Twenty First Century Wire Rods Ltd vs Commissioner Of Customs, Central ...

IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL,WEST ZONAL BENCH AT MUMBAI

COURT No. II

APPEAL No.E/85623, 85624, 85632 & 85663/13

(Arising out of Order-in-Original No.04/Commissioner/Goa/ Cx/2012-13 dated 30/11/2012 passed by Commissioner of Central Excise, Customs & Service Tax, Goa.)

For approval and signature:

Honble Mr. P.K. Jain, Member (Technical) Honble Mr. S. S. Garg, Member (Judicial)

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 : Yes 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? ========================================

Twenty First Century Wire Rods Ltd., Shri Vinod Goel Shri Darshan Churiwala Appellants Shri Gourav Goel

Vs. Commissioner of Customs, Central Excise, & Service Tax, Panaji, Goa Respondent Appearance:

Shri.Ashok Kumar Singh, Advocate for appellant Shri.V.K.Agarwal, Addl. Comm. (AR) for respondent

CORAM:

Honble Mr. P.K. Jain, Member (Technical) Honble Mr. S.S. Garg, Member (Judicial)

Date of Hearing : 30/06/2015 Date of Decision : /07/2015

ORDER NO

Per: P. K. Jain

1. Brief facts of the case are that the appellants have availed Cenvat credit amounting to Rs.4,49,99,766/- during the period March 2004 to July 2006, on the purported procurement of sponge iron from (i) M/s.Suryaa Songe Iron Ltd., Jaipur, Orissa, (ii) M/s.Ispat Industries Ltd., Raigad, Maharashtra, (iii) M/s.Ispat Godawari Ltd., Raipur, Chattisgarh (iv) M/s.Nisha Enterprises, Vithal Wadi, Mumbai and (v) M/s.C.J. Enterprises Pvt. Ltd. Out of the above mentioned five suppliers, first three are the manufacturers and 4th and 5th are dealers or the C&F agent.

2. The case of the Revenue is that no sponge iron was received from the said manufactures, dealers or the C&F agent. The purchases are bogus, invoices and other documents are fake and fictitious. The case was started based upon an intelligence collected by Central Excise Intelligence and search at the corporate office of the appellants in Mumbai was carried out from where certain incriminating documents and 6 Nos. of computers/Hard disc were seized. Examination of documents revealed wrong and fraudulent availment of Cenvat credit and utilisation thereof by the appellants. During search operations at Goa unit, appellant received a courier containing the purported invoices of Surya Sponge Iron Ltd., even though no such goods were received from them. Investigations were further carried out from the purported suppliers of the sponge iron. These purported suppliers denied having issued any of those invoices or supplied any goods to the appellants. Reference was made to the jurisdictional Assistant Commissioner relating to Surya Sponge Iron Ltd., who after verifying, informed that the invoices recovered from them are not issued by Surya Sponge Iron Ltd. and no duty as indicated in these invoices have been paid by the said company and no sponge iron was sold to the appellant by Surya Sponge Iron Ltd. Assistant Commissioner also sent the copies of the original invoices issued by Surya Sponge Iron Ltd., which were not tallying with the invoices on which appellant took credit. In case of other suppliers, the concerned persons denied having supplied any goods or the invoices. The purchase registers of the main appellant indicated payments for the said invoices of sponge iron through HDFC Bank. Enquiries were made with the HDFC Bank. From the enquiries, it was revealed that no payment has been made to the purported five suppliers as detailed in ledgers. Some of the cheques issued though shown in the ledger as payments made to the purported suppliers but in fact were issued as self cheques and amounts were withdrawn in cash.

3. Statements of Shri Naval Kishore Vasu, General Manager of the appellants firm were recorded on 31/08/2007. During the recording of statement, he was shown a letter written to the jurisdictional Assistant Commissioner of Surya Sponge Iron Ltd. and the reply received. After going through these documents he submitted that copies of the invoices retrieved from their factory are totally different from the copies of the original invoices. Differences in the invoices recovered from the factory and that received from the jurisdictional authorities were elaborated by Shri Naval Kishore Vasu in his statement.

