TMI Blog2018 (5) TMI 1512X X X X Extracts X X X X X X X X Extracts X X X X ..... .2009 wherein he had stated that copper scrap received was being returned back under the invoice of copper ingots. Whether the Department’s allegation that there was no manufacturing activity in the factory of VKM is not sustainable or not? - Held that: - the Department does not dispute that there were other machinery also, namely, two hydraulic cylinders, one each blower and chimney, one pusher machine, one EOT Crane, Rails, one air compressor, 26 moulds rails fixed on the ground for movement of moulds, one electronic weighing machine, two winch machines, two hydraulic oil tanks of 12000 Ltr. Capacity and one DG Set of 62.5 KVA capacity. There is no evidence that these machines were not in working order. Moreover, it is seen that while during the period of dispute, there was no power connection, the power requirement was being met by 62.5 KVA DG Set. At the time of officers’ visit to the factory, the total working hours DG Set were 8066.Since the unit had started functioning; sometime in December 2004 it would amount to working of about 12 hours per day. Therefore, the working of the DG Set also is not compatible with the Department’s allegation that there was no manufacturing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llant Shri K.K. Anand, Shri V.K. Gupta, Advocates Ms. Surbhi Sinha, Ms. Rinky Arora, Advocates Shri R.K. Mishra, D.R. - for the respondent ORDER Per Bijay Kumar In the first place we would dispose of first batch of appeals No. 55986-55989/2013- Ex (DB) which are mentioned at Sr No. 1 to 4 hereinabove. The fact of the case are as under: 1. M/s V.K. Metal Works (hereinafter referred to as VKM) having their factory at SIDCO Industrial Complex, Bari Brahmana, Jammu Tawi, (J K) are a manufacturer of Copper Ingots from Copper Scrap. They started their manufacturing operations in December 2004. The Units located in the area specified in Annexure-II to the Notification No. 56/02-CE and the goods manufactured by the unit Copper Ingots are also not in the negative list of the items mentioned in Annexure-I of the Notification. Accordingly, VKM had filed the required declaration for availing of the duly exemption under Notification No. 56/02-CE and were availing of the same. During the period of dispute, that is, from December 2004 to November 2006, the goods manufactured by a manufacturer, availing of this exemption Notification were exempt from the duties of excise lev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... diesel oil. Beside the oil fired melting furnace, other machinery, namely, two hydraulic cylinders, One blower, One chimney, One Pusher machine, One EOT Crane, One Air Compressor, 26 Moulds rails fixed on the ground for movement of moulds, one electronic weighing machine, One 62.5 KVA DG Set, Two winch machines, and two oil tanks for storage for Light Diesel Oil were also found. 3. On scrutiny of the records recovered, it was found that VKM were purchasing copper scrap from the following suppliers:- (1) M/s Vikash Trader, E-631, RIICO Industrial Area, Phase-I, Bhiwadi, (2) M/s BhartiyaTrade Linkers, D-68, Govind Marg, Adarsh Nagar, Jaipur (3) M/s Shi Krishna Traders, Vikash Nagar, Pilani Road,Chirwa, Jhujhunu. (4) M/s Ganpati Sales Corporation, 25/97-98 A, Gali No. 14, Vishwas Nagar, Shahdra, Delhi (5) M/s Hari Overseas, B-39, Ganpati Plaza, BhiwadiDistt.,Alwar. (6) M/s Sai Nath Enterprises, KabdiGali, New Bus Stand, Behror, Distatement. Alwar (7) M/s Jain Sales Corporation, A-4, 1st Floor, Oberoi Building, Dilshad Garden, Delhi. (8) M/s V K Metal Works, 9/84, ShastriGali, Vishwas Nagar, Delhi and (9) M/sSurya Traders, 15, Kanchan Nagar, Nimbahera, Ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... majority of cases the goods were transported from Delhi to Jammu by two different transporters and a fresh GR was prepared. On inquiry with 19 transporters who had transported 24 consignments involving 212.41MT of scrap, the transporters stated that their trucks had not been used for such transportation. Similarly on inquiry with the transporters in respect of 27 consignments involving 247.880 MT of copper scrap, it was found that the vehicles in which the goods were claimed to have been transported were Auto Rikshaws, LCVs, Tempos, Tankers etc., in which the goods claimed to have been transported could not be transported. 