TMI Blog2020 (2) TMI 2X X X X Extracts X X X X X X X X Extracts X X X X ..... ification dated 18.08.2015 that the letter of closure should be issued by an officer equivalent to the adjudicating authority. Further, quantification of the demand can only be communicated to an assessee once an investigation gets completed. Further, as per CBEC clarifications, a letter of closure is required to be issued without a separate adjudication order. Thus, the said closure dated 29.07.2016 is equivalent to an adjudication order, for all practical purposes. Thus, even instructions dated 18.08.2015 of CBEC have also been circumvented by ADG, DGCEI by issuing the closure letter, instead of a show cause notice, there being non acceptance of the allegation of the Revenue by the appellant / assessee. The impugned letter of closure dated 29.07.2016 is bad and illegal and the same is accordingly set aside. The said closure letter is neither in the spirit of the CBEC‟s circular/ clarification dated 18.08.2015 and is evidently in violation of the provisions of Section 11 A(4) read with Section 11 AC (1)(d). Appeal allowed - decided in favor of appellant. - Excise Appeal No. 50118 of 2017 - FINAL ORDER NO. 50024/2020 - Dated:- 9-1-2020 - HON BLE MR. ANIL CHOUDHARY, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all family members. The entire cash of ₹ 44,67,500/- found at Vice Chairman‟s ( VC‟ for short) residences was seized. The CCTV at the residence of the VC was switched off by the officers for the reasons best known to them. The appellants states that Panchnama does not reflect the true incidents which took place. Although the explanation of the cash available at home was given by Mr. Rajeev, but the same was not taken on record to justify the seizure of the cash. Appellant have been coerced by DGCEI to make deposits during the investigation without issuing SCN and without addressing its legal rights as tax payer. DGCEI in order to harass the appellant -- (i) Searched the residential premises of senior office bearers of appellant such as VC‟s residence apart from searching factory premises. (ii) DGCEI officers apart from seizing business related documents also seized personal mobile phones of all family members and also the email id and password of all family members. (iii) Officers also seized entire cash of rupees 44,67,500/- available at VC‟s residence for their day to day expenses, which was having no connection with the case investigate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ST dated 18.08.2015. 6. The appellant by its letter dated 21.04.2016 addressed to the DGCEI sought some clarifications with respect to CBEC instructions dated 18.08.2015. The appellant received reply dated 25.04.2016 advising them to go through the CBEC instruction and the same to be read with the provisions of the Section 11 AC (1)(d) of the Act which are explicit. The appellants by their letter dated 23.05.2016 decided to opt for the settlement Scheme and intimated their offer to the DG(DGCEI) to pay/deposit the cenvat credit objected to by the Revenue, subject to complete closure of all the proceedings in the following words:- Considering the intentions of the CBEC and provisions/ directions as are contained in the above instructions, we with a view to overcoming investigating hassles, which are distracting our management from their most important duty of attending to the business and its growth and also without in any manner admitting of any wrong doing, fraud or suppression with knowledge at our end. In order to buy peace‟ and avoid devoting time, energy and financial recourses we are desirous of availing the same. Till date we have already deposited Rs. Seventy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f receipt of your letter dated 23.05.2016, in order to avail the benefit of CBEC Circular No. 137/46/2015- Service Tax dated 18.08.2015. (emphasis supplied) 8. The appellant being not in agreement with the letter dated 20.06.2016 of the DGCEI, did not comply with the same and lodging their disagreement/specifically asserted that they have physically received the inputs along with the invoices showing the payment of duty, issued by the suppliers. The said letter reads as follows:- Kindly refer to our letter dated 23.05.2016 vide which we offered to settle the issue in terms of CBEC reference F. No. 137/46/2015-Service tax dated 18.08.2015 subject to quantification of duty, interest and penalty and your letter dated 20.06.2016. As mentioned in our letter as above and also in our version given to the Department goods were duly received by us and cenvat credit was taken on the strength of documented invoices by us. However, as orally explained by the DGCEI, some discrepancies and irregularities had taken place at the end of the suppliers, for which the reversal of cenvat credit is sought by the Department from us. We, therefore, in order to purely avoid the earliest are read ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the Revenue. (emphasis supplied) 10. That by letter dated 22.07.2016 addressed to the Additional Director General, DGCEI, the appellants stated that as informed by DGCEI officers, while doing verification of the RG-23 A Part-II register for the amount deposited by us, as mentioned by their letter dated 20.07.2016, it has been orally informed that in addition to the quantification given by the Department on 20.06.2016, 4 more entries were observed, which were left in the quantification provided by the DGCEI vide its letter dated 20.06.2016. The total cenvat credit involved with respect to the receipt of the inputs, perfumery compound, from Kanpur Perfumers, amounting to ₹ 62,50,000/- towards supply of goods vide invoices dated 28/29.10.2015, the appellant agreed to pay this amount also by requesting to adjust this amount from the excess paid amount of ₹ 14,55,97,964/-, as mentioned in their earlier letter dated 20.07.2016. 