Whether allegation of availing credit without receipt of inputs without granting cross-examination of the vital witnesses proper ?

PJ/Case Law/2013-14/1641

Case:- M/s LMR POLYMERS & SHRI RAJNEESH AGARWAL Vs C.C.E., Daman

Citation:- 2013-TIOL-924-CESTAT-AHM

Brief Facts:-The First appellant is engaged in the manufacture of PVC Compounds and Master Batches falling under Chapter 39 of the Schedule to the Central Excise Tariff Act, 1985 and are availing facility of CENVAT credit of duty paid on inputs and capital goods. Shri Rajneesh Agarwal, the second appellant, is an authorised signatory of the first appellant. A total CENVAT credit of Rs. 42,30,415/- has been denied and demanded from the appellant by invoking proviso to Section 11A(1) of the Central Excise Act, 1944 (the Act) on the ground that the first appellant had not received the inputs but has taken the credit of the same during the period from April 2004 to October 2007. Penalty equal to the CENVAT credit denied and demanded has been imposed on the first appellant and penalty has been imposed on the second appellant. Hence the appellants filed appeal before Tribunal.

Appellant’s Contention:- The appellant submit that M/s DCW Ltd. is having their own consignment agents at Daman duly registered with the Central Excise Authority to act as consignment agents and who are (1) M/s Signet Overseas Ltd., House No. DGGP, 4/A-3, Survey No. 747 & 748, Village - Kalaria, Nani Daman (2) M/s Kamdeep Marketing Pvt. Ltd., Plot No. 4/A-2, Survey No. 747 & 748, Village - Kalaria, Nani Daman. Thus, the above two private limited companies are registered as consignment agents/first stage dealer/second stage dealer with the Central Excise authorities at Daman who are maintaining statutory records for the receipt of the goods and issue of the goods under proper Central Excise Invoices sold to the buyers. The said invoices indicate the vehicle numbers for the physical movement of the goods to the destination of buyers.

The appellant also submit that the distance between the factory of the first appellant and the registered premises of consignment agents is hardly 5 to 7 kilometers in the radius of Daman. The appellant purchased PVC resin from the said consignment agents at Daman under proper Central Excise Invoices indicating the vehicle numbers (tempo umbers) which physically travelled to the factory premises of the appellants and after unloading the said goods, the same were recorded in raw-materials (input) register and the transportation payment for the said tempos were made in cash being small amount and payment vouchers were signed by the drivers. The time taken for transportation by the said tempos is hardly maximum thirty minutes. These payments were taken into account in accounts record by the cashier and also in ledger of the account books. Accordingly, appellants issued the said PVC Resin in production for manufacture of PVC compound and Master batches and the resultant products were recorded in RG-1 Register which were cleared on payment of duty under proper invoices to various customers. The appellants submit that the different vehicles like trucks, tempo which came from distant places to Daman, make local short distance transportation after unloading the goods which they have transported from distance places to Daman.

The appellant further submit that they had received inputs through the said vehicles viz. Tempo, Truck etc. under local transportation in Damn itself as the supplier of the inputs were in Daman and the factory of the receiver of input was also in Daman and the factory of the receiver of input was also in Daman in the radius of 5 - 7 kilometers. The appellants accordingly received the inputs to the factory of the appellants and local transportation charges were paid and the appellants were not required to verify the ownership of the said transporter or to obtain any permission from the owner of the said transport and in routine course the vehicles were hired and goods were physically transported to the factory of the appellants for which payments were made to the drivers and signatures were obtained on the vouchers which were accounted for in the accounts of the company. The investigating officer made inquiry in connection with the said vehicles and on the basis of the report of the RTO office which is not applicable to the facts of the case of the appellants made proposal for denial of the CENVAT credit. Para 11 of the show-cause notice is relevant for the said purpose. There are total 44 transactions as per Annexure-A & B to show-cause notice and none of the transactions are speaking about vehicle registration number (1) GJ-1AV 8222. Thus the remarks to the effect that "Not capable being Bajaj Auto Rickshaw cannot carry the shown quantity of 16 MTs" is not relevant at all (2) As regards DD-03-B-9460, the remarks is that - "Number not existing as vehicle transferred to RTO, Hyderabad on 03.4.2006 while purported transportation shown on 17.7.2006". In this connection, it was submitted that the said vehicle was in Daman who have made local transportations under invoice numbers 183, 184, 185 all dated 17.7.2006 and the payments were made to the drivers by obtaining signatures. Thus, whether it is registered with Hyderabad or Mumbai or Ahmedabad or Daman or Delhi is not relevant to deny the CENVAT credit as the said goods have been received and payment have been made to the driver Babu Mandal obtaining signatures on voucher (3) As regards DD-03-D-9268, the remarks to the effect that - "Number not existing as vehicle transferred to RTO Thane on 19.1.2007 while purported transactions shown on 9.2.2007". This cannot be the ground for denial the CENVAT credit if the number plate is continued by the owner. However, the facts remained that under the said vehicle number, the goods have been received by the appellant and the driver have signed the vouchers for the payment of local transportation. These facts have not been verified either by recording the statement of owner of the vehicles or recording the statement of the drivers. In para 11.2.2 of the show-cause notice, it is stated that based on the statement recorded of owners of the vehicle numbers GJ-5-UU-1168, GJ-5-UU- 0733, GJ-5-UU-2785, DD-03-C-9553, DD-03-C-9264, DD-03-B-9691, DD-03-E- 9743, DD-03-E-9621 & GJ-5-U-733, the local transportation of the goods have been denied without recording the statement of the drivers who are physically dealing with the goods and who have transported the goods to the appellants and received the payment and signed the cash vouchers.