8. Transportation from Delhi to Jammu has been shown through two transporters M/s Kanpur Kashmir Roadways (hereinafter referred to as KKR) and M/s Upkar Goods Transport Company (P) Ltd., (hereinafter referred to as UGTCPL) both based in Delhi. On inquiry with UGTCPL both based in Delhi. On inquiry with UGTCPL, they confirmed having transported the consignments of scrap from Delhi to VKM s Factory in Jammu and also they confirmed the transportation of ingots from Jammu to Delhi and other places. However, so far as the transportation by KKR is concerned, it w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the invoices of copper ingots, as there was no production of copped ingots n the factory. However, this statement of Shri Shanker Lal Gupta was retracted by him under his letter dated 22.01.2009. There is another statement of Shri Shankar Lal Gupta was recorded on 09.02.2009 wherein he once again stated that the statement dated 21.01.2009 written by him in his own hand writing is his correct statement. However, by letter dated 10.02.2009 the statementdated09.02.2009 was retracted. 10. During investigation, it was also found that the Govt.of J K had announced a scheme of incentives to the new Industrial units to be set up in the state and as per this scheme 30% capital investment subsidy was available to the Industrial units set up in the backward blocks, subject to certain conditions specified in the policy. However, it was found that VKM, while setting up this unit, had not availed this capital subsidy, which gave rise to suspicion that the purpose of setting up this unit was not the production of copper but only, the misuse of the exemption Notification No. 56/02-CE and to passed on bogus credit to manufacturers of various other copper products. 11. It is in view of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stated that Vikas Traders was the consignment agent of M/S Garima Internationals and M/S Agarwal Sales Corporation. Thus in his first statement he nowhere stated that he was only issuing invoices of Sale of scrap to VKM., that though in his subsequent statement dated 04.01.2008 he stated having issued bogus invoices regarding supply of copper scrap to VKM, statement04.01.2008 was retracted by him on 05.01.2008, that though subsequently Shri D.K. Jain, again in his statement dated 28.01.2008 reiterated the statement dated 04.01.2008 , but in course of his cross examination during adjudication proceedings on 12.10.2011, he again retracted his statement dated on 28.1.2008, that in view of frequent changing of statements by Shri DK Jain, he has to be treated as an unreliable witness and hence his statements have no evidentiary value. II. That as regards the other suppliers he took us through certificate of Registration of Sai Nath Enterprises, invoices of suppliers which duly mention TIN No. of the said supplier and computer printouts which mention TIN No. of these suppliers along with the location zone i.e. zone, circle and ward under which these premises were registered with VAT A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s have been utilized and when the Commissioner has given a finding that there is no evidence to prove that UGTCPL have not transported any material and have issued only bogus GRs, the Department cannot allege that no goods were transported by UGTCPL under their GRs from Jammu to Delhi and other destinations. VIII. That as regards the GRs issued by KKR regarding transportation of copper scrap from Delhi to Jammu and transportation of Copper Ingots from Jammu to Delhi and other places, the Department heavily relied on the fact that there was no office of this transport company at 53 Transport Nagar, Jammu and in this regard the Department relied upon the statement of Shri Kulwant Singh, proprietor of M/s Rein Road Carrier, 42 Transport Nagar, Jammu wherein he has stated that though about two years back he had allowed Shri Manoj Yadav, Proprietor of KKR to use his address and telephone number in its GRs, but no such firm had existed at 53 Transport Nagar, Jammu address and that Shri Manoj Yadav used to hand over the GR books to the factory owners, that the Department has ignored the statement of Shri Manoj Yadav dated 16.3.2010, which was recorded when investigations were conduct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ious production based checks and in this regard they have made remarks in the RG-1 Register which are also on record.The Ld Advocate took us through the copies of the invoices of the suppliers of the copper scrap, some of which were duly stamped at check posts in Rajasthan and Haryana, copies of GRs VAT58 way bills which were duly stamped and signed at J K border at Lakhanpur, weighment slips at the said check posts which are known as Toll Post which are issued by the J K Govt, exemption certificates which were duly stamped by the Deputy Commissioner Executive Jammu. VKM has also brought on record a chart obtained from ICC Madhopur (Punjab) under RTI a perusal of which reveals that each vehicle transporting copper scrap from