11. Thereafter, the Joint Director (INT), DGCEI issued letter dated 29.07.2016, F.No.208/INT/DGCEI/HQ/2015, addressed jointly to the Commissioner, Noida-I, Central Excise Commissionerate, Noida and the Commissioner, Delhi-II, Central Excise Com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rhanpur, M.P.) during the period May, 2012 to 31.10.2015, was improper and in violation of Rules 3(1), 4 and 9 of the CENVAT Credit Rules, 2004, as only invoices were received only without physical receipt of goods/inputs. These Rules prescribe that CENVAT Credit is admissible only when inputs cleared from the factory of the input manufacturer are received in the factory of the manufacturer of the final products. 4. On being explained the scope of the DGCEI investigation and evidences unearthed, establishing availment of inadmissible CENVAT Credit, M/s.DSL, vide letter dated 23.05.2016, expressed their desire to avail the benefit contained in CBEC‟s Circular F.No.137/46/2015-Service Tax dated 18.08.2015, and requested for the computation of their duty, interest and penalty liability. 5. The computation for the period May, 2012 to 30.10.2015, showed that M/s. DSL Noida and Delhi had taken inadmissible CENVAT credit to the tune of ₹ 41,11,11,971/- and ₹ 54,89,71,686/- respectively on the basis of the invoices of the said 13 suppliers. The duty, interest and penalty liability in respect of both the units was communicated to them vide this office letter of even ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the basis of the invoices of 13 suppliers covered by DGCEI investigation, has been disallowed by debiting/reversing the said amount in their CENVAT credit account and the balance amount of ₹ 60,89,71,686/- has been paid by M/s.DSL, Noida/Okhla in cash. 9. As M/s.DSL have deposited the duty, interest and penalty @ 15%of the duty amount in respect of inadmissible CENVAT credit taken by them on the basis of the invoices of 13 supplies/manufacturers during the period May, 2012 to 30.10.2015, in terms of CBEC Circular No.137/46/2015-ST dated 18.08.2015, proceedings in respect of such Central Excise Duty, interest and penalty arising out of the investigation against the two units of M/s. Dharampal Satyapal Ltd. (Flavour Division) at C-11,12,13, Sector-67, Noida and at 98, Okhla Industrial Area, Phase-III, new Delhi by DGCEI, Hqrs., New Delhi, have been concluded without issue of show cause notice. It may, however, be noted that the scope of the DGCEI investigation is limited to the inadmissible CENVAT credit availed by M/s.DSL, on the strength of the invoices issued by the aforementioned 13 suppliers/manufacturers only. 10. Further, during the investigation, it has been found ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... never admitted any fraud and further requested for complete closure of all civil as well as criminal proceedings against the appellant as well as each and every person connected in the matter. However, Revenue by its letter dated 29.07.2017 communicated that the investigations in respect of the appellant with respect to cenvat credit from 13 suppliers has been concluded. According to the appellant, there is no closure of the dispute as the appellant has been insisting all throughout in their oral as well as written communication, that they have received the inputs on which the cenvat credit has been disputed, whereas the DGCEI having been insisting that the appellant has received only the cenvatable documents without receipt of the inputs. Thus, there being variance in the stand of the revenue and that of the appellant/ assessee, there is no settlement of the issue in terms of the Section 11AC (1)(d) read with CBEC instructions dated 18.08.2015. The appellant have further stated that the revenue till date has not returned all the seized case records, laptops, mobile phone etc., seized from them. 14. The appellant in this appeal has prayed for setting aside the aforementioned com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... preme Court in the case of State of West Bengal Vs. Mohd. Khalil (2004) 4 SCC 594, wherein it has been held that under Tax Laws, there cannot be deemed acceptance or presumption, without sanction of law. It is further urged that the amounts of deposit by an assessee during investigation can be appropriated, only on acceptance of allegation by the assessee in writing along with the quantification. Otherwise, show cause notice has to be issued containing the gist of allegations and after opportunity of hearing, there has to be adjudication under the scheme of the Act. Upon adjudication, if any demand is found payable