The appellants also filed detailed reply to show-cause notice, produced evidences in the form of vouchers, cash book, ledger etc. and made several submissions and requested for cross-examination of several persons including owner of the tempos/trucks and drivers and the persons of SOL and KMPL to establish that PVC resin was physically transported from the registered premises at Daman of SOL and KMPL to the factory of the appellants under respective tempos indicated on the invoices since the distance between the consignment agent premises and the factory of the appellants is hardly 5-7 kilometers which takes only hardly 20 to 30 minutes time for delivery of the goods. However, the adjudicating authority passed the order confirming the show-cause notice without appreciating the evidences produced on record and without granting the cross-examination of the vital witnesses whose statements have been relied upon against the appellants for the sole purpose of confirmation of the show-cause notice who are as under :-

(1) Bhupendra K. Patel, owner of vehicle No. DD-03-C-9553 & DD-03- C-939

(2) Smt. Madnaben Patel, owner of vehicle No. DD-03-C-9741

(3) The investigating officers who recorded the statements of owners of the said transporters.

(4) Kirti Mahashchandra Kala, Mukesh Sangala, M.D. of M/s SOL

(5) Shri Pankaj Kalani, Chartered Accountant

(6) Drivers of vehicles who physically transported the goods under respective invoices.

It is the grievance of the appellants that even the learned Commissioner (Appeals) did not consider their above submissions and upheld the order of the adjudicating authority.

Respondent’s Contention:-The respondent supports the orders of the lower authorities and submits that this case was based on documents and, therefore, denial of cross-examination would not affect the rights of the appellants. Further, he also submits that non-transportation has been proved by taking the details from RTO.

Reasoning of Judgment:The Tribunal heard both the parties and considered that from the detailed submission made by the appellant, it was found that in some cases, the claim of the appellant that there was a possibility that goods could have been transported emerges. However, by denying cross-examination and re-examination of the evidence with regard to the transportation, these submissions have escaped consideration totally. Further, in case where only NOC had been issued by RTO as submitted, it cannot be said that the vehicle may not have been used. In such a case, evidence available to the department becomes only submission of the owner without any documentary evidence. Therefore, the Tribunal finds considerable force in the arguments. There was a need for consideration as to whether cross-examination of the owners of the vehicles was required in the context of the facts and circumstances in respect of the each vehicle. Further, since the issue relating to SOL is based on data of logbook and statement of Managing Director of the appellant-company, there was a need for consideration of request for cross-examination. On the whole, Tribunal considers that the request for cross-examination has not been dealt with adequately. Similarly, the statement regarding receipt of inputs and distance between the dealer and the appellants and use of local transportation has also escaped attention of the lower authorities.

In these circumstances, The Tribunal considers that the matter is required to be remanded to the original adjudicating authority for fresh consideration of the whole case in the light of the observations made by us above. Needless to say, more detailed appreciation of evidence and consideration of the claims made by the appellants are called for. In view of the above discussion, The Tribunal set aside the impugned order and remands the matter to the original adjudicating authority for fresh adjudication in accordance with law. In the result, the stay petitions also get disposed of and the appeals are allowed by way of remand.

Decision:- Matter remand back to the original adjudicating authority for fresh adjudication.

Comment:- The essence of this case is that without appreciating the evidences produced on record and without granting the cross-examination of the vital witnesses whose statements have been relied upon against the appellants, confirmation of demand by way of denial of input credit is not proper in law.

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PJ/Case Law/2013-14/1641

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