2. The Facts Of The Case Are That The M/S. ... vs Unknown

[Arising out of Order-in- Appeal No. SVS/299 TO 305/NGP-I&II/2007 dated 12/9/2007 passed by the Commissioner (Appeals) Central Excise & Customs, Nagpur]

For approval and signature:

Honble Mr Ramesh Nair, Member(Judicial)

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1. Whether Press Reporters may be allowed to see : No the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?

2. Whether it should be released under Rule 27 of the : CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?

3. Whether Their Lordships wish to see the fair copy : seen of the Order?

4. Whether Order is to be circulated to the Departmental: Yes authorities? ======================================================= Commissioner, Central Excise, Nagpur : Revenue

VS

M/s. Savijay Industries pvt. Ltd. (Now known as Sunvijay Rolling & Engineering Ltd) :

Assessee

M/s. Savijay Industries pvt. Ltd. (Now known as Sunvijay Rolling & Engineering Ltd)

:

Assessee

VS

Commissioner, Central Excise, Nagpur :

Revenue

Appearance

Shri. Rajesh Ostwal, Advocate for the Assesee Shri. Ashutosh Nath, Asstt. Commissioner(A.R.) for the Respondent

CORAM:

Honble Mr. Ramesh Nair, Member (Judicial)

Date of hearing: 12/6/2015 Date of decision: /2015

ORDER NO.

Per : Ramesh Nair

These are four appeals filed by the assessee and one appeal filed by the Revenue against a common Order-in-Appeal No. SVS/299 TO 305/NGP-I&II/2007 dated 12/9/2007 passed by the Commissioner (Appeals) Central Excise & Customs, Nagpur, wherein Ld. Commissioner(Appeals) passed following orders: The Order-in-Original is modified as under

1. Appeal No. 143/07 in respect of M/s. SIPL

(i) Penalty imposed of Rs.53,059/- is set aside.

2. Appeal No. 144/07 in respect of M/s. SREL

(i) Penalty imposed of Rs.46,664/-, 10,546/- is set aside.

3. Appeal No. 146/07 in respect of M/s. SSPL

(i) Penalty imposed of Rs.1,80,889/-, 10,051/- is set aside.

4. Appeal No. 147/07 in respect of M/s. SAPL

(i) Penalty imposed of Rs.1,49,406/-, 2,112/- is set aside.

5. Appeal No. 148/07 in respect of M/s. PIU

(i) Penalty imposed of Rs.2,01,812/-, 3,338/- is set aside.

6. Remaining portion of the Order-in-Original stands confirmed. Appeals are disposed in above terms.

2. The facts of the case are that the M/s. Sunvijay Group company namely M/s. Sanvijay Rolling & Engg. Ltd., M/s. Sanvijay Steels Industries Pvt. Ltd. and M/s. Sanvijay Alloys Pvt. Ltd. were engaged in the manufacture of excisable goods i.e iron and steel rolls falling under Chapter 72 of the scheduled to the Central Excise Tariff Act, 1985. The said units of M/s. Sanvijay group of Industries alongwith their other units and common registered office were visited by surprise by the Central Excise officers on 20/5/2003 to carry preventive checks. During the verification of statutory records, the physical stock of finished goods as well as raw material on which Cenvat credit was availed; it was revealed that there were discrepancies in the stock of finished goods as compared to the recorded balance as well as in the raw material also. Physical verification of stock of finished goods as well as raw material were conducted in presence of independent Panchas and authorized person of M/s. Sanvijay group Industries on 20/5/2003 and 21/5/2003 on each unit and on verification, shortage of finished goods as well as raw material were noticed.

