Arising Out Of ... vs Commissioners Of Central Excise

[ Arising out of OIA-KKS-42-44-DAMAN-2008 dtd 11.2.2008 Passed by Commissioners (Appeals) of Central Excise, Customs and Service Tax-DAMAN ]

1. M/s Aditya Laminators Pvt Ltd

2. Shri Vivek C Vaidya

3. Shri Yogesh N Desai - Appellant(s)

Vs

Commissioners of Central Excise, Customs and Service Tax-DAMAN - Respondent (s)

Represented by Appellant(s) : Shri Rahul Gajeria, Advocate.

Respondent (s) : Shri J Nagori , Authorised Representative.

For approval and signature :

Mr. P.K. Das, Hon'ble Member (Judicial)

1 Whether Press Reporter may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?

No 2 Whether it should be released under Rule 27 of CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?

No 3 Whether their Lordships wish to see the fair copy of the Order?

Seen 4 Whether Order is to be circulated to the Departmental authorities?

Yes

CORAM :

Mr. P.K. Das, Hon'ble Member (Judicial)

Date of Hearing : 10/02/2015 Date of Decision : 17/04/2015

ORDER No. A/10335-10337 / 2015 dtd 17/4/2015

Per : Mr.P.K. Das,

The relevant facts of the case, in brief, are that the Appellant No.1 was engaged in the manufacture of Plastic Bags and Pouches falling under Chapter 39 of the Central Excise Tariff Act 1985. They were availing cenvat credit benefit under the cenvat Credit Rules. On 7.2.2004 a team of Central Excise Officers of Daman Commissionerate visited the appellants factory and withdrew input invoices available in the factory for further verification/investigation. The said officers recorded the statements of Appellant 2 and 3, the Managing Director and the Authorized Signatory of the appellant company. A show cause notice dtd 14.12.2004 was issued proposing to deny the cenvat credit of Rs 44,10,384.00 wrongly taken alongwith interest and to impose penalty during the period from 3.1.2000 to 25.10.2003. It has also proposed demand of differential duty of Rs 14,266/-alongwith interest and penalty on clearance of 4953.400 kgs of plastic scrap/waste as undervalued. It has proposed imposition of penalty on Shri Vivek C Vaidya, Managing Director of the appellant company and Shri Yogesh N Desai, Manager/Authorized Signatory of the appellant company under Rule 209 A of the erstwhile Central Excise Rule 1944 and presently Rule 26 of the Central Excise Rule 2002. It has been alleged that the appellant company have wrongly taken cenvat credit on the basis of bogus invoices issued by non-existence firms and made false entries.

2. The adjudicating authority confirmed demand of cenvat credit of Rs 44,10,384/- alongwith interest under erstwhile Rules 57 I of the Central Excise Rule 1944, Rule 12 of Cenvat Credit Rule 2001 and 2002 and Rule 14 of the Cenvat Credit Rules, 2004 read with provisions of proviso to sub-section (1) of Section 11A of the Central Excise Act 1944. It has also confirmed the demand of Central Excise duty of Rs 14,266/- alongwith interest. It has also imposed penalty of equal amount of duty on Appellant No.1 company. Penalty of Rs 5,00,000/- and Rs 1,00,000/- were imposed on Shri Vivek C Vaidya, Managing Director and Shri Yogesh N Desai, Manager/Authorized Signatory respectively of the appellant company, Appellant No 2 and 3 herein. By the impugned order, the Commissioner (Appeals) rejected the appeals filed by the appellants. Hence, the appellants filed these appeals before the Tribunal. The appellants also filed applications for incorporation of additional grounds of appeal. They further filed applications for extension of the stay order.

3. Learned Advocate appearing on behalf of the appellants submits that the demand of duty is barred by limitation. He submits that the appellant availed cenvat credit on the basis of the invoices issued by the registered manufacturer/dealer and duly recorded in the cenvat account. It is evident from the record that the inputs were used in the manufacture of final product and cleared on payment of duty. It is contended that at the initial stage, the Superintendent of Central Excise verified and allowed Modvat credit and duly endorsed in the invoices. The Learned Advocate drew the attention of the Bench to the relevant invoices. He further submits that the appellant acted on bonafide manner. There is no material available of alleged irregularity on the part of the appellant and the extended period of limitation cannot be invoked. He strongly relied upon the decision of the Honble High Court of Gujarat in the case of Prayagraj Dyeing and Printing Mills Pvt Ltd vs. Union of India  2013(290)ELT61 (Guj) which was followed by the Honble High Court of Gujarat in the case of Poddar Exports (India) Proprietary Firm Shri Pradeep vs. Union of India  2014.TIOL.1251.HC.AHM.CX. He also relied upon the decision of the Tribunal in the case of Akik Dyechem Pvt Ltd vs. Commissioner of Central Excise, Ahmedabad  2013(290)ELT.273 (Tri.Ahmd).

