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TMI Blog2012 (10) TMI 549X X X X Extracts X X X X X X X X Extracts X X X X ..... 67/07 & 436-437/08 - M/125/12/EB/C-II/WZB/MUM/2011 - Dated:- 3-2-2012 - Ashok Jindal And Sahab Singh, JJ. Appellants Rep by: Shri V Sridharan, Adv., Shri Vishal Agrawal, Adv., Shri V S Sejpal, Adv., Shri S P Seth, Adv., Shri Ashok Kumar Singh, Adv. Respondent Rep by:Shri K M Mondal, Consultant Per: Ashok Jindal: These appeals are arising out of common issue, therefore, they are taken up together for disposal which were heard at length on 3 rd 4 th August, 2011. The period involved is 2000-04 in all cases except in M/s. Amar Ispat Pvt. Ltd., where the period involved is 2001-04. A chart showing demand of duty is as under:- Sr,. No Name of the Party Demand of duty on account of duplicate/ parallel invoices Demand of duty on account of dealers' invoices where vehicles were found to be non-transport vehicles as per RTO's Report No. of such invoices Demand of duty in respect of the remaining invoices issued by the dealers based on Ship Breaker's Invoices No. of such Invoices Total No. of Invoices 1. M /s. Bhagawati Steel Cast Ltd. Rs. 80 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g period and hence invoices issued by them were not genuine. 2.4 It, therefore, appeared that the dealers had issued only the sale invoices to the appellants for passing on the inadmissible Cenvat Credit and based on that the appellants had availed of the inadmissible Cenvat Credit without receiving the duty paid inputs physically in their factories and thus they had suppressed the fact of non-receipt of very Cenvatable inputs in their factories. 2.5 Based on the vehicle numbers found on the dealers' invoices, enquiries were made with R.T.O. authorities of Thane, Mumbai, Nashik, Jalgaon, Pune, Raigarh, Dhulia, etc. and as per the reports of the R.T.Os., quite a number of vehicles were found to be Tanker, Tipper, Trailer, Three Wheeler, Two Wheeler, Delivery Van, etc. which were incapable of transporting huge quantities of iron steel scraps. 2.6 In this connection, statements of some of the truck owners (whose truck Nos. were appearing on the dealers' invoices) were recorded by the investigation. In that, they had denied having transported any iron steel scraps from the dealers' premises to the premises to the premises of the appellants. 2.7 In the case of M/s. Amar Ispa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ashik and one Show cause notice issued to M/s. Amar Ispat Pvt. Ltd. was adjudicated upon by the Commissioner of Central Excise, Thane-I confirming the demand of duties along with interest and imposing penalties under the various provisions of the Cenvat Credit Rules read with provisions of the Central Excise Act. Hence the appeals. 3. Shri. V. Sridharan, learned Advocate appeared for the appellant M/s. Bhagwati Steelcast Ltd. and submitted as under:- There is categorical finding of Commissioner that scrap was indeed received by the appellants from Simandhar. 4. The charge of the Commissioner is that the Appellants have not received those goods which are mentioned in the cenvatable invoices issued by M/s. Simandhar. The Appellants submit that this allegation is baseless perverse. In any case, the Appellants are not privy to fraud, if any, committed by M/s. Simandhar hence proceedings against the Appellants need to be dropped. The demand is not sustainable 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. 5. The reliance placed by the Commissioner on RG-23 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be ruled out. The findings of the ld. Commissioner on this aspect are not sustainable. 6.5 Second, for the so called parallel invoices issued by M/s. Simandhar, the aggregate quantity of its source material is sum-total of quantities of the so-called parallel invoices. In other words, suppose the source invoice "X" for the scrap is say 25 MT and say M/.s. Simandhar has issued "Y" invoice to the appellants for say 13 MT. In such a situation, M/s. Simandhar has issued another invoice having same number i.e., "Y" to a different party for the balance quantity i.e., 12 MT only. It is not a case where M/s. Simandhar has issued invoices having same number for 25MT each to different parties. 6.6 The Revenue has also not come out any figures showing aggregate of the quantities mentioned in the source received and the aggregate of the quantities mentioned in the invoices issued by M.s. Simandhar. 6.7 The table below would clear the above point. S.No. In Annexure "D" to scn (2002-03) Invoices issued by Simandhar to the appellants Alleged paralled invoice issued by Simandhar to another party Total Qty in MT Qty (MT) mentioned in source invoic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 24.12.2004 issued by Deputy Commissioner (Preventive), Mumbai-III. To understand the scope of the letter dated 12.1.2005, it is very imperative to see a copy of the letter dated 24.12.2004. The appellants made written request vide letter dated 22.6.2005 that copy of the aforesaid letter dated 24.12.2004 must be provided to them to enable them to file their reply. It was therefore urged before the Commissioner that the appellants must be supplied with a copy of the letter dated 24.12.2004 referred to in Assistant Commissioner's letter dated 12.1.2005. Without supplying the appellants a copy of the letter dated 24.12.2004, it was submitted that the letter dated 12.1.2005 cannot be used against the appellants. The ld. Commissioner has not supplied the appellants a copy of the letter dated 24.12.2004 despite written and oral requests. Hence the indirect reliance placed on 12.1.2005 by the Commissioner to conclude that M/s. Simandhar has not received scrap from Alang (Gujarat) is not tenable in law. 7.3 It is submitted that letter dated 12.2.2004 issued by the Sales Tax officer, Bhilad Check Post also cannot be relied upon. This letter was issued pursuant to letter dated 11.2.20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, the burden to prove that the appellants did not receive the scrap lay on the department and such burden cannot be shifted to the appellants as held by the Tribunal in Basant Rubber Factory Vs. CCE - 2005(185) ELT 280 (T) which has been affirmed by Bombay High Court at 2011 (264) ELT 16 (Bom.). 