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TMI Blog2013 (1) TMI 123X X X X Extracts X X X X X X X X Extracts X X X X ..... iled 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. Decision of 3rd member Vehicles were found to be non-transport vehicles as per RTO's report - Incapable of transporting huge quantities of iron and steel scrap, which was the input on which CENVAT credit of excise duty was taken - Appellants contended that the delivery in these cases were arranged by the dealers themselves and the freight was pre-paid - Discrepancy occurred due to entering of incorrect numbers of the transport vehicles by the dealer as admitted by the dealer – Held that:- Following the decision in case of RANJEEV ALLOYS LIMITED (2008 (9) TMI 223 - CESTAT NEW DELHI) that CENVAT credit involved in 306 invoices where the vehicles were found to be non-transport vehicles as per the RTO's reports and where the appellants have not been able to produce any reliable evidence with respect to the receipt of the goods in the factory, the appellant are not entitled for the CENVAT credit. In favour of revenue CENVAT credit on the basis of invoices i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cate invoices received from the dealers. In favour of revenue Extended period of limitation – Fraud – Collusion - Conspiracy to deprive the exchequer – Ineligible CENVAT Credit - Held that:- In such a situation, extended period of time is rightly invokable and, therefore, hold that the demand for CENVAT credit wrongly taken invoking the extended period of time is sustainable in law. In favour of revenue Therefore, the appellants are not eligible to avail CENVAT credit and that the extended period of time has been rightly invoked in demanding the same. - E/655-657,800,801,840-842,864-867/07 & 436-437/08 - A/687-700/2012-WZB/C-II(EB) - Dated:- 10-7-2012 - Ashok Jindal And Sahab Singh, P.R. Chandrasekharan, JJJ. 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 Appellants Rep by: Shri S P Sheth, V S Sejpal, Shri Gajendra Jain, Shri A K Singh, Advs. and Mr Nikhil Rungta, CA Respondent Rep by: Shri K M Mondal, Special Consultant Per: Ashok Jindal: These appeals are arising out of common issue, therefore, they are tak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0-2004 as per the reports of the Sales Tax Authorities of Gujarat vide their letters dtd. 12/2/2004, 24/5/2004 12/1/2005 respectively. It, therefore, appeared 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. 2.3 During the course of enquiry, the Superintendent of Central Excise, Alang vide his letters dtd. 5/2/04 15/4/04 had also informed, inter-alia, that some of the suppliers like M/s. R.K. Steel Alloy Industires, Pipavav, M/s. Ajay Alloys Castings Pvt. Ltd. M/s. Baldev Shipbreakers, Alang had closed their manufacturing activities since a long 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 input ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e erstwhile Central Excise Rules, 1944 and Rule 12 of the Cenvat Credit Rules, 2001/Rule 12 of the Cenvat Credit Rules, 2002 as applicable from time to time read with Section 11AB of the Central Excise Act, 1944. The notices also sought to impose penalty on others under Rule 209A of the erstwhile Central Excise Rules, 194 and Rule 13(1) of Cenvat Credit Rules,2001 Rule 13(1) of Cenvat Credit Rules, 2002 read with rule 26 of the Central Excise Rules, 2001 and Rule 26 of the Central Excise Rules, 2002 as applicable from time to time for their various acts of omission and commission for availing inadmissible Cenvat Credit without receipt of the duty paid inputs. 2.9 Four of the Show Cause notices were adjudicated upon by the Commissioner of Central Excise, Nashik 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t vehicle. The time of removal of goods is also not matching. 6.3 There are several possible explanations to the above factual situation. 6.4 Firstly, there may be some error by the concerned dealer in printing the serial number of the invoices issued by them. This was rightly explained to the department by Mr. Hitesh Shah, Director of M/s. Simandhar. However, the Commissioner without giving proper reasons has ignored the possibility of human error to hold that the invoices were not genuine. The records of M/s. Simandhar were computerized and one simple error in programming would recur resulting in the error being repeated over number of transactions. Hence, the possible error in programming of giving same invoice number for one source consignment cannot 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 su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6.8 Without prejudice to above, it is submitted that the appellants have not been provided with the copy of RG-23D register of M/s. Simandhar despite specific request being made by the Appellants. Without supplying the appellants the copy of RG-23D register of M/s. Simandhar, the allegation made that the invoices are parallel in nature is not sustainable. Letters issued by the sales tax authorities cannot be relied upon. 7.1 The show cause notice relies upon letter dated 12.1.2005 issued by Assistant Commissioner of Sales Tax, Bhilad Check post to allege that no consignment of scrap has been received physically at Bhiwandi, Mumbai and therefore there is no question of delivery of scrap to any person in Mumbai. 7.2 This letter is pursuant to letter 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 app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... troi details cannot be a basis either to demand duty or to deny credit. Hence the letters issued by sales tax / octroi authorities are not sufficient to deny credit. 7.9 The conclusion of the Commissioner that M/s. Simandhar had not received scrap from its suppliers in Alang is not supported by legally sustainable evidence. Hence the impugned Order-in-Original of the Commissioner is liable to be set aside. Voucher for transport payment not relevant 8.1 The Commissioner has held that the appellants did not produce vouchers for payments to transporters to prove that they received the scrap. 8.2 First this was not the charge in the show cause notice. It is well settled that any charge which is beyond show cause notice is not maintainable. 