M/S Bajrang Castings Pvt.Ltd vs Commissioner, Central Excise & Service ...

Appeal No.E/10689-10690/2015 [Arising out of OIA No.AHM-EXCUS-002-APP-191 to 198-14-15, dt.20.02.2015, passed by Commissioner (Appeals), Central Excise & Customs, Ahmedabad]

1. M/s Bajrang Castings Pvt.Ltd. 2. Shri Amit R. Bhasin Appellant

Vs

Commissioner, Central Excise & Service Tax, Ahmedabad-II Respondent

Represented by:

For Appellant: Shri Alok Barthwal, Shri R.K. Jain  Advocates.

For Respondent: Shri S.K. Shukla, Authorised Representative

For approval and signature:

Honble Mr. H.K. Thakur, Member (Technical)

1. Whether Press Reporters may be allowed to see the No 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 of Seen the order?

4. Whether order is to be circulated to the Departmental Yes authorities?

CORAM:

HONBLE MR. H.K. THAKUR, MEMBER (TECHNICAL)

Date of Hearing: 13.07.2015 Date of Decision: 17.07.2015

Order No.A/11033-11034/2015, dt.17.07.2015

Per: H.K. Thakur

Appeal No.E/10689/2015 has been filed by the main Appellant M/s Bajrang Castings Pvt.Ltd. against OIA No.AHM-EXCUS-002-APP-191 to 198-14-15, dt.20.02.2015, passed by Commissioner (Appeals-II) Ahmedabad as First Appellate Authority. Appeal No.E/10689/2015-SM is filed by Shri Amit R. Bhasin, who is the Director of the main Appellant.

2. Shri Alok Barthwal (Advocate) and Shri R.K. Jain (Advocate) appeared on behalf of the Appellants. Shri Alok Barthwal argued that main Appellant was the manufacturer of M.S. Ingots before its closure from M.S. Scrap and Ferrous Alloys obtained from different sources. That investigations were conducted at the end of a Broker Shri Bharat Sheth by DGCEI on the grounds that no M.S. Scrap was received and that only documents were obtained by the main Appellant. That according to Revenue, even if the entire payments are made through cheques, but an equivalent amount was received by the Appellant in cash transferred through Angadias after deduction of some commission by the Broker. That certain diaries were recovered from Broker Bharat Sheth which indicate that material against the Cenvatable documents were sold to certain re-rolling mills clandestinely against cash payment as per the investigation. That certain statements of the transporters, employees of Shri Bharat Sheth, few ship breaking units and angadias were recorded by the investigation to rely upon and conclude that all purchase of M.S. Scrap was only on paper and no inputs were received by the main Appellant.

2.1 Learned Advocate argued that the inputs received was M.S. Scrap as per the invoices whereas as per the records of Brokers M.S. Plates were supplied to re-rolling mills. That the diary maintained by the Broker also talk of M.S. Plates and not M.S. Scrap. He furnished a copy of one such Cenvatable invoice. It was his case that even invoice numbers under which main Appellant has received M.S. Scrap is not mentioned in the private records of the Broker. That due to these discrepancies, the statements of the Broker and private diary cannot be relied upon. That no alternative raw material procurement has been shown by investigation for manufacturing undertaken by main Appellant. That there was no excess or shortage of raw materials detected during the entire operation from the Appellant. That there is no statement from the Director or employee of the main Appellant that inputs were not received alongwith the duty paying documents. That no investigation has been done also at the end of re-rolling units to unearth whether they have received M.S. Plates. That Appellants asked for cross-examination of all the third party witnesses, whose statements are relied upon, but no cross-examination was given by the Adjudicating authority. That total amount of CENVAT Credit with respect to 5 ship breaking units is only Rs.3,52,890.00 against a demand of Rs.31,17,904.00. That out of these 5 ship breaking units, 3 ship breaking units have refused having not supplied goods alongwith documents. Learned Advocate made the Bench go through the statements of Shri Satyapal Wilaitiram of M/s Maria Ship Breaking. Shri Maheshbhai Dayal Patel of M/s P. Patel Ship Breaking Co. and Shri Ramesh Agarwal of M/s Hoogly Ship Breakers to argue his case. He also relied upon the following case laws to argue that no case can be made out against the Appellants as no investigation has taken place at the end of recipients of clandestinely diverted inputs i.e. M.S. Patel Steel Industries & Rolling Mills or M/s Panchtantra:-

a) Monarch Metals P. Ltd Vs CCE Ahmedabad [2010 (261) ELT 508 (Tri-Ahmd)]

b) CCE Ludhiana Vs Parmatma Singh Jatinder Singh Alloys Pvt.Ltd.

