Hon'ble Judges/Coram:
Rachna Gupta ORDER
Rachna Gupta, Member (J)
1. The present appeal has been filed to assail the order of Commissioner (Appeals) bearing No. 174-179/2019 dated 06.06.2019. The relevant facts of adjudication, in brief, are as follows:
That the appellants are engaged in the manufacture of copper ingots. The Department initially received the information through Director General of Central Excise Intelligence, Delhi Zone unit (DGCEI). Show cause notice dated 2.3.2016 issued to M/s. Chandra Proteco Ltd., Silvassa on the basis of fraudulent availment of CENVAT Credit on the strength of Cenvatable invoices raised by M/s. Sypher Impex Alloys Pvt. Ltd. Bhiwadi, Alwar, against which the no goods as that of copper ingots were received by them physically in their factory premises. On the basis of the said show cause notice, the information was called from the Additional Commissioner (AE) Central Excise Commissionerate Alwar and pursuant to the reply response to that information that Show Cause Notice dated 25.5.2017 was issued to the M/s. Sypher Impex Alloys Pvt. Ltd. Prior to issuing the said Show Cause Notice, there was already a search in the premises of M/s. Sypher Impex Alloys Pvt. Ltd. on 09.04.2013 with Panchnama of the even date. During investigation it was observed that M/s. Sypher Impex Alloys Pvt. Ltd. has issued the invoice bearing No. 67, 69 and 90 dated 8.6.2012, 10.6.2012 and 2.7.2012 respectively of the appellant herein involving CENVAT Credit amounting to Rs. 5,82,384/- however, without supply of any material. Resultantly, a show cause notice bearing Number 1145 dated 28.6.2017 was served upon the appellant as well proposing the recovery of said amount of CENVAT Credit along with the interest of the proportionate penalties upon the appellants company as well its Managing Director and the authorised signatory. The Director of the M/s. Sypher Impex Alloys Pvt. Ltd. Shri Yogesh Singh has also been made the co-noticee. The said proposal was initially confirmed vide Order-in-Original No. 32/2018 dated 16.7.2018. The appeals thereof have been rejected vide the order under challenge. Being aggrieved the appellant is before this Tribunal.
2. I have heard Shri Bipin Garg and Ms. Kainaat, learned Counsels for the appellant and Shri Ravi Kapoor, learned Departmental Representative for the Department.
3. Learned Counsel for the appellant has mentioned that appellants herein have wrongly been involved in the present case. It is submitted that CENVAT Credit of inputs received in the factory of the appellant was taken on the basis of invoices prescribed under Rule 11 of Central Excise Rules, 2002 issued by M/s. Sypher Impex Alloys Pvt. Ltd. It is mentioned that once they have received the inputs under the cover of valid and prescribed invoices, same was more than sufficient to believe that the said M/s. Sypher Impex Alloys Pvt. Ltd. has manufactured such inputs more so, for the reason that the said supplier was duly registered under Central Excise for manufacturing of impugned goods. The findings that the appellants have not received inputs in their factory and have not used such inputs in or in relation to manufacture of their final products are alleged to be baseless. Duty paid invoices were duly been shown to the Investigating officer. It was only duly shown that such invoices have appropriately been accounted for in appellants statutory CENVAT Credit account registers. It is impressed upon that there is no evidence as was collected from the appellants premises to prove the above said allegations against the appellants. There is no denial to the fact that the impugned invoices are consigned to appellants factory. The findings of the adjudicating authority below have mentioned based upon the statements recorded by the third parties upon the documents recovered from the third party premises. Reliance has wrongly been placed to fasten the liability upon the appellants. Learned Counsel has emphasised upon the several statements recorded at the time of investigation mentioning that none of them have uttered even an iota of doubt about the appellants to not to have received the inputs from M/s. Sypher Impex Alloys Pvt. Ltd. The deposition that Director of M/s. Sypher Impex Alloys Pvt. Ltd. Shri Yogesh Singh was in the habit of generating fake invoices is not sufficient to prove that the invoices issued in the name of appellants were also fake. Order accordingly is prayed to be set aside. Appeal is prayed to be allowed.
4. To rebut the submissions learned Departmental Representative has impressed upon massive investigations carried out by the Department to unearth the racket of issuing CENVAT Creditable invoices with an intent for passing the ineligible CENVAT Credit to appellants manufacturers without supplying the goods. The same has resulted in fake CENVAT Credit even by the appellants which is very much contravention of CENVAT Credit Rules, 2004. Hence there is no infirmity in the order passed by the Commissioner (Appeals). The appeals in hand is prayed to be dismissed.