8.3 Secondly, 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 fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eceived the scrap under necessary duty paying documents containing all relevant information such as description of goods, manufacturers' name, assessable value, date of removal, duty paid, first stage dealers name and address, etc. Moreover, in majority of the cases, the Appellants made payments through Letters of Credit (LC) at the insistence of the supplier i.e., M/s. Simandhar. The reply would show that the appellants had enclosed copies of LCs and given details of all LCs opened in favour of the Bankers of the supplier namely M/s.Simandhar. These LCs were encashed by the supplier. Besides, the Appellants used to make payments through cheques. The invoices issued by the supplied were issued in the normal course of the business and there is nothing on record 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld establish that the supplier was in existence, had an account with Bank operating through those accounts. The LCs cheques were encashed and valuable consideration was passed on by the Appellants to M/s.Simandhar. This is enough to prove that the Appellants took "reasonable steps" as envisaged in the provisions. 13.3 Hence "reasonable steps" as envisaged by the Rules have been fulfilled by the appellants. It is humanly impossible to go beyond the invoice and take credit within reasonable period. The Lorry Receipts (LRs) accompanying the invoices prove that the goods were received by the Appellants. 13.4 There is absolutely no evidence on record to show that the appellants acted in connivance / collusion with M/s. Simandhar. The appellants always acted 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 av ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e bonafide assessee who are following the procedure under Central Excise Act read with rules made thereunder. During the period in question, the appellants had availed credit of Rs. 17,90,81,274 out of which credit availed on the purchase from M/s. Simandhar is Rs. 1,26,07,341 ie., 7%. The appellants are paying duty through PLA also. As and when the production increases, the payment of duty through PLA has also substantially increases. The appellants would have gained nothing in making themselves party to the fraud. There is no incentive to the appellants to commit such a fraud, if any. The appellants have actually received the goods in their factory which has been used by them in the manufacture of the final products. The dispute is no longer res integra. The 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 assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been granted by the Commissioner does not forward the case of the department, The truck owners did not produce any log book or any record based on which they state with certainty that they did not supply the goods to the appellants. The Tribunal in Utility Alloys Vs. CCE - 2005 (184) ELT 80 (T) held that demand cannot be confirmed against the Appellants based on statements of truck drivers without any corresponding log sheet to corroborate the statement. This judgment was affirmed by Kerala High Court at 2009 (236) ELT A19 (Ker.). 15.6 Further, the trucks are generally managed by agents and these agents pay fixed amount to the owners. In such cases, the truck owners would not be in position to state whether that particular truck did or did not carry scrap to 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 Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed raises question on the authenticity of such investigations. The earlier proceedings against M/s.Simandhar has already been adjudicated and the penalty has been imposed on M/s.simandhar for irregularities. Under such circumstances invoking extended period of limitation is unjustified and illegal. 16.5 The stand taken by the Commissioner in the impugned Order-in-Original that the Nashik Commissionerate has started investigation only in 2004, smacks of double standards. On one hand, the ld. Commissioner relies upon investigation by another Commissionerate to allege non-receipt of scrap by M/s.Simandhar. On the other hand, the Commissioner runs away from that very investigation when confronted with the fact that there was delay on Nashik Commissionerate's part to 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 sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irector was recorded on 30.08.2006, wherein it was categorically stated that for procuring melting scrap appellants used to place order telephonically with SSMIPL and received the melting scrap from them and accordingly payment thereof was made through cheques." He further submitted from the statements of the director of the appellant company it is clear that the appellant was not aware of the mischief being purported by SSMIPL and had availed credit against the goods which have been supplied by the said registered dealers against the valid duty paying documents for which consideration was duly paid by the appellant by A/c Payee Cheques. Therefore, extended period is not invokable against them. From the statement of Shri Sandeep Garg it is clear that appellants were 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... actum of sale of iron and steel scrap to SSIMPL is not disputed. While enquiry has been conducted with the vehicle owners in respect of 16 such vehicles, no statements of any drivers of the said vehicles have been recorded nor has any log book maintained by the transporters been examined. Further, the respondent has also not allowed for cross examination of the transporters and understood the basis on which the statements that goods were not transported. This being so, their statements are not reliable. With regard to RTO reports, a request was made to furnish it with the reference made by the Excise authorities, however the same was not furnished. In the absence a copy of the reference made by the Central Excise Authorities to the Sales Tax Authorities the report 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 inve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the present case, no investigation has been carried out to support this contention. Further, the difference in purchase price and selling price has also not been examined. The respondent has also not examined the aspect of a stock lot of iron and steel scrap being purchased by the registered dealer who in turn after segregating its quantity, sell the scrap at different prices. Further, no investigation has been carried out to establish that on an overall basis, the registered dealer was selling scrap at a loss vis- -vis the price at which it was purchased. 