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TMI Blog2019 (12) TMI 176X X X X Extracts X X X X X X X X Extracts X X X X ..... nager (Testing), CIPET Chennai, regarding feasibility of mixing of the Polycarbonate granules with granules of polymers of ethylene, in primary forms or with granules of polymers of propylene or of other olefins, in primary forms or with granules of polymers of styrene, in primary forms to mould Energy Meter parts i.e., meter base, meter cover, terminal base and terminal cover at an injection moulding machine. Further, it is states that the Polycarbonate is more polar then PE, PP, PS but do not say that PE, PP, PS are non-polar. It makes general statement that due to non-compatibility, mixing of polar polymers with non polar polymers results into incompatibility but does not mention, out of PC, PE, PP, PS which polymer is polar or non polar and there is no certain conclusive to say PC, PE, PP and PS cannot be mixed in any case. Polycarbonate is one of the engineering material and as per the tender document; the electric meter should be manufactured either of polycarbonate or engineering material. Admittedly, all the inputs in question do qualify as engineering materials as per the tender documents. The suppliers of the goods were not investigated. Merely on the basis of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the main party, namely, M/s Avon Meters Pvt. Ltd. is engaged in the manufacture of Energy Meters and registered with the Central Excise Department. As the appellants are manufacturing excisable product, therefore, they are availing cenvat credit on capital goods, inputs and input services. The appellant is registered since 1996 and regularly filing their statutory returns and regular central excise audit was conducted in their premises. To manufacture of Energy Meters, the appellants are procuring certain inputs and taking cenvat credit thereon. The premises of the appellant was visited by the preventive team of Central Excise Department on 11.02.2015 acting on an information that the appellant were engaged in large scale evasion of central excise duty by fraudulently availing cenvat credit without actual receipt and use of raw materials. During the search, physical verification was stock of inputs as well as finished goods was conducted and as a result of verification of BOPT film (poly film) weighing 6949.900 Kgss was found short vis-a-vis the recorded balance of 6971.900 Kgs. Records regarding availment of cenvat credit by the appellant as per details mentioned in the panchna ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (i) any input or capital goods received in the factory of manufacturer of final product or premises of the provider of output service on or after the 10th day of September, 2004; and (ii) any input service received by the manufacturer of final product or by the provider of output services on or after the 10 th day of September, 2004. 17.1 Further, as per sub rule (k) of Rule 2 of the Credit Rules, input' means- (i) all goods used in the factory by the manufacturer of final product; or (ii) any goods including accessories, cleared along with the final product, the value of which is included in the value of the final product and goods used for providing free warranty for final products; 17.2 As envisaged under Rule 3(1) of the CENVAT Rules, the manufacturer availing CENVAT credit had to ensure that they have taken CENVAT credit on the goods which are actually received by them duly covered by the invoices- Further, the provisions of Rule 9(5) of the Credit Rules, 2004, read as under:- The manufacturer of final products or the provider of output service shall maintain proper records for the receipt, disposal, consumption and inventory of the in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... use of BOPP film in wrapping the meters. Statement of Sh. Ramesh Sharma Store Incharge was also to be recorded as he had earlier not stated the true facts regarding recovery of invoice from Electronic Store under his charge. But, both these persons did not appear despite repeated summons issued to them. Whenever summons were sent to either of them a standard reply was submitted by the Noticee that the concerned person is on leave. Sh. Nikhil Goel, Director of the Noticee also appears to have stated false facts in his only statement dated 04/06/2015. Sh. Nikhil Goel had inter alia stated that they used to mix blend different types of plastic materials with polycarbonate; that they used to use Polyfilm extensively in %Tapping different parts of the meters at each stage and the meters; there was sudden increase in the usage of poly film and during December, 2014 January, 2015 the usage shown as 7 to 9 MT per day (and supposidely dumped as scrap in nearby plot) which was earlier not that much and after January Noticee appears to have received no Poly film as their CENVAT documents for February and March show. The claim of Sh. Nikhil Goel in his Statement that they had done dust proofi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Noticee admitted to have got made entries at the ICC s where incase of plastic granules entries were made the basis of fake invoices and GRs as for the said goods, there was a provision for payment of advance tax with the Punjab Excise Taxation Department.. 18. From the above, it appears that the Noticee had failed to discharge its statutory duty of proving the admissibility of cenvat credit since the facts on records suggest that the Noticee had indulged in mere paper transactions only, without actual receipt of impugned goods. 