Central Excise Appeal No.13 of 2004 1 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. CEA No.13 of 2004 Date of Decision:-February 9,2010 The Commissioner, Central Excise Commissionerate, Ludhiana ...Appellant Versus M/s Krishna Wire Products (P) Ltd. and others ...Respondent CORAM: HON'BLE MR.JUSTICE ASHUTOSH MOHUNTA HON'BLE MR.JUSTICE MEHINDER SINGH SULLAR Present:- Mr.H.P.S.Ghuman, Advocate for the appellant. Mr.Jagmohan Bansal, Advocate for the respondents. Mehinder Singh Sullar, J. As per brief, but relevant facts, emanating from the record, the Central Excise Officers searched the registered office premises of M/s Shobhit Impex situated at Gandhi Lodge, College Road as well as at Chak Sidhu Complex, Malout Road, Abohar and M/s Gandhi Chem-Fert Industries, Old Fazilka Road, Abohar on 23.7.1998 alongwith other premises as mentioned in the order dated 21.11.2002 (Annexure A1). During the course of checking, it revealed that M/s Shobhit Impex have imported six consignments of copper rods/copper scrap/brass scrap through container Freight Station, Ludhiana since 1995. Modvatable invoices were issued by them against these consignments to various buyers in Punjab under Rule 57-GG (3) (i) of the Central Excise Rules, 1944 (for brevity “the Rules”). It appeared that at the time of issuing of the said invoices, M/s Shobhit Impex had the knowledge that the same were not genuine and were deliberately issued to enable the manufacturer buyers to avail the modvat credit. On 12.12.1997 M/s Shobhit Impex imported 20.001 MT of brass scrap valued at Rs.7.18.328 involving additional duty of customs to the tune of Rs.1,45,461/- vide B.E.No.1426 through CFS Ludhiana. A part of this consignment is shown to have been sent to M/s Aman Engineering Works and M/s Vardhman India Products, Jalandhar vide Invoice Central Excise Appeal No.13 of 2004 2 Nos.56 dated 26.12.1997 and 52 dated 22.12.1997. However, Ashok Sharma son of Des Raj Sharma of M/s Aman Engineering Works admitted in his statement dated 31.7.1998 that they had received the invoice No.56 dated 26.12.1997 without any goods, which were got arranged later on. He also admitted that the modvat credit has been wrongly availed. Sandeep Jain son of Darshan Lal Jain of M/s Vardhman India Products admitted in his statement dated 31.7.1998 that they had received the invoice No.52 dated 22.12.1997 without any goods which were, however, got arranged later on. He also admitted that the modvat credit has been wrongly availed. Om Parkash of M/s Makkar Metal Industries in his statement dated 9.9.1998 has stated that the goods were received by them as per two invoices bearing Nos.53 dated 22.12.1997 and 60 dated 6.1.1998. However, since the goods covered under those invoices are said to have been transported from Abohar to Ludhiana. He was asked to produce the Octroi receipts for the said goods, but he could not produce the same. It appeared that there was no proper evidence to show that the goods had been received by M/s Makkar Metal Industries thoruhg lawful and valid invoices. 2. The revenue claimed that on 31.12.1997 M/s Shobhit Impex imported 23.265 MT of continuous cast electrolytic copper wire rods valued at Rs.18,53,112 involving additional duty of customs to the tune of Rs.3,65,255/- vide BE No.1571 through CFS Ludhiana. The said consignment is shown to have been dispatched from CFS Ludhaina to Abohar and GR No.6436 dated 3.1.1998 of M/s Samra Transport Traders. Jaspal Singh son of Joginder Singh partner of M/s Samra Transport Traders and partner of M/s Ludhiana Trailer Syndicate admitted before the Superintendent, Central Excise in their statements dated 25.7.1998 that the aforesaid consignment was not issued by them or any of their staff members but in fact blank copies of GR were given by them to the representative. Jaspal Singh disclosed that as per their day book trailer No.AS-01-4676 mentioned in GR No.6436 had in