18.7 It is further stated that:- (a) The Ld. Special Counsel for the revenue had referred to letter dated 05.02.2004 and 15.04.2004, issued by the Superintendent, Central Excise, Alang where it is supposedly 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was other than duty paid material. The decision in the case of V.K.Enterprises Vs. CCE [2010(249) ELT 462] also cannot be relied upon as the admitted position in that case was that the recipient of goods had admitted non-receipt of goods and had reversed the irregular credit availed by it therein by approaching the settlement commission. In that case it was an admitted position that dealers 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. (d) The decision of the Hon'ble Supreme Court in the case of 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ealer i.e. Simandhar (Annexure-1 2 above) which clearly shows reference of RG-23D Entry No. and Pg. No. In other words the Central Excise Invoice so received by the appellants clearly shows the maintenance of RG-23D Register and it is their bonafide belief and claim that they are maintained. The appellants further submitted that the excise invoices shows maintenance of input stock register i.e. RG-23D by the registered dealer and the register so taken by the Excise Officers during investigation does not show the said entries, illustrates that there were separate RG-23D Register and it is difficult to allege that RG-23D Register so found by the Officers was correct and the other was fake. There is no finding that same inputs (from same invoices) are given to more than 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 ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e invoices issued by the ship-breakers were found to be of non-transport vehicles like Motorcycles, Tanker, Tourist Car, Delivery Van etc. (vii) Parallel/duplicate invoices having the same serial nos. issued by the dealers to the appellants do not find any entry in RG-23D Register maintained by the dealers. 20.3 Principles of natural justice: During the hearing, ld. Advocates for the appellants contended that the appellants had asked for copies of the letters written to the Gujarat Sales Tax authorities by the Department, but the same were not provided to them in violation of the principles of natural justice. It was, therefore, urged that since they were not provided with the copies of the Department's letters to the Gujarat sales Tax authorities, the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... howing wrong vehicle numbers. 20.4.2 The contention of the appellants that mentioning of wrong vehicle numbers may be due to human error is farfetched and the same cannot be accepted. Human error may be in one or two cases, but not in a large numbers of cases and that too, in respect of each of the appellants. 20.4.3 In this connection, reliance is placed on the Principal Bench decision in the case of Ranjeev Alloys Limited V/s. CCE Chandigarh - 2009 (236) ELT 124 (T). Para 11 of this decision which is very relevant is reproduced below for proper appreciation: "11 It goes without saying that in any series of transactions some may be genuine for which the benefits available in law may be allowed to the party, for other transactions in the same series, similar 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hown 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 .". 20.4.6 In view of the foregoing submissions, it is submitted that the Commissioners have rightly denied the inadmissible Cenvat Credit availed by the appellants. 20.5 Parallel Invoices: In a large number of cases, the investigation has found that during the material period the dealers had issued parallel invoices to various parties bearing the same 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. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nvalid invoices based on which the appellants have taken the inadmissible credits which have been rightly denied. 20.5.7 It is contended by the appellants that Explanation to sub-rule (2) of Rule 7 requires that the manufacturer or producer taking Cenvat Credit on inputs or capital goods received by him shall be deemed to have reasonable steps if he satisfies himself about the identity and address of the manufacturer of supplier issuing the invoice. In the present case, the identity and address of the supplier i.e. the dealer is not in doubt. Therefore, they have satisfied the requirement of Rule 7(2) of the Cenvat Credit Rules, 2002 and hence they have rightly taken the Cenvat Credit. Though the identity and address of the dealers is not in doubt, the appellants 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e scrap actually obtained by them was bazaar scrap. It was held that credit availed on the basis of dealers' invoices without actually receiving the duty paid inputs is not admissible. 20.5.10.1 In the case of V.K. Enterprises V/s. CCE, Panchkula reported in 2010 (249) ELT 462 (T), it was held by the Tribunal that dealers issuing Cenvatable Invoices without supplying the goods is a fraud committed on revenue. The documents issued by the dealers/manufactures without supply of duty paid goods are clearly invalid documents and no credit could have been passed on through such documents and no such credit should have been taken and used by the ultimate users. The ratio of this decision is clearly applicable to the case in hand. Further, this decision has been affirmed 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 b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... supplied by the shipbreakers at Alang did not cross the Gujarat Border, the two dealers in question could not have supplied the said material to the appellants under their invoices. 20.7.3 In this connection, it may be made clear that it is not the case of the Department that the appellants did not receive any materials for their manufacturing activities. The case of the Department as brought out in the Show cause notices and as found by the Commissioners is that the dealers did not supply the duty paid materials to the appellants, which they have claimed to have received from the shipbreakers. This is also very clear from the analysis of the dealer's invoices which show that the rates charged by the dealers to the appellants were much less than the rates charged 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 acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elevant date. The relevant dates are prescribed in Section 11A of the Central Excise Act, 1944. In this connection, reliance is placed on the judgment of the Gujarat High Court in the case of CCE, SUrat-I V/s. Neminath Fabrics Pvt. Ltd. - 2010 (256) ELT 369 (Guj.) Paras 16 to 20 of this judgment are relied upon in this regard. Since this is a case of fraudulent availment of Cenvat Credit, extended period of limitation has been rightly invoked and demands of duties have been correctly confirmed by the Commissioners along with interest. 