Delhi to VKM Jammu passed through the state of Punjab and entered state of J K. This chart contains details of each invoice and vehicle number. XII. That the Ld Advocate also took us to the minutes of cross examination of Central Excise Officer Offices of District Industry Centre wherein they had verified the consignments of Copper scrap and Copper Ingots. XIII. That during the period of dispute and even after that every month, the Assistant Commissioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . There was no rebuttal of the contents of this letter or Affidavit either in the Show cause Notice or in the order-in- general. XVII. That at the time of visit, in addition to one oil fired melting furnace melting furnace, the other machinery like two hydraulic cylinders, one each blower and chimney, on pusher machine, one EOT crane, one air compressor, rails fixed on the ground for movement of moulds, 26 moulds, one electric weighing machine, two winch machines, two hydraulic oil tanks of 12,000 Liters and 10,000liters capacity and one DG Setof 625 KVA capacity had been found, XVIII. That in course of manufacture of copper ingots from copper scrap, a waste called keeth arises, that VKM was clearing keeth on payment of duty by classifying the same under heading 2620 and were claiming exemption under Notification No. 56/-02-CE, that subsequently, the Department issued a Show Cause Noticedated 28.5.2009 to them alleging that keeth is not excisable and hence, no duty is payable and for the reason the refund by the way of self credit taken in respect of this item is not admissible under Notification No. 56/02-CE and accordingly, theShow Cause Notice sought recovery of the duty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d order holding that there was no manufacturing activity in the factory premises of VKM during December 2004 to November 2006 period, and that only bogus invoices regarding Copper Ingots had been issued. XXIII. That since the orders sanctioning refund were never reviewed and have attained finality, the question of demand of duty could not arise. Further the provisions of Section 11A are not applicable to where the refund has been sanctioned under Notification No. 56/02-CE dated 13.11.2002. In support of this contention, he relied upon certain judgements. XXIV. Ld Advocate therefore pleaded for setting aside of the impugned order and allowing the appeal filed by VKM. 14. Shri Prabhat Kumar, Advocate the Ld. Counsel representing KKR and Shri D.K. Jain of M/s Vikash Traders, pleaded that so far as Shri D.K. Jain of M/s Vikash Traders is concerned though, initially Shri Jain in his statementdated4.1.2008 had admitted to have issued bogus invoices, he vide his letter dated 5.1.2008 had retracted his statement, However, subsequently vide his statement dated. 28.1.2008, he again reiterated his statement dated. 4.1.2008. In course of his cross examination, during the adjudication ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nvoices had been issued for some commission, that through, he has retracted his statementdated04.01.2008 on 05.01.2008 but on 28.01.2008 he had again reiterated his statement dated04.01.2008, that in view of this, his statement in the cross examination on 12.10.2011 that his statements dated04.01.2008 and 28.1.208 had been recorded under duress, is not acceptable. II. that in addition to M/s V.K. Traders, there are eight other suppliers all of whom have been found to be non-traceable that when out of nine suppliers, one supplier M/s Vikash Traders has stated that he had issued only bogus invoices and other eight suppliers have been found to be non-existent, the only conclusion which can be drawn is that no copper scrap had been received by VKM from the 9 suppliers, III. that the Department has also conducted inquiry regarding transportation of scrap, claimed to have been received from the suppliers in Rajasthan, that in this regard on inquiry with 19 transporters who had transported24 consignments of scrap weighing 212.41 MT it was revealed that those transporters had not transported any scrap and similarly inquiry in respect of 27 consignments involving 246.880 MT of scrap r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n this statement, he nowhere stated that he was only issuing bogus invoices to VKM. However in his two subsequent statements dated04.01.2008 and 28.01.2008 Shri DK Jain had stated that M./s Vikash Traders did not supply any scrap to VKM and issued only bogus invoices. But he had retracted his statements dated 04.01.2008 on 05.01.2008 and in the course of his cross examination during adjudication proceedings he again stated that his earlier statements dated04.01.2008 and 28.01.2008 had been given under pressure