8.4 Lastly, the transport charges were on dealers account and not on appellants account. Hence, the appellant keeping an account for transport payments, is out of question. The appellants produced details of payments made to M/s.Simandhar in the reply which was clearly overlooked by the Commissioner while passing the impugned Order-in-Original. Ship breaking scrap useable and indeed used. 9.1 The finding of the Commissioner that ship breaking scrap is not usable by the appellants is - apart from devoid of any evidence - beyond the show cause notice as well. 9.2 Besides, the Supreme Court in Tata Iron Steel Co. Ltd. Vs. CCE - 1995 (75) ELT 3 (SC) = (2002-TIOL-311-SC-CX) held that size of scrap is not determinative whether it is melting scrap or not. 9.3 Hence this portion of the order of the Commissioner is not sustainable. Demand based on assumptions and presumptions. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to arise any suspicion. 11.4 The following case laws held that denial of credit in genuine transactions is incorrect: (a) RS Industries Vs. CCE - 2003(153) ELT 114 (T) Approved by CCE Vs. RS Industries - 2008 (228) ELT 347 (Del.) (b) CCE Vs. Shakti Roll Cold Strips - 2007 (80) RLT 267 (T) Approved by CCE Vs. Shakti Roll Cold Strips - 2008 (87) RLT 793 (P H) (c) CCE Vs. Neepaz Steels - 2007 (213) ELT 100 (T) Approved by CCE Vs. Neepaz Steels - 2008 (230) ELT 218 (P H) (d) Rishabh Industries Vs. CCE - (2007-TIOL-1330-CESTAT-MUM) (e) Flex Engg. Vs. CCE - 2006 205) ELT 251 (T) Allegation of purchase price being more than the sale price for Simandhar is not sustainable. 12.1 The Commissioner has concluded that M/s.Simandhar has purchased the scrap at higher rate and sold the scrap at lower rate and that this was evident from the invoice. 12.2 The appellants submit that such an allegation was never put up in the show cause notice and hence it cannot be taken for the first time in the Order-in-Original. The appellants are not responsible for M/s.Simandhar purchasing at higher rate and selling at lower rate. Lastly, the scrap dealers purchase scrap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in a bonafide manner as a normal prudent businessman would do. 13.5 No part of the alleged violation, if any, can be attributed to the appellants. There has been no admission / statement from any officer of the appellants to the effect that inspite of being aware that the relevant scrap had not left Gujarat border or that the scrap received from M/s. Simandhar is scrap on which duty has not been paid, the appellants were availing credit. 13.6 The Appellants have taken reasonable steps as envisaged under law and hence denial of credit is not sustainable. (i) Transpek Industry Ltd. Vs. CCE - 2010(249) ELT 91 (T) (ii) CCE Vs. Prakash Industrial Corporation - 2009 (248) ELT 536 (T) 13.7 The appellants believed in the declarations made by M/s. Simandhar in their invoices. There was no reason for doubting that the scrap received by the appellants is not from and out of the scrap sold by first stage dealer referred to in the invoice issued by M/s.Simandhar. M/s.Simandhar, in their invoices, represented that the scrap being sold by them to the appellants is duty paid and also gave reference to first stage dealer. If M/s.Simandhar have mis-represented or made any mistake t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decision of Hon'ble Gujarat High Court settles the issue. 14.1 The assessee who was a manufacturer-exporter in CCE Vs. DP Singh - 2011 (270) ELT 321 (Guj.) had availed rebate claims on the ground that the suppliers to the input-manufacturers were non-existent entities hence there was no way in which the assessee could have claimed credit and consequential rebate. As per the department, the goods received by the assessee were no-duty paid and hence, rebate was inadmissible. 14.2 The Hon'ble High Court of Gujarat dismissed Revenue's contention by holding that the assessee was not party to the fraud and that the assessee had purchased the goods by paying duty to the vendor. It was further held that since the assessee had taken precautions as envisaged in Rule 9 (actually it should have been Rule 7) of the Central Excise Rules, 2002, denial of rebate was unsustainable. 14.3 The Appellants are also bonafide purchaser for value having no connection whatsoever with the fraud, if any, committed by M/s. Simandhar. The Appellants cannot be expected to check the authenticity of each every invoice. The department was in a position to prevent the fraud hence the department should b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellants. 15.7 Besides, the appellants gave details of various truck numbers where the appellants did not receive any scrap from those trucks. The statements of the truck owners also do not state the basis for saying that they did not supply the goods to the appellants. 15.8 Hence reliance on the statements of the truck owners is misplaced. 15.9 The Commissioner did not consider this submission at all. The Commissioner has acted in a perverse manner ignoring relevant material and relying on irrelevant material. 