20.9 Penalties Since the appellants have intentionally availed inadmissible Cenvat Credit on the strength of fake invalid documents without physically receiving the duty paid goods, the Commissioners have rightly imposed penalties 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scrap. In the case of Tata Iron Steel Co. Ltd. Vs. CCE- 1995 (75) ELT 3 (SC), the Hon'ble Apex Court has observed that re-rollable iron steel scrap which was used for melting purposes was classifiable as melting scrap. 24. Besides, the Supreme Court in Tata Iron Steel Co.Ltd. Vs. CCE - 1995 (75) ELT 3 (SC) held that size of scrap is not determinative whether it is melting scrap or not. The Supreme Court also held that even re-rollable material can be scrap. The relevant portion is reproduced below: "4. Although this letter is not relevant but it goes to demonstrate that size of the scrap is not determinative whether it was melting scrap or not. Scrap' according to dictionary means, a small piece cut or broken from something; fragment'. In commercial 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds. 27. It is contended on behalf of the appellants that the letters through which the references were made from the Sales Tax authorities by the department were not supplied to them, therefore, the letter of the Sales Tax authorities cannot be relied upon as the appellants are not known what references were made by the department to the Sales Tax authorities. It is also found on record that the reference was made on 11.2.2004 from Assistant Commissioner of Central Excise, Mulund Division, Mumbai and Sales Tax Officer, Bhilad Check-post replied the said letter on very next day on 12.2.2004. As the period involved is 2000-01 to 2003-04 and for such a heavy record, how the enquiries were made by the Sales Tax authorities and replied within one day that creates doubt 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of AIA Engg. Pvt. Ltd., (supra) is also irrelevant to the facts of the present case inasmuch as in that case, the manufacturing units had only received invoices from the dealers and had purchased bazaar scrap. In the instant case, there is no suggestion let alone any evidence to even suggest or prove that appellants had purchased bazaar scarp and that what was supplied to it was other than duty paid material. The decision in the case of V.K.Enterprises Vs. CCE [2010 (249) ELT 462] also cannot be relied upon as the admitted position in that case was that the recipient of goods had admitted non-receipt of goods and had reversed the irregular credit availed by it therein by approaching the settlement commission. In that case it was an admitted position that dealers 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 wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion, the same is reproduced herein as under:- "The appellant has to take all reasonable steps to ensure that inputs in respect of which he has taken the credit are the goods on which the appropriate duty of excise as indicated in the documents accompanying the goods, has been paid. To satisfy himself about the identity and address of the supplier, as the case may be, issuing the document specified in rule 7, evidencing the payment of excise duty or the additional duty of customs, as the case may be, either- (a) from his personal knowledge; or (b) on the strength of a certificate given by a person with whose handwriting or signature he is familiar, or (c) on the strength of a certificate issued to the manufacturer or the supplier, 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erefore, the demand, if any, of duty should have been raised against the registered dalers. There is no evidence on record to show except the statement of the employees of the appellant. The statement of the employees alone cannot be the sole evidence. There is no evidence to prove that the invoices on the strength of which Modvat credit was taken did not cover the goods actually received. The claim of the appellant was that in their stockyard there was sufficient scarp, which showed that the scrap was from M/s. MUL. 10. We note however that in the scrap market the scrap changes hands from place to place and from one dealer to the other. Thus it is not possible for the recipient of the scrap to verify whether the scrap was actually from one source to the other. 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 Mil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... strength of which the present appellants have availed the Modvat credit, the same cannot be denied to them. The appellants cannot be penalized for the fault of the dealer in which they had no role to play. 42. The cases which were relied upon by the learned Special Counsel for the Revenue, the case of AIA Engg. Pvt. Ltd. Vs. CCE, Ahmedabad-II-2006 (195) ELT154 (Tri) cannot be relied on the ground that in that case the credit was availed without receipt of any inputs in the factory. This is not the case at present before us. 43. In the case of CCE Vs. Shakti Roll Cold Strips Pvt. Ltd. - 2008(87)RLT 793(P H), the Hon'ble Punjab Haryana High Court has held that the inputs supplied by the respondent were duly received by the manufacturer and were used in the goods 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... umstances, if any fraud has been committed, the same has been committed by the supplier of the goods i.e. M/s Simandhar and the duty can be demanded from M/s Simandhar and not from the appellants. Therefore, the appellants cannot be faulted for the fraudulent action of M/s Simandhar. 47. In view of the aforesaid findings, without going into the issue of limitation, we hold that the appellants have succeeded on merits, therefore, we set aside the impugned order and allow the appeals with consequential relief, if any. Per: Sahab Singh: I have carefully gone through the proposed order made by the Learned Member (Judicial). However, I have different views on the issues. Hence I am recording this separate order. 2. I have perused the relevant records and considered 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, na ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Consequently, they could not have supplied the said materials to the appellant-assessees. According to the findings of the Commissioner, the dealers had purchased non-duty paid bazaar scrap locally and supplied the same to the appellant-assessees under their invoices in the guise of ship breaking scraps. 