The Commissioner of Central Vs. Mukut Plastics Pvt. Ltd.

The Commissioner of Central vs Mukut Plastics Pvt. Ltd.

Type Court Judgment Court Customs Excise and Service Tax Appellate Tribunal CESTAT Mumbai Decided Feb 11, 2004

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Citation: sooperkanoon.com/34103
Court: Customs Excise and Service Tax Appellate Tribunal CESTAT Mumbai
Judge: M T K.D.
Decided On: Feb 11, 2004
Subject: Service Tax

Case Summary

AI-generated summary - not the official court judgment text.

Service Tax

Key legal issue: Service Tax

Parties & Advocates

Appellant / Petitioner

The Commissioner of Central

Respondent

Mukut Plastics Pvt. Ltd.

Excerpt

.....material of 1 m.t of hdpe granules vide invoice no.843 dated 22/12/98 from m/s. silver plastochem pvt ltd., a registered dealer, was admitted. the credit equivalent to rs. 8224/- was reversed.it is also stated that the virgin hdpe granules were in fact sold in the open market and the same was substituted with equal quantity of scrap which was hidden under the finished goods at the factory premises. under panchnama dated 23/12/98, the plastic scrap weighing 2 mt valued at rs. 60,000/- was seized, as evidence of its utilisation in the factory against virgin hdpe granules on which the modvat credit was taken without actually bringing the virgin hdpe granules. this was the only piece of evidence based on which the entire case of taking of excess modvat credit, only on the basis of the invoice showing receipt of virgin material without actually bringing the said material in the factory, was made. the allegation is that, though the duty paying documents have been received by the respondents in their factory, in respect of virgin material, actually the scrap has been brought into the factory and the virgin material itself has been either removed after it was received in the factory or otherwise, and only scrap material has been used for the manufacture of plastic drums (finished goods). the statement of s/shri sushil and agarwal were subsequently retracted stating that the said statements were taken under threat and force.2. the entire facts of the case are based on the statement that virgin input material was substituted with sub-standard material viz., plastic scrap.3. in order-in-appeal, the commissioner (appeals) exhaustively discussed the evidential value of the statements and held that, no efforts has been made by the department to make further investigation relating to clandestine removal of material in the open market.therefore, was it held that, demand of duty cannot be sustained, as the charge of clandestine removal is not substantiated.4. in the revenue's.....

Full Judgment

1. This is a revenue appeal against the order-in-appeal passed by the Commissioner (Appeals). In the impugned order-in-appeal, the department's case of duty evasion has been rejected. In the order-in-original passed by the Joint Commissioner of Central Excise, it has been held that, the respondents have wrongfully availed the modvat credit amounting to Rs. 6,74,082/-. The ground for recovery of modvat credit of the aforesaid amount was that, on the basis of stock verification of modvat records and physical stock, a shortage of 1 MT of HDPE granules was noticed. The statement of one Shri Ashok Halwai, Accountant & Excise-in-charge of the respondents, was recorded wherein non-receipt of the material of 1 M.T of HDPE granules vide invoice No.843 dated 22/12/98 from M/s. Silver Plastochem Pvt Ltd., a registered dealer, was admitted. The credit equivalent to Rs. 8224/- was reversed.

It is also stated that the virgin HDPE granules were in fact sold in the open market and the same was substituted with equal quantity of scrap which was hidden under the finished goods at the factory premises. Under panchnama dated 23/12/98, the plastic scrap weighing 2 MT valued at Rs. 60,000/- was seized, as evidence of its utilisation in the factory against virgin HDPE granules on which the modvat credit was taken without actually bringing the virgin HDPE granules. This was the only piece of evidence based on which the entire case of taking of excess modvat credit, only on the basis of the invoice showing receipt of virgin material without actually bringing the said material in the factory, was made. The allegation is that, though the duty paying documents have been received by the respondents in their factory, in respect of virgin material, actually the scrap has been brought into the factory and the virgin material itself has been either removed after it was received in the factory or otherwise, and only scrap material has been used for the manufacture of plastic drums (finished goods). The statement of S/Shri Sushil and Agarwal were subsequently retracted stating that the said statements were taken under threat and force.

2. The entire facts of the case are based on the statement that virgin input material was substituted with sub-standard material viz., plastic scrap.

3. In order-in-appeal, the Commissioner (Appeals) exhaustively discussed the evidential value of the statements and held that, no efforts has been made by the department to make further investigation relating to clandestine removal of material in the open market.

Therefore, was it held that, demand of duty cannot be sustained, as the charge of clandestine removal is not substantiated.

4. In the revenue's appeal, the reliance has been placed on the judgment of the CEGAT reported in 1986 (23) ELT 507 (Tri) in the case of Orient Enterprises, New Delhi v. Collector of Customs, Cochin to claim that the statement made under Section 108 of the Customs Act, 1962, which is para-materia with Section 14 of the Central Excise Act, are admissible as a piece of evidence. The Ld. Counsel for the respondents, however, relying on the same judgments claims that, no doubt that, such a statement is admissible, but its value is still required to be gauged in conjunction with the other evidence and attending circumstances to prove the facts in issue.

6. The demand for recovery of excess modvat credit has been issued to respondents on the ground of the allegations that dispite having shown receipt of certain quantity of virgin material, the respondents actually used scrap in its place and sold off the virgin material in the open market. Apart from the statement of the persons recorded, there is no other corroborative piece of evidence collected during the investigation. When the inventory of virgin material was taken, a shortage of 1 M.T was noticed. Simultaneously, there was also stock of 2 MT of scrap. The shortage of virgin material and presence of scrap of 2 MT which almost compensates the noticed shortage of virgin material, do not lead to the probability of removal of virgin material itself, from the factory, unless the investigation brings on record an evidence to show that, there was some activity of clandestine removal of virgin input from the factory or clandestine receipt of scrap into the factory. In fact, it was very easy for the investigation to indicate as to whether the scrap, which was found in the factory, could somehow be co-related with the scrap of plastic material used in the process of manufacture of containers or, it was a scrap of totally unrelated products. It was also possible for the investigation to make inquiry from the suppliers, as to whether the virgin material had been directly consigned to the respondents or as per their instructions delivered to somebody else.

7. In the absence of any of the details, the charge relating to availment of extra credit and disposal of virgin material in the open market is correctly held by the Ld. Commissioner (A) as not sustainable.

Same Court & Year Customs Excise and Service Tax Appellate Tribunal CESTAT Mumb... Same Parties The Commissioner of Central vs Mukut Plastics Pvt. Ltd. Same Subject Service Tax Same Judge M T K.D.