TMI Blog2024 (5) TMI 5X X X X Extracts X X X X X X X X Extracts X X X X ..... precautions were taken by them as per the provisions of Rule 9(5) of the Cenvat Credit Rules, 2004. It is evident that the appellant had taken all reasonable precautions as per legal provisions. Consequently, the penalties imposed on the appellants can also not be sustained. The impugned order is set aside - appeal allowed. - DR RACHNA GUPTA, MEMBER (JUDICIAL) AND MS. HEMAMBIKA R. PRIYA, MEMBER(TECHNICAL) Present for the Appellant : Shri A. K. Prasad, Advocate Present for the Respondent : Shri M K Chawda, Authorized Representative ORDER M/s. Rotocast Industries Ltd(hereinafter referred to as the appellant) has filed the present Excise Appeal No. 52365/2019 to assail the Order in Original dated 29.09.2018 which denied Cenvat credit of Rs. 1,97,53,930/- availed by it and ordered its recovery with interest and imposed an equal amount of penalty on it. Shri Sunil Kumar Melani, Director of the appellant has filed an Excise Appeal No. 52367/2019 to assail the penalty of Rs. 10,00,000/- imposed on him. 2. The brief facts are that the appellant during the relevant period were duly registered with central excise (now with GST) and engaged in the manufacture of steel granules and powder, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ., Dhanbad, ii) Supreme Multi-Trade Pvt Ltd., Dhanbad and iii) Singh Minerals Infratech, Dhanbad. Therefore, the allegation was that the manufacturers of M S waste and scrap but also the first stage dealers dealing in them, were all fictitious and that all transactions were paper transactions without movement of the accompanying duty paid goods. It has also been alleged that equivalent quantity of non duty paid scrap or bazaar scrap/kabadi was supplied in place of the duty paid waste and scrap. Accordingly, the show cause notice dated 02.12.2016 was issued to the appellant. 3.1. During the adjudication proceedings, the Appellants sought cross- examination of 28 persons which comprised 24 persons whose statements were relied upon as well as 4 DGCEI officers who were directly associated with investigations. The cross-examination of all the 28 persons was allowed by the adjudicating authority. However, except for 4 DGCEI officers (whose cross examination was conducted on 08/09-03-2018), none of the other 24 persons appeared despite three opportunities being provided by the adjudicating authority. The adjudicating authority passed the impugned order and confirmed the full demand along ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the goods mentioned therein. The goods were transported to the appellants' factory through vehicles accompanied by bilties/GR's, the details of which were entered in their records. The appellants took all reasonable precautions before taking credit, there is no responsibility cast on the appellant to verify whether the 1st stage dealers who supplied the goods to the 2nd stage dealers or the manufacturers who supplied scrap to the 1st stage dealers, were genuine or not. As per Rule 9(8) of the Cenvat Credit Rules, 2004, the 1st and 2nd stage dealers are required to file periodical returns which was done. It is not the case of the department that this was not done by the two 2nd stage dealers in question. 4.2 The learned counsel further submitted that Shri Sushil Malani, Director of the appellant company had clearly stated in answer to question no. 10 of his statement dated 19.09.2015 that they had taken all necessary precautions and had fully complied with the provisions of Rule 9(5) of the Cenvat Credit Rules, 2004. He further contended it is established law that statements of those witnesses cannot be relied upon if they have not been subjected to examination-in-chief by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s premises, the goods were once again weighed on the appellant s computerized weigh bridge and computerized weighment slips were generated. When the goods were received in the appellant s factory, GRN (Goods Receipt Note) was also generated. These details were duly entered in Part-1 of the RG-234 register of the Appellants and thereafter credit was taken in Part-II of the register. 4.5. The learned counsel further stated that as regards M/s. RMS Steel Tech Co., Raipur, the department's investigation revealed that the company had a genuine address though it was found closed at the time of the visit of the officers. In this regard, he further submitted that the invoices of the 2nd stage dealer in which details of this first stage dealer, is found relating to the period 18-12-2012 to 23-02-2015. He contended that the department has not been able to establish that this particular 1st stage dealer was not in existence during the relevant period. In any case, the 1 stage or 2nd stage dealer can send the goods directly to the buyer without first bringing it to his godown or office premises, which is a very common trade practice and is referred to as Bill to- Send to system. Further, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y involved in the activity of passing on ineligible Cenvat credit, he has not been made a noticee. 4.8 As regards transporters, the ld counsel submitted that no document was made RUDs to the show cause notice despite the investigations conducted with transporters. He further stated that paragraph 7 of the show cause notice lists 85 instances where the transport owners denied having supplied the goods claimed by the 1st stage dealers involved in the instant case. He pointed out that the chart reveals that none of the consignees/recipients were either the appellant or the two 2nd stage dealers from whom the appellant had procured the duty paid scrap. Hence, the investigations with the transporters has not led to any adverse conclusions against the appellant. On the issue of demand being time barred, learned Counsel submitted that there is no evidence to show that the appellant had either colluded with the suppliers or that they were aware of any irregularities on part of the suppliers. 