9. During the hearing as also in the written submissions it has been contended that the assessees had asked for copies of letters written to the Gujarat Sales Tax authorities by the department. However, copies of the same were not provided to them resulting in violation of principles of natural justice. Therefore, the Commissioner ought not to have relied upon the same. Further, it has also has been contended that the authenticity of the letter dt. 12.2.2004 of 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 ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s from the ship-breakers of Alang, Gujarat and consequently, they could not have supplied the said duty paid material to the assessees and instead they supplied non duty paid bazaar scraps procured locally and hence the assessees were not eligible for the CENVAT Credit have to be confirmed and I do so. 13. Apart from the above ground of denial of CENVAT Credit, there are other grounds on which the Commissioner has recorded his findings. One such ground is that the vehicles which had purportedly transported the goods from the dealers premises to the premises of the assessees were not capable of transporting heavy materials like iron and steel scraps. In this connection, the Department has relied upon reports of concerned R.T.O's according to which, in a large number 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ailed to do so. Their gate register was burnt in some fire accident and the bills/vouchers indicating payment of cash to the drivers/owners of the trucks were also, destroyed in fire. One could understand that bills/vouchers, getting destroyed in fire or lost. But one cannot understand as to what has happened to the ledgers and registers to which the transactions done in cash are ultimately transferred. It is not the appellant's case that even such ledger and registers were destroyed in the fire. The fact that the inputs in the form of ship-breaking scrap was entered in RG 23A, Part-I does not establish that the goods were received in the factory. At least two truck owners have categorically denied having transported any goods to the appellant. The plea that the truck 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the decision of the Division Bench in M/s. Viraj Alloys Limited (supra). 11. It goes without saying that in any series of transactions some may be genuine for which the benefits available in law may be allowed to the party, for other transactions in the same series, similar 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the dealers are fake and invalid. 14.1 The learned Counsels for the appellant-assessees contended that the requirement of maintenance of RG-23D Register has been dispensed w.e.f. 1.4.2000. However, the learned Special Counsel for the Revenue submitted that even after 1.4.2000, registered dealers are required to maintain RG-23D Register. In this connection, he cited the Board's Circular No.536/32/2000-CX dtd. 30.06.2000 and referred to para 12 of the said circular which reads as follows: "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 maintained 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 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) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the very same duty paid materials which originated from the ship-breaking units at Alang. Therefore, the Commissioner has rightly rejected their claim that the invoices issued by the dealers were valid and genuine. It is significant to note that during the investigation Shri Hitesh Shah, Proprietor of M/s. Simandhar Enterprises and Director of M/s. Simandhar Steel Movers (India) Pvt. Ltd. absconded along with his family as brought out by the investigation in the case of M/s. Amar Ispat Pvt. Ltd. If the transaction between the dealers and the assessees were genuine, he would not have absconded immediately after the investigation started. 15. With the above findings, a few more points need to be considered. In the impugned order, the Commissioner has recorded a 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ship-breakers. However, I find that in respect of other assessees, such as M/s. Amar Ispat Pvt. Ltd., the dealers had purportedly supplied their scrap received from the above ship-breakers also. In any case the fact remains that it has not been established by any tangible evidence that the goods supplied by the ship-breakers including above ship-breakers had crossed the Gujarat Border and the same were received by the dealers. It has, therefore, to be held that the dealers had supplied to the assessees locally procured bazaar scrap. 18. In view of my foregoing finding I hold that on merits, the appellants are not eligible for the CENVAT Credit and the Commissioner's orders are required to be upheld on this count. 19. Now it brings me to the question of limitation. 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 bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Opinion 21. Following difference of opinion is placed before the Hon'ble Vice President/HOD:- 1. 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 (Judicial). OR 2. Whether the appellants are not entitled to avail 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 (Technical) 3. Whether the demands are barred by limitation in the facts and circumstances or not. Per: P R Chandrasekharan: 22. This case was heard by me on 18/05/2012, 25/05/2012, 08/06/2012 and 15/06/2012. The difference opinion referred to me for decision is reproduced verbatim below: "Following difference of opinion is placed before the Hon'ble Vice President/HOD:- 1. 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 (Judicial). OR 2. Whether the appellants are not entitled to avail CENVAT credit of duty on the basis of invoice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it scheme and how the excise duty regime has been designed to carry out this objective. As is well known, the object and purpose of CENVAT credit is to relieve the cascading effect of taxes when the taxes are levied at various stages in the production/manufacturing chain. The input duty relief can be granted in three ways, namely, (1) invoice credit method, (2) subtraction method; and (3) addition method. These concepts have been lucidly explained in the e-book "Modern Vat" published by the International Monetary Fund, 2001 edition. Pages 19 to 20 of the said book deals with methods for determining VAT (Value Added Tax) liability. The relevant extracts are reproduced. "Methods for Determining VAT liability As noted, it is a key feature of VAT that tax is charged - in effect, if not in form, only on the difference between purchase and sales. There are three main ways in which this can be done Under the invoice credit' where each trader charges output tax at the specified rate on each sale and passes to the purchaser an invoice