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TMI Blog2022 (8) TMI 1252X X X X Extracts X X X X X X X X Extracts X X X X ..... uminium wire Rod, Aluminium Ingot, Aluminium Scrap, Copper Ingot and Scrap, Nickel and Zinc Ingot and Scrap etc. - HELD THAT:- The department in the present case itself admitted that the Appellant shown the receipts and use of the goods in their factory, therefore we do not find any reason for disallowance of cenvat credit in this matter specifically when the supplier of the goods/ raw material, nowhere admitted that, they have not supplied the goods to appellant and any evidences in relation to diversion of disputed raw materials. When the inputs are used in the manufacture of dutiable final products, the benefit of cenvat credit in respect of such input cannot be denied. There is no provision in the Central Excise Law and Cenvat Credit Rules for determination of Cenvat amount on the basis of SION norms - There was specific provision in the Act and the Rules for determination of capacity of production on the basis of capacity of furnace and rolling mill. Since there was no similar provision in the law for determination of cenvat amount on the basis of SION norms, the entire proceeding in the impugned matter is void. Apart from the input-output ratio, which has been made the ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eceipts of the goods in factory and without actually using the said goods in the manufacture of their finished goods on the strength of Bill of Entries issued by ICD - HELD THAT:- Department in the present matter nowhere produced any corroborative evidences related to the diversion of imported raw materials/ substitute of imported raw material in factory/ any buyer of imported raw material who admitted that the Appellant had delivered the said imported goods to them. Moreover in the said matter Transporters did not turne up for cross-examination, hence their statement cannot be relied upon. During the investigation the transporter admitted the payment from the appellant towards transportation, high seas sale supplier had also confirmed the sale to the appellant. The bills of entry filed by the Appellant and clearances of the goods from customs substantiate the purchase of goods by the Appellant and appellant also account for the said goods in their books of account - the case on merit is not sustainable due to lack of evidence to establish the allegations. CENVAT Credit - case of the Revenue is that the Appellant has availed the Cenvat Credit on inputs mainly copper/Nickle, su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terials and also money flow back from manufacturer/supplier to the assessee, it can not be said that they had not received the inputs especially when statements relied upon by the Revenue are contrary to the documentary evidence on record produced by the Appellant - this contention cannot be accepted. The reliance of third party i.e transporters documents /statements was placed while confirming demand against present appellant is also observed to be unjustified and unreasonable - the demands of whatever nature cannot be confirmed solely on the basis of third party s evidence/record. The appellant have satisfied the requirement of receipt of inputs along with cenvatable invoices and use of such inputs in the manufacture of final product, accordingly, the Cenvat credit taken by them is in accordance with the scheme of the Act read with Cenvat Credit Rules - Appeal allowed - decided in favor of appellant. - Excise Appeal No.12159 of 2019, 11380 of 2019, 13005 of 2019, 13007 of 2019 - A/ 11049-11052/2022 - Dated:- 29-8-2022 - MR. RAMESH NAIR, MEMBER (JUDICIAL) AND MR. RAJU, MEMBER (TECHNICAL) Shri Uday Joshi, Shri Aashish Chauhan, Shri Rahul Dhirubhai Patel Ms. Neha Ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Order-In-Original No. 01/MP/VAPI/2009 dtd. 30.03.2009 confirming Cenvat demand along with interest and imposing penalty. Being aggrieved, Appellant and other co-noticees filed appeals before the CESTAT, Ahmedabad and CESTAT vide its Final Order No. A/1983-2012/WZB/AHD/2009 dated 27.08.2009 set aside the order-in-original and remanded back the case for fresh decision after allowing the cross examination of witnesses whose statements are relied upon. Therefore, the present case was re-adjudicated vide impugned order whereby Ld. Adjudicating authority confirmed the Cenvat Credit demand of Rs. 16,95,76,390/- and imposed equal amount of penalty on the Appellant. Aggrieved with the said orders, the Appellants are in appeal before us. 03. The learned Advocates Shri Uday Joshi, Shri Aashish Chauhan, Shri Rahul Patel Ms. Neha Agrawal for the appellant submits that department had analysed the consumption of raw material used by the Appellant and manufacturing wastage from the perspective of applicability of SION and accordingly inferred that the Appellant is involved in a mischievous activity of inflating the qty. of raw material and wastages for availing the inadmissible credit on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the reason that the Appellant had neither availed nor intended to avail any benefit under the FTP for the material period. Hence the Appellant had neither applied for fixation of the specific norms nor sought an amendment of SION C-3 from DGFT. It is apparent that the department had grossly erred in enforcing the SION C-3 on the Appellant and inferring that the Appellant had consumed less quantities of the input items and to camouflage that has superficially shown the excess qty, of wastages i.e. aluminium dross. 