15.10. Lastly, the demand of Rs. 10 lakhs is on the higher side. Even if it is assumed for the sake of argument without admitting the same, the demand could have been more than Rs. 3 lakhs. There is no fraud or collusion by the appellants much less with an intention to evade payment of duty. Hence demand is barred by limitation. 16.1 Extended period has been invoked by alleging that the credit availed by the appellants is on account of fraud willfull mis-statement by the appellants who have suppressed the fact regarding non-receipt of cenvatable input material. 16.2 For the reasons submitted supra, the allegation that the appellants have not received ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conduct investigation. 16.6 In any case, the records of the appellants are periodically audited by the excise authorities. No case has ever been booked against the appellants for evasion of duty or irregularity in carrying out the activity of manufacture. 16.7 Further, the invoices alleged to be parallel in nature did not find place in another investigation being conducted by Mumbai-III Commissionerate. This itself shows that there is no consistency in stands taken by the department. 16.8 The appellants were always of the bonafide view that they were eligible for the credit. There is no suppression much less with an intention to evade payment of duty. 16.9 The following rulings also hold that demand is time barred when there is no collusion between purchaser seller and the purchaser is a bonafide purchaser for value. (i) Shabana Steel Vs.CCE - 2007(177)ELT 332(T) (ii) IDL Chemicals Vs.CCE - 1996(88)ELT 710(T) 16.10 In view of the above, the demand is barred by limitation. No penalty and interest is imposable on the appellants 17. The appellants have not willingly committed any action with an intention to evade payment of duty. The appellants have acted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e receiving goods from the said registered dealer since long years for which they have been paying by account payee cheques, there was not reason for them to believe that the goods received by them were not the same which were covered by the invoices. He further submitted that it is not the department's case that against the invoices issued on the appellant, no scrap has been received by the appellant in their factory. He further submitted that when the appellants were paying for the goods received by them, there is no question that the appellants would knowingly indulge in inadmissible Cenvat credit despite the fact of it having paid the value of the goods. 18.3 It is also submitted that the premises of the registered dealers were searched in the year 2001 and a panchnama was drawn thereafter, records have been summed and the department being aware that SSMIPL godown was very small wherein all scrap could not have been stored, despite this no action was taken. This fact was in the knowledge of the department, therefore, it cannot subsequently allege suppression and invoke the extended period on the premise that SSMIPL godown did not have space to store the entire scrap. It is se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot be relied upon. No investigation was made to ascertain where the said material was diverted if it had not reached Maharashtra. There was no dispute regarding sale of goods by the ship breakers and they have discharged their Central Excise duty liability. 18.5 With regard to invoices in respect of which there are other parallel entries in the RG 23D register are concerned, the stand of SSMIPL in the course of investigation that the same happened due to mistake in numbering. It is also not in dispute that the credit passed on by the registered dealer was not in excess of the credit availed by him in respect of the goods received by him. With regard to credit sought to be denied on the premises that on an investigation some of the transporters have stated that they did not transport the goods from the premises of the registered dealer to the appellants' factory and that in some cases, the RTO and the Sales Tax Authorities have stated that the vehicles in which the goods were said to have been transported were in fact incapable of transporting the said goods is concerned, it is submitted that the responsibility of arranging transport was that of the registered dealer; the fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osedly stated that some of the ship breaking firms such as M/s R.K.Steel Alloy Industries, Pipavav, M/s Ajay Alloys Castings Pvt. Ltd. and M/s Baldev Shipbreakers, Alang have closed their manufacturing activities and hence invoices issued by them are not valid. Appellant submits that out the four ship breaking firms mentioned in the letter only one has issued invoices to the appellants. Therefore, rest of the invoices are not related to appellant's case and are completely irrelevant to the facts of the case in hand. Further the said letter has not been relied upon in the appellant's case. (b) The decision of the Tribunal in the case of Rajeev Alloys Vs. CCE, Chandigarh [2009(236)ELt 124 (T)] which was maintained by the Hon'ble Punjab Haryana High Court as reported in 2009(247)ELT 27 based on the decision in the case of Viraj Alloys Ltd., [2004(177)ELT890]. In this case it was admitted factual position that responsibility of carrying the goods from the supplier's premises was that of M/s. Viraj Alloys. Further, M/s. Viraj Alloys have failed to produce any bills, vouchers evidencing payment of freight for carrying the materials from supplier's location to their factory. It is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CCE Vs. Afloat Textile (I) Pvt. Ltd., [2009(235) ELT 