Can the transporter’s bilty and the mode of payment of the freigjht can be the sole criteria for determination of the fact that whether the goods have actually been received in the factory or not ?

PJ/Case Law/2014-15/2363

Case:- COMMISSIONER OF CENTRAL EXCISE, LUDHIANA Versus C.L.ENGG. LTD.

Citation:-2012 (279) E.L.T. 262 (Tri.- Del.)

Brief fact:-When the appeal was called none was present to represent the respondent. However a letter dated 20-6-2011 form the respondent was seen requesting that the case may be decided based on records available on file.
Respondents are manufacturers of Non-Alloy Steel Ingots. They were procuring their raw materials like MS Scrap, Sponge Iron, Ferro Alloys, etc., from various suppliers including M/s. Amit Steel Traders, Mandi Govindgarh, a registered dealer of such goods. Investigations conducted at the end of M/s. Amit Steel Traders showed that they were issuing invoices without supply of materials thus enabling the person purchasing invoice to take fraudulent Cenvat credit. The main evidence in this regards was the fact that the transport companies which were supposed to have issued the GRs were non-existent. Further in some cases the vehicle numbers were that of oil tanker, scooter, etc., which could not have carried the goods in question.
Statement of Shri Sajjan Kumar, Proprietor of Amit Steel Traders, was recorded wherein he admitted that in many cases the material was sold to SSI units in non-duty paying sector which units did not need any invoice and therefore the excess credit lying in their account was passed on by issuing dummy invoices to units in duty paying sector.
When Shri Sanjay Gupta, Director, was confronted with these facts he stated that his company had actually received the goods and made payments by cheque but he was not able to explain why the vehicle number appearing in the invoices and transport documents were fraudulent. Based on the evidence gathered a Show Cause Notice was issued to the Respondent demanding Cenvat credit for Rs. 223723/- availed by them against such invoices along with interest. Penalty under Rule 15 of the Central Excise Rules also was proposed. The SCN was adjudicated vide order dated 4-3-2009 which con-firmed the demand of Rs. 223723/- along with interest. Further a penalty equal to the said amount was imposed on the respondent under Rule 15 of the Cenvat Credit Rules, 2004. Aggrieved by the order the Respondent filed an appeal with the Commissioner (Appeal). The Commissioner (Appeal) held that the facts of the case is similar to that in the case of Neepaz Steel Ltd. & Others v. C.C.E. - 2008 (230) E.L.T. 218 (P & H) and set aside the demand. Aggrieved by the order of Commissioner (Appeals) Revenue has filed this appeal.

Appellants’ contention:- The ld. DR appearing for revenue submitted that in similar circumstances higher Courts have held that Cenvat credit taken can be recovered. He relied on the following decisions :
(i) Mahesh C. Ka& v. C.C.E.- 2007 (217) E.L.T. 223 (Tri.-Mumbai);
(ii) Rajeev Alloys Ltd. v. C.C.E.- 2009 (236) E.L.T. 124 (Tri.-Del.) upheld by Punjab & Haryana High Court as reported at 2009 (247) E.L.T. 27 (P&H). He argued that in that type of cases, each case should be appreciated on the basis of facts of the case. The facts of the case would clearly show that the Cenvat credit in question was fraudulently taken.

Respondent’s contention:-Nobody was present on behalf of the assessee.

Reasoning of judgment:- The Tribunal, after studying the facts of the case and documents provided to it, stated that they had studied the case of the Neepaz Steel Ltd. (supra) and also explained that
In that case the High Court held that it was a case involving dispute of facts only and since there was no question of law involved the Court did not interfere with the order of the Tribunal. So what is to be seen the decision of the Tribunal reported at 2007 (213) E.L.T. 100 (Tri.- Del.). So this decision was scrutinized. In this decision the Tribunal relied on the findings of the Commissioner (Appeal) recorded as under in para 4 of the Tribunal's order as under:
'4. I find that the Commissioner (Appeals) after going through the evidence on record, held as under: - "The further contention of the appellant is that the department has not disputed the following facts :-
1. Payments for the purchase of the inputs have been made through cheque and demand draft;
2. The inputs in question have been used in the manufacture of final products, which have been cleared on payment of duly;
3. The Department has not been able to prove that any other alternative raw material was received and used in the final products;
4. The RT-I2 return have been assessed finally by the Range officer, which contains all the documents including (the invoices under dispute) on the basis of which the Modvat credit has been availed and utilized".
Further they had added that the Respondent had also taken the plea that they had paid for the inputs by cheque. But it was clearly recorded that payments to the transporters was made in cash. When the allegation was about manipulated transactions just to take credit payment for such transaction through cheque was to be considered as part of manipulation only. Since the dispute was that the goods were not transported and the fact that the transporters were paid in cash does not help the case of the Respondent.
Further the argument that the inputs were used in manufacture and final products cleared on payment of duty cannot be accepted on face value in the absence of ratio of weight of final products to inputs used. When Revenue had prima fade made out a case that goods were not received in the factory of the Respondent, the burden to prove otherwise had shifted to the Respondent and no concrete facts to prove their claim has been put forward. In the case of Neepaz Steel the mode of payment of freight has not been examined.
Further I note in the case of Neepaz Steel the decision has been taken on the basis that the RT-12 return had been assessed finally by the Range Officer, which contains all the documents including (the invoices under dispute) on the basis of which the Cenvat credit has been availed and utilized. The practice of submitting the invoices based on which credit was being taken was stopped w. e. f. 1-7-2001 there cannot be case that such invoices were presented to the department in this case.
On an appreciation of all the facts, the case that the goods were never transported to the factory of the Respondents was established on the basis of preponderance of probability which was the criteria used in deciding this type of economic offences. So the Tribunal of the view that the order of the Commissioner (Appeal) is not legal and proper. So the Tribunal set aside the order and restored the order of the adjudicating authority insofar as the demand of duty from the respondent is concerned. However they noted that the adjudicating authority had not given the option to pay 25% of penalty within 30 days of receipt of the order as provided in Section 11AC. So following the decision of the Delhi High Court in the case of K.P. Pouches v. UOI - 2008 (228) E.L.T. 13 (Del.), they have given an option to the respondent to pay 25% of the penalty amount within 30 days of receipt of the order and if such payment is made penalty will stand reduced to such amount.

Decision:-Appeal partly allowed.

Comment:-the tribunal held that the respondents were not able to provide any firm evidence to support the fact that input goods have been received in their factory and also the vehicle no. mentioned on the bilty/invoice were that of scooters and oil tankers. Thus the demand adjudicated by the adjudicating authority was sustained and the order of Commissioner (Appeal) was set aside.

Prepared by:-Kushal Shah

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PJ/Case Law/2014-15/2363

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