[2011 (266) ELT 67 (Tri-Del)]

2.2 Learned Advocate emphasized again that in the absence of any cross objection of the witnesses, no case of clandestine activity can be established only on the basis of few statements as held in Basudev Garg Vs Commissioner of Customs [2013 (294) ELT 353 (Del.)] and CCE Daman Vs Dhakad Metal Corporation [2012 (285) ELT 382 (Tri-Ahmd)].

2.3 He further relied upon the following case laws to argue that a case cannot be made only on the basis of few statements of brokers, transporters, angadias and diaries without giving cross-examination:-

a) CCE Coimbatore Vs Rajguru Spinning Mills [2009 (243) ELT 28 (Tri-Che.)]

b) Rhino Rubbers Pvt.Ltd. Vs CCE Bangalore [1996 (85) ELT 260 (Tribunal)]

c) CBI Vs V.C. Shukla [AIR 1998 SC (1406)]

d) TGL Poshak Corporation Vs CCE Hyderabad [2002 (140) ELT 187 (Tri-Che.)]

e) Emmtex Synthetics Ltd Vs CCE New Delhi [2002 (147) ELT 649 (Tri-Del)]

f) CCE Chandigarh Vs Neepaz Steel Ltd [2008 (230) ELT 218 (P&H)]

3. Shri S. Shukla (AR) appearing on behalf of the Revenue argued that various statements recorded during the investigation are corroborated by the diary maintained by the broker. That Shri Amit R. Bhasin also admitted the correctness of the statement of the broker and his employee by perusing those statements. That all the statements were corroborating each other, therefore, request for cross-examination of the witnesses were correctly denied by the lower authorities. Learned AR made the Bench go through Para 32.1 of the OIO to drive home the point that principles of natural justice were not violated in view of Apex Courts decision in Surjeet Singh Chhabra Vs Govt. of India [1997 (89) ELT 646 (SC)]. Learned AR also made the Bench go through Para 34 of the OIO dt.27.06.2014/01.07.2014 to argue that accounts maintained in the diary had complex codes which were decodified by Shri Manish Patel, Accountant of the Broker who was maintaining the said diary. Learned AR also made the Bench go through Para 16 of the OIA to argue that when statements are not retracted then the cross-examination can be denied in view of the case law of Ahmednagar Rolling Mills [2014 (300) ELT 119 (Tri-Mum)]. That First Appellate Authority has also relied upon the case law of Viraj Alloys Ltd Vs CCE Thane-II [2009 (177) ELT 892] and Bhagwati Steel Cast Ltd Vs CCE Nashik [2012 (02) ELT LCX 0200].

4. Heard both sides and perused the case records. The issue involved in these proceedings is whether main Appellant is eligible to CENVAT Credit on the basis of proper CENVAT taking documents when the First Appellate Authority has held that only documents were obtained by the main Appellant and no inputs were accompanied by these documents. For establishing the case, Revenue has recorded the statements of supplier, ship breaker, broker and his employees, transporters and angadias to the effect that only documents were sold to the Appellant and M.S. Scrap which was in the form of M.S. Plates was sold in cash to certain re-rollers. It is the case of the main Appellant that three out of the five ship breakers have not corroborated case of investigation that M.S. Scrap was not supplied to the Appellant or that the same was diverted to certain re-rolling units on cash payments. It is observed from the answers to Q.No.18.8, 19 & 20 of the statement dt.26.07.2013 of Shri Satyapal Wilaitiram Singhal, Director of M/s Mariya Ship Breaking Pvt.Ltd; that investigation repeatedly asked him to confirm that M.S. Plates were sold to rolling mills and only documents were sent to the Appellants. Shri Satyapal W. Singhal has denied to have sold such goods to the rolling units. Similarly, two other shipbreaking units M/s P. Patel Ship Breakers Co. & M/s Hoogly Ship Breakers have not confirmed that only documents were sent to the Appellants. No statements of the rolling mills, whose names cropped up during the investigation, were recorded to confirm that M.S. Plates were received by them. No evidence was brought to the notice of the Bench that those rolling units were also booked for clandestinely manufacturing and clearing of re-rolled product with respect to these consignments received on making payments in cash. There is also no indication as to how Appellants manufactured huge quantities of goods on which duty was paid and how it resourced the inputs. During investigation, no shortage/excess of raw material was noticed. It is difficult to perceive as to how Appellant manufacturers finished goods from air.