587 (SC)] cannot be relied upon inasmuch as the admitted factual position in that case was that the licence against which the goods were imported, were forged i.e. signature and the security seal of Foreign Trade Development Officers and the Joint Director General of Foreign Trade Development were forged and against such forged licence, goods were imported in respect of which the benefit of customs exemption was held to be inadmissible by the Hon'ble Supreme Court, on the premises that the licence was forged and consequently, non-est. The said decision was based on the principle of caveat emptor and holds that the buyer ought to have made enquiries regarding the genuineness of the licence and having failed to undertake such an enquiry, the buyer was responsible for the consequence of the same. It is submitted that this decision cannot be relied upon in the present case as undisputedly, the documents issued to the appellants were not forged and were genuinely issued. Appellant had taken due care as provided for in the Rules before availing credit. The Hon'ble Supreme Court's decision cannot be treated as a binding precedent as the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... han one customer. There is no ground nor any evidence to arrive at the conclusion that the invoices so issued to the appellants are fake. The duplication of invoice number was explained as technical error and there are no evidences to completely ignore the same. 20.1 On the other hand, Shri.K.M.Mondal, learned Special Counsel appeared on behalf of the Revenue and submitted as under:- (i) All the five appellants have availed of the Cenvat Credit of duty based on the invoices issued by the two dealers, namely, M/s. Simandhar Enterprises and M/s. Simandhar Steel Movers India Pvt. Ltd. (ii) All the invoices issued by the dealers to the appellants show the reference of invoices of ship-breakers at Alang, Bhavnagar, Gujarat thereby indicating the source of procurement of duty paid materials by the dealers from the shipbreakers. 20.2 He further submitted that the following evidences have been relied upon by the Department. At the further outset, it is submitted that the case of the Deptt. is based mainly on the following evidences: (i) Three letters of Gujarat Sales Tax Authorities, namely, (a) letter dtd. 12/2/2001 addressed to the Asstt. Commissioner of Central Exc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... three letters written to the Department by the Gujarat Sales Tax authorities stating that no vehicle carrying consignments of iron and steel scraps consigned to the two dealers crossed the Gujarat Border as per their records during the relevant period should be ignored. 20.3.1 It is submitted that no prejudice has been caused to the appellants by not supplying the copies of the Department's letters to the Gujarat Sales Tax authorities. From the contents of the letters of the Gujarat Sales Tax Authorities, it is quite apparent what information was sought for from them by the Department. Grievance of the appellants is, therefore, not genuine. In the instant case, copies of all the documents relied upon in the proceedings have been supplied to them. Therefore, principles of natural justice have not been violated. It is not necessary that copies of the documents simply referred to in the proceedings should also be given. In the case of Raletronics Ltd. V/s. Union of India - 1994 (71) ELT 26 (Kar), the Hon'ble Karnataka High Court has held that only copies of the documents relied upon in the Show cause notice should be furnished and not copies of all documents referred to therein. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lar benefit may not be allowed -depending on the attending facts in particular cases. In other words, cenvat /modvat credit can be allowed where there is actual transportation and receipt of goods by the manufacturer entitling them to take cenvat credit, but where there is no such proof of actual transportation and receipt, credit cannot be allowed. Surely, it would be too wide to suggest that all transactions made by M/s Adhunik Steels Limited involving M/s Neepaz Steels (India) and others were fictitious. Each of such transaction has to be considered as separate and independent. The appellant therefore cannot contend that in view of the judgement of the Punjab and Haryana High Court - which was rendered between the same parties in the context of seemingly similar transactions, taking modvat/ cenvat credit by the appellant in the present case too was legal and they cannot be asked to reverse the same and demand cannot be made against them. As a matter of fact, for this reason alone, the issue involved in the appeal being an issue of fact - resulting in inevitable consequence of allowing or disallowing cenvat credit - depending on the outcome of the issue, we proceed to consider on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... serial numbers. While the invoices issued to other parties are recorded in the RG-23D Register of the dealers, the invoices issued to the appellants bearing the same serial numbers are not recorded therein thereby indicating that the invoices issued to the appellants by the dealers are not genuine. 20.5.1 It is contended by the appellants that after 1/4/200, there is no requirement in law to maintain RG-23D Register. Therefore, the reliance placed by the Commissioner on RG-23D Register is without any basis. 