showing the amount of tax charged. The purchaser, is subject to VAT on his own sales, is in turn able to credit such payment of input ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rules stipulates that the invoices shall be serially numbered and shall contain registration number, address of the concerned Central Excise Division, name of the consignee, description, classification and date of removal, mode of transport and vehicle registration number, rate of duty, quantity and value of goods and the duty payable thereon. The proviso to the said rule provides the dispensation of the copies of the invoices i.e., original copy for the buyer, duplicate for the transport and triplicate for the assessee. Sub-rules (4) to (6) deal with certain procedural requirements relating to invoices and sub-rule (7) provides that the provisions of said Rule shall apply mutatis mutandis to goods supplied by a first stage dealer or a second stage dealer. Similar provisions were stipulated in the Central Excise Rules, 2001 and also the Central Excise Rules, 1944 to the same effect. 26.3. The CENVAT Credit Rules, 2004, deals with the procedure relating to availment of credit. As per Rule 3, a manufacturer or a producer of final products or a provider of taxable service shall be allowed to take credit (hereinafter referred to as CENVAT credit) of the duties specified therein paid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stage dealer, an additional condition is stipulated to the effect that the inputs or capital goods were supplied from the stock on which duty was paid by the producer of such goods and only an amount of such duty on pro rata basis has been indicated in the invoices issued by him. It is further stipulated that the burden of proof regarding admissibility to CENVAT credit shall lie upon the manufacturer taking such credit. Sub-rule (2) of Rule 7 of the CENVATY Credit Rules, 2001/2002 (as they stood at the relevant time) further stipulated that a manufacturer/producer taking CENVAT credit on inputs or capital goods shall take all reasonable steps to ensure that the inputs or capital goods in respect of which he has taken CENVAT credit are goods on which appropriate duty of excise as indicated in the document accompanying the goods has been paid and the manufacturer shall be deemed to have taken reasonable steps if he satisfies himself about the identity, name and address of the manufacturer/supplier issuing the document specified in the said Rule either from his personal knowledge or on the strength of a certificate given by a person with whose handwriting or signature he is familiar w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 27. The issues involved have been categorised into three by the hon'ble Member (Judicial) in para 1 of his order, namely, (1) demand of duty on account of duplicate/parallel invoices; (2) demand of duty on account of dealers' invoices where vehicles were found to be non-transport vehicles as per RTO's report; and (3) demand of duty in respect of invoices issued by dealers based on ship breakers' invoices. I propose to examine the issue based ont eh categories indicated above, though not in the same order. 27.1 I first take up the issue relating to admissibility of ENVAT credit in respect of dealers' invoices where vehicles were found to be non-transport vehicles as per RTO's report. The total number of invoices in respect of all the five appellant herein in 306 involving a total credit amount of Rs. 53,82,321/. The details in respect of each of the appellants are given in para 1 of Member (Judicial)'s order. The case of the department is that, in all these invoices, as per the reports of the Regional Transport authorities at Thane, Mumbai, Nasik,. Jalgaon, Pune, Raigad, Dhulia, etc., the vehicle numbers mentioned were found to be of tankers, tippers, trailers, three wheelers/ tw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are found to be untrue, the onus of proof shits to the appellant-assessees to show that they have received the goods covered by the document. The evidence that can be led by the assessees are the GRNs or the consignee's copy of the transport document. In the case before me, none of the appellants have been able to produce even a single copy of the GRN or the consignee copy even in respect of a single case. Further, it is on record that the appellants have not maintained any gate register or materials inward register which would show the entry of the transport vehicle in the factory premises of the receiver and receipt of the materials in their factory premises. In the absence of any such evidence, it cannot be concluded that the appellant-assessee has discharged the onus cast on them regarding the admissibility of the CENVAT credit. As per the provisions of sub-rule (4) of Rule 7 of the Cenvat Credit Rules, as they stood at the relevant time, the onus is on the manufacturer who avails credit to show that he is entitled for the credit. Inasmuch a s the appellant-assessees have not discharged this onus, it would be reasonable to conclude that the appellants are not eligible for or e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the CENVAT credit. 28. The next issue for consideration is regarding the demand in respect of invoices issued by dealers based on ship breakers' invoices. These invoices are 669 in number and the duty credit involved is approximately Rs. 1.02 crore. The case of the Revenues that the scarp has been procured from ship breakers in Alang/Bhavnagar in Gujarat by the first stage dealers, M/s. Simanhdar Enterprises (SE in short) and M/s. Simandhar Steel Movers (India) Pvt. Ltd (SSMIPL in short). Some of the ship breakers whose name figures in the invoices issued by the first stage dealers., from whom the ship breaking scrap was allegedly procured, namely, M/s. R.K. Steel Alloy Industries, Pipavav, M/s. Ajay Alloys Castings Pvt. Ltd. and M/s. Baldev Ship breakers, Alang had closed down their activities since a long time and hence the invoices said to have been issued by them are not genuine. This fact has been confirmed by the letter dated 05/02/2004 and 15/04/2004 issued by the Superintendent of Central Excise, Aland. Further, enquiries made with the transport of goods from Gujarat to Bhiwandi/Mumbai revealed that in some cases, the vehicles used for transportation were motorcycles, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o been argued that it is not the responsibility of the appellants to ascertain the source of scrap by the dealers and how it has been transported. So long as they have paid the consideration for the scrap received and paid the duty liability