Thus in all, there was a shortage of 220.665 MTs of finished goods valued at Rs.35,01,828/- involving Central Excise duty of Rs.5,60,292/-, 43.044 MTs of raw materials valued at Rs.5,10,330/- involving Cenvat Credit of Rs.81,653/- and of 2,400 Kls of furnace oil valued at Rs.21,600/- involving Cenvat Credit of Rs.2,456/-(Grand Total= 266.109 MT/KL of various Finished goods/Raw Materials valued at Rs.40,33,758/- involving Central Excise Duty Rs.6,45,401/-). The Central Excise Officers also recorded the statements of concerned authorized signatory of the each unit of M/s. Sanvijay Group industries under Section 14 of the Central Excise Act, 1944 who interalia admitted the discrepancies as pointed out by the Department and in confession, the amounts of Rs. 6,45,401/- involved were paid by them. Regarding this shortage, Shri. Sanjay Agrawal, Director & Authorised Signatory of the M/s. Sanvijay Group in his statement recorded under Section 14 of Central Excise Act, 1944 stated that this shortage were due to method of accounting of finished goods. The inputs are received and recorded on actual weight basis as well as the finished goods are dispatched also on actual weight basis.

However, in the panachanama proceedings dated 20/5/2005 and 21/5/2005, the method adopted for arriving at the stock position was as per sectional weight basis. The shortage notices are very negligence when compared to the total turnover made by the units and is within BIS tolerance limits. Accordingly they had also given a letter of payment of duty under protest after said panchanama. During the investigation it was revealed that M/s. M/s. Sanvijay Rolling & Engg. Ltd., M/s. sanvijay Steels Industries Pvt. Ltd. and M/s. Sanvijay Alloys Pvt. Ltd. have taken Cenvat credit of Rs.21,14,189/-, Rs.7,44,260/- and Rs.7,15,827/- respectively without receipt of the input in the respective factories. The credit was availed by the unit whose name is mentioned in the invoices as consignee whereas on investigation it was revealed that the input were received in the some different unit of the group, therefore they have wrongly availed Cenvat Credit. In the adjudication Ld. Adjudicating authority confirmed demand on shortages found in the respective unit and also confirmed Cenvat Credit demand in respect of three units i.e M/s. Sanvijay Rolling & Engg.

Ltd., M/s. Sanvijay Steels Industries Pvt. Ltd. and M/s. Sanvijay Alloys Pvt. Ltd. Aggrieved by the order in original dated 30/3/2007 confirming demand, assessee filed appeal before the Commissioner (appeals) who upheld the demand however dropped the penalty commensurate to the excise duty on the shortages of input and finished goods. Demand of Cenvat Credit in respect of credit taken on debit notes was also confirmed which was admittedly paid by the assessee and they have not contested the same. Aggrieved by the said impugned order the following appeals were filed.

Sr. No. Appeal No. Name of the appellant Duty amounts.

Penalty amount Rs.

Cenvat Credit Inventory shortage Debit Note Total

1 E/1552/07 Deppt. Appeal

42,45,724 42,45,724

2. E/1560/07 M/s. Sanvijay Rolling & Engg. Ltd., 21,14, 189 46,664 10,546 21,71,399 21,14,189

3. E/1561/07 M/s. Sanvijay Steels Industries Pvt. Ltd 7,44,260 1,80,889 10,051 9,35,200 7,44,260

4. E/1562/07 M/s. Sanvijay Alloys Pvt. Ltd.

7,15,827 1,49,406 2,112 8,67,345 7,15,827

5. E/1564/07 Shri. Sanjay Agarwal

5,00,000

Contesting the demand of shortage of inputs and finished goods, demand of Cenvat credit availed without receipt of inputs in the respective unit and penalties thereon. The Revenue also filed appeal No. E/1552/07 for upholding the penalties dropped by the Ld. Commissioner (Appeals) commensurate to the duty demand on shortages and on debit notes.

3. Shri. Rajesh Ostawal, Ld. Counsel for the assessee submits that as regard shortage of various inputs and finished goods the quantum is negligible. It is his submission that shortage is not due to the clandestine removal of the goods, but it is only due to the accounting method and method adopted for taking the stock by the officers. He submits that stock taking was conducted on the basis cross sectional weight whereas the accounting in the records is done by the aseesee on actual weight basis. He submits that difference in the stock is less than 5% which is permissible as per the BIS standard. He also submits that in their own case this Tribunal vide final order No. A/1182-1183/WZB/06.C.II (EB) dated 7/7/2006 held that +/- 5% difference should be ignored and accordingly the demand raised on the difference was dropped. He submits that in the present case also the difference is less than 5%, therefore the judgment of this Tribunal in their own case is squarely applicable, particularly in the fact that it is not the case of the department that the assessee have cleared the goods clandestinely.