5. After hearing the rival contentions perusing the entire records, I observe and hold as follows:
The investigation in the present case originated with the search in the premises of M/s. Sypher Impex Alloys Pvt. Ltd. way back in the year 2013 and when the Show cause notice issued to said M/s. Sypher Impex Alloys Pvt. Ltd. on 25.5.2017, it has been alleged against the said company that M/s. Sypher Impex Alloys Pvt. Ltd. had conducted only paper transaction for showing the purchase of copper scrap with the sole intention of generating CENVAT Credit and passing the same to various firms. CENVAT Credit of more than Rs. 12,84,36,617 was alleged to have been passed on by the said company and their Director Shri Yogesh Singh during the period of less than 10 months including the passing of CENVAT Credit amounting to Rs. 5,82,384/- to the present appellant based on three invoices of 8.6.2012, 10.6.2012, 02.07.2012 without any finished goods manufactured and cleared by M/s. Sypher Impex Alloys Pvt. Ltd.
While investigating the said allegations, several statements were being recorded including statement of Shri Praveen Naruka. The statement of Shri Satender Sharma authorised signatory of M/s. Sypher Impex Alloys Pvt. Ltd. who admitted that no raw material have ever been allotted or housed in the company. In addition, he stated that the documents related to purchase of raw material were mainly received from M/s. Skyward Rolling & Alloys Ltd. and M/s. Star Delta Exim (P) Ltd., however without receipt of goods. The statement of Shri Yogesh Singh, Director of M/s. Sypher Impex Alloys Pvt. Ltd. was repeatedly recorded where he had admitted that he has no trading activity in his company in Bhiwadi since March, 2013. Infact the Central Excise registration was also surrendered on 20.5.2013, He specifically admitted about not supplying any material to M/s. Chandra Proteco Ltd. There is no mention about any such arrangement of M/s. Sypher Impex Alloys Pvt. Ltd. with the present appellant. No movement of vehicle was at all involved in case of said company. Only a payment used to be made to the transporter through cheque for the same amount mostly to give back in cash and transporters and for issuing their GRs. Issue of sale invoice and payments relating as stated to be handled by Shri Pawan Gupta of M/s. Star Delta acknowledge to be authorised signatory Statement of Shri Banwari Lal Sharma, the transporter was also recorded who stated that he has issued bilties for transport of goods to M/s. M/s. Sypher Impex Alloys Pvt. Ltd. from Bhiwadi to Bhiwadi, Bhiwadi to Jaipur and Bhiwadi to Delhi and nowhere else. The present appellants are based in Alwar. Though this transporter has also admitted that all the GRs used to be issued by Shri Yogesh Singh out of book of GRs provided by the transporter and the transporter used to receive Rs. 100/- per biltie. This witness stated that the blank bilties books of M/s. Chauhan Transport service was also provided Shri Yogesh Singh who was the owner of not only of M/s. Shri Lord Venkateshwar Metal and Alloy Company, Khushkhera, Alwar but also of M/s. Star Delta Exim Pvt Ltd. Khushkhera, Alwar M/s. Sypher Impex Alloys Pvt. Ltd., Bhiwadi, M/s. Skyward Rolling and Allows Pvt Ltd. Khushkhera, Alwar. Again there is no mention about any of the present appellants to have been involved in any of the arrangements between M/s. Sypher Impex Alloys Pvt. Ltd. and Shri Yogesh Singh and the transports or the other companies who would have received the cenvatable invoices from said Shri Yogesh Singh/M/s. Sypher Impex Alloys Pvt. Ltd. without delivery of goods so as to fraudulently avail wrong CENVAT credit but none of the statements have specifically pointed about the similar involvement of any of the appellants who otherwise have been alleged by the Department. There also have been a statement of Shri Praveen Naruka who was the owner of premises which was existing manufacturing unit of M/s. Sypher Impex Alloys Pvt. Ltd. He has acknowledged that though some trading machines were installed in the premises, but were neither seems to have been used in any trading, or was noticed by him, no fresh machine was got installed in the said premises and he has never seen any truck being loaded or unloaded by any type of finished goods from/in the premises of M/s. Sypher Impex Alloys Pvt. Ltd. Statement of Shri OP Sharma authorised signatory of Trishul Metal Industries Pvt. Ltd. was also recorded by the Department on 07.06.2017 who has specifically mentioned that M/s. Trishul Metal Industries has purchased the raw material from manufacturers/registered dealers/importers which they were using for manufacture of their own final product. He stated to have purchase of 10.133 MT of copper ingots from M/s. Sypher Impex Alloys Pvt. Ltd., however against the proper invoice and the payments were made by them with all the transactions duly recorded in their record maintained in the course of their business. He stated that CENVAT credit has been availed on the basis of those invoices against which the material was duly received by the appellant. The documents as stated that all invoices purchase register CENVAT Credit register ledger bilties were duly been submitted to the Department proving impugned invoices as genuinely purchased raw material which got reimported the genuine credit of Rs. 5,82,384/-.