5. The learned counsel submitted that there is no evidence to show that Shri Sushil Kumar Malani, Director, had knowingly abetted the availment and utilization of irregular Cenvat credit. He also submi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with statements admitting the fact of non-existent manufacturers, and 1st stage dealers as well as nonpayment of duty, the transaction shown by the 2nd stage dealer has no locus to establish their genuineness. In the circumstances, consideration of allowing Cenvat Credit to the beneficiary appellant would be an unjust enrichment to them and financial accommodation for the reason that no duty was paid to the Government on the subject goods at the end of the manufacturer. The learned Authorised Representative further submitted that to sustain a claim of Cenvat Credit on purchases, the purchasing dealer has to prove and establish the actual physical movement of the goods genuineness of transactions, by furnishing the details referred to above and mere production of tax invoices would not be sufficient to claim Cenvat credit. This view was taken by the Hon'ble Supreme Court in the case of The State of Karnataka v. M/s Ecom Gill Coffee Trading Private Limited reported in (2023) 4 Centax 223 (S.C.) wherein it was held that Input Tax Credit would be available to purchasing dealer only after the discharge burden to establish actual receipt of goods; mere production of invoice and paym ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... if the supplier fails to pay duty to the Government even after collecting from the buyer. He contended that Cenvat Credit is in the nature of a benefit/concession and not a statutory right, and therefore, the conditions for such availment of credit has to be scrupulously followed, failing which, no benefit can be conferred on the assessee. He relied on the Hon'ble Supreme Court in the case of ALD. Automotive Pvt. Ltd. v. The Commercial Tax Officer Ors. (Civil Appeal Nos. 10412-10413 of 2018)] reported in [2018 (364) E.L.T. 3 (S.C.)]. 6.3 The learned Authorised Representative submitted that as per the records, the invoices of 2nd stage dealer did not contain details of the manufacturer. In absence of these details, it cannot be said that recipient has discharged their statutory obligation. He also contended that it was evident that 1st stage dealers were non-existent and there was actually no transaction effected, except paper transactions. He further submitted that the appellant has not contested the non-existence of the 1st stage dealer and manufacturer. The only contention raised by the appellant is that they have paid duty, which the ld AR contended is not duty. The said 2n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Raipur decided by Final Order No. 50426- 50430/2019 dated 27.3.2019 passed in Excise Appeal No. 53371- 53373 of 2018, 53433/2018 and 53741/2018 (b) Fortune Metaliks Ltd. vs CCE Raipur decided in Final Order No. 51708-51709/2021 dated 6.8.2021 passed in Excise Appeal No. 51044-51045/2019 (c) Trishul Mehta Industries vs CGST in Final Order dated 27.12.2021 in Excise Appeal No. 52313/2019. In Ashok Sharma vs Commissioner of Central Excise, Raipur, the Tribunal held as follows:- 16. Having considered the rival contentions, we find that the Revenue is not disputing the fact that First Stage Dealers raised invoices giving all the particulars required to be given under the provisions of Cenvat Credit Rules in respect of material supplied to the assessee-Appellant. It is also not being disputed that the assessee-Appellant has received inputs and entered the same in their Central Excise records. The said inputs were further used by the assessee-Appellant in the manufacture of their final product which were cleared by them on payment of duty. This fact is sufficient to prove the physical entry of the inputs in the assessee- Appellant s premises. Further, the ledger account and RG-23A registe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... partment. It needs to be pointed out at this stage that duty is paid by the manufacturer and Cenvat credit can be taken on the strength of it. However, if some traders want to buy goods from the manufacturer and further sell and also pass the benefit of the Cenvat credit, they need to be registered with the Central Excise department. Cenvat credit can be taken only on invoices issued by those traders who are registered with the Central Excise department and not on the strength of invoices issued by any other trader. The registered dealers could be first stage dealers who buy goods from the manufacturers and further sell or second stage dealers who buy goods from first stage dealers and further sell. The traders‟ invoices issued by the first or second stage dealer also mention the invoice number of the original manufacturer who paid the duty. 23. Thus, registration of a trader by the Central Excise is one of great responsibility as Cenvat credit becomes available on the strength of the invoices issued by such traders and every rupee available as Cenvat credit is a rupee less of tax paid in cash. The case of the Revenue in this appeal is that the manufacturers and the traders d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssued over an year ago. In order to ensure natural justice, opportunities of personal hearing were extended to them but they did not appear on any of the dates scheduled for personal hearing to defend their case. It is observed that the Noticees did not intend to defend their case . The first stage dealers in dispute in this case are noticees no. 4 5 and the manufacturers are noticees no. 7,8 9 above. In the impugned order, however, no penalties have been imposed against them relying on some case laws. Thus, according to the impugned order, while these entities did not exist at all and for that reason, Cenvat credit is inadmissible on the basis of the second stage dealer s invoices issued on the basis of the invoices issued by these manufacturers and first stage dealers on the one hand, they did exist and had been served the SCN and notices of personal hearing but such opportunities were not availed. 27. Like the Schrodinger s cat which is both dead and alive, according to the Revenue, these firms both existed and did not exist. Their existence was presumed when they were registered and their existence was denied when their registrations were cancelled. In the SCN and the impugned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l and including when the impugned order was issued. We, therefore, find no grounds to deny Cenvat credit to the assessee. Consequently, the penalties imposed on Drolia and Choudhary also cannot be sustained. 30. In view of the above, the impugned order is set aside and all three appeals are allowed. 8. In the instant case, we note that the appellant had verified that the invoices issued by the 2nd stage dealers were as per the prescribed format under Rule 11 of the Central Excise Rules, 2002, and the said dealer was duly registered with the central excise authorities. The goods were transported in vehicles which had GRs/bilties. The record of the receipts and usage was maintained in the statutory records by the appellant. The payment was remitted through banking channels. Shri Sushil Malani, Director has in his statement stated that all necessary precautions were taken by them as per the provisions of Rule 9(5) of the Cenvat Credit Rules, 2004. It is evident that the appellant had taken all reasonable precautions as per legal provisions. Consequently, the penalties imposed on the appellants can also not be sustained. 9. In view of the discussions and the consistent stand taken by t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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