3.1 Later on a number of summons were issued to the Directors appellants No.2, 3 & 4 of the appellant firm. However, they themselves did not appear for tendering their statement. Later on, Shri Naval Kishore Vasu was authorised to appear on behalf of Shri Vinod Goel, the Director of the company and in his statement dated 11/03/2008 he stated that the said illegal activities of taking fraudulent Cenvat credit without purchasing/receiving the inputs in the factory is being carried out as per the directions of Shri Darshan Churiwala, Director and earlier and upto May 2005 under the direction of Shri Vinod Goel, Director of the firm. With regard to the way this activity is carried out he does not know as to how the same is carried. Another person, one Shri KK Agarwal, authorised signatory of the appellant firm, in his statement, recorded on 14/12/2007 stated that he signed all the statutory documents like ER-1, etc. filed with the department. He divulged the details regarding the fraudulent availment of Cenvat credit. He also stated that fictitious transactions were maintained in their Mumbai office under the directions of Shri Darshan Churiwala and Shri Vinod Goel. The said statement of Shri Agarwal was retracted on 14/12/2007. Another summon was issued to Shri Agarwal to appear on 10/01/2008. He did not appear for recording of the statement. However, he sent a letter confirming/reiterating the correctness of his statement dated 14/12/2007.

3.2 The concerned persons of supplying firms, namely, (i) M/s.Suryaa Songe Iron Ltd., Jaipur, Orissa, (ii) M/s.Ispat Industries Ltd., Raigad, Maharashtra, (iii) M/s.Ispat Godawari Ltd., Raipur, Chattisgarh (iv) M/s.Nisha Enterprises, Vithal Wadi, Mumbai and (v) M/s.C.J.Enterprises Pvt. Ltd., confirmed that they had not supplied the sponge iron and the invoices were also not supplied. Summonses dated 03/10/2007, 25/10/2007, 07/11/2007 and 14/03/2008 were issued to the Directors of the appellants firm, Shri Darshan Churiwala and Shri Vinod Goel. They did not appear on some or other grounds. They further authorised Shri Naval Kishore Vasu, the General Manager to appear on their behalf. In the meantime, the two directors applied for anticipatory bail. The Court granted anticipatory bail subject to compliance of certain conditions. The said conditions were not fulfilled by the directors.

3.3 Based upon the investigation, a show-cause notice dated 22/12/2008 was issued to the appellants. During the adjudication proceedings, appellants demanded cross examination of various persons, whose statements were recorded, which was granted by the adjudicating authority.

3.4 Shri KK Agarwal was cross examined, who stuck to his statement. However, he clarified that he joined the company in October 2006 and whatever has been stated by him is true from that time onwards.

3.5 One Shri BP Singh from M/s.Godawari Power & Ispat Ltd., appeared for cross examination. However, on the said date the Advocate for the appellants did not turn up. Other persons, whose statements were relied upon did not turn up in spite of the notices on three different occasions.

3.6 Keeping in view the replies submitted by the appellants, the Commissioner adjudicated the case wherein he confirmed the demand of Rs.4,49,99,766/- imposed equal penalty under Rule 13 of the Cenvat Credit Rules, 2002/Rule 15 of the Cenvat Credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944, confirmed interest under Section 11AB and also imposed a penalty of Rs.50 lakhs each on Shri Vibnod Goel, Shri Darshan Churiwala and also a penalty of Rs.30 lakhs on Shri Gourav Goel. Aggrieved by the said order, the appellants are before us.