3.1 He also submits that department had contended that the qty. of purchase and consumption, of Silicon had been accounted extremely less in the books of accounts as against the content of Silicon in the finished goods. The entire case was booked by the department on hypothesis and without going into the technicalities of the manufacturing process, nature of raw materials and finished goods. The objective of such procurements is that the chemistry of the scrap was more or less similar to the chemical composition requirement of the finished goods. The alteration required to meet the chemistry of the final product were done in the furnace by frequent testing of molten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had purity of 90% to 97% is absurd and the entire proceedings on such notion need to scrapped. 3.3 He also submits that the department had completely gone off track while disallowing the admissibility of Cenvat Credit based on the assumption that the finished goods were not manufactured as the consumption of furnace oil was less. The Department had not taken any effort to get the technical assistance from any scientific body or technical literature to substantiate its assumption. Metal recycling is a complicated industry because the raw materials are scraps which contain many different impurities which too changes from lot to lot within the same grade, impurity contents etc, and to remove impurities from the Heat charges, some heats take more time, some take less depending on the quality of scraps, Different Fluxes to remove the different impurities e.g. for magnesium removal from the molten metal MG remove flux is used. Some scraps many contain higher magnesium some may have less and therefore the charge time differs depending on the contents in the scraps. It will also differ on the Temperature control of each heat, type of furnace etc. Department had derived the so called act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tatutory auditors, further substantiate the boanfide of appellant. 3.6 He further submits that department based on the statements of couple of transporters alleged that the Appellant had procured the LRs to substantiate their movement of raw material from supplier to their factory. The Lorry receipts is a title documents as per the Sales of Goods Act 1930 and there is a prime relevance while transporting the goods as the transporter while issuing the LR act as bailee (custodian of goods) and accordingly owns a liability to that extent. The department had completely misconstrued the statements of the representative of transporters. The transporter, M/s Avadh Transport had confirmed that they were frequently transporting the goods for the Appellant and payment has been received by them through banking channel. The department also had relied upon a statement of transporter, M/s Haryana Commercial Cargo Carriers, Delhi wherein they had purported issued LR for 5 paisa/Kg to the Appellant. However, when the said transporter was called for cross-examination, no one turned up and Ld. Commissioner in impugned order held that the address of such transporter is not clear. While the depart ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted by the Appellant to store raw material for the reason that the storage capacity of factory premises is limited. The raw material being automobile scrap occupies, lot of space and therefore this warehouse had been used. Further the other supplier, M/s Metaplast was a 100% EOU and therefore under Excise Control. The statement of Shri Ashish Gupta, authorised signatory of Avadh Transport, and Shri Ramji Singh Manager, Piparia, Silvassa were recorded during the investigation. Shri Ashish Gupta in the cross examination had confirmed that M/s Avadh Transport frequently transported the goods to the factory of Appellant. All payment had been received by them as recorded on the books of account. Further the copies of ledger of M/s Avadh as shared by them with Appellant for account confirmation and couple of sample bills issued by M/s Avadh against supply from Appellant s warehouse to Silvassa factory. When inputs are entered in the statutory records as stipulated under Central Excise law, it is well settled law that the documentary evidence is more reliable then the statements. The denial of Cenvat Credit on the basis of transporter statements and records is not tenable. This issue is w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his letter dated 24.07.2006 addressed to the Superintendent (Preventive) in response to earlier summons has stated that his company had transported the goods for appellant and he had received the payment from Appellant towards such transportation. Further Shri Gaur didn t turn up for cross-examination by the Appellant. 