed against the assessee. The Tribunal has further found that it is an undisputed fact that all the purchases were duly recorded the statutory books of the assessee and the goods were also found to be entered in its statutory records. That the Department had not made any investigation of the unit of the assess .....

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as set aside the demands and the penalties imposed upon the assessee and the co-noticees. 6. Similarly in the case of Commissioner of Central Excise, Ludhiana Vs. P.J. International Ltd. [2010/ (255) E.L.T. 418 (Tri-Del), it was held by CESTAT-Delhi that once statutory records are maintained by an appellant, which is not doubted by the department, then by mear tallying numbers and dates of LR s and GR s in a statement, cannot be made a conclusive and satisfactory basis for diversion of inputs. I .....

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. Ltd. Vs. CCE Aurangabad [2014 (300) E.L.T. 119 (Tri-Mumbai)]. It is observed from the facts of this case that suppliers of scrap raw materials in this case admitted receiving consideration in case without proper document. Further charge of clandestine production and removal was established by duty payment of ₹ 60,00000/- towards such duty evaded. It is in these Factual Matrix of the case where CESTAT held that cross-examination of the witnesses was not necessary. In the case of Shalini S .....

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.1:- 18.1 The Daily report tin factory note-book contained details of production and issue of tin containers by the appellant, which did not reflect in the statutory record. The details of production and clearance of tin containers were also shown in the note-book Daily production report separately in respect of the appellant firm which tallied with the figures shown in the Daily report tin factory which contained figures both for the new tin factory as well in the name of the appellant. In this .....

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amongst other supervisors, even Awadesh Kumar Saxena, Electronics Engineer looked after the production and clearance of the goods of the factory. The authorized signatory of the appellant Girijesh Kumar Rai, confirmed in his statement recorded on 28-9-1998 that the records shown to him were withdrawn from the factory of the appellant in his presence and that he had put his signatures on the said documents at the time of withdrawal on 1-9-1998. The Electronics Engineer, Shri Awadesh Kumar Saxena .....

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Managing Director. The facts revealed by the Managing Director, Shri Yogesh Garg, the authorized signatory, Shri Girijesh Rai and Shri Awadesh Kumar Saxena make it clear that the said private documents recovered from the appellant premises on 1-9-1998 were maintained by the appellant and that the record, namely, the daily production reports, challans etc. were pertaining to the clandestine production and removal of tin containers without payment of duty. We have perused copies of these two note- .....

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without anything more is relied upon. The private record was recovered from the factory of the appellant, and it is established beyond doubt and not even disputed that it was so recovered and that it belonged to the appellant. The nature of particulars contained in this private record clearly go to show their intrinsic authenticity about the clandestine production and removal of the excisable goods by the appellants who had obtained the excise registration for the manufacture of such goods in th .....

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he note-books were recovered under a panchnama. In answer to question No. 18, Shri Awadesh Kumar Saxena who was shown the Daily production reports, stated in his statement dated 29-9-1998 that all these pertained to the appellants who manufactured the tin containers and that these contained information regarding production and clearance. He also stated in reply to question No. 19 that all challans were prepared by Shri Rajeev Agarwal and others whose signatures he recognized. The authenticity of .....

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ers to examine consumption of electricity. When production and removal of excisable goods in a clandestine manner is established by such positive documentary evidence and the oral evidence of the managing partner and the supervisor, it cannot be said that the Commissioner committed any error in holding that the appellant had manufactured and cleared tin containers in a clandestine manner. The quantum of liability which is worked out, has not been disputed before us. We find ourselves in complete .....

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verall control of the affairs of the unit. It was, therefore, rightly held that he was aware that the goods clandestinely manufactured and removed in the name of his partnership firm were liable to be confiscated. 7. In view of the above facts involved in this case larger bench held that oral evidence made by the Managing Director of the appellant and the positive documentary evidence recovered from the factory were of clinching nature. However as already mentioned in the present proceedings the .....

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