Whether any waiver of pre-deposit justifiable for clear cut fraud case?

PJ/CASE-LAW/2015-16/2744

Case:-GOBIND CASTINGS (P) LTD. VERSUSCOMMISSIONER OF C. EX., CHANDIGARH

Citation:- 2014 (307) E.L.T. 520 (P & H)

Brief Facts:-The facts of the present case prima facie disclose an unmitigated fraud perpetuated by the appellant while availing Cenvat credit on raw material allegedly procured by them from various sources, are not inclined to grant any relief to the appellant. The appellant is a manufacturer in non-alloy steel ingots and availed benefit of Cenvat credit on raw material procured by them from various sources. A search of the appellant’s premises revealed that inputs were not received by the appellant and the transactions which formed basis for availing Cenvat credit, were mere paper transactions. The appellant’s supervisor and melter made statements which clearly prove that the material received could not be used for melting. A finding of fact was also recorded that out of 203 invoices, corresponding goods received are not available with regard to 142 invoices. Out of ten transporters, seven were found to be non-existent and three have denied having transported material to the appellant. The registration numbers of four trucks were found to be fake.
By way of this order, tribunal shall decide CEAs No. 56 and 87 of 2013. For the sake of convenience, facts are being taken from CEA No. 56 of 2013.
CEA No. 87 of 2013
The appellant herein challenges order dated 15-4-2013, passed by the Customs, Excise and Service Tax Appellate Tribunal, New Delhi, dismissing its appeal for failure to abide by the order of pre-deposit.
CEA No. 56 of 2013
The appellant herein challenges order dated 7-9-2012, passed by the Customs, Excise and Service Tax Appellate Tribunal (hereinafter referred to as the “CESTAT”), New Delhi, required the appellant to pre-deposit the duty.

Appellants Contention:-Counsel for the appellant submits that order passed by the CESTAT directing the appellant to deposit Rs. 60 lacs, within eight weeks while staying the balance amount of duty and penalty, is erroneous as the CESTAT has failed to take into consideration that the order imposing duty and penalty etc. is null and void for violation of principles of natural justice and disregard to the rights of the appellant. It is further submitted that statements relied by the Assessing Officer while imposing penalty and duty were not supported by authors of these statements and as the appellant was not allowed to cross-examine all the witnesses whose statements form foundation of the assessment order, the impugned order is null and void. It is further submitted that various other witnesses relied upon by the respondents for recording a conclusion relating to evasion of duty, denied their statements during cross-examination, thereby renders the demand of Rs. 81.41 lacs with an equal amount of penalty, null and void. It is further contended that the appellant is unable to pay the duty demanded as is apparent from the balance sheet, appended with CM No. 17053-CII of 2013, as Annexure A-1, it is further contended that as the appellant-firm has incurred losses, is not in a position to pay the amount of pre-deposit as determined by the CESTAT. It is also contended that the appellant is ready to pay Rs. 10 lacs and for the balance amount to furnish a bank guarantee or personal bond as was directed vide order dated 12-7-2013, passed in CWP No. 6867 of 2013 and CWP No. 9202 of 2013, decided on 12-7-2013.

Respondents Contention:-Counsel for the respondents submits that facts of the case reveals that the appellant perpetuated a fraud while availing Cenvat credit on raw material allegedly procured from various sources, though no such material was procured. The statements of the appellant’s supervisor and melter clearly reveal that the material received could not be used by the appellant and out of 203 invoices, there are no corresponding goods receipts showing transportation of raw material. It is further submitted that out of ten transporters, seven were found to be non-existent and three denied having transported material to the appellant. It is contended that despite this fraud, the CESTAT has waived duty over and above Rs. 60 lacs, thereby giving sufficient relief to the appellant. It is further contended that inability of the appellant or its financial hardship to pre-deposit the amount, does not entitle the appellant to any relief particularly as the appellant is accused of perpetuating a fraud while availing Cenvat credit.

Reasoning of Judgement:-The tribunal have heard counsel for the parties, perused the impugned order and find no reason to entertain the appeal much less grant any relief to the appellant whether by reducing the amount of pre-deposit, or allowing the appellant to furnish a bank guarantee or a personal bond. Tribunal may have considered the appellant’s financial hardship, as they are conscious that dismissal of an appeal for failure to deposit the amount of pre-deposit determined, in essence, deprives a party its right of filing an appeal but as facts of the present case prima facie disclose an unmitigated fraud perpetuated by the appellant while availing Cenvat credit on raw material allegedly procured by them from various sources, are not inclined to grant any relief to the appellant. The appellant is a manufacturer in non-alloy steel ingots and availed benefit of Cenvat credit on raw material procured by them from various sources. A search of the appellant’s premises revealed that inputs were not received by the appellant and the transactions which formed basis for availing Cenvat credit, were mere a paper transactions. The appellant’s supervisor and melter made statements which clearly prove that the material received could not be used for melting. A finding of fact was also recorded that out of 203 invoices, corresponding goods received are not available with regard to 142 invoices. Out of ten transporters, seven were found to be non-existent and three have denied having transported material to the appellant. The registration numbers of four trucks were found to be fake. The appellant’s contention that it was not allowed to cross-examine witnesses or that some of the witnesses resiled during their cross-examination, in our considered opinion, does not entitle the appellant to any relief as is apparent from the statement made by the representative of a registered dealer M/s. Ekam International, that no inputs/goods were supplied by them but cheques issued in respect thereof by M/s. Gobind Castings (P) Ltd. were encashed and cash was returned to M/s. Gobind Castings (P) Ltd. In view of what has been recorded hereinabove, tribunal find no reason to hold that the CESTAT committed any error in directing the appellant to deposit Rs. 60 lacs of duty determined by the respondents. The second appeal i.e. CEA No. 87 of 2013 was rightly dismissed for failure to abide by the order of pre-deposit. The appeals are, therefore, dismissed but with no order as to costs.

Decision:- Appeal dismissed.

Comment:- The gist of the case is that no relief can be granted to assessee if it is substantiate that fraud was committed by them. According to Section 35 B of Central Excise Act, 1944 ,the appeal filed to appellate tribunal is not to be entertained if the conditions of stay order have not been fulfilled. In the present case, the assessee has wrongly availed the cenvat credit on the basis of mere paper transactions without actually receiving the inputs and by showing the names fake transporters in the invoices. Consequently, the Tribunal ordered pre-deposit of Rs. 60 Lakhs after exercising the discretion available with it and the High Court found no reason to interfere with the same.

Prepared By:- Neelam Jain

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PJ/CASE-LAW/2015-16/2744

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