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TMI Blog2013 (9) TMI 415X X X X Extracts X X X X X X X X Extracts X X X X ..... different person during the whole period from 1997 onwards who was not even aware that the premises had been leased to Itisha. The investigation also found that Aluminium scrap by Itisha which was supposed to have been purchased was in reality not at all purchased since the suppliers, on the basis of whose invoice entries were made by Itisha, stated that they had not supplied any raw material to Itisha and Shri Goutham N. Pal, the proprietor of Itisha admitted that he himself had printed, written, randomly stamped the serial numbers and taken Cenvat credit. The investigation also revealed that even though 1512 MTs of Aluminium Ingots was supposed to have been supplied by Itisha to various buyers, in reality only a small quantity was supplied that too by purchasing from open market without central excise invoice. Thus either a small portion of Aluminium Ingots was supplied by purchase from the open market which was not duty paid or only invoices were prepared and sent to the buyers to facilitate availment of Cenvat credit. Investigation also revealed that in order to show proper accounting, Shri Goutham N. Pal would issue self-bearer cheques, withdraw the same in cash but would acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Ltd. - Manufacturer-Purchaser. 2. In addition to the adjudication order passed by Commissioner of Central Excise, which is the order under challenge in the appeals filed by the above persons the same issue has been adjudicated by the Asst. Commissioner of Central Excise, Kalol Division in the case of M/s. Sampath Aluminium Pvt. Ltd. which was challenged before the Commissioner (Appeals) and the order of the Commissioner (Appeals) which held a portion of the demand as time-barred and reduced the penalty against the appellant has been challenged as regards the balance amount within limitation upheld by Commissioner (Appeals) and penalty imposed on M/s. Sampath Aluminium Pvt. Ltd. M/s. Jankilal & Nandlal Metal (P) Ltd. are in appeal against the order-in-appeal which upheld the penalty imposed on the appellants by the Asst. Commissioner. In the case of M/s. Panchmahal Steels Ltd., Revenue is in appeal against the order of Commissioner (Appeals) setting aside the demand for duty with interest and imposition of penalty. 3. Heard both the sides. The ld. SDR also submitted that he would like to make written submissions and the written submissions were received from him on 7-10-2008. On ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he arguments advanced, our findings as regards the facts have to be given so that in the light of the facts, the arguments put forth by the appellants can be considered. 6. The ld. DR has submitted that M/s. Itisha never existed at the premises declared in the registration certificate. This has been clearly admitted by Shri Goutam Pal and it has also been brought out by a drawal of the panchnama that Shri Mujibkhan H. Pathan was found operating a manually operated furnace in that premises. It has also been brought out that there was no electricity connection to the premises during the past 7-8 years. Shri Mujibkhan H. Pathan had also stated that Shri Goutam Pal had entered into a lease agreement with his daughter Ms. Ruksana Bibi one of the premises in the year 1997 but had not taken possession till 28-3-2005 the date on which his statement was recorded. This statement has not been challenged or retracted. It has also been brought out by panchnama that the total area of the premises was only 165 sq. yards and the manually operated furnace could manufacture a maximum of 80 kgs. of Aluminium Ingots per day. No challenge has been made on the evidence brought out by the Revenue that i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble steps as required under Rule 7 of Cenvat Credit Rules. As regards payment of duty, Shri Goutam Pal has clearly admitted that he was not in a position to quantify the cases of invoices where material was supplied since he dealt with only supplying bills. He also submitted that about 11 bills were supported by goods but he could not identify which one were they. He also submitted that he used to make payment by cheque but encashed the same himself so that for accounting purposes cheque transactions were shown. In fact investigations have revealed that M/s. Itisha had maintained meticulous accounts and regularly filed returns. Shri Goutam Pal also clearly stated that the invoices were issued as per the requirement of the manufacturers and this activity was going on for a long time. None of the appellants have brought out any evidence to show that the facts as emerging out of investigation discussed above are not correct. Therefore, this order proceeds on the basis that facts are as mentioned herein. 7. Now, we take up discussion of the issues one by one. As regards M/s. Sampat Aluminium Pvt. Ltd. case, the Commissioner (Appeals) had held that extended period cannot be invoked in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... steps if he satisfies himself about the identity and address of the manufacturer or supplier, as the case may be, issuing the documents 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, by the Superintendent of Central Excise within whose jurisdiction such manufacturer has his factory or the supplier has his place of business, and where the identity and address of the manufacturer or the supplier is satisfied on the strength of a certificate, the manufacturer or producer taking Cenvat credit shall retain such certificate for production before the Central Excise Officer on demand. (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 prod ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the Director of job worker had arranged supply of Ingots and he had not taken any steps as contemplated under Rule 7. Shri Manish Kiri, Director of M/s. Kiri Dyes and Chemicals Pvt. Ltd. also submitted that they had not taken any steps and it was M/s. Sun Chlorochem who