4. He submits that the credit cannot be denied on the basis of simple report of the Central Excise Officers, as the jurisdictional Superintendent already verified the invoices. He relied upon the decision of the Tribunal in the case of Suraj Lamps and Industries Pvt Ltd vs. Commissioner of Central Excise, Delhi  IV - 2004(178)ELT.967 (Tri.Del.) He also submits that the Misc. application filed by them on additional grounds in so far as the demand of duty under Rule 571 of the erstwhile Rules is liable to be set aside as the said Rule was not in existence at the time of issue of show cause notice. He also contested the demand of duty of Rs 14,266.00 in merit and imposition of penalty.

5. On the other hand, the Learned Authorized Representative for the Revenue reiterates the findings of the Commissioner (Appeals). He submits that admittedly the appellant availed the credit on the basis of the invoices issued by the non-existence firms. It is submitted that the appellant did not dispute this fact and therefore the demand of duty and imposition of penalty are justified. Further, he submits that the Honble High Court of Punjab and Haryana in the case of M S Metals vs. Commissioner of Central Excise, Haryana  2014(309) ELT.241 (P&H) rejected the appeal of registered dealers. In that case, the appellant a registered dealer issued bogus invoice without selling any goods to a firm, on the basis of which the said firm took the cenvat credit. In the present case, the appellant availed credit on the basis of the invoices issued by the registered dealer which has no existence. He further submits that the appellant did not take reasonable steps to ensure the identity of the manufacturer/supplier under Rule 7(2) of the Cenvat Credit Rules 2002/Rule 9 of Cenvat Credit Rule 2004. He relied upon the decision of the Honble High Court of Gujarat in the case of Sheela Dyeing and Printing Mills Pvt Ltd vs. CCE and C., Surat 1  2008(232)ELT.408(Guj). Learned Authorised Representative filed written submission opposing application for additional ground filed by the appellant.

6. After hearing both the sides and on perusal of records, I find that during the period from 3.1.2000 to 25.10.2003, the appellant availed cenvat credit on the basis of invoices issued by the registered manufacturers/dealers as per provisions of erstwhile Central Excise Rules, 1944 and Cenvat Credit Rules 2001/2002. Superintendent of Central Excise defaced some of the invoices at the initial stage, with remark Modvat allowed not to be used again. Subsequently, defacing of invoices were stopped, as not required under the Cenvat Credit Rules. The receipt of input and utilization in the manufacture of final products were duly recorded in the cenvat account. On 7.2.2004 the Central Excise Officer of the Head Quarters visited the appellants factory and withdraw input invoices from the factory for further verification. Jt. Commissioner (Prev.), Central Excise, Mumbai II Commissionerate vide letter dtd 25.6.2004 reported that input supplier M/s Raj Petrochem Ltd, was neither any dealer nor any manufacturer registered under Central Excise, Mumbai II Commissionerate and the same was found to be non-existence. Similarly, the invoice issued by the M/s J V Petrochem Ltd has also got verified from the jurisdictional Dy. Commissioner, Central Excise, Division K III, Mumbai IV Commissionerate and it was reported vide their letter dtd 6.7.2004 that there was neither any manufacturer nor any dealer is registered in the name of J V Petrochem Pvt Ltd. Hence, both the input suppliers are non-existence. On the other hand, on perusal of the records, I find that the Range Superintendent of the appellant company defaced some of the invoices and allowed Modvat Credit at the initial stage as required under the law.

7. Shri Vivek C Vaidya, Managing Director of the appellant Company (Appellant No 2 herein) in his statement dated 27.9.2004 stated that they received the goods with the central excise invoices through the broker from the said input supplier. The central excise invoices were verified and defaced by the Superintendent of Central Excise at the initial stage. Thus, there is no scope to doubt the genuinty of invoices. It is evident that the duty paying documents were found genuine at the time of availing credit, as the Superintendent of Central Excise defaced the invoices, under the law, as it stood during the relevant period. Subsequently, in 2004, the Central Excise officers withdrew the said invoices for further verification and found that the input suppliers are non-existent. In this situation, it cannot be said that the appellant had not taken any reasonable steps under Rule 7(2) of the Central Excise Rules as the invoices were defaced by the Superintendent of Central Excise at the initial stage. There is no material available on record that the appellants had any knowledge of the issue of the invoices by the non-existence firms. It is evident from the record that the invoices contained all the information, such as, central excise duty, PLA entry number, central excise Range number etc. So, there is a force in the submission of the Ld. Advocate that the demand of duty is barred by limitation.