thereon, they are entitled for the CENVAT credit. It has also been argued that scrap could have been transported from Gujarat to Mumbai not only through Bhilad check-post but also through other check-posts and, therefore, the letters of the sales tax authorities at Bhilad does not conclusively establish that the scrap has not been received by the aforesaid dealers. Further, doubts have been expressed about the reliability of the records maintained by the sales tax authorities at Bhilad check post. It has also been argued that the appellants can not be asked to prove the impossible about the movement of scrap from Gujarat to Mumbai. It has also been contended that there has been denial of principles of natural justice in as much as the department has not furnished a copy of the letter written by them to the Sales Tax Authorities in Gujarat and they have reserved the right to cross-examine the Sales Tax Authorities once the copy of the letter wri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dealers are not the same as what has been received by the dealers form the ship breakers. This conclusion is further corroborated/strengthened by the reports of the Transport Authorities in Gujarat wherein it was found that some of the vehicles said to have been used for transportation were two-wheelers, three-wheelers, etc. which is incapable of transporting steel scrap. Again in a few cases, statements of the transporters (Owners of vehicles which figure in the invoices) were recorded and they have denied transporting any scrap from Gujarat to the dealers in Mumbai/Bhiwandi. These facts have been further corroborated by the letters issued by the check-post and sales tax enforcement authorities in Gujarat which categorically state that no vehicle carrying scrap from the ship breakers to the two dealers in Mumbai have crossed the commonly used check post at Bhilad during the impugned period. Thus, it is not one single piece of evidences that have been brought out by the Revenue which corroborate and strengthen each other and which substantiate the fact that from the documents available on record, the scrap claimed to have been received by the appellants are not the same as those s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opinion, the principles of natural justice do not require that in matters like this the persons who have given information should be examined in the presence of the appellant or should be allowed to be cross-examined by them on the statements made before the Customs Authorities". The same reasoning applies to the facts of the present case. Therefore, I do not find any merits in this argument adduced by the appellants and reject the same. 28.3 As regards the case laws relating to Transpek Industry Ltd. and Monarch Metals Pvt. Ltd, cited supra, the facts of those cases are different and distinguishable. In Transpek Industry Ltd.'s case, the issued related to purchase of capital goods by the appellant therein from a registered dealer on payment of duty. In that case there was no dispute about the goods supplied by the dealer and receipt of the same by the assessee. In that context it was held that the assessee buying goods from a registered dealer cannot be expected to examine as to whether the credit availed by such dealer is in accordance with law or not. In the other case pertaining to Monarch Metals Pvt. Ltd. it was held that transporters' incriminating statements being in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to the existence of a fact is raised against the assessee that the input has not been transported in the vehicle mentioned in the invoices, it is reasonable to say that the inputs were not received in the factory. In the case of R.V.E. Venkatachala Gounder vs. Arulmigu Viswesaraswami V.p. (order dated 08/10/2003 in Civil Appeal No.10585 of 1996) the hon'ble apex Court held as follows: " Whether a civil or a criminal case, the anvil for testing of proved', disproved' and not proved', as defined in Section 3 of the Indian Evidence Act, 1872 is one and the same. A fact is said to be proved' when, if considering the matters before it, the Court either believes it to exist, or considers its existence so probable that a prudent man ought, under the circumstances of a particular case, to act upon the supposition that it exists. It is the evaluation of the result drawn by applicability of the rule, which makes the difference. "The probative effects of evidence in civil and criminal cases are not however always the same and it has been laid down that a fact may be regarded as proved for purposes of a civil suit, though the evidence may not be considered sufficient for a convic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bstitute in this work-a-day world. The law does not require the prosecution to prove the impossible. All that it requires is the establishment of such a degree of probability that a prudent man may, on its basis, believe in the existence of the fact in issue. Thus, legal proof is not necessarily perfect proof; often it is nothing more than a prudent man's estimate as to the probabilities of the case. The other; cardinal principle having an important bearing on the incidence of burden of proof is that sufficiency and weight of the evidence is to be considered - to use the words of Lord Mansfield in Batch v. Archer (1) "according to the proof which it was in the power of one side to prove, and in the power of the other to have contradicted". Since it is exceedingly difficult, if not absolutely impossible, for the prosecution to prove facts which are especially within the knowledge of the opponent or the accused, it is not obliged to prove them as parts of its primary burden. Smuggling is clandestine conveying of goods to avoid legal duties. Secrecy and stealth being its covering guards, it is impossible for the Preventive Department to unravel every link of the process. Many facts re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... beyond reasonable doubt. There is an unmistakable subjective element in the evaluation of the degrees of probability and the quantum of proof. Forensic probability must, in the last analysis, rest on robust common sense and ultimately, on the trained intuitions of the Judge. ". 28.8 From the case laws cited above, the department need not prove the case with mathematical accuracy. So long as the department has established the case with such degree of preponderance the existence of a fact, it is sufficient. In the instant case, the burden to establish eligibility to the credit is on the appellant-assessee and if they fail to establish or explain the facts established by the department, and adverse inference arises against them coupled with the presumptive evidence adduced by the department. 