20.5.2 It is submitted that even after 1/4/2000, Registerd Dealers are required to maintain RG-23D Register as is evident from the Board's Circular No. 536/32/2000-CX dated 30/6/2000. Para 12 of this Circular which is relevant for the present purposes is reproduced below:- "12. The previous RG-23D Register for Registered Dealers was specified by a notification issued under Rule 57GG, which rule has since been omitted. However, as this said Register is now required to be mai8ntained under Rule 52AA, it has been decided to re-introduce the same register, with minor modifications specifying the New ECC Number of the manufacturer and Import-Export Code Number of the Import ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have failed to show that they had received the very same duty paid goods which originated from the ship breaking units at Alang. 20.5.8 Ld. Counsel appearing for M/s. Jaiprakash Strips Ltd. relied upon the Tribunal's decision in the case of Transpek Industry Ltd. V/s. CCE, Vadodara reported in 2010(249) ELT 91 and submitted that an assessee buying goods from a registered dealer cannot be expected to examine whether the manufacturer who has sent the goods to the registered dealer has actually discharged his duty liability or not. This decision has no application to the facts of the present case. Firstly, in the Transpek Industry's case, the dealer's Invoice was genuine, whereas in the present case, the dealer's invoices are found to be fake and invalid. Secondly, in the present case, there is no dispute that the shipbreakers had cleared the scraps on payment of duty, whereas in the Transpek Industry's case, the main controversy was that the manufacturer who supplied the goods to the dealer did not discharge the duty liability. Ld. Counsel has also relied upon the Tribunal's decision in the case of Monarch Metals P. Ltd. Ors. V/s. CCE, Ahmedabad/Bhavnagar reported in 2009(95) RL ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Hon'ble Punjab Haryana High Court as reported in 2011(266)ELT 436 (P H). 20.5.10.2 It is contended by the appellants that they were bona fide purchasers and they were not aware that the dealers had committed the fraud. Therefore, the credit taken by them based on the invoices issued by the dealers cannot be denied. 20.5.10.3 It is submitted that once it is found that the documents based on which credit has been taken are fake and invalid, the assessees cannot take the credit. In the case of CC(Prev.) V/s. Aafloat Textiles (I) P. Ltd. - 2009(235) ELT 587 (S.C.), the Hon'ble Apex Court has held that once the document is found to be fake or forged, consequences will follow. Knowledge or no knowledge of the fraud on the part of the Department is immaterial. The buyer is expected to be cautious, because risk is his and not that of the seller. It has also been held by the Hon'ble Apex Court that where fraud is involved, that is sufficient to invoke the extended period of limitation. 20.6 Reports of the Gujarat Sales Tax Authorities vis- -vis the Dealer's Invoices : Vide three letters already referred to above, the Gujarat Sales Tax Authorities have reported that the v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the shipbreakers to the dealers. 20.7.4 In the case of M/s. Amar Ispat Ltd., while dealing with the 357 Invoices issued by the dealers, the Commissioner has recorded a finding to the effect that the invoices did not accompany the goods and the transport vehicles. The invoices were being sent separately to the assessee after a day or two for the purported removal and dispatch of the goods. Also no weighment slips accompanied the material and no gate register was maintained for recording inward movement of the goods and vehicles by the assessee. This clearly shows that the dealers issued only fraudulent invoices. 20.7.5 In this connection, it may be mentioned that the two dealers were also issued Show cause notices. However, they did not submit any reply nor did they participate in the adjudication proceedings. In fact Shri Hitesh Shah, Proprietor of M/s. Simandhar Enterprises and Director of M/s. Simandhar Steel Movers (India) Pvt Ltd. absconded with his family immediately after the investigation started. This clearly establishes that he had committed a fraud by issuing fraudulent invoices without dispatching the duty paid goods to the appellants. Otherwise, he would not hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ties on them and other individuals for their various acts of omissions and commissions. 21. Heard all the parties in detail at length. As the issue involved is common in all the appeals, therefore, all are being disposed of by a common order. 22. In nutshell, the demands have been confirmed on the ground that the inputs have been received by the appellants are not those inputs which have suffered duty at the end of the scrap manufacturers. To come to this finding, the department was of the view that there is a modus operandi in the trade that the scrap (manufactured by the ship-breakers), on which he Central Excise duty has been paid, have been diverted to some other places in Gujarat to the dealers/manufacturers, who do not require any duty paid invoices. Therefore, the duty paid invoices were issued in the name of M/s Simandhar, a dealer who issued invoices to the appellants as they are the units which were registered with the Central Excise and needs duty paid invoices. As the goods/scrap manufactured by the ship-breakers have been diverted to some other dealers and only invoices were moved and M/s Simandhar, a dealer of bazaar scrap has supplied the bazaar scrap along with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l parlance scrap' is normally understood as waste'. But it may be used for re-rolling or re-melting for bringing out raw material to be used for producing finished products. Under Entry 26AA what is exigible to duty is semi-finished steel including blooms, billets, slabs, sheet bars