had opted to procure Aluminium Ingots from M/s. Itisha and send it to their job worker M/s. Sun Chloride Pvt. Ltd. He submitted that the Director of job worker had arranged supply of Ingots and he had not taken any steps as contemplated under Rule 7. Shri Manish Kiri, Director of M/s. Kiri Dyes & Chemicals Pvt. Ltd. also submitted that they had not taken any steps and it was M/s. Sun Chlrorochem had arranged to procure Aluminium Ingots from M/s. Itisha and send it to their job worker M/s. Pratiksha Chemicals Ltd. He also agreed that he had not taken any steps. In the case of M/s. Rose Labs Ltd. also the Managing Director admitted that he had never met Shri Goutam Pal nor had he visited the factory and in their case also Aluminium Ingots were sent to their job worker M/s. Mansi Industries. Proprietor of M/s. Akik Dye Chem. also admitted that he had neither met Shri Goutam Pal nor visited the factory and got Alumin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nly getting invoices and not goods. Further they were also aware that M/s. Itisha was not supplying the quantity but only supplying invoices and therefore the question of taking reasonable steps does not arise. This is the only conclusion that is possible from the above discussions and therefore we are unable to accept the arguments advanced by the appellants that they had taken reasonable steps as contemplated under Rule 7 of Cenvat Credit Rules. What comes out from the investigation is that seller and the buyers and the job workers were together in this operations of taking credit on the basis of invoices which did not actually cover the goods supplied and in fact they were only invoices and not covering any goods. In fact some relief could have been given provided the appellants had submitted evidence of actual quantity received in view of the fact that even the work sheet prepared by the ld. SDR shows that at least 407 MTs of Aluminium Ingots were actually supplied by making purchase in the open market under the cover of invoices of M/s. Itisha even though legally it cannot be admissible in view of the fact that Aluminium Ingots were actually admitted to be non-duty paid. But a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Cenvat credit utilized by them and the amount has been paid under protest and the same may be refunded to them. In the absence of any challenge to the statement of Shri Goutam Pal by any of the appellants, it is quite clear that none of the appellants have paid money out of their own pocket and therefore not only because of the reason that they failed to take reasonable steps contemplated under Rule 7 but also because of this reason, the appellants are liable to pay the duty taken as credit by them to the Government. 9. As regards the contention that this was a pure commercial transaction and they had received the goods and therefore, credit was taken correctly, the discussion above clearly proves that these contentions have no basis whatsoever. Not only the appellants were aware that goods were not received in all the cases but they were also aware that the credit taken by them was wrong and may have to be paid back in case it was found by the Department that goods were not received. The contentions of the appellants that they had paid for the goods received is totally baseless in view of the evidence gathered by the Revenue in the form of statement of the Driver, statements of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so applies to a person who is liable to pay duty as determined under sub-section 2 of Section 11A and sub-section 1 provides for serving notice on the person chargeable with the duty or on the person who has because of whose emission duty has become liable. We also note that in this case no action has been initiated against either the supplier Itisha or the receiver GACL. There is no indication in the orders to show that action on GACL is being taken separately. Therefore, the arguments advanced by the ld. Advocate have to be accepted and therefore the dealer cannot be visited with the penalty. 12. The Revenue has filed an appeal against the order of the Commissioner (Appeals) setting aside the demand for duty, imposition of penalty and recovery of interest. In this case also the respondents had received the raw materials from Itisha through M/s. S.R. Enterprises, Vadodara, a dealer. In this case, admittedly the assessee has produced goods receipt note, invoices, stores, acceptance report and details of entries in RG23A Part-I and Part-II registers. The Vice-President of M/s. Panchmahal Steels Ltd. had admitted that they had purchased the goods from M/s. S.R. Enterprises, Vadodara ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sub-section (1) shall be counted from the date of receipt of such information of payment. Explanation 1. - Nothing contained in this sub-section shall apply in a case where the duly was not levied or was not paid or was short-levied or was short-paid or was erroneously refunded by reason of fraud, collusion or any wilful mis-statement or suppression of facts, or contravention of any of the provisions of this Act or of the rules made thereunder with intent to evade payment of duty. Explanation 2. - For the removal of doubts, it is hereby declared that the interest under section 11AB shall be payable on the amount paid by the person under this sub-section and also on the amount of short-payment of duty, if any, as may be determined by the Central Excise Officer, but for this sub-section." The amount paid by the respondents in this case has to be treated as paid under the provisions of Section 11A(2B). There is no dispute that the goods had not suffered duty in view of the fact that as far as Itisha is concerned the matter stands finally decided. In this case, Commissioner (Appeals) has already held that extended period cannot be invoked, but in view of the provisions of Section 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the appellant plea of the demand being barred by limitation. It is further seen that in the said decision of IDL Chemicals Ltd., the Tribunal observed that the credit taken on the basis of the fake and no genuine duty paying documents is required to be reversed. Accordingly, we are of the opinion that the reversal of credit by M/s. AIA Engineering P. Ltd. and Bhagwati Autocast Ltd. is justified." 