and are not his voluntary statements. In view of the changing statements of Shri DK Jain, it would not be correct to place absolute reliance on the same without corroboration from some other evidence. In this regard, we find that these statements of Shri D.K. Jain are not corroborated by any other independent evidence, in as much as the consignments of scrap from Delhi to Jammu had been transported by using two transporters KKR and UGTCPL. In fact two statements of Sh. D.K Jain dated 4.1.2006 and 28.1.2008 are contrary to documentary evidence which is being discussed hereunder. In respectof UGTCPL, the Commissioner himself in para 95 of the impugned order has stated that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... DK Jain of M/s Vikash Traders, it cannot be inferred that this firm had issued bogus invoices for scrap without any supply. The above details also establish beyond any shadow of doubt that all the suppliers of copper scrap were in existence and were duly selling copper scrap to VKM. This fact also stands proved from the TIN Numbers of these suppliers which is mentioned on each invoice. There is no evidence that these TIN Numbers were falsely obtained by the respective suppliers. Moreover, the Department s allegation that no copper scrap was being received in the factory of VKM is also not compatible with the statement of Shri Shankar Lal Gupta dated 21.01.2009 wherein he had stated that copper scrap received was being returned back under the invoice of copper ingots. 18. Though, it is seen that the payments by cheques made by VKM to M/s Vikash Traders, for supply of copper scrap were being deposited in the M/s Vikash Traders Bank account in Krishna Nagar, Delhi Branch of UTI Bank and on the same day these amounts were being transferred to M/s Garima International and M/s Agarwal Sales Corporation were the companies floated by Shri Vinod Kumar Jain, proprietor of VKM. Similarly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . In any case, as discussed above, the Department s allegation of non-receipt of scrap is not compatible with the statement of Shri Shankar Lal Gupta, that the scrap consignments were being received in trucks but were being returned back without any processing but under the invoices of copper ingots. We have already noted above that the copper scrap was duly transported to the factory of VKM at Jammu for which sufficient documentary evidence is available on record. Hence there could not been any flow back of cash back to VKM. 19. Next comes the question as to whether the Department s allegation that there was no manufacturing activity in the factory of VKM is not sustainable or not. In this regard the Department heavily relies upon the statement dated 21.01.2009of Shri Shankar Lal Gupta, coupled with the fact that there were no stock of copper scrap and no used burner blocks. In our view, just because there were no used burner blocks and there was no copper scrap on the day of the officers visit, it cannot be inferred that there was no manufacturing activity. The shortage of copper scrap even otherwise is doubtful as there is no rebuttal of letter dated 5.12.2006 along with a du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he power generated by the DG Set in VKM was being sold to other manufacturers. It is also seen that for running of the DG Set HSD, was being used and there is record of purchase of HSD also which also stands verified by the Department. 19.1 In any event we find that in the show cause notice at page 44 a chart of service record of Genset is appended a perusal of which shows that up to 7.3.2006 the running hours of the said DG Set are compatible with the production of copper ingots and meter reading upto 7.3.2006 is 7825-7 hours. But in subsequent months from April 2006 up to October 2006 the total meter reading only got increased by 225 hours. The working hours per day range from 9 minute per day to 4.22 hrs per day. Shri Shankar Lal Sharma in his statement dated 29.11.2006 stated that the Gen set was being used for the power supply to the Guest house located at the first floor of the unit for an average of 2 hrs daily since December 2004. That going by the statement of Shri Shankar Lal Sharma the service record of DG Set should have shown per day working of atleast 150 minutes or 21/2 hours per day. This fact itself is sufficient to hold that the DG Set meter had developed fau ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... copper keeth under heading 2620 and were clearing the same n payment of duty and were claiming refund of the duty paid through PLA,. It is seen that on 28.05.2009, a Show Cause Notice was issued to them for denying the refund in respect of copper keeth on the ground that the same is not excisable and hence, no duty was required to be paid. The issue of Show Cause Notice dated 28.5.2009 indicates that the Department acknowledges that there was manufacture of Copper Ingots from copper scrap, as once the Department accepts that VKM were clearing copper keeth, the Department cannot take the stand that there was no manufacturing activity. 