etc. Semi-finished may mean between raw material and finished products. But it cannot be described as scrap. A sub-standard bloom or billet is steel bloom or billet. But the scrap of billet or bloom would not be the same thing as semi-finished product. In the commercial sense, scrap and semi-finished products cannot be understood in the same sense. The attempt of the Department, therefore, to levy duty on scrap under Item 26AA was not correct. Melting scrap is defined as :- "Scrap which cannot be used for any other purposes but can be charged into furnace for melting should be classified as melting scrap". The Tribunal held that since the appellant did not dispute that the scrap produced by the appellant could be industrial scrap, the scrap produced by it could not be taken to be re-melting scrap. Item 26 purports to levy duty on re-melting scrap. The Tribunal having found that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t on the reliability of the letters issued by the Sales Tax Officer, Bhilad Check-post. 28. It is also alleged that the suppliers of the scrap like M/s R.K.Steel Alloy Industries, M/s Ajay Alloys Casting (P) Ltd., M/s Baldev Ship Breaking have closed their activity since long period, hence the invoices issued by them are not genuine. As no investigation has been made at the end of the authorities in Tipava/Alang at the end of the scrap manufacturers, therefore, the correctness of invoices issued by the suppliers cannot be doubled. 29. The another ground on which the credit was to be denied that some of the vehicles' number mentioned in the invoices, the vehicles are not capable to transport the goods. In defence, it is contended on behalf of the appellants that vehicles' number in the invoices may not be recorded properly, but there is no allegation that the inputs have not been received in their factory under the cover of the said invoices. In fact, in these cases, it is the responsibility of the scrap suppliers to arrange the vehicle and it is nowhere the case of the department that the scrap has not been received in the factory of the appellants. There may be human error in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ealers did not supply the goods but only supplied documents for which they earned 3% (approx.) commission. This being the factual position, credit was denied to the recipient of the goods. In the present case there is no such admission. Consequently, the said decision cannot be applied to the facts of the case in hand. Therefore, mere statement of the truck owners that they have not supplied the goods to the appellants without supporting evidence cannot be relied upon. 31. The another ground taken by the department is that M/s. Simandhar has issued invoices having same serial number to the appellants, which did not find any entry in RG-23D register maintained by M/s. Simandhar. We have examined the issue and the invoices. The invoices issued to the appellants bearing the entry number of RG-23D register. The allegation is that the credit has been taken on a parallel invoices. In fact, in these matters what has happened that M/s Simandhar has issued to parallel invoices bearing the same number. For example, the scarp manufacturer issued invoice No. 100 having the scarp of 500 MTs. Against the invoice, M/s Simadhar issued two invoices bearing same number, one to the appellants for 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as the case may be, the Superintendent of Central Excise within whose jurisdiction such manufacturer has his factory or the supplier has his place of business." 34. In this case, we find that M/s Simandhar has been supplied the scrap to the appellants from since long back and the invoices issued by M/s Simandhar are genuine one, therefore, it cannot be alleged that the appellants have not taken reasonable steps being the goods received by them. Moreover, in this matter, we observed that investigation against M/s Simandhar has been initiated in 2001 and Panchnama was drawn. Even, if the activities of M/s Simandhar were found to be doubted, why the activities of M/s Simandhar could have been allowed to continue till 2004. If the alert notices would have been issued in 2000 itself, then ineligible credit could have been stopped at that stage itself. 35. In the case of SRT Ltd. (supra) this Tribunal has observed that the assessee has taken credit based on the invoices issued by the dealer. Mistake, if any, is committed by the dealer in issuing invoice, the best course open to the department is to take action against such dealer. Since the assessee has not contravened any provision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r. This view finds supports from the judgment of the Tribunal in the case of C.C.E., Chandigarh v. M/s B.T. Steels cited above. 11. We have also perused the Board's Circular, which inter alia set out a procedure in respect of verification of payment of duty exceeding Rs. 10,000/-. In the instant case no such verification to prove the case against the appellants is brought out." 39. In the case of Shree Rolling Mills (supra), this Tribunal has held as under:- "6. I have heard the rival submissions. I note that in the instant case the appellants took credit on the strength of the transporter's copy issued by the registered dealer. I do not find any irregularity in taking credit by the appellants. If some irregularity has happened at the end of the registered dealer then the action should have been taken against the registered dealer and not against the appellants before me. I also find that the ratio of the judgment cited and relied upon by the Counsel of the appellant squarely covers the present case. In the circumstances all the five appeals are allowed ." 