8. Honble High Court of Gujarat in the case of Prayagraj Dyeing and Printing Mills Pvt Ltd (supra) on the identical situation held that the demand is barred by limitation. The relevant portion of the said decision is reproduced below :

 12.?The next question is whether demand of reversal is barred by the period of limitation. In our opinion, in view of our above finding that if the original document is issued even by practising fraud, a holder in due course for valuable consideration unless shown to be a party to a fraud, cannot be proceeded with by taking aid of a larger period of limitation as indicated in Section 11A(1) of the Act. It is now settled law that Section 11A(1) is applicable when there is positive evasion of duty and mere failure to pay duty does not render larger period applicable. In the case before us, it is not the case of the Revenue that the transferees were party to any fraud and therefore, the Revenue cannot rely upon a larger period of limitation. Our aforesaid view finds support from the following decisions of the Supreme Court :

(i) CCE v. Chemphar Drugs & Liniments, reported in 1989 (40) E.L.T. 276.

(ii) Padmini Products v. Collector of Central Excise, reported in 1989 (43) E.L.T. 195.

(iii) Lubrichem Industries Limited v. CCE, Bombay, reported in 1994 (73) E.L.T. 257.

(iv) Nesle (India) Limited v. CCE, Chandigarh, reported in 2009 (235) E.L.T. 577.

13.?We thus find substance in the contention of Mr. Parikh that in the case before us, in the absence of any allegation that the appellants were parties to the fraud, the larger period of limitation cannot be applied, and thus, even if the original document was assumed to be issued by practising fraud, the appellants being holders in due course for valuable consideration without notice, the larger period of limitation cannot be extended in the case before us. In this connection, we may profitably refer to the decision of the Supreme Court in the case of Commissioner of Central Excise, Belapur v. E. Merck India Ltd. reported in 2009 (238) E.L.T. 386 (S.C.) where the Supreme Court took a view that in the absence of a willful misdeclaration on the part of the respondent-assessee, there was no scope of invoking Section 11A of the Act.

9. In the present case, it is evident that the appellant had no knowledge that the input suppliers were not registered with the Central Excise Authorities. The appellant during the investigation, categorically stated that they received the goods accompanied with Central Excise invoice and duty recorded in Cenvat Register. It is further evident from record that inputs were utilized in the finished goods, cleared on payment of duty. There is no material available that the appellant was party to the fraud and the decision of the Honble High Court is applicable in this case.

10. The case laws relied upon by the Learned Authorized Representative for the Revenue are not applicable in the present case. The case of M/s M S Steel (supra) as relied upon by the Learned Authorized Representative is in respect of imposition of penalty on the registered dealer. The decision of the Honble High Court of Gujarat in the case of Sheela Dyeing and Printing Mills Pvt Ltd (supra) as relied upon Learned Authorised Representative is not on the issue of limitation. On the other side, the decision of the Honble High Court of Gujarat in the case of Prayagraj Dyeing and Printing Mills Pvt Ltd (supra) followed in Poddar Exports (India) Proprietary Firm Shri Pradeep (supra) are squarely on the issue of limitation and applicable in the present case.

11. Regarding the demand of Rs 14,266/-, the appellant cleared 4953.400 kg of plastic scraps/waste to Milan Plastics under the cover of Central Excise invoice showing the value of goods of Rs 52,011/- and paid Central Excise duty of Rs 8,322/-. It has been alleged in the show cause notice that during the investigation, the officers found a chit paper that the appellant received a payment of Rs 1,41,142/- from Milan plastics for the goods cleared under the said invoices. The appellant in reply to show cause notice took a stand before the Adjudicating Authority that the said paper would not reveal the clearance of goods in respect of the said invoices. It is stated that the figures mentioned in the rough paper pertained to cash received by the appellant factory from their office for disbursement to the employees. There is no indication undervalue of sales of scraps. The appellant requested the adjudicating authority to produce the seized documents at time of hearing to reveal the truth. The appellant also took same ground before the Commissioner (Appeal). Both the authorities below failed to examine the seized documents. Taking into account of the amount involved and the appeal is old one, there is no reason to remand the matter on issue and the benefit of doubt goes in favour of the assessee.

12. In view of the above discussions, the demand of duty of Rs 44,10,384/- alongwith interest is held barred by limitation. Further, the demand of duty of Rs 14,266/- alongwith interest and the penalties are also liable to set aside. Hence, the impugned order is set aside. All appeals filed by the appellants are allowed. Miscellaneous application for the additional ground are disposed of without going into merit. Applications of extension of Stay Order are dismissed as infructuous.

(Pronounced in the open Court on 17.4.2015)

(P.K. Das) Member (Judicial)

swami ??

??

??

??

2