23. It is also seen that while the present Show Cause Notice dated 05.01.2010 alleges that during the period from December 2004 to November 2006 there was no manufacturing activity and on this basis seeks to recover the refund of ₹ 42,37,24,491/- from the appellant, for subsequent months, that is, for the period from December 2006 to August 2008, the Department has sanctioned the refund by different orders and for that period to Show Cause Notice has been issued. We are of the view, that Department cannot take contradictory stand for the per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Similar law has also been laid down in two recent judgements by this Tribunal under Notification No. 56/02-CE which are as under:- I. First order No. 62271-62272/2018 dated 19.3.2018 in the case of M/S Krishna Rasayan Exports (P) Ltd. II. Final order No. 62192-62193/2018 dated 20.3.2018 in the case of M/S Bharat Box Factory Ltd. In view of the above, we hold that VKM did not contravene the provisions of Notification No. 56/02-CE, as held by the Commissioner. They were also correctly granted the benefit of the said Notification No. 56/02-CE hence question of recovery of duty under provise to Section 11A does not arise. Consequently the confirmation of duty demand and imposition of penalty upon VKM is required to be set aside. 26. The Commissioner has also imposed penalties upon other appellants under Rule 26 of Central Excise Rules. This penalty has been imposed mainly on the ground that these appellants colluded with VKM in helping them either in issuing the bogus invoices, or issuing bogus GRs or actively conniving with VKM in the availment of erroneous refund under Notification No. 56/02-CE. Since we have already held that VKM had duly received copper scrap in their ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en disputed by the department. There is neither any allegation nor any finding that all the manufacturers procured the copper ingots from any alternate source. 4.1 That Sh K.K Anand ld Advocate who appeared in Appeal No E/57750 57751/2013 in the case of M/S Ganpati Rollings(P) Ltd stated that apart from denial of cenvat credit on copper ingots which were received from VKM another issue of confirmation of duty demand on higher consumption of electricity is also involved in the appeal filed by M/S Ganpati Rollings(P) Ltd. This duty demand is for the period 2005-06 to 2007-08 on the ground that during some months the consumption of electricity for the production of 01 MT copper rods/strips was varying between 311.40 units to 382.30 units whereas during some months its consumption was raised to 935.34 units for producing 01 MT of finished goods. The department took 382.30 units of electricity for producing 01 MT of finished goods during the financial year 2005-06 and 311 units during the years 2006-07 and 2007-08. He pleaded that no enquiries were conducted with regard the reasons for variation in consumption of electricity. It is his contention that during investigations of their ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of such raw material raw material for clandestine manufacture of finished goods; iii. Manufacture of finished goods with reference to installed capacity, consumption of electricity, labour employed and payment made to them, packing material used, records of security officers, discrepancy in the stock of raw materials and final products; iv. Clandestine removal of goods with reference to entry of vehicle/truck in the factory premises, loading of goods therein, security gate records, transporters documents, such as L.Rs, statements of lorry drivers, entries at different check posts, forms of the Commercial Tax Department and the receipt by the consignees v. Amount received from the consignees, statement of the consignees, receipt of sale proceeds by the consignor and its disposal. The above judgment was upheld by the Hon ble Allahabad High Court and also by the Hon ble Supreme Court. 7.1 We observe that the duty demand on higher consumption could not be confirmed without first proving that the ingredients of para 22 of the judgement rendered in the case of RA Castings are fulfilled. We hold that in view of the above no case of clandestine removal of finished goods ha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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