then only, the deposit/pre-deposits can be adjusted/approrpriated. Under the facts of the present case, there is no acceptance of the allegations by the DGCEI, that the appellant has not received the goods. Thus, there is no conclusion of dispute as prescribed under Section 11 AC (1)(d) of the Act. 17. Ld. Counsel further urges that cases not involving fraud, suppression, etc., is covered under Section 11 A(1) of the Act, wherein show cause notice can be issued within the normal period (2 years). In such cases, the assessee on his own ascertainment or on being point ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the appellant has never given any waiver of its right to receive a written of show cause notice under Section 11 A(4), which covers a case involving fraud, suppression of facts, etc. Thus, it was imperative for the Department to issue a written show cause notice under Section 11 A(4) and thereafter to proceed in accordance with the law. 21. Ld. Counsel further urges that the CBEC‟ instructions /clarifications dated 18.08.2015 F.No.137/46/ST cannot override the provisions of the Act. Contrary to the provisions of Section 11A(4) read with Section 11AC (1)(d), Clause 2.3. of the CBEC Clarification dated 18.08.2015, provides as follows:- 2.3 If the ground on which, the Department feels that there has been short/non-payment of tax/ duty are intimated to the assessee orally with its quantification and the assessee indicates in writing that he has been informed about such ground and he accepts the ground and the quantification and he is waiving for the requirement of written show cause notice, then a written show cause notice need not be issued. 22. Ld. Counsel further states that the clarification issued by the Board following the ruling of the Apex Court in the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rties pre-judicially. That reliance is also placed on the following rulings:- (i) Asstt. Commr. Commercial Tax Department Vs. Shukla Brothers 2010 (254) ELT 6 (SC). (ii) Uma Nath Pandey Vs. State of U.P. 2009 (237) ELT 241 (SC) (iii) Manju Varma Vs. State of U.P. 2004 (178) ELT 64 (S.C). 24. Ld. Counsel further urges that the appellant can challenge the vires of law / circular/clarification before the Appellate Authority as a question of law, and there is no estoppel against law. It is a settled principle of law that one should not be allowed to turn back on facts, but a poor understanding of law at one point of time cannot prevent the person to plead the correct position of law subsequently. Even under the Contract Act, an agreement in restraint of the law is void ab initio. Further, urges that consent for an action or forbearance contrary to law is not a consent in the eyes of law. Thus, the impugned communication dated 29.07.2016 neither concludes the dispute between the appellant and the Revenue, nor is there any deemed closure under the provisions of Section 11 AC (1)(d) of the Act. Reliance is placed on the ruling of the Allahabad High Court in the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion, then there is more reason to set aside the impugned communication dated 29.07.2016. 27. It is further urged that even Clause 2.3 of the CBEC Instructions/Clarification dated 18.08.2015 requires satisfaction of following four conditions, as a pre-condition for non-issuance of written show cause notice. - Communication of precise grounds to assessee on which department seeks denial of credit (this may be done orally). - The communication by assessee in writing that he has been informed about such grounds. (Thus precise grounds though communicated orally, are reduced in writing and communicated back to department. Therefore, if there are communication gaps and department and assessee are not on same page, it shall be checked at this stage. By assessee, communication of grounds cannot be oral). - The assessee in writing accepts the grounds as well as the quantification which has been reduced in writing. (This eliminates the LIS between assessee and the department and thus nothing remains to be adjudicated. Grounds are already abundantly clear and reduced in writing and accepted by party and thus those grounds cannot be challenged by party at all). - After accepting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the appeal, ld. Authorised Representative for Revenue urges that the communication dated 29.07.2016 is not an appealable order. The appellant have approached this Tribunal against the impugned letter, which is not a decision or order passed by the Commissioner as an adjudicating or appellate authority. Further, the impugned letter is only an endorsement of intimation to the appellant of an Administrative Act under the Statute, and not a decision or order passed in adjudication. The impugned letter is in fact an intimation to the Jurisdictional /Field Commissioner in Noida-I and Delhi-II, regarding statutory closure of proceedings against the appellant in terms of Central Excise Act, read with instructions /clarification dated 18.08.2015. It is further urged that the proceedings under the impugned communication are deemed to be closed after verification of the certain acts, prescribed by the statute, is not appealable before this Tribunal. The Board‟s Circular /clarification