4.1 Investigation undertaken by the Revenue no doubt raise a strong presumption on the basis of recorded statements and diary that Appellant may be indulging in some clandestine activity. Manufacturers of M.S. Ingots and rolling products are known to be dealing with commodities prone to evasion but the same notion cannot be the basis to fix all such units on the basis of presumption. In the present case, the entire emphasis is on the statements of third parties to establish the case. Appellant was requesting the Adjudicating authority for cross-examination of all these persons whose statements are relied upon. Three of five ship breaking units denied to have followed the practice suggested by investigation. When statements were the only establishing factors then cross-examination was the only way to assist the Revenue and the arguments of the Appellant also could have been made blunt. First Appellate Authority in Para 16 of the OIA relied upon the case law of Ahmednagar Rolling Mills [2014 (300) ELT 119 (Tri-Mum)] to hold that cross-examination of witnesses was correctly denied by the Adjudicating authority.

4.2 It is observed from Para 9 of this case law, quoted by the First Appellate Authority in Para 16 of the OIA that in the case before CESTAT there were evidences of unaccounted production, purchase of raw materials, statements of the 16 purchasers of finished goods, statements of scrap dealers who supplied scrap in cash etc. After considering such corroborative evidences, CESTAT held that cross-examination of witnesses was not required. However, that is not the factual matrix in the present proceedings where only a diary and statements of some persons whose cross-examination has not been allowed, have been made available. On this issue, Honble Delhi High Court in the case of Basudev Garg Vs Commissioner of Customs [2013 (294) ELT 353 (Del)] held as follows:-

10.?Insofar as the general propositions are concerned, there can be no denying that when any statement is used against the assessee, an opportunity of cross-examining the persons who made those statements ought to be given to the assessee. This is clear from the observations contained in Swadeshi Polytex Ltd. (supra) and Laxman Exports Limited (supra). Apart from this, the decision of this court in J&K Cigarettes Ltd. (supra) clinches the issue in favour of the appellant. In that case, the validity of Section 9D of the Central Excise Act, 1944 was in question. ....

14.?The Division Bench also observed that though it cannot be denied that the right of cross-examination in any quasi judicial proceeding is a valuable right given to the accused/Noticee, as these proceedings may have adverse consequences to the accused, at the same time, under certain circumstances, this right of cross-examination can be taken away. The court also observed that such circumstances have to be exceptional and that those circumstances have been stipulated in Section 9D of the Central Excise Act, 1944. The circumstances referred to in Section 9D, as also in Section 138B, included circumstances where the person who had given a statement is dead or cannot be found, or is incapable of giving evidence, or is kept out of the way by the adverse party, or whose presence cannot be obtained without an amount of delay and expense which, under the circumstances of the case, the Court considers unreasonable. It is clear that unless such circumstances exist, the Noticee would have a right to cross-examine the persons whose statements are being relied upon even in quasi judicial proceedings.....

Honble Delhi High Court while making above observations relied upon Apex Courts decisions in the case of Lakshman Exports Ltd Vs Collector [2002 (143) ELT 21 (SC)] and Swadeshi Polytex Ltd Vs Collector [2002 (122) ELT 641 (SC)].

4.3 In another case of CBI Vs V.C. Shukla [AIR 1998 SC 1406] Apex Court held that evidentiary value of correct and authentic entries in certain book of accounts, cannot fix the liability of a person in the absence of independent evidence of their trust worthiness. Honble Supreme Court under this case law made following observations in Paras 36 to 39 of the judgment:-

36. The same question came up for consideration before different High Courts on a number of occasions but to eschew prolixity we would confine our attention to some of the judgments on which Mr.Sibal relied. In Yesuvadiyan v. SubbaNaicker, AIR 1919 Madras 132 one of the learned Judges constituting the Bench had this to say:

"S. 34, Evidence Act, lays down that the entries in books of account, regularly kept in the course of business are relevant, but such a statement will not alone be sufficient to charge any person with liability. That merely means that the plaintiff cannot obtain a decree by merely proving the existence of certain entries in his books of account even though those books are shown to be kept in the regular course of business. He will have to show further by some independent evidence that the entries represent real and honest transactions and that the moneys were paid in accordance with those entries. The legislature however does not require any particular form or kind of evidence in addition to entries in books of account, and I take it that any relevant facts which can be treated as evidence within the meaning of the Evidence Act would be sufficient corroboration of the evidence furnished by entries in books of account if true.

