2015 (11) TMI 1478 - AT - Central Excise

Waiver of pre deposit - area based exemption - Refund under notification no. 56/02-CE - The allegation against VKM is that during the period from December 2004 to November 2006, they did not manufacture any goods in their factory and only showed production in their records and thus have wrongly claimed the refund under notification no. 56/02-CE by the way of credit entries in PLA - Held that - 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 no Show Cause Notice has been issued. We are of the prima facie view, that Department cannot take contradictory stand for the period from December 2009 to November 2006 and for period from December 2006 to August 2008 when the machinery installed and the staff employed was the same. Even if statement of Sh. Atul Sharma, Manager of the Ahmadabad Branch of M/s Single Road Carriers, Delhi is believed, it would prove only the non transport of copper ingots of VKM from Delhi to Gujarat. By itself, this statement cannot lead to inference that there was no manufacture of copper ingots by Jammu unit of VKM and there was no transportation of copper ingots from Jammu to Delhi. - The allegation against VKM is showing bogus receipt of copper scrap and bogus manufacture and clearances of copper ingots without manufacturing and clearing any goods. This is the allegation which has been upheld against VKM in the impugned order. If this is so, there would be no duty liability against VKM and since VKM have paid the duty and have taken its refund under notification no. 56/02-CE, it amounts to non-payment of duty. Hence, in our prima facie view, there cannot be any fault recovery of duty from there as refund under notification no. 56/02-CE given to VKM is of the duty which was paid by them, while the same were not required to be paid. The real allegation against VKM would be the issue of bogus invoices of copper ingots and thereby enabling his customers to avail wrong Cenvat Credit, but neither the SCN sought imposition of penalty on VKM on this count nor the Commissioner has imposed penalty on VKM on this ground. - appellant have prima facie case in their favour. Therefore, the requirement of pre-deposit of duty demand, interest and penalty by VKM and the requirement of pre-deposit of penalty by Shri Shankar Lal Gupta, Authorized Signatory of VKM, Shri DK Jain of M/s Vikash Traders and the transporter KKR is, waived for hearing of their appeals and recovery thereof is stayed - Stay granted.

Summary

Issues Involved:
1. Allegation of non-manufacture and fraudulent claims by VKM.
2. Non-existence and non-traceability of copper scrap suppliers.
3. Alleged bogus invoices and transportation records.
4. Statements and retractions by key witnesses.
5. Evidence of transactions and financial links.
6. Allegations of misuse of exemption notification No. 56/02-CE.
7. Penalty imposition on various parties under different sections and rules.

Issue-wise Detailed Analysis:

1. Allegation of Non-Manufacture and Fraudulent Claims by VKM:
The Department alleged that VKM did not manufacture any copper ingots from December 2004 to November 2006 and fraudulently claimed refunds under Notification No. 56/02-CE. The Show Cause Notice sought recovery of Rs. 42,37,24,491/- along with interest and penalties. The evidence included statements from suppliers, non-existence of suppliers, and lack of manufacturing activity at VKM's premises. However, the Tribunal found that the statements of suppliers, particularly Shri DK Jain, were inconsistent and unreliable. The presence of machinery, purchase of Light Diesel Oil (LDO), and records of toll tax exemption suggested some level of manufacturing activity.

2. Non-Existence and Non-Traceability of Copper Scrap Suppliers:
Several suppliers, including M/s Bhartiya Trade Linkers and M/s Krishna Traders, were found non-existent. The Tribunal noted that despite the suppliers being non-traceable, the transport records and toll tax exemptions indicated the movement of goods. The statements of Shri DK Jain were not corroborated by independent evidence, making the Department's allegations less credible.

3. Alleged Bogus Invoices and Transportation Records:
The Department claimed that VKM issued bogus invoices and that transporters did not transport the scrap. The Tribunal found that the transporters UGTCPL and KKR had confirmed transporting goods, and entries at check posts supported the movement of consignments. The Tribunal also noted discrepancies in the Department's investigation, such as not linking VKM with the alleged financial entities involved in the transactions.

4. Statements and Retractions by Key Witnesses:
Key witnesses, including Shri DK Jain and Shri Shankar Lal Gupta, provided conflicting statements. Shri DK Jain retracted his statements multiple times, and Shri Shankar Lal Gupta's statements were inconsistent. The Tribunal held that due to the frequent changes in statements, they could not be relied upon without corroboration.

5. Evidence of Transactions and Financial Links:
The Department alleged that VKM's payments to suppliers were funneled through various accounts, eventually linking back to VKM. However, the Tribunal found no conclusive evidence linking VKM to the financial entities (M/s Garima International, M/s Agarwal Sales Corporation) involved. The Tribunal emphasized the lack of investigation into the actual control of these entities by VKM.

6. Allegations of Misuse of Exemption Notification No. 56/02-CE:
The Department alleged misuse of the exemption notification by VKM. The Tribunal noted that VKM had applied for and received toll tax exemptions, which required verification of manufacturing activity. The Tribunal found that the Department's own actions, such as issuing a Show Cause Notice for copper keeth, contradicted the allegations of non-manufacture.

7. Penalty Imposition on Various Parties:
The Commissioner imposed penalties on VKM, Shri Shankar Lal Gupta, Shri DK Jain, and KKR under various sections and rules. The Tribunal found that the evidence did not support the imposition of penalties, particularly given the inconsistencies and lack of corroboration in the Department's case. The Tribunal waived the requirement for pre-deposit of penalties, citing a strong prima facie case in favor of the appellants.

Conclusion:
The Tribunal concluded that the evidence presented by the Department was insufficient to establish the allegations of non-manufacture and fraudulent claims by VKM. The Tribunal highlighted significant gaps in the investigation and inconsistencies in witness statements. Consequently, the Tribunal waived the requirement for pre-deposit of duty demand, interest, and penalties, allowing the appeals to proceed without immediate financial burden on the appellants.