19. Thus, from the above facts, it appears that the Noticee have availed inadmissible CENVAT credit fraudulently on impugned goods involving CENVAT credit amounting to ₹ 7,84,04,706/- (as per details given in Annexure A, B, C D) during the period 01/082011 to 31/03/2015 as detailed below: Sr. No. Annexure No. Amount of CENVAT credit (Rs.) 1. A 2,48,92,889/- 2. B 2,43,36,840/- 3. C 1,66,02,397/- 4. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st and demand of duty of ₹ 6,27,92,944/- was confirmed alongwith interest and equivalent amount of penalty was imposed and various penalties were imposed on the co-appellants. Against the said order, the appellants are before us. 4. Shri Surjit Bhadu, Advocate appeared on behalf of the M/s Avon Meters Pvt. Ltd. and submits as under:- i. The demand in the present case was raised vide Show Cause Notice dated 30.08.2016 in respect of below mentioned four commodities : - a) Plastic granules other than polycarbonate b) Polyfilm c) Electric Wires and Cable d) Electronic component and accessories ii. The demand is raised on the allegation that the noticee has fraudulently availed Cenvat Credit without actual receipt / raw material, thus, the entire case of the revenue in Show Cause Notice was that the noticee / appellant did not receive the raw material in question at all. The case of revenue is of complete non-receipt of material. The Revenue s case is not shortage of material. PLASTIC GRANULES OTHER THAN POLYCARBONATE iii. The appellant is engaged in manufacture of electrical energy meters and for manufacturing various meter parts, the plastic gr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s paid Service Tax on reverse charge basis under Section 68(2) of Finance Act, 1994 under the category of GTA on the freight paid for transportation of entire quantity of plastic granules. Such service tax payment is not disputed by the revenue. - It is admitted fact by revenue that the transactions of purchase of plastic granules by appellant were recorded at Information Collection Centre (ICC) established by Punjab Government as per the Show Cause Notice. - It is also not disputed by the revenue that on entire purchase of plastic granule, the appellant deposited advance / entry tax @ 8% to the credit of Punjab VAT department. - The revenue did not make any enquiry at the end of suppliers of plastic granules and no statement was recorded of suppliers. - The suppliers in their reply to Show Cause Notice has categorically confirmed the actual supply of goods to the appellant. - The goods were duly recorded in the statutory records of the appellant. - Despite of repeated and numerous statements of different officials of the Appellant, there is no inculpatory statement. Rather, the officials of the Appellant every time confirmed the receipt of the impugned Inputs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce beginning, was done by the department. - There is no verification of the process of manufacture adopted by the Appellant by any agency. - In the present case, although the revenue has alleged that a huge quantity of the plastic granules other than polycarbonate was not used in manufacture of final product i.e. electric meters, however, at the same time there is no investigation or evidence to show how the final products (more than 57 Lakhs electric meters) are manufactured, if disputed inputs were not used. The revenue has received excise duty on final products and their quantity is not disputed as the same are supplied to Government Departments. - During the second visit on 16.02.2015, the visiting staff made weighment of some meter parts and other items to verify the consumption of the inputs vis- -vis the final product manufactured by the Appellant, however, after a formality of weighment of some parts, neither any further investigation is done, nor it is relied upon in the Show Cause Notice or impugned order. In fact, the revenue had found out that the quantity final product manufactured by the Appellant could not be manufactured if the disputed inputs are alleged t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red four parts of the meter namely meter base, base cover, terminal block and terminal cover but has completely ignored other essential parts such as meter seals, meter switches, wires and cable glands and meter box which are manufactured by the appellant using all types of plastic granules and this fact was specifically stated in the statement of Shri Nikhil Goel in his statement dated 04.06.2015. While dealing with this submission the Adjudicating Authority admitted that the meter seals, meter switches, wires and cable glands constitute only 2 to 5% by weight of the meter base, meter cover, terminal base and terminal cover. Thus, the Adjudicating Authority itself broke the presumption of the Show Cause Notice that no plastic granules other than polycarbonate were at all received. - The Adjudicating Authority wrongly held that the meter box are nothing but meter cover. Infact, meter box is altogether different item which consumes substantial plastic granules and the same has not at all been considered in the Show Cause Notice or the Order in Original. POLYFILM viii. The Cenvat Credit on polyfilm is denied to the appellant on the allegation that the polyfilm was not at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated in his statement dated 10.12.2015 that the goods were physically supplied to the appellant. No Show Cause Notice has been issued to the said three traders who arranged and sold polyfilm to the appellant. In such a case, no demand can be raised in respect of such supplies. - The purchase of polyfilm was on FOR