4. The case was heard on 04/06/2015 and also on 30/06/2015. The only contention raised by the learned Counsel for the appellant was that they had requested for cross examination of the persons, whose statements have been relied upon by the Revenue and except one person, other persons were not produced by the Revenue. Since whole case is based upon the oral statements, it is absolutely necessary that these persons should be produced for cross examination. The learned Counsel in support of his contention, quoted the following case laws:

a) J&K Cigarettes Vs. CCE  2009 (242) ELT 189 (Del)

b) Slotco Steel Products Pvt. Ltd. Vs. CCE, Delhi

c) Arjandas Metal Industries Pvt. Ltd.Vs. CCE

d) Jay Bhawani Metal Company Vs. CCE & ST Surat

e) CC (General) Vs. M.K .Shipping Services  2014 (3030) ELT 360 (Bom)

f) Patel Engineering Ltd., Vs. UOI  2010 (253) ELT 165 (Bom)

g) UOI Vs. Rajendra Bajaj  2010 (253) ELT 165 (Bom)

5. The learned Additional Commissioner (AR) took us through the show-cause notice and the impugned order and submitted that the present case is a case of absolute fraud wherein the appellants created fictitious invoices and took Cenvat credit on the basis of such invoices. No sponge iron as indicated in the invoice was ever received by them. No duty as indicated in these invoices was paid to the Government and, therefore, there is no question of taking the credit. It was further submitted that they have also manipulated their own records, so as to give an impression that the documents/procedures are genuine and in their own records they even showed as if they have paid for the said goods. However, enquires with the concerned HDFC bank (wherein the appellant has an account and purported payments were made to the purported suppliers of sponge iron) revealed that no payments have been made to the said suppliers. Payments shown against a particular cheque was purported to be paid to Ispat Industries but in reality amount was withdrawn as self in cash. Thus, even in their own ledgers bogus entries were made for payment by the appellants.

5.1 The learned AR further submitted that during the course of investigation, number of summons were sent to the directors/appellant No.2, 3 & 4 to appear on various occasions and they kept on avoiding the same on some or other pretext and thereafter, when the department took approval for the arrest of the directors, they filed anticipatory bail, they did not even honour the Courts directions while granting the anticipatory bail.

5.2 Further, during investigation Appellant No.2, 3 & 4 deputed their General Manager Shri Naval Kishore Vasu to represent them for recording of the statement. However, now they want to cross examine Shri Naval Kishore Vasu. Shri KK Agarwal, authorised signatory stucked to his statement and thus confirmed the fictitious documentation and role of appellant No.2, 3 & 4. It was further submitted that other persons, Shri BP Singh came and presented himself for cross examination. Advocate of the appellants suddenly absented. Even in respect of other persons, the Commissioner had issued notices more than once for cross examination, but they did not appear. Thus, even the conditions stipulated under Section 9D (1) (a) of the Central Excise Act, 1944 are satisfied and hence their statements can be relied upon by the adjudicating authority.

5.3 The learned AR further submitted that the fundamental condition for availment of Cenvat credit is receipt of goods, duty payment on the goods to the Government and the corresponding invoices. In the present case the appellant has neither during investigation nor during adjudication nor before this Tribunal has produced even a single documents evidencing that the sponge iron from the suppliers as indicated in the invoice was received by them. This could have been easily done by them by producing the transport documents and the persons, who had transported the goods even during adjudication proceedings. But no such thing has been shown or done. If purchases were genuine, they would have paid for the goods. No evidence relating payment or details of bank transactions wherein they have remitted the amount to the purported supplier has been submitted by the appellant at any stage. On the contrary Revenue has produced evidence for bogous/fictitious documentation.

5.4 The learned AR further submitted that duty involvement itself is approximately Rs.4.5 crore and the value of the goods would be somewhere around Rs.25 crore and it is not understood what is the difficulty in producing the proof of payment through the banking channel. The very fact that the appellants have not produced any such documents prove that all the transactions are fictitious and bogus.