While concurring with the above observations the other learned Judge stated as under:

"If no other evidence besides the accounts were given, however strongly those accounts may be supported by the probabilities, and however strong may be the evidence as to the honesty of those who kept them, such consideration equid not alone with reference to S. 34, Evidence Act, be the basis of a decree."

37. In Beni v. BisanDayal, AIR 1925 Nagpur 445 it was observed that entries in books of account are not by themselves sufficient to charge any person with liability, the reason being that a man cannot be allowed to make evidence for himself by what he chooses to write in his own books behind the back of the parties. There must be independent evidence of the transaction to which the entries relate and in absence of such evidence no relief can be given to the party who relies upon such entries to support his claim against another. In HiraLal v. Ram Rakha, AIR 1953 Pepsu 113 the High Court, while negativing a contention that it having been proved that the books of account were regularly kept in the ordinary course of business and that, therefore, all entries therein should be considered to be relevant and to have been proved -said that the rule as laid down in Section 34 of the Act that entries in the books of account regularly kept in the course of business are relevant whenever they refer to a matter in which the Court has to enquire was subject to the salient proviso that such entries shall not alone be sufficient evidence to charge any person with liability. It is not, therefore, enough merely to prove that the books have been regularly kept in the course of business and the entries therein are correct. It is further incumbent upon the person relying upon those entries to prove that they were in accordance with facts.

38. The evidentiary value of entries relevant under Section 34 was also considered in HiralalMahabirPershad, (ILR 1967 1 Punj 435) (supra) I. D. Dua, J. (as he then was) speaking for the Court observed that such entries though relevant were only corroborative evidence and it is to be shown further by some independent evidence that the entries represent honest and real transactions and that monies were paid in accordance with those entries.

39. A conspectus of the above decisions makes it evident that even correct and authentic entries in books of account cannot without independent evidence of their trustworthiness; fix a liability upon a person. Keeping in view the above principles, even if we proceed on the assumption that the entries made in MR 71/91 are correct and the entries in the other books and loose sheets (which we have already found to be not admissible in evidence under Section 34) are admissible under Section 9 of the Act to support an inference about the formers' correctness still those entries would not be sufficient to charge Shri Advani and Shri Shukla with the accusations levelled against them for there is not an iota of independent evidence in support thereof. In that view of the matter we need not discuss, delve into or decide upon the contention raised by Mr.Altaf Ahmed in this regard. Suffice it to say that the statements of the four witnesses, who have admitted receipts of the payments as shown against them in MR 71/91, can at best be proof of reliability of the entries so far they are concerned and not others. In other words, the statements of the above witnesses cannot be independent evidence under Section 34 as against the above two respondents. So far as Shri Advani is concerned Section 34 would not come in aid of the prosecution for another reason also. According to the prosecution case itself his name finds place only in one of the loose sheets (Sheet No.8) and not in MR 71/91. Resultantly, in view of our earlier discussion, Section 34 cannot at all be pressed into service against him.

5. In view of above settled proposition of law, a diary recovered from the broker and few statements alone cannot be made the basis for denying CENVAT Credit to the Appellant in the absence of any cross-examination of the third party witnesses given. Further, there is no evidence of alternative purchase of raw material by the Appellant for manufacture of goods cleared on payment of duty during the relevant period. On this issue, Punjab & Haryana High Court in the case of CCE Chandigarh Vs Shakti Roll Cold Strips Pvt.Ltd. [2008 (229) ELT 661 (P&H)] has allowed credit. Appeal against this order filed by the Department was dismissed by Apex Court [2009 (242) ELT A 83 (SC)]. CESTAT Chennai in the case of T.G.L. Poshak Corporation Vs CCE Hyderabad [2002 (140) ELT 181 (Tri-Che.)] also held that a case cannot be made only on the basis of note books maintained by the workers unless supported by corroborative evidence with regard to purchase of material, seizure of goods, money flow back etc. No cash has been seized any where when huge cash transactions are alleged to have been made.

6. In view of the above observations, appeals filed by the Appellants are allowed with consequential relief, if any.

(Pronounced in Court on 17.07.2015)

(H.K. Thakur) Member (Technical)

cbb 10