basis to the factory of appellant and in all the invoices, the consignee is shown factory of the appellant. - All the purchases was made against C-Forms issued by the Punjab VAT Department. The C forms are discharged only after the purchase inputs are validly used in manufacture of taxable goods. The Order in Original duly notes the contention of the appellant, however, nothing is brought on record to show the misuse of C forms. - The Adjudicating Authority did not allow the cross-examination of the witnesses including transporters whose statements are relied upon for denying Cenvat Credit on polyfilm, rather, specifically rejected the request of cross-examination. Thus, in terms of judgment of Hon‟ble Supreme Court in the case of Andaman Timber Industries Vs. CCE, Kolkata-II - 2015 (324) ELT 641 (S.C.), the Order in Original becomes a nullity and state ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore, to avoid the rejection and to maintain good track record the appellant decided to use the polyfilm albeit the cost. xii. In the Show Cause Notice and order lot of stress has been given on the 25 Invoices whose copies were found in the factory, however, the goods covered by said invoices were not received. In this regard, it is firstly submitted that the appellant has not taken Cenvat Credit on the said invoices, therefore, there is no effect of such invoices on the present matter. Secondly, even in relation to conduct of appellant, all the invoices in the matter were issued between 20.01.2015 to 31.01.2015 and had been received by the appellant immediately. The visit of the Central Excise department was on 11.02.2015. If the appellant was in practice of availing credit without receipt of goods, they would not have waited for 20 days before taking credit, especially when they could have taken the credit in January 2015 and could have used the credit on 10th of February. WIRES AND CABLES xiii. In the Show Cause Notice, denial of Cenvat Credit was proposed for the amount of ₹ 1,66,02,397/-, however, the demand of ₹ 1,22,32,390/- was dropped by the Adjud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, the demand of ₹ 33,79,372/- was dropped by the Adjudicating Authority in relation 3 suppliers namely M/s Team Tech Electronics Ltd., M/s Rabyte Electronics and M/s Analogics Tech India Ltd. xx. At the same time, demand of ₹ 91,93,208/- was confirmed on the electronic components and accessories supplied by M/s Nata Devices India Pvt. Ltd. (Nata Devices). The main allegation for denial of Cenvat Credit on electronic components and accessories supplied by M/s Nata Devices is that the same have not been received by the appellant in their factory in or in relation to manufacture of meter parts, In nutshell, it is concluded that for such electronic components and accessories, only invoices are received but goods are not received. xxi. At the outset, it is submitted that since the Cenvat Credit on the identical goods have been allowed in respect of above three suppliers, there remains no dispute that the electronic components and accessories in question are inputs for the appellant. xxii. That the supplier M/s Nata Devices duly confirmed that the goods were physically supplied to the appellant. The payments of the impugned goods are made through banking channel and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... time of loading consignment of M/s Nata. As the such truck would be already loaded with some other material of another supplier of the Appellant, the first name remains in the name of supplies whose material is already loaded in truck and accordingly, the entry in ICC and / or in freight account of Appellant was made. Such an arrangement was though beneficial for the Appellant in commercial terms, however, is not to prejudice of revenue as there was no violation of law or tax evasion. xxvi. The revenue has not discharged its onus to prove that the material was not actually received by the appellant. There is no tests or expert report or any other finding to the effect that the electronic components and accessories supplied by M/s NATA devices were not used OR could not be used, in manufacture of the final products of the Appellant. In view of the above it is prayed that the impugned Order in Original No. LUD-EXCUS-000-COM-00-07-19-20 dated 12.07.2019 may be set aside to the extent it is prejudicial to the appellant and set aside the demand of Cenvat Credit and penalties confirmed vide the impugned Order. 5. Shri Vikrant Kackria, Advocate on behalf of the M/s Nexgen Lamina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... material. The act does not prescribe the imposition of penalty for such an offence. Even though the appellant are taking categoric stand that they have actually supplied the goods yet it is to be mentioned that in the absence of any provisions in the Act for imposition of penalty for mere issuance of invoices without actual supply of material, the penalty cannot be imposed under Rule 26(2) of the Central Excise Rules. Rules cannot override the provisions of the Act. Rules 26(2) has been incorporation in the Central Excise Rules in terms of Section 37 of the Central Excise Rules Act, 1944 which is reproduced hereunder:- Section 37. Power of Central Government to make rules:- (1) The Central Government may make rules to carry into effect the purposes of this Act. (2) In particular, and without prejudice to the generality of the foregoing power, such rules may- [(i) provide for determining under section 4 the nearest ascertainable equivalent of the normal price; (ia) having regard to the normal practice of the wholesale