2012 (10) TMI 549 - AT - Central Excise

Duty paying document - Whether the appellants have correctly availed CENVAT credit of duty on the basis of invoices issued by the dealers - demand on the ground that the appellants have availed credit on the invoices issued by Simandhar which do not find mention in the RG-23D register maintained by Simandhar alleged that when the duty paid goods supplied by the ship breakers did not cross the Gujarat Border, the dealers at Bhiwandi/Mumbai could not have received the said duty paid goods physically and consequently they could not have delivered the same to the appellants There is a difference of opinion arose between the Members, therefore the matter is placed before the Hon ble Vice President/HOD for appointing a 3 rd Member to decide the issue - Whether the appellants have correctly availed CENVAT credit of duty on the basis of invoices issued by the dealers in the facts and circumstances of the case as held by the Member - Whether the demands are barred by limitation in the facts and circumstances or not.

Issues Involved:
1. Validity of CENVAT credit availed based on invoices issued by dealers.
2. Allegations of non-receipt of duty-paid inputs.
3. Reliance on letters from Sales Tax authorities.
4. Use of non-transport vehicles for transporting scrap.
5. Issuance of parallel/duplicate invoices.
6. Allegation of purchase price being higher than the sale price.
7. Compliance with Rule 7(2) of the CENVAT Credit Rules.
8. Limitation period for demand of duty.
9. Imposition of penalties and interest.

Detailed Analysis:

1. Validity of CENVAT Credit:
The appellants argued that they received the scrap materials physically from the dealers and used them in manufacturing final products, on which duty was duly discharged. The Commissioner, however, denied the CENVAT credit on the ground that the invoices issued by the dealers were not valid as the scrap materials supplied were not duty paid.

2. Allegations of Non-Receipt of Duty-Paid Inputs:
The Department relied on letters from Gujarat Sales Tax authorities indicating that no consignment of iron and steel scraps addressed to the dealers had crossed the Gujarat Border during the relevant period. The appellants contended that these letters could not be relied upon as they were not provided with copies of the letters written by the Department to the Sales Tax authorities. The Tribunal found that non-supply of these letters did not violate principles of natural justice since the letters from Sales Tax authorities were provided, and their content was clear.

3. Reliance on Letters from Sales Tax Authorities:
The Tribunal noted that the authenticity of the letter dated 12.02.2004 from the Sales Tax Officer, Bhilad Check Post, was doubted by the appellants. However, it was held that the Department could not have created evidence against the dealers and the authenticity of the letter could have been verified by the appellants.

4. Use of Non-Transport Vehicles:
The Department's investigation revealed that in many cases, the vehicles purported to transport the goods were non-transport vehicles, such as Tankers, Trailers, Delivery Vans, Buses, Auto Rickshaws, Motorcycles, etc. The Tribunal upheld the Commissioner's findings that it was not plausible for such vehicles to transport huge quantities of iron and steel scraps.

5. Issuance of Parallel/Duplicate Invoices:
The Department found that the dealers issued parallel invoices to various parties bearing the same serial numbers. The invoices issued to the appellants did not find any entry in the RG-23D Register maintained by the dealers. The Tribunal noted that the maintenance of RG-23D Register was required even after 01.04.2000 as per the Board's Circular No. 536/32/2000-CX dated 30.06.2000.

6. Allegation of Purchase Price Being Higher Than the Sale Price:
The Commissioner found that the dealers purchased the scrap at higher rates and sold it at lower rates to the appellants. The Tribunal observed that this ground was not taken in the show-cause notice and hence could not be sustained.

7. Compliance with Rule 7(2) of the CENVAT Credit Rules:
The Tribunal found that the appellants had taken all reasonable steps to ensure that the inputs received were duty paid, as required under Rule 7(2) of the CENVAT Credit Rules. The appellants had received the goods under proper duty-paying documents and had made payments through Letters of Credit and cheques.

8. Limitation Period for Demand of Duty:
The Tribunal held that the extended period of limitation was rightly invoked as the case involved fraudulent availment of CENVAT credit. The knowledge or awareness of the Department about the activities of the dealers was not relevant for invoking the extended period of limitation.

9. Imposition of Penalties and Interest:
The Tribunal upheld the imposition of penalties and interest on the appellants for intentionally availing inadmissible CENVAT credit on the strength of fake and invalid documents without physically receiving the duty-paid goods.

Conclusion:
The Tribunal was divided on the issue of whether the appellants correctly availed CENVAT credit based on the invoices issued by the dealers. The Member (Judicial) held that the appellants had correctly availed the CENVAT credit, while the Member (Technical) held that the appellants were not entitled to avail the CENVAT credit. The matter was placed before the Hon'ble Vice President/HOD for appointing a third Member to resolve the difference of opinion. The demands were not barred by limitation, and the imposition of penalties and interest was upheld.

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