13. In view of the above, we cannot find fault with the Commissioner for invoking extended period and imposing penalties. Accordingly the same is upheld. As regards M/s. Sampath Aluminium (P) Ltd. demand within time-limit confirmed by Commissioner (Appeals) has to be upheld. 14. In view of the above discussions, all appeals except that of dealer are rejected and the appeal of the Revenue in the case of M/s. Panchmahal Steels Ltd. is allowed to the extent of appropriation of duty out of the amount deposited by the party only. (Pronounced in Court on..................) Sd/- (B.S.V. Murthy) Member (Technical) 15. [Per : Archana Wadhwa, Member (J)]. - After having gone through the order proposed by my learned brother, I agree with him as regards the reversal of the credit, so availe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a far off corner of the country, he cannot be expected to verify the existence of such factory. Expression "from his personal knowledge" appearing in Rule 7 only envisages that the person supplying the goods should be known to the manufacturer. It has come on record by way of statement that Shri Goutam Pal of M/s. Itisha approached various manufacturing units for supply of good quality aluminum ingots as competitive price and inasmuch as such goods were being supplied under the cover of invoice, there can be no reason for manufacturer to doubt the correctness of the entries made in the said invoices. As such, by extending the benefit of doubt to the manufacturing unit, I am of the view that penalties are not required to be imposed upon them. 18. The second situation, which comes out from the records is that M/s. Itisha was supplying material without actually sending the goods. Larger Bench decision of the Tribunal in the case of M/s. Steel Tubes of India Ltd. as reported in 2007 (217) E.L.T. 506 (LB) has held that where the person has not dealt with the goods, he cannot be met with penalty under Rule 26 of C.E.R. As such, even if the Revenue's stand that only invoices were receive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) or the same are required to be set aside as observed by Member (Judicial). Sd/- Sd/- (B.S.V. Murthy) (Archana Wadhwa) Member (Technical) Member (Judicial) (Pronounced in Court on 28-9-2010) 22. [Per : M.V. Ravindran, Member (J)]. - This Difference of Opinion is listed before me as per order of Hon'ble President for deciding the points of difference arose between the Bench while deciding the appeal No. E/883/2007. 23. Following Difference of Opinion are indicated :- (i) Whether the manufacturers can be said to have taken reasonable steps in terms of Rule 7 of Cenvat Credit Rules, while receiving the inputs from the supplier M/s. Itisha Aluminum Industries. (ii) Whether the manufacturers were aware of non-payment of duty on the inputs received by them from M/s. Itisha so as to impose penalty upon them. (iii) Whether any penalties required to be imposed upon the manufacturers, even if the inputs have not been received by them, in view of the law laid down by the Larger Bench decision on the case of Steel Tubes of India Ltd. - 2007 (217) E.L.T. 506 (LB). (iv) Whether the penalties imposed upon the manufacturers are required to be uphel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7 of Cenvat Credit Rules, 2004. It is the submission that as far as imposition of penalties in view of non-receipt of inputs, the decision of the Tribunal in the case of Steel Tubes of India Ltd., will apply as the appellant manufacturers have not dealt and there is no situation where the inputs were not received. It is the submission that the inputs were consumed in further manufacturing of the product and these products were cleared. It is the submission that one of the appellant had sought cross-examination of the officers who during the course of cross-examination had admitted that M/s. Itisha was following all the prescribed procedures including filing of monthly returns and issuance of Central Excise invoices. It is the submission that under the circumstances, no fault can be found with the appellant manufacturer. The advocate appearing on behalf of M/s. Sun Chloride Pvt. Ltd. submits that they are job workers of M/s. Parshwanath Dyechem Industries and they have not availed any Cenvat credit on capital goods and hence Rule 7(2) of Cenvat Credit Rules is not required to be followed by them. It is submitted that the impugned order of the Commissioner holds that the job workers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of Tribunal in the case of Dr. Writer's Food Products v. CCE, Pune - 2009 (242) E.L.T. 381. He would submit that at Para 4, Hon'ble Member (Judicial) has recorded finding that in most of the cases, the goods did not actually travel, but only the invoices were issued. It is the submission that on this background of admitted facts, the question of taking reasonable steps is absent. 27. I have considered the submissions in detail made by both sides and perused the records. 28. The entire Difference of Opinion is only regarding imposition of penalty on the manufacturer, job worker and one of the appellant Shri Janakilal Nandlal. 29. It can be seen from the findings of both the Members that manufacturer/manufacturing unit have availed the Cenvat credit only on the basis of invoices issued by M/s. Itisha. It is also an admitted fact by both the Members that no duty was actually paid by M/s. Itisha and no credit was available to such manufacturers/manufacturing units. On concurrence of such views with both the Members, it is accepted by both the Members that reversal of Cenvat credit by the manufacturing unit in balance was not seriously challenged and was correctly upheld. It is to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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