trade, define or specify the kinds of trade discount to be excluded from the value under section 4 including the circumstances in which a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acturer or the licensee of a warehouse to provide accommodation within the precincts of his factory or warehouse for officers employed to supervise the carrying out of regulations made under this Act and prescribe the scale of such accommodation; (viii) provide for the appointment, licensing, management and supervision of bonded warehouses and the procedure to be followed in entering goods into and clearing goods from such warehouses; (ix) provide for the distinguishing of goods which have been 271 [manufactured after registration], of materials which have been imported under licence, and of goods on which duty has been paid, or which are exempt from duty under this Act; (x) impose on persons engaged in the production or manufacture, storage or sale (whether on their own account or as brokers or commission agents) of salt, and, so far as such imposition is essential for the proper levy and collection of the duties imposed by this Act, of any other excisable goods, the duty of furnishing information, keeping records and making returns, and prescribe the nature of such information and the form of such records and returns, the particulars to be contained therein, and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the giving of credit of sums of money with respect to raw materials used in the manufacture of excisable goods;] [(xvic) provide for charging and payment of interest as the case may be, on credit of duty paid or deemed to have been paid on the goods used in, or in relation to, the manufacture of excisable goods where such credit is varied subsequently;] (xvii) exempt any goods from the whole or any part of the duty imposed by this Act; [(xviia) provide incentives for increased production or manufacture of any goods by way of remission of, or any concession with respect to, duty payable under this Act;] (xviii) define an area no point in which shall be more than one hundred yards from the nearest point of any place in which salt is stored or sold by or on behalf of the Central Government, or of any factory in which saltpetre is manufactured or refined, and regulate the possession, storage and sale of salt within such area; (xix) define an area round any other place in which salt is manufactured, and regulate the possession, storage and sale of salt within such area; (xx) authorize the [Central Board of Excise and Customs constituted under the Cent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovisions of any such rule, or (b) does not account for all such goods manufactured, produced or stored by him, or (c) engages in the manufacture, production or storage of such goods without having applied for the [registration as] required under section 6, or [(d) contravenes the provisions of any such rule with intent to evade payment of duty, then all such goods shall be liable to confiscation and the manufacturer, producer or licensee shall be liable to a penalty not exceeding the duty leviable on such goods or [two thousand rupees], whichever is greater.] This Act has been applied to- (1) The Central Government may make rules, including rules conferring the power to issue notifications with retrospective effect under those rules, to carry into effect the purposes of this Act. . Note. - Amendment made to sub-section (1) shall be in addition to, and not in derogation of, the provisions of section 4. Vide The Central Excise Laws (Amendment and Validation) Ordinance, 2005 (1 of 2005), sec. 2 (w.e.f. 25-1-2005). [(5) Notwithstanding anything contained in sub-section (3), the Central Government may make rules to provide for the imposition upon any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... missions and facts placed before us, the sole issue arises, (i) whether the appellant M/s Avon Meters Pvt. Ltd. is entitled for cenvat credit which has been denied by the Ld. Commissioner alleging that it was mere a paper transaction or not?, and (ii) Whether the penalty under Rule 26 of Central Excise Rules can be imposed on the co-appellants or not? Issue No. 1 In this case, the intelligence was gathered by the Revenue that the appellant is availing cenvat credit on the inputs in question without receiving in their factory and there are not input, therefore, the investigation was conducted. During the course of investigation, the stock taking was conducted and on verification of the stock on the date of investigation. The stock of the following goods were found are as under:- The allegation of the revenue is based on the test conducted on the finished goods recovered from the premises of one of the buyer which show that the main material to manufacture the goods in question is polycarbonate only, but, some other inputs were found in the premises of the appellant, the same were alleged that these are not input for the appellant, therefore, they are not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ments have been relied upon were granted cross examination, neither their statements have been taken in compliance to the provisions of Section 9D of the Central Excise Act, 1944 as held by this Tribunal in the case of CCE, Delhi-I vs. Kuber Tobacco Industries. reported in 2016 (338) ELT 113 (Tri. Del.) wherein this Tribunal has observed as under:- 7. We have gone through the facts of the case wherein the certain machines were installed at Sandeep Poultry Farm Khasra No. 63/3, Village Khera Khurd, New Delhi-110082 found wherein Kanchan/Kanchann brand gutka and wiz brand pan