40. In the case of Century Laminating Co. (supra), this Tribunal has held as under:- "3. I have carefull ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s manufactured, which were cleared on payment of duty. The department has not been able to prove that any other alternative raw material was used in manufacture of final product and the RT-12 returns have been assessed finally by the Range Officer which contains all the documents including the invoices under dispute on the basis of which the Modvat credit has been availed and utilized and that payments for the purchase of the inputs have been made through cheque/demand draft. Therefore, the allegation that the goods have not been received by the appellants or the vehicles did not have the capacity to carry invoiced goods is not sustainable. 44. In this case, it is admitted that there is no shortage of inputs or final and it has not been proved by the department that for manufacturing the final product, some other goods have been brought by the appellants. Therefore, inferences has drawn that the appellants have received the goods against these invoices and have taken reasonable step as per Rule 7(2) of the Cenvat Credit Rules,2002 for availment of CENVAT Credit. The Board's Circular No. 766/82/03-CX dated 15.12.2003 clarified that on the issue of availment of credit by the user-m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dered the rival contentions of both sides including their written submissions. 3. The brief facts of the case have been clearly brought out in the proposed order made by the learned Member (Judicial). Hence, I am not repeating the same. 4. I find that the main issue to be decided is as to whether the appellant-assessees have correctly availed of the CENVAT credit of duty based on the invoices issued by two dealers, namely, (i) M/s. Simandhar Enterprises and (ii) M/s. Simandhar Steel Movers (India) Pvt. Ltd. 5. It is the common contention of all the appellants that they have received the scrap materials physically from the concerned dealers and have used the same in the manufacture of final products on which duty liability has been duly discharged. However, in the impugned orders, the Commissioner has denied the CENVAT Credit on the ground that the invoices issued by concerned dealers on the basis of which the appellant-assessees have availed of CENVAT Credit were not valid inasmuch as the scrap materials supplied against these invoices were not duty paid. 6. From the facts of the case as recorded in the impugned orders, I find that there is no dispute that in all the cases, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sales Tax Officer Bhilad Post in response to the department's letter dt. 11.2.2004 is doubtful. According to the learned Counsels for the appellant-assessees, it is just impossible that the Sales Tax department could furnish the required information within a day. 10. After giving due consideration to the aforesaid contentions, I find it difficult to accept the same. Firstly, copies of letters of Sales Tax authorities have been provided to all the appellant-assesses. The said letters simply give the information that as per their records during the relevant periods no vehicles carrying iron and steel consignments addressed to the concerned dealers has passed through this check post i.e. Bhilad Check Post. It is for the assesses to say whether the consignments had crossed the Bhilad Check Post or the same came through some other route. It is not necessary to see what letters were written by the department to the Gujarat Sales Tax Authorities. In view of this, I do not think much significance can be placed on the letters written by Department to the Gujarat Sales Tax Authorities and non-supply of copies of the same has affected their defence. I, therefore, do not agree with the conte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er of cases in respect of each of the assessees, vehicles said to have transported the goods from the dealers premises to the premises of the assessees were found to be non-transport vehicles such as Tankers, Trailer Delivery Van, Bus, Auto Rickshaw, Two Wheelers, Three Wheelers etc. which were not capable of transporting huge quantities of iron and steel scraps. The Department has also relied upon statements of drivers and owners of the vehicles and in a number of cases they have denied having transported any goods from the premises of the dealers to the premises of assessees. Based on these evidences, the Commissioner has held that these evidences clearly establish that the assessees had availed CENVAT Credit without receiving the duty-paid materials physically in their factories. 13.1 During the hearing as also in the written submissions, it has been contended that the human error in mentioning the wrong vehicle numbers on a few invoices cannot be ruled out. It is claimed that the assessees have received the scraps physically and the same have been used by them in the manufacture of the final products on which duty was duly discharged. 13.2 I find that the Commissioner has c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uck owners indulged in malpractices and run them with false numbers is farfetched. In the appellants case 99 vehicles were such that they could not have carried the goods from the supplier to the buyer, some of the numbers belonged to auto-rickshaws, motorcycles and some numbers did not exist. The fact that out of the list of vehicles which were shown to be tankers, according to RTOs, Office, two vehicles turned out to be regular carriers of goods does not establish that the case of other vehicles also it was true. An exception cannot make a rule. Once it is established that the input has not been transported in the vehicle mentioned in the invoice it is but reasonable to say that the inputs were not received in the factory as required under Rule 57G". 