6. From the entire above deposition, it is clear that there is no evidence to prove that the appellant have not received material from M/s. Sypher Impex Alloys Pvt. Ltd through the invoices No. 67, 69 and 90 dated 8.6.2012, 10.6.2012 and 2.7.2012 respectively. Irrespective Shri Yogesh Singh Director would have been involved in the practice of issuing fake invoices for permitting the purchasers of raw material to have fraudulent CENVAT Credit but there is no iota of any positive evidence for involvement of the present appellant in the said fraudulent availment. The Department has failed to falsify the statement of Shri OP Sharma and to falsify the documents produced by them for proving the transactions of impugned invoices as genuine.
7. Resultantly it stands clear that the confirmation of demand against the appellant has been confirmed based on the third party evidence. Since the sole challenge to the order is its reliance upon third party evidence, it is necessary to check the evidentiary value of the third party evidence. The relevant case law in the case of Bajrangbali Ingots & Steel Pvt. Ltd. & Suresh Agarwal vs. CCE, Raipur in Appeal No. E/52062 & 52066/2018 heard on 16.11.2018, which is held as follows:-
"9. The law i.e. as to whether the third party records can be adopted as an evidence for arriving at the findings of clandestine removal, in the absence of any corroborative evidence, is well established. Reference can be made to Hon'ble Allahabad High Court decision in the case of Continental Cement Company Vs. Union of India - MANU/UP/1995/2014 : 2014 (309) ELT 411 (All.) as also Tribunal's decision in the case of Raipur Forging Pvt. Ltd. Vs. CCE, Raipur-I - MANU/CE/0141/2016 : 2016 (335) ELT 297 (Tri.-Del.), CCE & ST, Raipur Vs. P.D. Industries Pvt. Ltd. - MANU/CE/0936/2015 : 2016 (340) ELT 249 (Tri.-Del.) and CCE & ST, Ludhiana Vs. Anand Founders & Engineers - MANU/PH/3994/2015 : 2016 (331) ELT 340 (P&H). It stand held in all these judgements that the findings of clandestine removal cannot be upheld based upon the third party documents, unless there is clinching evidence of clandestine manufacture and removal of the goods."
8. It is well settled law that there has to be some concrete evidence which would show clandestine manufacture of goods, as was reiterated by Tribunal, Delhi in the case of Commissioner of Central Excise & Service Tax, Raipur vs. P.D. Industries Pvt. Ltd. reported as MANU/CE/0936/2015 : 2016 (340) ELT 249 (Tri.-Del.). Earlier also in the case of Continental Cement Company vs. Union of India reported as [MANU/UP/1995/2014 : 2014 (309) ELT 411 (All.)], Hon'ble High Court of Allahabad has held:-
"12. Further, unless there is clinching evidence of the nature of purchase of raw materials, use of electricity, sale of final products, clandestine removals, the mode and flow back of funds, demands cannot be confirmed solely on the basis of presumptions and assumptions. Clandestine removal is a serious charge against the manufacturer, which is required to be discharged by the Revenue by production of sufficient and tangible evidence. On careful examination, it is found that with regard to alleged removals, the department has not investigated the following aspects:
(i) To find out the excess production details.
(ii) To find out whether the excess raw materials have been purchased.
(iii) To find out the dispatch particulars from the regular transporters.
(iv) To find out the realization of sale proceeds.
(v) To find out finished product receipt details from regular dealers/buyers.
(vi) To find out the excess power consumptions.
13. Thus, to prove the allegation of clandestine sale, further corroborative evidence is also required. For this purpose no investigation was conducted by the Department."