As regard the demand of Cenvat Credit confirmed on the ground of non receipt of inputs in the respective units, it is his submission that goods were admittedly received in some different unit but subsequently it was transported and shifted to the units in whose name the invoices was consigned. He submits that though the goods initially wrongly delivered in the different unit but subsequently it was transferred to correct unit and used in the manufacture of final product, therefore Cenvat credit was wrongly denied on this count. He mainly emphasized that if it is presumed that goods have not been received in the correct respective unit then how production was taken out. There is no dispute that the quantity shown as received, the production was taken in accordance with the said received quantity. On the query from the bench regarding the evidence of transportation of the goods from the unit where the goods were said to have been wrongly delivered to the actual unit, he could not produce a single evidence. As regard the departmental appeal on penalties on the shortage, debit note, he submits that since the clandestine removal has not been established and demand is within the normal period, penalties were rightly dropped by the Ld.

Commissioner (Appeals) therefore appeal filed by the Revenue to this effect is not maintainable and same require to be dismissed.

4. On the other hand, Shri. Ashutosh Nath, Ld. Asstt. Commissioner (A.R.) appearing on behalf of the Revenue submits that as regard the parties appeal, he reiterates the findings of the Ld. Commissioner inasmuch as demand on shortage of stock debit note as well as wrongly availed Cenvat credit without receipt of inputs. As regard penalties, he submits that shortage were found in respect of finished goods and input during stock taking and the same was admitted by the director of the assesee/company therefore the same is maintainable. As regard wrong availment of Cenvat credit without receipt of inputs in respective unit, he further submits that appellant have categorically admitted that inputs were first received in different factory and as regard shifting of goods to the correct and respective unit the assessee could not provide any evidence. It is his submission that from the investigation, it is revealed that the invoices on which Cenvat Credit was taken bearing stamp of different unit regarding the delivery of the goods. Since, this is clear evidence was found then assessee had no choice except to take a false stand that inputs received in different factory and subsequently shifted to the correct factory. But, since, this is a fact as no evidence was provided or produced to this effect, merely oral version of the assesee cannot be accepted, therefore demand in respect of Cenvat Credit on the non- receipt of input is correctly confirmed. As regard Revenues appeal which confined to the penalties commensurate to the duty confirmed in respect of debit note, he submits that since the demand is not under dispute and there is suppression on the part of the appellant the equal amount of penalty under Section 11AC was correctly imposed by the original authority and Ld. Commissioner(Appeals) should not have dropped the said penalty therefore the same require to be restored. Ld. A.R. also relied upon following judgments:

(a) Jigar Foundry Vs. CCE,[2015-TIOL-125-HC-AHM-CX]

(b) Goyal Ispat Ltd. Vs. 1. Cestat 1. CCE[2015-TIOL-749-HC-MAD-CX]

(c) Bajrang Petro Chemicals(P) Ltd. Vs. CCE[2014-TIOL-2254-HC-ALL-CX]

(d) Shivkripa Ispat Pvt. Ltd. Vs. CCE[2010(262) E.LT.477(Tri. Mumba)]

(e) CCE Vs. Goyal Ispat Ltd.[2010-TIOL-1684-CESTAT-MD]

(f) Ganpati Rollings Pvt Ltd. Vs. CCE[2014-TIOL-2529-CESTAT-DEL]

(g) Friends Auto India Ltd. Vs. CCE[2004(167)ELT 228(Tri. Del)]

5. I have carefully considered the submissions made by both sides and perused the record.

6. I find that there is no dispute that the entire shortage found in the physical stock taken by the officers is less than 5%. The director of the assessee/company also stated that the difference in stock is only due to the accounting method and not due to the clandestine removal. I have gone through the judgment of this Tribunal in the assessees own case passed vide order dated 7/7/2008 wherein the division bench of this Tribunal has held as under:

Based upon the above appellants were given show cause notice dated 30/07/98 raising demand of duty against them on the allegations of clandestine removal of their final products and proposing imposition of personal penalty. The said show cause notice stands adjudicated by the impugned order of the Commissioner. After hearing both sides duly represented by Shri R. Nambirajan, Ld. Advocate And Shri R.B. Pardeshi, Ld. SDR, we find that the duty demanded can be split into three parts.