3.10 He also submits that The department had not given any corroborative evidence to support its contention and had not placed any proof in their support that the goods had been diverted by the Appellant to some other place. Neither the revenue had produced any evidence of sale of such goods. The revenue also failed to substantiate the fact that how the finished goods could be manufactured without the procurement and receipt of such raw materials. The revenue also could not produce any evidence that alternative goods were sourced by the Appellant to manufacture their finished goods. The Buyer of the Appellant viz. M/s Jindal Steels , M/s Mukund Steels, M/s Stainless India, etc. in their communication to the department in this matter against summons, had confirmed that they had purchased the finished goods such Copper Ingots, Copper Nickel Base Alloys etc., from th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns and therefore reliance on such third party oral statements or records is untenable. The Appellant hereby states that the goods had been received at their factory at the relevant time and the credit has been correctly taken. There is no allegation that the goods have been diverted to third party. In absence of any such allegation or empirical proof, the demand of irregular Cenvat Credit cannot be sustained. The Invoiced goods have been received and the payments were made by the Appellant and the same has not been denied by the department nor has the investigation brought out any evidence that no payments were made to the suppliers/ transporters. The department has not produced any evidence from where the appellant has procured the said raw materials and how the Appellant had produced the finished goods and has supplied to organized sector. In cross examination proceedings, less than 50% of the witnesses had appeared. Further these witnesses have not produced any evidence towards their ownership or any documentary evidence to substantiate that their vehicle were not used for transportation. Infact none of such witness (vehicle owner) had given any trips sheet or any booking relate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vider of output service. Rule 9 of Cenvat Credit Rules, 2004 deals with the documents and accounts on the basis of which the Cenvat credit can be taken and this includes an invoice issued by a manufacturer, an importer, a first stage dealer or second stage dealer. Sub-rule (2) further stipulates that no Cenvat credit shall be taken unless all the particulars as prescribed under the Central Excise Rules, 2002 or the Service Tax Rules, 1994 are contained in the said document. In case any particulars are missing, Cenvat credit may be taken only with the prior approval of the jurisdictional Asst./Dy. Commissioner of Central Excise, if he is satisfied that the goods or service covered by the document have been received and accounted for in the books of account of the receiver. Sub-rule (4) of the said rule further stipulates that the Cenvat credit in respect of input or capital goods purchased from a first stage dealer or second stage dealer shall be allowed only if such first stage dealer or second stage dealer, as the case may be, has maintained records indicating the fact that the input or capital goods was supplied from the stock on which duty was paid by the producer of such input ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hased from M/s Metal Link Alloys, Daman and M/s N.D. Metals and M/s Kothari Metals. We examine the issues based on the categories indicated above. 5.3 We first take up the issue relating to admissibility of cenvat credit of Rs. 7,22,30,953/-. The case of the department is that Appellant has shown the receipts and consumption of cenvatable raw materials Aluminium Wire rods, Aluminium Ingots, Aluminium scrap, Copper Ingot and scrap, Nickel and Zinc Ingot and scrap etc. in their records for the manufacture of the finished goods without physically receiving and using the same with an intent to evade the payment of central excise duty by availing the cenvat credit of such goods. Appellant have shown excess/more production/generation of Ash, Iron waste, Non metallic waste, manufacturing loss etc., We noticed that the sole reason for this issue is that the inputs/ raw material used by the Appellant for manufacturing their final products are not in line with the declared standard Input Output Norms (SION) described in Foreign Trade Policy. Revenue calculated the production of final products and the consumption of raw materials in the respective products by adopting the DGFT-SION norms a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cision of the Tribunal in the case of M/s. Hindustan Coca Cola Beverages Pvt. Ltd. [2006 (205) E.L.T. 700 (Tri)], the demand was set aside. Similarly in the case of M/s. Ghodavat Pan Masala Products Ltd. [2004 (175) E.L.T. 182 (Tri.