fact gone to Jalandhar and fare of Rs.6630/- mentioned on the GR Central Excise Appeal No.13 of 2004 3 has also been wrongly mentioned, but in fact GR No.6428 dated 3.1.1998 was issued by them in respect of aforesaid trailer. Sanjeev Kumar son of Hans Raj Clerk with M/s Gandhi Chem-Fert Industries admitted in his statement dated 31.7.1998 that he had received blank GR No.6436 from Trailer Syndicate, Ludhiana and issued the same on behalf of M/s Shobhit Impex. He further admitted that the said trailer never went to Abohar but in fact he had sent the goods directly to M/s Emkay Industries Ltd. Jalandhar on 3.1.1998. It appeared that the date of Octroi receipts had also been changed from 3.1.1998 to 5.1.1998 to show the movement from Abohar to Jalandhar. 3. According to the revenue, on 24.5.1996 M/s Shobhit Impex imported 19.805 MT of continuous cast electrolytic copper rods valued at Rs.15,75,970/- involving additional duty of customs to the tune of Rs.3,12,042/- vide Bill of Entry No.108012 through ICD Tuglakabad, New Delhi. This consignment is shown to have been further dispatched to M/s A.K.Industries, Ludhiana, M/s Krishna Wire Products (P) Ltd. Goniana (respondent No.1-assessee), M/s Alfa Products, Ludhiana, M/s Friends Wire Industries, Malerkotla (respondent No.3-assessee) and M/s Pee Dee Wires (P) Ltd. (respondent No.2-assessee). M/s Shobhit Impex issued invoice Nos.15 and 21 dated 12.9.1996 and 8.10.1996 respectively to respondent No.1-assessee. On 28.5.1997, M/s Shobhit Impex also imported 25976 MT of continuous cast electrolytic copper rod valued at Rs.18.63.719 involving additional duty of customs to the tune of Rs.3,59,016 vide Bill of Entry No.105278. This consignment is shown to have been sold to M/s Makkar Metal Industries vide invoice Nos.14 dated 4.6.1997, 16 dated 6.6.1997 and 19 dated 14.6.1997 to M/s Alfa Products Ludhiana vide Invoice No.17 dated 7.6.1997 to respondent No.1-assessee vide invoice No.15 dated 4.6.1997 to M/s A.K.Industries vide invoice No.18 dated 7.6.1997 and to respondent No.2-assessee vide invoice No.20 dated 15.6.1997. On 7.6.1997 M/s Shobhit Impex imported 21.905 MT of continuous cast electrolytic copper rod valued at Rs.19.56.584 involving additional duty of customs to the tune of Central Excise Appeal No.13 of 2004 4 Rs.3.87.404 vide Bill of Entry No.105720 through ICD Tuglakabad, New Delhi. This consignment is shown to have been sold to M/s Makkar Metal Industries, Ludhiana vide Invoice Nos.22 dated 20.6.1997 and 25 dated 26.6.1987 to M/s Alfa Products, Ludhiana vide incoice Nos.24 dated 25.6.1997 and 28 dated 3.7.1997 to M/s A.K.Industries vide invoice Nos.21 dated 18.6.1997 and 23 dated 25.6.1997 and to respondent No.2-assessee vide invoice Nos.26 dated 27.6.1997 and 27 dated 30.6.1997. Rajinder Mohan its Managing Director in his statement dated 29.7.1998 admitted to have purchased the goods under the said invoices. He admitted that the goods were actually despatched from Ludhiana but the invoices were sent from Abohar subsequently by M/s Shobhit Impex. As such, the goods were not co- relatable with the invoices. He also admitted the incorrectness of the invoices for the purpose of taking modvat credit by respondent No.1-assessee. Des Raj Partner of respondent No.3-assessee in his statement dated 28.7.1998 admitted that he cannot substantiate the physical arrival of the goods pertaining to invoice No.16 dated 18.9.1996 and then reversed the amount of Rs.39546.85 in respect of modvat credit so wrongly availed by the assessee. Dinesh Garg Director of respondent No.2-assessee in his statement dated 14.9.1998 admitted to the correctness of certificates issued by Municipal Council, Sangrur, wherein it has been certified that only two receipts Nos.182/695 dated 16.6.1997 for 2375 Kg. of copper and 171/617 dated 27.6.1997 for 2510 Kg. have been issued by council. Dinesh Garg then voluntarily debited an amount of Rs.70,000/- in