13.4 I also find that in similar circumstances, another Division Bench of the Tribunal in the case of Ranjeev Alloys Limited Vs. Commissioner of Central Excise, Chandigarh reported in 2009 (236)E.L.T. 124 (Tri.-Del.) relied on the decision in the case of Viraj Alloys Ltd. Case. Paras 9 and 11 of the Division Bench which are relevant for the present purpose are reproduced below: 9. At the outset we may observe that the questio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hers were fictitious. Each of such transaction has to be considered as separate and independent. The appellant therefore cannot contend that in view of the judgment of the Punjab and Haryana High Court - which was rendered between the same parties in the context of seemingly similar transactions, taking Modvat/Cenvat credit by the appellant in the present case too was legal and they cannot be asked to reverse the same and demand cannot be made against them. As a matter of fact, for this reason alone, the issue involved in the appeal being an issue of fact - resulting in inevitable consequence of allowing or disallowing Cenvat credit - depending on the outcome of the issue, we proceed to consider on the merit of the case as an independent case notwithstanding favourable decisions in so called similar cases by Single Member Benches. As observed above, at the cost of repetition, if the vehicles in question were really light motor vehicles - incapable of carrying large quantities of steel and iron items, conclusion would be inevitable that there was no actual transportation or receipt of the goods and, therefore, the appellant could not have taken Cenvat credit on them - as held by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e register, with minor modifications specifying the New ECC Number of the manufacturer and Import-Export Code Number of the Importer. A copy of format of this RG-23D Register (Central Excise Series No.55-J) is also appended for information" 14.2 I find that during the relevant period, the dealers were required to maintain their records as per provisions of Rule 57AE(2)(b) of the Central Excise Rules, 1944 and Rule 7(3) of the CENVAT Credit Rules, 2002. Rule 7(3) of the CENVAT Credit Rules 2002 reads as under:- "3 The CENVAT Credit in respect of inputs or capital goods purchased from a first stage or second stage dealer shall be allowed only if such dealer has maintained records indicating the fact that the inputs or capital goods were supplied from the stock on which duty was paid by the producer of such inputs or capital goods and only an amount of such duty on pro rata basis bas been indicated in the invoice issued by him" Like wise, the manufacturer of final product shall also maintain proper records as per provisions of Rule 7(4) of the CENVAT Credit Rules 2002 which is reproduced below: "4 The manufacturer of final products shall maintain proper records for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... finding that though the ship-breakers invoices described the goods as iron and steel scrap, the same were actually re-rollable scrap which cannot be regarded as waste and scrap under heading 7204 of the Central Excise Tariff. The learned Counsels for M/s. Bhagvati Steel Cast conceded that the re-rollable scrap is also scrap fit for melting. In this connection, he relied upon the decision of the Supreme Court in the case of Tata Iron and Steel Co. Ltd. Vs. CCE 1995 (75) ELT 3 (S.C.). I observe that in the background of this case, it is not material to consider whether re-rollable scrap is melting scrap or not. What is material is whether the iron and steel scrap purportedly dispatched by ship-breakers under their invoices crossed the Gujarat Border. I have already held herein before that the appellants have not been able to prove the same. Therefore, the matter should rest there. 16. I also find that in the impugned order, the Commissioner has given a finding to the effect that while the dealers invoices show the price of iron and steel scrap varying from Rs. 6750/- to Rs. 7,500/- PMT, the original manufacturer's invoices show the price varying from Rs. 8,000/- to Rs. 10,500/- PMT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion. The learned Counsels for the appellants contended that the demand of duty is barred by limitation inasmuch as in the facts of the present case, the extended period of limitation under Section 11A(1) of the Central Excise Act, 1944 cannot be invoked. The assessees were not aware that the dealers had issued fraudulent invoices issued to them. They were bona fide purchasers of the goods. The receipt of the goods has been entered in RG-23A Part I II Register and that their monthly RT-12 returns including invoices were verified by the Jurisdictional Central Excise Officers without any objection. The learned Special Counsel for the Revenue counter the above contention. He said that the assessees were working under Self Assessment Scheme. The onus is therefore on them to certify the correctness of all the information furnished in the Returns. The investigation has successfully established that the dealers invoices were fake and invalid and the assessees have knowingly availed of the CENVAT Credit based on such invoices. He relied upon the decision of the Hon'ble Supreme Court in the case of Commissioner of Customs (Prev.) Vs. Aafloat Textiles (I) Pvt. Ltd. 2009 (235) ELT 587 (SC) h ..... X X X X Extracts X X X X X X X X Extracts X X X X
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