-Mum.)], it was observed that theoretical calculations based on minor inputs without tangible, strict, positive, direct and corroborative evidence to show that goods produced in excess removed or transported, the allegations of clandestine removal cannot be upheld. To the same effect is the Tribunal s decision in the case of M/s. Parle Beverages Ltd. [1999 (114) E.L.T. 872 (Tri.)], it was observed that there is no contractual obligation on the part of the assessee to strictly adhere to the formula. The object of the formula is to ensure consistency of the product in different batches and in each bottle of the same batch. It is therefore, more of a working guide than an inflexible requirement in terms of quantity of end-product and it is not permissible to demand duty only on the basis of consumption of a single raw material. In the case of M/s. Nav Karnataka Steels Pvt. Ltd. v. CCE, Bangalore [2008 (225) E.L.T. 454 (Tri. Bang.)], it was observed that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of raw materials from M/s Metal Plast Exim (India) Pvt. Ltd. and M/s Nico Extrusions Pvt. Ltd, Kalyan by relying the records of transporters and statements of transporters. We find that M/s Metal Plast Exim (India) Pvt. Ltd. was a 100% EOU unit and M/s Nico Extrusions Pvt. Ltd. Kalyan was registered warehouse of Appellant. The goods were duly found to have recorded in the Appellant s factory and were consumed in the production. The payment was made through banking channels to supplier and transporters which is not denied. Both the suppliers nowhere stated that they have not supplied the alleged goods to the Appellant. In such case we do not find any reason to disallow the credit to the Appellant. We rely upon the judgment of M/s. Monarch Metals P. Ltd. v. Commissioner of C.Ex., Ahmedabad - 2010 (261) E.L.T. 508 (Tri.-Ahmd.) wherein it was held that credit is available where the assessee produced ample evidence in shape of documentary record to prove that they had actually received inputs from first dealer and made payments through Demand Draft. We also find that Shri Ashish Gupta, Authroised signatory of M/s Avadh Transport during the cross-examination had confirmed that they freq ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... count. Therefore, we find the case on merit is not sustainable due to lack of evidence to establish the allegations. 5.9 The next issue for consideration is regarding the Cenvat Credit demand of Rs. 4,57,79,503 in respect of invoices issued by Supplier M/s Metec Asia Pvt. Ltd., Silvassa. The case of the Revenue is that the Appellant has availed the Cenvat Credit on inputs mainly copper/Nickle, supplied by M/s Metec Asia Pvt. Ltd. without actual receipts of the said goods in their factory and without using the said goods in manufacture of their finished goods. The revenue in support of their allegations rely on the statement of transporters and RTO reports. However, we find that the Revenue failed to establish beyond doubt that the goods received were only on paper and physically there was no receipt of goods by the appellant. The Revenue has not shown anything on record to establish that the goods were not physically received as well as completely ignored the documents and exculpatory statements of the supplier showing that the goods were actually transported. We also find that The Hon ble Gujarat High Court dealing with the issue in the case of Motabhai Iron Steel Industries (s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etal Ind. Ltd., M/s Merchandiser Pvt. Ltd. and M/s Kothari Metals. We find that Ld. Commissioner while confirming the demand in this matter relied on the statements of transporter and He did not consider the statements of suppliers that they had stated and admitted the supply of goods to the Appellant and receipts of payment of goods through banking channel. Moreover it is on records that in the present case all the transporters had been arranged by the suppliers and therefore in our view when the suppliers had admitted the supply of goods, the denial of cenvat credit on the basis of transporters statements not sustainable. The contention of the Ld. Commissioner is that investigation shown that the supplier of the material has not actually supplied the material as the transporter denied the transportation of the material not sustainable in the absence of any corroborative evidences. In this case the appellant's submission is that they had received the material in question from the suppliers, the suppliers in his statement admitted that supply of the material and payments made through banking channel the material was duly entered in the statutory records and issued for manufactu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lly when statements relied upon by the Revenue are contrary to the documentary evidence on record produced by the Appellant. Therefore, the contention of the Adjudicating authority on this issue cannot be accepted. 5.13 We also noticed that in the present case the reliance of third partyi.e transporters documents /statements was placed while confirming demand against present appellant is also observed to be unjustified and unreasonable. It is necessary to check the evidentiary value of the third party evidence. The relevant case law in the case of Bajrangbali Ingots Steel Pvt. Ltd. Suresh Agarwal v. CCE, Raipur in Appeal Nos. E/52062 52066/2018 supports the appellant, which held as follows. 9. The law i.e. as to whether the third party records can be adopted as an evidence for arriving at the findings of clandestine removal, in the absence of any corroborative evidence, is well established. Reference can be made to Hon ble Allahabad High Court decision in the cases of Continental Cement Company v. Union of India - 2014 (309) E.L.T. 411 (All.) as also Tribunal s decision in the case of Raipur Forging Pvt. Ltd. v. CCE, Raipur-I - 2016 (335) E.L.T. 297 (Tri. - Del.), CCE ..... X X X X Extracts X X X X X X X X Extracts X X X X
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