2017 (5) TMI 1373 - AT - Central Excise

CENVAT credit - diverted billets/slabs - penalty u/r 57AH(2) read with Section 173Q of CER, 1944 and Rule 13 to of CCR, 2001 - clandestine removal of billets - Held that - the inputs in questions were procured from SAIL and duty was paid. Both HML & MSL were independently entitled to purchase the inputs and avail credit on the same. There was no apparent gain for HML to purchase the input and avail credit and divert the said duty paid inputs to MSL. The Revenue failed to demonstrate any benefit accruing to HML or MSL, due to indulgence in such practices. Admittedly both the companies are under the same management and are closely held companies. Clandestine manufacture and removal of 7,651.817 MT of MS Strips - Held that - The basis for the demand raised appears illogical, as no apparent benefits is shown to have accrued to either of the appellants. The sending of goods on job work by M/s HML to M/s MSL was duly intimated to Revenue vide letter dated 02/01/2002. A confirmation letter dated 18/03/2002 was issued by Assistant Commissioner, to this fact (brought on record by appellants). Further appellants have led evidence that Mr. S. K. Tyagi had retracted his statement within a few days vide letters dated 17/04/2002 & 22/04/2002 addressed to the D. G. of DGCEI, New Delhi. The contention of Revenue that factory of M/s MSL was running for 7 more hours, than declared, is untenable, being based only on the basis of statements of some employee. The same does not stand in view of order dated 18/03/1998 passed by commissioner of Central Excise, Kanpur, determining the Annual Capacity of production at 17 MT per day. Further under the facts and circumstances, extended period of limitation is not invokable. The impugned order is also bad and unsustainable for non-compliance of the provisions of Section 9 D of the Act. The case of Revenue is not proved and the allegations are sham and illusory and Show Cause Notice is not maintainable - appeal allowed - decided in favor of assessee.

Summary

Issues Involved:
1. Admissibility of additional evidence and grounds.
2. Alleged diversion of duty-paid inputs and wrongful availment of Cenvat credit by M/s Hans Metal Limited (HML).
3. Alleged clandestine manufacture and clearance of goods by M/s Maitri Steels Ltd. (MSL).
4. Reliability of documents recovered during searches.
5. Penalties imposed on individuals and companies.

Issue-wise Detailed Analysis:

1. Admissibility of Additional Evidence and Grounds:
The Tribunal allowed the Miscellaneous Application for additional grounds and evidence, noting that some of the documents were already on record and others were obtained subsequently. The additional grounds arose from facts already on record.

2. Alleged Diversion of Duty-Paid Inputs and Wrongful Availment of Cenvat Credit by M/s Hans Metal Limited (HML):
The Revenue alleged that HML diverted duty-paid inputs (Billets & Blooms) to MSL without receiving them back after job work, and wrongfully availed Cenvat credit amounting to ?1,51,17,528/-. The Tribunal found that the case against HML was based on uncorroborated documents allegedly recovered from a wheat field and a rented room. The Tribunal noted that there was no apparent benefit for HML to divert duty-paid inputs to MSL, and the findings were illogical and unsupported by evidence.

3. Alleged Clandestine Manufacture and Clearance of Goods by M/s Maitri Steels Ltd. (MSL):
The Revenue claimed that MSL clandestinely manufactured and cleared 7,651.817 MT of MS Strips, resulting in a duty demand of ?1,56,70,921/-. The Tribunal found that the production figures of alleged clandestine manufacture exceeded MSL’s installed capacity and recorded production. The Tribunal also noted that no evidence of clandestine production and clearance was established, as no buyers were identified, and there was no investigation into the transportation of the alleged clandestine goods.

4. Reliability of Documents Recovered During Searches:
The Tribunal questioned the reliability of the documents recovered during the searches, noting that the documents were allegedly planted by certain employees (Mr. S.K. Tyagi and Mr. Zakir Ali) to mislead the Revenue. The Tribunal highlighted irregularities in the preparation of the Panchnama and the lack of cross-examination of key individuals. The Tribunal also noted that the documents were not maintained in the ordinary course of business and were uncorroborated.

5. Penalties Imposed on Individuals and Companies:
The Tribunal set aside the penalties imposed on individuals and companies, including the penalties on Shri Rajeev Kant, Shri Vijay Kant, Shri Rajesh Dheer, and others. The Tribunal found that the case against the appellants was not proved, and the allegations were sham and illusory.

Conclusion:
The Tribunal concluded that the case of Revenue was not proved, and the allegations were sham and illusory. The Tribunal set aside the impugned order, allowed the appeals, and directed that the appellants were entitled to consequential benefits in accordance with law. The Miscellaneous Application was also allowed.