their RG23/A Part II vide Entry No.254 dated 14.9.1998. Thus, there was no evidence to show that these goods have entered in Sangrur through the Octroi Post. 4. Having noted the various deficiencies and after going through the record, it revealed that various firms including the present assessees availed the modvat credits on false invoices and in fact the inputs did not reach their respective factory premises. Therefore, show cause notices were issued to the assessees alongwith other firms. Central Excise Appeal No.13 of 2004 5 5. In the wake of show cause notices, the assessees filed the replies and tried to explain that they have rightly claimed the modvat credit. The explanation put forth by the assessees did not find favour and the Commissioner, Central Excise (Appeals), Chandigarh negatived their claim and directed the reversal of the amount of modvat credit, imposed penalty and interest, vide impugned order (Annexure A1). 6. Aggrieved by the impugned order Annexure A1, the assessees filed the appeal, which was accepted by the Customs, Excise & Service Tax Appellate Tribunal, New Delhi, vide impugned order dated 26.9.2003 (Annexure A2). 7. The revenue did not feel satisfied with the impugned order (Annexure A2) and filed the present appeal. 8. The appeal was admitted to consider the following substantial question of law proposed in para 1 (7) (i) of memo of appeal:- “Whether the Hon'ble Tribunal has erred in reversing the order appealed against and thus allowing the Modvat credit taken on the inputs received by the parties on the strength of “invalid” invoiced issued by the registered dealers.” 9. Assailing the impugned order (Annexure A2), the learned counsel for the revenue has submitted that the Commissioner in his order (Annexure A1), after taking into consideration the evidence on record and the admissions of the parties, has recorded categoric findings that the assessees have availed and utilized the modvat credit on the alleged incorrect/invalid invoices issued by M/s Shobhit Impex, Abohar, M/s Satish Metal Company and Ruby Impex, Jalandhar. The argument further proceeds that the Tribunal has just ignored the admissions of the parties and other material and recorded a perverse finding in favour of the assessees without any basis or cogent material. 10. Hailing the impugned order Annexure A2, on the contrary, the learned counsel for the assessees argued that since the Tribunal has recorded a Central Excise Appeal No.13 of 2004 6 finding of fact that the assessees have rightly availed the modvat credit, so, no interference is called for, in this relevant connection. In order to substantiate his argument, he has placed reliance on the judgment dated 24.2.2009 of this Court in cases Commissioner, Central Excise Commissionerate, Chandigarh v. Shri Nirmal Kumar Aggarwal CEA No.108 of 2008; judgment dated 16.4.2009 in Commissioner of Central Excise, Jalandhar v. DCM Engineering Products CEA No.131 of 2008 (O&M); Commissioner of C.Ex. Ludhiana v. Malerkotla Steels & Alloys Pvt. Ltd. 2009 (244) E.L.T. 48 (P&H) and Commissioner of Central Excise, Chandigarh v. Neepaz Steels Ltd. 2008 (230) E.L.T. 218 (P&H). 11. Having regard to the rival contentions of the learned counsel for the parties, we are of the considered view that the impugned order (Annexure A2) cannot legally be sustained and the appeal deserves to be accepted. 12. The crux of the observations made in the aforesaid judgments is that if the finding recorded by the Tribunal is based on evidence and does not suffer from any legal infirmity, this Court cannot appreciate the same set of facts and evidence available on record. 13. Possibly, no one can dispute about the aforesaid observations, but the same would not come to the rescue of the assessees, because in the instant case, the findings of the Tribunal are perverse, speculative and without any basis or evidence. 