28.9 The appellants have also argued that if they required to show that the dealer form whom they purchased the scrap procured the same legitimately, they are being asked to prove the impossible, which is not permissible and have placed reliance on the judgment of the apex court in the Narmada Bachao Andolan case. This argument of the appellants has no relevance to the case un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es issued to the appellants are not reflected and invoices bearing the same number are shown to have been issued to other buyers though for a different quantity and value. Further, in many cases, the transporters who are said to have transported these goods from the dealers' premises to the appellants have denied transporting these goods. In the case of appellants situated in Nasik, the Municipal Corporation authorities have confirmed that as per their records, escort permits, which are statutorily required for movement of these goods into the Corporation area, have not been issued at all which again corroborates the fact that the impugned goods (melting scrap) have not been received by the appellants at all. 29.2 In the case of M/s Amar Ispat Pvt Ltd., one of the appellants in the present case, Sri. Sunil Fakirchand Agarwal, who was working as the General Manager of the said appellant firm during the material period, in his statement dated 03/08/2006, recorded under Section 14 of the Central Excise Act, 1944, averred as follows:- "To-day you have shown me the invoices issued by M/s Simandar Steel Movers India Pvt. Ltd. to M/s Amar Ispat Pvt. Ltd. and the copies of the RG 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aling in both cenvatable material as well as non-cenvatable material. Bo the these goods were stored in the same godown at Bhiwandi. The non-cenvatable material covers the scrap material such as pieces of angle-channel, plate cuttings, pieces of pipes etc. On comparison of these two statements with respect to the nature of the materials supplied by the dealer and received by the appellants, it is clear that the material was non-cenvatable material. In other words, non-cenvatable material, which once again shows that the documents supplied by the said dealer did not pertain to the goods supplied and the cenvat credit was transferred fraudulently. 29.4 The appellants' contention is that they are not responsible for maintenance of the accounts by the dealer. So long as they have paid consideration for what has been received by them, it is sufficient and they cannot be expected to undertake any responsibility more than this, 29.5 This argument is wrong for the following reasons. Sub-rule (3) of Rule 7 of CENVAT Credit Rules, 2002 as it stood at the relevant time (as also its predecessor and successor rules) clearly provided that CENVAT credit in respect of inputs or capital goods p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch they have failed to discharge. Therefore, ratio of the judgment in the cases of D. Bhoormul, cited supra, and A.N. Guha cited supra, apply squarely to the facts of the case and, therefore, even in respect of the parallel invoices/duplicate invoices the appellants are not entitled for the credit. 29.6 The facts of a case decided by the hon'ble High Court of Bombay on 11 Th May, 2012 in M/s Mahalaxmi Cotton Ginning Pressing and Oil Industries v. The State of Maharashtra Ors. [2012 (191) ECR 0433 (Bombay)] closely resembles the case before me and the ratio decided therein has great relevance. In that case, the constitutional validity of section 48(5) of the Maharashtra Value Added Tax Act, 2002 was under challenge. If the constitutional validity was upheld, the petitioner sought a mandamus to the State to recover from the vendor tax paid on goods of which a set off was claimed. Consequential orders of set off and refund were sought. The petitioner was a re-seller of cotton bales and he filed tax returns and based on the purchases effected, claimed Input Tax Credit (ITC) by way of set-off under section 48. The petitioner supported his claim by tax invoices of his vendor. The pet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the Government Treasury. The grant of set off without receipt of tax into the treasury would result in a loss of revenue, a consequence which the provision of set-off does not contemplate. 29. A set off constitutes a concession granted by the legislature. In the absence of a set-off under section 48(5), the selling dealer would be liable under the charging provision of MVAT Act, 2002 to pay tax on the sale consideration. There is no independent right to a set off apart from section 48. The entitlement to a set off is created by the taxing statute and the terms on which a set off is granted by the legislation must be strictly observed. . 42. ..Moreover, the concept of a set off presupposes that tax has been paid in respect of the goods in respect of which a set off is claimed. To allow a set off through the tax has not been paid actually would be to defeat the legitimate interests of the Revenue. Hence, in the overall statutory scheme of section 48, sub-section (5) has a rational basis and foundation. In granting a set off, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a few cases there is a clear admission that the documents on the strength of which credit was availed was not accompanying the goods said to have been received but were received separately. So long as the appellants have not discharged the onus case on them about the receipt of the materials, the presumption that they have not received the materials remain valid and irrebuttable. In such a situation, the only reasonable inference that can be drawn is that they are also a party to the fraud committed by the dealers. This Tribunal in the case of AIA Engineering Pvt. Ltd. vs Commissioner of Central Excise, Ahmedabad - II 2006 (195) ELT 154 held that where credit has been availed without actually receiving any duty paid inputs and the same has been corroborated by the statement of dealers, extended period of time is rightly invokable. Revenue has also relied on the decisions of the hon'ble apex Court in the case of Commissioner of Customs (Preventive) vs. Aafloat Textiles (I) Pvt. Ltd. 2009 (235) ELT 587 (SC) . In the case before me, the transaction undertaken by the appellant is a fraud committed on the exchequer in connivance with the dealer. Without receiving duty-paid goods, the a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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