masala manufactured clandestinely without declaring the said premises as registered premises for manufacture of the said gutka. The contention of M/s. Kuber is that they were not involved in the activity of manufacture of gutkhas and the said activity was illicit and misused of their brand name and goodwill of the appellant by certain elements who were manufacturing duplicate goods bearing M/s. Kuber brand names and clearing them in the market. The facts of the care are not in dispute, the appellants have raised the dispute that the statements recorded during the course of investigation cannot be re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, for the purpose of proving the truth of the facts contained therein. If the circumstances are absent, therefore, the statement, which has been made during the course of inquiry/investigation, before a gazetted Central Excise Officer, cannot be treated as relevant for the purpose of proving the fact contained therein as observed by Hon ble Delhi High Court in the case of J.K. Cigarettes (supra) wherein Hon ble High Court has observed as under :- 12. Bare reading of the above section manifests that under certain circumstances, as stipulated therein, statement made and signed by those persons before any Central Excise Officer of a gazetted rank during the course of inquiry or proceedings under this Act can be treated as relevant and taken into consideration if under the given circumstances such a person cannot be produced for cross-examination. Thus, this provision makes such statements relevant for the purposes of proving the truth of the facts which it contains, in any prosecution for an offence under the Act in certain situations. Sub-section (2) extends the provision of sub-section (1) to any proceedings under the Act other than a proceeding before the Court. In this mann ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lace before the Court. But the duty of the court is only to appreciate the case in the proper perspective and on the basis of what is placed before the Court. Even with regard to the prayer for permitting the applicant to cross-examine the plaintiff, the prayer is misconceived as the question of cross-examination arises only when a witness has tendered evidence in chief-examination. Under section 138 of the Indian Evidence Act, cross-examination follows chief-examination, but not without chief-examination. If there is no chief-examination, there is no cross-examination. It is only witness who is examined in chief who can be cross-examined. Therefore, a prayer for cross-examination of the plaintiff even when the plaintiff has not been examined in chief is ridiculous and not provided for under Section 138 of the Indian Evidence Act. The Trial Court has rightly rejected the application. No scope for interference with an order of this nature. 11.We further find that in the case of Swiber Offshore Construction Pvt. Ltd. (supra), this Tribunal has further observed as under : 6. We therefore have no hesitation in holding that the impugned Order passed by the Commissioner as an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not be confined to the facts to which the witness testified on his examination-in-chief. Direction for re-examination. - The re-examination shall be directed to the explanation of matters referred to in cross-examination; and if new matter is, by permission of the Court, introduced in re-examination, the adverse party may further cross-examine upon that matter. 10. We therefore find force in the submission of the ld. counsel for the appellant. We find no reason to justify rejection of request made by the appellant to the adjudicating authority in light of Section 138B of the Act, to summon witnesses for examination and to offer them for cross-examination if their statements were to be considered as relevant and admitted in evidence in the interest of justice. 12.We further find in the case of Bussa Overseas Properties Ltd., this Tribunal again observed as under :- 24. The fact that in cases relating to smuggling or indeed any case civil or criminal cannot or need not been proved for degree of mathematical precision or that the department governed by strict rules of evidence is again no answer. The department is certainly bound by the contents of the Custom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... available during the course of adjudication and the same has not been considered judicially. 15. In view of the above, the impugned order is set aside. The adjudicating authority shall be at liberty to re-adjudicate the matter after following the procedure laid down under Section 9D of the Act as discussed above. 16.The appeals are disposed of in the above terms . Therefore, all the statements recorded during the course of investigation cannot be relied upon. 13. We further take a note of the fact that in the show cause notice although various discrepancies were found during the course of investigation in the records of the appellant, but, the main allegation made in the show cause notice is that the input in question on which cenvat credit sought to be denied are not input of the appellant as were not used in the manufacture of their final product, but, it is mere paper transaction. It means that if it is a paper transaction then no goods have been received in the factory premises of the appellant but the stock found during the course of investigation with the statutory records are showing all the inputs on which cenvat credit sought to be denied were in the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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