14. It is not a matter of dispute that the premises of M/s Shobhit Impex and M/s Gandhi Chem-Fert Industries, Abohar were searched by the Central Excise Officers and found that the respondent Nos.1 to 3-assessees and other various firms, have availed the modvat credit, on the basis of forged invoices. After considering the replies filed by the assessees to the show cause notices, which were found not to be satisfactory, the Commissioner directed the reversal of the amount of modvat credit and imposed the penalties and interest on them. Having noted the admissions of the parties mentioned in para Nos.1 to 3 of this judgment, Central Excise Appeal No.13 of 2004 7 the Commissioner has also observed in para 3.8 of his order Annexure A1 as under:- (i) The assessees violated Rules 57G and 174 of the Central Excise Rules were required to maintain a godown and registered the same with the Central Excise Authorities indicating the quantum of business, receipt and storage of the imported material in the same godown; (ii)The goods were never received and stored in the godown; (iii)M/s Shobhit Impex, Abohar M/s Satish Metal Company, M/s Ruby Impex, Jalandhar issued fake and invalid invoices for facilitating the assessees for the availment of modvat credit, which was not due to them; (iv)M/s Shobhit Impex as a registered dealer had issued invoices to the manufacturer of final products from their registered office/premises for the sale of copper rods, zinc bars, copper scrap, brass-scrap, zinc scrap etc. after importing from various ports of import; (v)These goods were never received their registered premises/godown at Abohar, Om Parkash Gandhi, Sanjeev Kumar and Aman Kumar in their respective statements have admitted that the goods were never brought to the godown of M/s Shobhit Impex, Abohar and on some occasion, the goods were never accompanied the invoices to their consignees. (vi)Om Parkash owner of M/s Milap Transport Carrier and M/s Deepak Roadways, Abohar in his written statement dated 25.7.1998 admitted that he had given blank GRs of both the transport companies to different firms including M/s Shobhit Impex, Abohar through his representatives. Sanjeev Kumar admitted in his statement dated 31.7.1998 that the blank GRs were issued by falsely entering the destination as Abohar which was done at the instance of Shri Om Parkash Gandhi. (vii)Om Parkash Gandhi, General Power of Attorney holder and authorized signatory of M/s Shobhit Impex, and Managing Partner of M/s Gandhi Chem-Fertilizer Industries, Abohar in his statement dated 23.7.1998 had admitted that his daughter Miss Pooja Gandhi is the sole proprietor of the firm M/s Shobhit Impex and that since she is a student, so he is looking after the business activity and accounts himself on hehalf of M/s Shobhit Impex etc. Central Excise Appeal No.13 of 2004 8 15. Taking into consideration the admission of the parties and other evidence on record, the Commissioner, inter-alia, held as under, with regard to the cases of the present assessees:- (I) “M/s Krishna Wire Products, Goniana, Bathinda have availed modvat credit to the tune of Rs.3,15,175.62 on 4 (four) invoices issued by M/s Shobhit Impex, Abohar. However, as discussed in the previous paras, the goods of the aforesaid invoices have been directly received by M/s Krishna Wire Products as Sh.Rajinder Mohan s/o Sh.Banarsi Dass, Managing Director of M/s Krishna Wire Products in his statement dated 29.7.1998 has admitted that the goods were actually despatched from Ludhiana, but the invoices were sent from Abohar subsequently by M/s Shobhit Impex, Abohar. As such, the goods received were not co-relatable with the invoices. Further admitting the incorrectness of the invoices for the purpose of taking Modvat credit. Sh.Rajinder Mohan agreed to reverse the amount of credit so wrongly availed. I find that the Modvat credit amounting to Rs.3,15,175.62 availed utilized wrongly by them is recoverable from them