9. I further observe that the document recovered from the appellant premises shows that the appellant had maintained a record about the invoices being received from various companies whereupon the appellant has availed the Cenvat Credit. Merely because the company issuing invoice was found non-existent, the appellant could not be denied the availment of Cenvat Credit thereupon unless and until his involvement in terms of his knowledge about such non-existence and about the invoice to be bogus is not proved on record. Otherwise also there is no denial that the appellant has cleared his final product on payment of duty. In such circumstances and that the invoices were containing all the particulars as are required under Rule 9 of Cenvat Credit Rules and that the appellant was also making the record of all those details. The allegations based on the statements given by other manufacturers, first or second stage dealers or even by the transporters cannot be read against the appellant. I draw my support from the decision of Hon'ble High Court of Allahabad in the case of Commissioner of Central Excise, Customs and Service Tax vs. Juhi Alloys Ltd. reported as [MANU/UP/0061/2014 : 2014 (302) ELT 487 (All.)] where it was held that though the invoice of manufacturer issued in the name of registered dealers was found fake, though the manufacturer of import was not found existing but it would be impractical to require the assessee to go behind the records maintained by the first stage dealer. Once assessee is found to have acted with all reasonable diligence in its dealings within the meaning of Rule 9(3) of Cenvat Credit Rules, 2004 will amount to casting an impossible or impractical burden on the assessee and same would be contrary to the rules. Tribunal, Chennai also in the case of Adhi Alloys Pvt. Ltd. vs. CCE, Ludhiana reported as [MANU/CJ/0120/2016 : 2017 (346) ELT 113] has held that demand on the grounds of invoices being issued by non-existent dealer without delivering goods, in absence of any corroborative 10 E/51045 & 51044/2019 [SM] evidence to show that assessee has not received goods, cannot be confirmed and Cenvat Credit cannot be denied to such assessee. I further observe that despite the investigation in the present case began with the information against M/s. High Tides Infra Project Pvt. Ltd. But no penalty has been imposed on said M/s. High Tide Infra Project.
10. Imposition of penalty of Rs. 5 Lakhs on Shri Pradeep Kumar Aggarwal whose statement has mainly been relied upon by the Department and that he has not challenged the said imposition cannot be a ground to confirm the disallowance of Cenvat Credit to the appellant. Final Order No. 50426-50430/2019 dated 27.03.2019 in the case of Ashok Sharma etc vs. CCE, Raipur has also been brought to my notice. The companies involved herein i.e. High Tides Infra Project Pvt. Ltd., RMS Steel Tech Pvt. Ltd., Jetking Trading and Agencies, Singh Materials & Infratech etc. were the companies in the said decision wherein it has been held that when sufficient document is produced by the appellant to prove the physical entry of inputs in the assessee's premises along with the ledger account and RG-23 A Register maintained by the assessee along with the invoices the burden is upon the Revenue to prove that it was merely a paper transaction and goods were not received by assessee appellant. It was held by this Tribunal in the said Final Order that Revenue has failed to produce such a record. Per contra, there is apparent compliance of Rule 9, CCR 2004 on part of the appellant. The allegations based on the fact that manufacturers as that of M/s. High Tides Infra Project Pvt. Ltd are found non-existent have been set aside.
11. In the case of Jindal Drugs Pvt. Ltd. vs. UOI reported as [MANU/PH/1117/2016 : 2016 (340) ELT 67 (P & H)] Similar are the facts for the present appeal. Hence I have no reason to differ from the above findings.
12. Above all, it becomes clear that entire case of the Department is on the basis of statements of witnesses who were never allowed to be cross examined by the present appellants. There is no other material with the Revenue to justify its findings against the appellants. Withholding the opportunity to cross examination to the appellants definitely amounts to violation of principles of natural justice and the statutory mandate of section 9D of Central Excise Act, 1944 which becomes another reason for nullifying the impugned order. The procedure prescribed under section 9D of Central Excise Act is required to be scrupulously followed as was held by Hon'ble Delhi High Court in the case of JK Cigarettes Ltd. vs. CCE reported as [MANU/DE/2136/2009 : 2009 (242) ELT 189].
13. Hon'ble Apex Court has also in the case of Andaman Timber Industries vs. Commissioner of C. Ex., Kolkata-II reported as MANU/SC/1250/2015 : 2015 (324) ELT 641] has held that non compliance of the provisions of section 9D and section 33 of Central Excise Act, 1944 nullify the order confirmed in demand.
14. In view of the entire above discussions, the order under challenge is hereby set aside. Appeals stand allowed.
(Pronounced in the open Court on 27-12-2021)
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