dated 18.08.2015, provides that in case an assessee pays the tax, interest and the prescribed penalty, and makes a request in writing that written show cause notice may not be issued to him, then the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2016 and 8.8.2016. Further, request was made to return the seized documents/lap top and mobile phones, etc. Further, reliance is placed on the Ruling of a Coordinate Bench of this Tribunal in Titan Industries 2014 (307) ELT 884, wherein the issue was of maintainability of appeal against letter inviting the participation in E-auction of watches of Titan Brand, upon compliance of prescribed procedure. The said letter was issued with the approval of the Commissioner of Customs. The question for determination before the Tribunal was whether this letter of Asstt. Commissioner can be considered as an order, against which the appeal can be preferred before the Tribunal. 33. Having considered the rival submissions and grounds of appeal and the written submissions of both the parties, we find that the bone of contention between the appellant and the DGCEI is that the settlement is not in the proper legal spirit, neither it is out of free consent and have further exposed the appellant to adverse inference particulary under the other tax laws and also as a matter of business repute. The main allegation of the DGCEI against the appellant is that they have done only paper transactions fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .4.2011 and further, Section 11 AC has been substituted by Finance Act, 2015 w.e.f. 14.5.2015. There is clear distinction made by the Statute, as in Section 11 A (1), in the facts of normal case where there is no allegation of fraud, collusion, mis-statement, etc., the show cause notice can be issued within the normal period of limitation and if, prior to the issue of the show cause notice the appellant on being pointed out by the Central Excise officer or on his own, voluntarily deposited the tax and interest under intimation to the Department, then no show cause notice is required to be issued and the matter stands closed. Whereas under Section 11A(4), in cases involving fraud, collusion, mis-statement, etc., the show cause notice has to be compulsorily issued and there is no waiver from the issue of show cause notice, has not been waived under sub-section (2) of Section 11A, as in the case of normal situation. Further, in view of the condition precedent in Section 11AC(1)(d), for settlement or closure of dispute, a show cause notice was essentially to be issued and could not have been waived. Further, we find that the impugned letters/ order dated 29.07.2016, visits with grave c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e closure letter dated 29.07.2016. 36. Further, in the facts and circumstances, we find that the appellant and its director and its other personnel were subjected to undue influence and coercion by the DGCEI. One of the Directors was arrested (remanded in custody for many days) and DGCEI has been constantly calling its various officers to its office for recording of the statement and investigation, which was seriously affecting the normal business operation of the appellant. Further, the various records including computers, mobile phones of the key personnel of the appellants were also under seizure by the department. Thus, under such circumstances, the appellant was under pressure to opt for closure in order to purchase peace. The closure as specified in terms of Section 11AC(1)(d), is in the form of a binding contract between an assessee and the revenue. Free consent of the party is one of the basic requirement for a binding contract. The principle of law is no contract, for want free consent. Even clause 2.3 of the CBEC instructions /clarifications requires that the Revenue should convey the allegations and quantification to the assessee and the assessee upon understanding th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s adjudication order, by explaining the whole case in oral. Conducting hearing in oral and then deciding about closure, without a reasoned order, there being differences in understanding the grounds is not tenable. If such process is provided for by a circular of CBEC without specific authority of the statute, then it is bound to be bad in law. No circular can be in violation of the principles of natural justice and cannot deprive any person of any legal remedy available to him, the minimum that the circular should have provided is for a reasoned order while closing the case, in the event of difference in understanding the grounds or conditions. The Hon‟ble High Court found the closure letter in complete circumvention of the provisions of the law. 39. Further, we notice that even Section 124 of the Customs Act, which provides that at the instance of an assessee/party, the show cause notice can be oral, prescribes for passing of a reasoned order in accordance with law. Similar principles have been laid down by the Apex Court in the following decisions: (i) 2011 (273) ELT 345 (SC): Kranti Associates (P) Ltd. Vs. Masood Ahmed. (ii) 2010 (254) ELT 6 (SC): Asstt. Commissi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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