under Rule 571 (1) of Central Excise Rules, 1944 and has already debited vide RG-23A Part-II entry No.7 dated 29.7.98. They are also liable to penal action under Rule 571 (4) of Central Excise Rules, 1944 for the contravention of aforesaid provisions of Central Excise Law. (II) M/s Pee Dee Wire Pvt. Ltd., Sangrur have availed modvat credit to the tune of Rs.4,73,276.81 on 10 (ten) invoices issued by M/s Shobhit Impex, Abohar. However, as discussed in the previous paras Sh.Dinesh Garg, s/o of late Daya Parkash Garg, Director M/s Pee Dee Wire Pvt. Ltd. Sangrur has admitted in his statement dt.14.9.98 that the certificate issued by Municipal Council, Sangrur is correct. Superintendent, Municipal Council, Sangrur has certified that all the consignments purportedly received by M/s Pee Dee Wire Pvt. Ltd. Sangrur, the Council has issued only two octroi receipts Nos.182/695 dt.16.6.97 for 2375 Kg. of Copper and 171/617 dt.27.6.97 for 2510 Kg. of copper which pertain to invoice No.20 dt.15.6.97 and invoice no.26 dt.27.6.97. Further, goods of invoices No.17 dt.23.9.96 and 18 dt.29.9.96 have not been received by M/s Pee Dee Wire Pvt. Ltd. Sangrur in view of the Central Excise Appeal No.13 of 2004 9 aforementioned certificate issued by Superintendent, Municipal Council, Sangrur. Even goods of Invoice No.20 dt.15.6.97 have not been received by M/s Pee Dee Wire Pvt. Ltd. Sangrur because goods are shown to have been transported to Sangrur in truck no.PB-05-C-9684 whereas on the same day and in the same truck fertilizer of M/s Gandhi Chem Fert. Industries, Abohar was transported to M/s Asija Fertilizers & Pesticides, Ladhoka Mandi vide invoice No.10514 dt.15.6.97. Goods of invoice No.27 dt.30.6.97 have not been received by M/s Pee Dee Wire Pvt. Ltd. Sangrur because goods are shown to have been transported to Sangrur in truck No.PB-05-C-9684 whereas on the same day and in the same truck fertilizer of M/s Gandhi Chem-fert Industries, Abohar have been transported to M/s Vikas Khad Store, M/s Tarlochan Singh, M/s Sandhu Fertilizers Centre all of Fazilka vide invoice no.10548 to 10550 dt.30.6.97, goods of invoice no.35 dt.1.8.97 & 33 dt.31.7.97 have not been received by M/s Pee Dee Wire Pvt. Ltd. Sangrur as the same were sent to M/s Emkay Industries Ltd. A-23 Focal Point Extn. Jalandhar. Sh.Ashwani Kumar, s/o Sh.late Chman Lal of M/s Golden Transport Co., New Delhi, has admitted in his statement dt.31.7.98 that he had arranged transportation for the consignment pertaining to Bill of Entry No.106822 in trailer No.HR 38A-4514 of M/s Satpal Road Lines, ICD, Tuglakabad, Sh.Ashwani Kumar has further admitted that this consignment was sent to Jalandhar on the instructions of M/s Shobhit Impex, Abohar, for delivery of the goods of M/s Emkay Industries Ltd. A-23 Focal Point, Extn. Jalandhar. Sh.Satpal Kawatra s/o Sh.late S.S.Kawatra of M/s Satpal Road Lines, New Delhi in his statement dt.31.7.98 has admitted that he had given on vehicle HR 38A-4514 to Sh.Ashwani Kumar. Owner of M/s Golden Transport company on 11.7.97 for carrying loose cargo to Jalandhar. Sh.Satpal Kawatra further stated that Sh.Jagpal working as driver with him for last 8-9 years also remembers having delivered the goods at M/s Emkay Industries Ltd. Jalandhar. Sh.Jagpal Singh s/o Sh.Jungliya, driver with M/s Satpal Road Lines, admitted in his statement dt.31.7.98 as to have delivered copper rods in trailer No.HR-38-A-4514 in July last year to M/s Emkay Industries ltd. Jalandhar. Also goods of invoice No.38 dt.4.10.97, 43, dt.7.11.97 & 34 dt.27.3.97 could not have been received by M/s Pee Dee Wire Pvt. Ltd. Sangrur in view Central Excise Appeal No.13 of 2004 10 of the certificate issued by Municipal Council, Sangrur. I find that the Modvat credit amounting to Rs.4,73,276.81 availed/utilized wrongly by them is recoverable from the under Rule 571 (1) of Central Excise Rules, 1944. An amount of Rs.70,000/- has already been