6. We have considered the rival submissions.

6.1 The main contention of the learned Counsel for the appellant is denial of cross examination of six persons, whose statements have been relied upon in the show-cause notice. In our considered view this contention cannot be examined in isolation but is required to be examined with reference to the scheme of Cenvat credit. This Tribunal in the case of Bhagwati Steelcast Ltd., Vs. CCE, Nashik reported in 2013 (293) ELT 417 has analysed the scope and purpose of certain rules relating to Cenvat credit. Paragraphs No.73.3 and 73.4 from the said judgement is reproduced below:

73.3 The Cenvat Credit Rules, 2004,? deal with the procedure relating to availment of credit. As per Rule 3, a manufacturer or a producer of final products or a provider of taxable service shall be allowed to take credit (hereinafter referred to as Cenvat credit) of the duties specified therein paid on any inputs or capital goods and received by the manufacturer for use in or in relation to the manufacture of final products. Rule 4 of the said Rule stipulates that Cenvat credit in respect of inputs may be taken immediately on receipt of the inputs in the factory of the manufacturer or in the premises of the provider 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 or capital goods and only an amount of such duty on pro rata basis has been indicated in the invoice issued by him. Sub-rule (5) further stipulates that the burden of proof regarding the admissibility of the Cenvat credit shall lie upon the manufacturer or provider of output service taking such credit. Similar provisions existed in Rule 57A of the Central Excise Rules, 1944, Rule 7 of the Cenvat Credit Rules, 2001 and 2002.

73.4 From the above provisions of law,? it becomes evident that to avail Cenvat credit, the inputs or capital goods should have suffered the stipulated duty by the producer/manufacturer of such goods and the goods should be received by the manufacturer availing credit in his factory and the inputs or capital goods so received should be utilised in or in relation to the manufacture of final products. In respect of inputs received from a first or second stage dealer, an additional condition is stipulated to the effect that the inputs or capital goods were supplied from the stock on which duty was paid by the producer of such goods and only an amount of such duty on pro rata basis has been indicated in the invoices issued by him. It is further stipulated that the burden of proof regarding admissibility to Cenvat credit shall lie upon the manufacturer taking such credit. Sub-rule (2) of Rule 7 of the Cenvat Credit Rules, 2001/2002 (as they stood at the relevant time) further stipulated that a manufacturer/producer taking Cenvat credit on inputs or capital goods shall take all reasonable steps to ensure that the inputs or capital goods in respect of which he has taken Cenvat credit are goods on which appropriate duty of excise as indicated in the document accompanying the goods has been paid and the manufacturer shall be deemed to have taken reasonable steps if he satisfies himself about the identity, name and address of the manufacturer/supplier issuing the document specified in the said Rule either from his personal knowledge or on the strength of a certificate given by a person with whose handwriting or signature he is familiar with or on the strength of a certificate issued to the manufacturer or supplier by the jurisdictional Superintendent of Central Excise.

6.2 As mentioned above, the sub-rule (5) the burden of proof regarding the admissibility of the Cenvat credit is on the manufacturers taking such credit. Sub-rule (5) of Rule 7 is reproduced below:

The manufacturer of final products or the provider of output service shall maintain proper records for the receipt, disposal, consumption and inventory of the input and capital goods in which the relevant information regarding the value, duty paid, CENVAT credit taken and utilized, the person from whom the input or capital goods have been procured is recorded and the burden of proof regarding the admissibility of the Cenvat Credit shall lie upon the manufacturer or provider of output service taking such credit.

6.2 The Modvat credit scheme was introduced in 1986 and in the initial phases of the scheme, the manufacturers were required to intimate about the arrival of the raw-materials in the factory to their jurisdictional Central Excise authorities, who in turn were required to verify the inputs received. Further the manufacturers were required to submit copy of the gate passes as evidence of duty payment by supplier of the goods along with the monthly return in order to enable the department to verify the correctness of the Cenvat credit taken. Later on the procedure was simplified and the manufacturers were required to submit intimation and wait for the specified period within which the jurisdictional authorities could physically verify the inputs received. Later on more and more trusts were reposed in the manufacturers/assesses and the requirements of intimation and physical verification was done away with. The invoices being received with monthly return, above certain specified amounts were being verified from jurisdictional authorities from where such invoices were originated. After some years even the requirement of submitting the invoices relating to the credit were done away with. With the stoppage of getting the copies of invoices, this verification was also done away with. All these procedures have been simplified and more and more trusts have been reposed on the manufacturers/assesses. However, this does not imply on the burden of proof regarding the admissibility or correctness is on the department. The burden of proof regarding the admissibility or correctness continues to be on the manufacturer assesses. Sub-rule (5) of Rule 7 very specifically states that the burden of proof related to the admissibility of Cenvat credit shall lie on the manufacturer taking such credit. Thus, in the present case also it is the appellants whose responsibility is to produce proof regarding the admissibility of the Cenvat credit.

