2018 (1) TMI 260 - AT - Central Excise

Clandestine removal - Validity of second SCN - extended period of limitation - case of appellant is that the extended period of limitation is not invokable in subsequent proceedings when the earlier proceedings on same subject matter are decided/pending - 2 invoices on which purchase of raw material was allegedly made via the first stage dealer M/s.Shiv Shakti Steels - 24 invoices on which purchase of raw material was shown directly from M/s.HSAL. Held that - Had the appellant informed the DGCEI about availment of credit in complete details and come fully clear on 27.8.2008 itself, the same would have become part of the first show cause notice itself. Since it was deliberate suppression and positive act of mis-declaration by the Director of the NSPL, which was discovered after his second statement dt.23.12.2009, I find that the Department had no option but to issue second show cause notice. However, a different picture emerges with respect to 2 invoices pertaining to M/s. Shiv Shakti Steels. I find that the transactions, which have been made by M/s.HSAL through the dealer M/s.Shivshakti Steels, were in the knowledge of the Department when first show cause notice was issued on 2.12.2008. This is evident from the fact that the statement of Ashok Bansal, partner in M/s. Shiv Shakti Steels was recorded on 19.11.2008 wherein he was questioned about these invoices. Hence, these two invoices could not be included in second show cause notice - demand in respect of 2 SCN set aside. The new facts relating to 24 invoices came to the notice of the Department only after second statement of Shri Dinesh Goyal - While some part of the investigation, in both proceedings are undoubtedly common, but the suppressed information relating to 24 transactions directly with M/s.HSAL between 18.2.2006 and 7.6.2006 were not included in his categorical statement given by Shri Goyal on 27.8.2008 and deliberately withheld. Hence I hold that the department is justified in invoking the extended period for the second show cause notice in respect of 24 invoices - the demand in respect of 24 invoices issued by M/s.HSAL is sustained. Penalty on M/s.NSP Forging Pvt.Ltd. - Held that - since there was fraudulent availment of credit, suppression and mis-declaration, the penalty of equivalent amount to credit pertaining to 24 invoices referred hereinabove is thus sustained. Penalty on the Director under Rule 26(1) - Held that - it is evident that Shri Goyal has played a vital role in receipt of only invoices from M/s.HSAL to give appearance that the transactions were genuine. Besides, he did not disclose full information as required of him under law in his earlier statement 27.8.2008 and the details of 24 invoices in the show cause notice dt.23.2.2010 came to light in his statement dt.23.12.2009 - penalty on the Director is justified - however, quantum of penalty is excessive considering the duty evaded and the same is therefore reduced to ₹ 6 lakh. Appeal disposed off.

Summary

Issues Involved:
1. Legality of the second show cause notice based on the same investigation.
2. Validity of Cenvat credit availed on invoices from M/s. HSAL and M/s. Shiv Shakti Steels.
3. Imposition of penalty on the appellant company and its Director.

Detailed Analysis:

Issue 1: Legality of the Second Show Cause Notice
The appellant argued that the second show cause notice was based on the same investigation as the first, with no new facts. They cited judgments from the Supreme Court (Nizam Sugar Factory vs. CCE, AP and ECE Industries Ltd. vs. CCE, New Delhi) to support their claim that the extended period of limitation should not apply to subsequent proceedings on the same subject matter. However, the Tribunal found that the second show cause notice was justified because new facts regarding 24 invoices were discovered only after the second statement of Shri Dinesh Kumar Goyal on 23.12.2009. The Tribunal held that the department was correct in invoking the extended period for the second show cause notice for these 24 invoices but not for the 2 invoices from M/s. Shiv Shakti Steels, as these were already known to the department during the first show cause notice.

Issue 2: Validity of Cenvat Credit
The Tribunal examined two sets of invoices:
- 24 Invoices from M/s. HSAL: The Tribunal upheld the demand for ?10,84,303/- as these invoices were not known during the first investigation and were discovered later. The appellant’s Director admitted that the goods covered by these invoices were not manufactured by M/s. HSAL, and the credit was therefore fraudulent.
- 2 Invoices from M/s. Shiv Shakti Steels: The Tribunal found that these invoices were already known to the department during the first show cause notice, making the second show cause notice for these invoices unsustainable. Consequently, the demand for ?1,39,053/- related to these invoices was set aside.

Issue 3: Imposition of Penalty
- On the Appellant Company: The Tribunal upheld the penalty of ?10,84,303/- on the appellant company under Section 11AC of the Central Excise Act, 1944, read with Rule 15 of CCR, 2004, for fraudulent availment of credit on the 24 invoices from M/s. HSAL.
- On the Director: The Tribunal found that the Director played a vital role in the fraudulent transactions and upheld the imposition of penalty. However, considering the circumstances, the penalty was reduced from ?10,84,303/- to ?6,00,000/-.

Conclusion
The Tribunal concluded:
1. The demand of ?1,39,053/- related to the 2 invoices from M/s. Shiv Shakti Steels is set aside, along with interest and equivalent penalty.
2. The demand of ?10,84,303/- related to the 24 invoices from M/s. HSAL is upheld, along with interest.
3. The penalty of ?10,84,303/- on M/s. NSP Forgings Pvt. Ltd. is upheld.
4. The penalty on the Director is reduced to ?6,00,000/-.

The appeals were disposed of accordingly.