debited vide RG-23A Part-II entry No.254 dated 14.9.98. They are also liable to penal action under Rule 571 (4) of Central Excise Rules, 1944 for the contravention of aforesaid provisions of Central Excise Law. (III) M/s Friends Wire Industries, Malerkotla have availed modvat credit to the tune of Rs.39,546.85 on 1 (one) invoice issued by M/s Shobhit Impex, Abohar. However, as discussed in the previous paras, the goods of invoice No.16 dt.18.9.96 issued by M/s Shobhit Impex, Abohar have not been received by M/s Friends Wire Industries, Malerkotla as Sh.Satpal s/o Sh.Des Raj Partner M/s Friends Wire Industries, Malerkotla has admitted in his statement dt.28.7.98 that he cannot substantiate physical arrival of the goods pertaining to invoice No.16 dt.18.9.96. He further admitted the incorrectness of invoice issued by M/s Shobhit Impex, Abohar and agreed to reverse the amount of Modvat credit wrongly availed by them on the said invoice. I find that the Modvat credit to Rs.39,546.85 availed/utilized wrongly by them is recoverable from the under Rule 571 (1) of Central Excise Rules, 1944 and has already been debited vide RG-23A Part-II entry No.45 dated 28.7.98. They are also liable to penal action under Rule 571 (4) of Central Excise Rules, 1944 for the contravention of aforesaid provisions of Central Excise Law.” 16. The bare perusal of record would reveal that the Tribunal, having just ignored the admissions of the parties and the evidence on record, reversed the order of Commissioner (Annexure A1) without any basis, particularly when in para 6 of the impugned order (Annexure A2), Tribunal has noticed the fault of the assessees, that the invoices are incorrect for the purpose of taking modvat credit, but it fell in legal error and observed that even if it is assumed that the goods had not been dispatched from Abohar, yet their receipts in the factories of the assessees and the other particulars relating to the quantum of duty, are not in Central Excise Appeal No.13 of 2004 11 dispute. 17. The contention of learned counsel for the revenue that this finding of the Tribunal is without any basis, has considerable force. The tribunal has also observed that if according to the department, Shobhit had committed certain irregularities at the time of issue of invoices, there cannot be a case to penalize the assessees for some one else doing. Here, to us, the Tribunal has fell in grave error and did not deal with the reasons recorded by the Commissioner, in this relevant connection and the impugned order cannot legally be sustained. 18. Again, it is not a matter of dispute that the party can only claim the modvat credit on the basis of the invoices of the input duty paid goods, which had actually reached the premises of the assessees and not otherwise. Thus, the findings of the Tribunal are not only devoid of merit and misdirected but perverse and speculative as well. As indicated earlier, the tribunal has just ignored the admissions and other cogent evidence on record with impunity as noticed by the Commissioner. Meaning thereby, the Tribunal did not decide the real controversy between the parties. We are of the view that it would be expedient to remit the matter to the tribunal for deciding the appeal afresh in the light of the aforesaid observations, admissions of the parties and evidence as relied upon by the Commissioner, so as to reach a definite conclusion, as to whether the assessees fulfilled all the requisite conditions to avail the modvat credit, in the obtaining circumstances of the case. 19. In the light of the aforesaid reasons, the present appeal is accepted and the impugned order (Annexure A2) of the Tribunal is hereby set aside. The matter is remitted back to the Tribunal for its decision afresh. The parties through their counsel are directed to appear before the Tribunal on 26.3.2010. (Mehinder Singh Sullar) Judge (Ashutosh Mohunta) February 9,2010 Judge AS