6.3 As elaborated by this Tribunal in paragraphs 73.3 and 73.4 in the case of Bhagwati Steelcast Ltd., (supra) that the Cenvat credit can be taken only after the receipt of the inputs in the factory. Secondly, such received goods should be covered by a duty paying invoice. In essence, the goods should be received and the goods should be duty paid and there should be evidence for the same.

6.4 In the present case, the allegation of the Revenue is that the appellant has not received the goods. The invoices are fictitious/bogus and no duty has been paid on such fictitious transactions. In support of these allegations, Revenue has produced evidence from the bank of the appellant that no money has been paid to the purported five suppliers of sponge iron. The least that is expected from the appellant was to produce evidence from the banking channels that the money for the so called as sponge iron purchased was indeed paid to the five suppliers, corresponding to the alleged fictitious invoices. In addition, the appellant could have produced some transportation documents and the transporter to prove that the goods have been transported from the manufacturers or dealers place to the appellants factory. Since no explanation whatsoever is coming forward from appellant, in our view the case against the appellant stands even if the statements given by seven persons are ignored. In view of this position, in our view the contentions of the revenue are correct and the demands of duty, interest and penalty, etc. are in order.

6.5 In addition to the above, we find the conduct of the appellant directors of the appellant company very strange, inasmuch as that number of summonses were issued to them, they did not appear in response to these summonses. They authorised Shri Naval Kishore Vasu, their General Manager to give statements on their behalf, but during the adjudication proceedings they want to cross examine the same person. To our mind this implies cross-examining themselves. Another employee Shri KK Agarwal had appeared for cross examination, he stood by his original statement. Shri BP Singh from Godawari Power & Ispat Ltd. appeared for cross examination but the appellants advocate did not turn up. The Commissioner has issued three notices on three different occasions to call all the witnesses but other five witnesses did not respond. Thus, there would have been undue delay. Keeping in view these facts and the provisions of Section 9D (1) (a) & (b) , in our view the statements made by various persons can be relied upon. The learned Counsel for the appellant has quoted few judgements. We have gone through the said judgements and keeping in view the facts of the present case and above analysis, particularly the fact that in the present situation, burden of proof is on appellants, we find that the facts of the present case are distinguishable and these judgements are therefore, not applicable to the facts of the present case.

6.6 We have already come to the conclusion that even without the statements, the demands for fraudulently availed Cenvat credit will stand. Statement by seven witnesses only fortify the said conclusion. The penalty under Section 11AC is correctly imposed as this is a case of fraudulent availment of Cenvat credit, interest under section 11AB would be payable. As far as the appellant No.2 & 3 are concerned; they were the directors at the relevant time. Their conduct during investigation as also the statements made by Shri Naval Kishore Vasu, General Manager and Shri KK Agarwal, authorised signatory leaves no doubt that the fraudulent availment of Cenvat credit was at their instance alone. Shri Naval Kishore Vasu was authorised to give statement by appellant No.2 & 3 and therefore, in a way the appellant No.2 & 3 have admitted their role in the fraudulent availment of Cenvat credit, we find that penalty imposed are not on the higher side. In the result their appeals are dismissed. As far as appellant No.4 is concerned investigation has not brought out any evidence of his involvement. His appeal is therefore allowed. In the result first three appeals are dismissed and fourth appeal is allowed.

(Pronounced in Court on ..)

(S.S. Garg) Member (Judicial) (P.K. Jain) Member (Technical)

pj

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