(i) Demand of duty of Rs.49491/- is on account of difference in the physical stock entered in RG-1 register on sectional weight basis. Whereas in some cases, where their customers insists on actual weight, they cleared the goods on actual weight. In any case, the shortage being within the range of +/- 5% , should be ignored.

We agree with the above contention of the Ld. Advocate, except for small % of shortage in the final product, which in any case stands explained by the appellants, we find that there is no other evidence on record to show that the appellants had cleared the said goods without payment of duty from their factory. Inasmuch as the shortage is within the range of +/- 5%, we find no justifiable reason to hold against the appellants on this count and to confirm the demand of duty.

From the above clear judgment of this Tribunal in the assessees own case it was held that the shortage in the range of +/- 5 % should be ignored and it is not justified to confirmed demand on this count. I find that aforesaid judgment is squarely applicable in the present case. Accordingly, following the ratio of the above judgment, I drop the demand in respect of shortage found in the physical stock and consequently penalties commensurate to the duty of such shortage also not sustainable. As regard the duty on debit note, the assesse admittedly paid the duty and not contested. In my considered view, the penalties related to duty on debit note is also not maintainable as there is no suppression of facts on the part of the assessee in respect of non payment of duty on debit note, therefore the departments appeal which is limited to penalties on shortage and debit note does not survive and the same is dismissed. As regard the issue that Cenvat credit of Rs.21,14,189/- was wrongly availed by the M/s. Sanvijay Rolling & Engg. Ltd., Rs. 7,44,260/- by M/s. Sanvijay Steels Industries Pvt. Ltd and Rs. 7,15,827 by M/s. Sanvijay Alloys Pvt. Ltd., I find that there is no dispute and it has been admitted by the assessee themselves that inputs were initially received and delivered on different unit but credit was availed by the unit in whose name, invoices were issued.

However appellant could not produce any single evidence regarding re-transportation of inputs from wrong factory to the correct factory therefore it is very clear that assessee have availed Cenvat credit but input was delivered at different factory and it was used in the production by the different factory. Stamp of delivery of goods affixed at the invoices only shows that goods have been delivered in the different factory and not in the assessees own factory, contrary to this no evidence was produced except oral submission that goods were subsequently shifted to the unit. In view of this fact I am of the considered view that demand of Cenvat credit for non-receipt of input against M/s. Sanvijay Rolling & Engg. Ltd., M/s. Sanvijay Steels Industries Pvt. Ltd. and M/s. Sanvijay Alloys Pvt. Ltd. are maintainable. Since the Cenvat Credit was fraudulently availed without receipt of the input the penalties is unavoidably imposable, hence the same is also maintained. As regard the various judgments cited by the Ld. A.R., I am of the view that since the issue of shortage in stock is squarely covered by this Tribunal order in assessees own case, all the judgment cited by the Ld.

A.R. are not applicable. As regard the appeal No. E/1564/07 filed by Shri. Sanjay Agarwal, Director of the assessee/company for waiver of penalty of Rs. 5 lakhs, I am of the view that penalty of Rs. 5 lakhs was imposed considering the total demand and confirmation on the issue of wrong availment of credit without receipt of inputs, shortage of input/finished goods and debit note. However, I dropped the part of the duty in respect of shortage of material, therefore Shri. Sanjay Agarwal, Director of the assessee/company deserves reduction of penalty, therefore I reduce penalty from Rs. 5 lakhs to Rs. 3 lakhs on Shri. Sanjay Agarwal. In view of my above discussion appeals of the assessees and Shri. Sanjay Agarwal is partly allowed in the above terms. The appeal No. E/1552/07 filed by the Revenue is dismissed.

(Order Pronounced in court on____________)

Ramesh Nair Member (Judicial) sk

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