1. Appellants are an assessee under the Central Excise Act engaged in the manufacture of Rubber extracted, moulded & rubber to metal branded products and avail Modvat Credit on hot rolled and cold rolled coils, sheets & plates.
1.2 On basis of an intelligence that manufacturers of Iron & Steel products had been availing credit on 4R/CR sheets & coils on the strength of the Registered dealers without actual receipt of the said goods in the factory. The factory premises of the appellant were visited by the officers on 11.10.99 & enquires conducted.
2. On basis of the enquiries it was alleged in the notice dated 9.1.2002_____ i) That HR/CR Sheets and Coils mentioned in the duty paying documents issued by dealers were other than those received by the Appellants.
ii) That the Appellants require the Sheets/Plates of thickness 3.15 mm, 3.50 mm, 4 mm, 5 mm, 6 mm, 8 mm and 10 mm, which were received from the dealers, but duty paying documents were for the plates/Sheets of thickness other than the required thickness mentioned above: iii) That the Appellants did not provide any evidence of payment of octroi, transportation, etc.
iv) That the sub-heading Nos. mentioned in the dealers' invoices indicate the thickness other than the one actually received.
& the appellants were directed to why credit of Rs. 26,61,571 availed in respect of inputs in Annexure A to then notice should not be disallowed & recovered under Rule 57I (i) (ii) of the Central Excise Rule read with Rule 12 of the Cenvat Rule 2001 & penalties be imposed.
The allegation in the Show cause notice is that the assessee availed of modvat credit on hot rolled/cold rolled coils/ sheets/ plates which were not received in their factory.
The assessee submitted that they were properly recording the information available with them and communicating to the Department from time to time. They submitted that modvat documents received till July, 1999 have never shown any specific thickness. It is the primary duty of an assessee to confirm whether they receive raw materials of specific standard. In other words, if they receive defective material, they have no alternative but to return the same to the supplier. Hence, assessee's submissions regarding proper recording of the information and communicating to the Department from time to time is incorrect and unacceptable in toto. This is vividly established from the statement dated 18.07.2001 of Shri Praveen M. Jethwant, Director, who stated that in order to adhere to the customers' standards and specifications each consignment of these goods were tested by quality control department.
The assessee's submission regarding incorrect application of extended period of five years is also not acceptable. In the instant case, I find that in spite of their experience for many years in Central Excise matters, the assessee failed to maintain proper records/information. It is an absolute fact that the assessee required hot rolled/cold rolled sheets and coils as major raw material for the manufacture of 'rubber to metal bonded products' i.e. multiple bonded sandwich mounting, rubber butter spring, metal bonded rubber pads for side bearer, modified elasonetric pad, etc.
on perusal of engineering drawings of the above mentioned products, it was seen that each and every product required hot rolled/cold rolled sheets and coils of thickness 3.15 mm, 3.5 mm, 4 mm, 5 mm, 6 mm, 8 mm and 10 mm. These goods are, accordingly, procured from manufacturers as well as various registered dealers. Once procured, these goods undergo test by the quality control department to see if the specifications are adhered to. During investigation, the details of the consignments procured from the registered dealers when compared with the purchase documents, revealed that the thickness of the goods (raw materials) received is different form the thickness mentioned in the corresponding purchase invoices. I find that the assessee and its responsible persons including the director not only failed to convincingly explain the discrepancies but failed to produce details of freight octroi payments and thickness of the goods supplied. Instead they merely contended that the transaction was on ex-godown basis. It is also noticed that the dealers have either declared that freight and octroi was paid by the assessee or failed to submit the same.
In other words, the registered dealers and the assessee failed to produce any documents showing payments of freight and octroi, thereby failing to establish any co-relation in terms of the material received by the assessee and that supplied by the dealers.
Hence invoking of extended period of five years is quite convincing to me.
Regarding assessee's submission that they correctly followed the modvat procedure, I observe that they were found to be fraudulently availing of modvat credit on the basis of invalid invoices issued by the registered dealers. It is astonishing as to how they could not explain the cause of discrepancies when the assessee was confronted with the discrepancies in thickness of hot rolled/ mild steel sheets/ plates supplied by the registered dealers and those actually received by them. Nor could the assessee produce the corresponding delivery challan or octroi payment documents and transport documents to substantiate their stand before investigating officer.
The assessee submitted that they did not contravene any provisions of modvat, but dealers had committed mistake while issuing invoices.
I do not agree with this submission. Instead I would like to emphasise that even the investigating officer has given ample chance to the assessee and to the registered dealers to produce details of freight, octroi payments and thickness of the goods supplied but all the registered dealers and the assessee failed to produce the same by contending that transaction is on ex-godown basis. It is also noticed that the dealers have either declared that freight and octroi is paid by the assessee or have failed to submit the same and only declared that the sale of the goods to the assessee is ex-godown basis. Instead of producing the payment particulars, I observe, the assessee tried to divert the attention of adjudicating authority and to imply that all the mischief is done by the registered dealers. Two case laws have been cited by the assessee in respect of SRF Ltd. v. C.C.E., Indore and Shree Ram Vinyl & Chemicals Industries Ltd. in support of their contention, but the same do not have any relevance whatsoever to the issue discussed here.
Shri Bakre, advocate of the assessee, submitted during personal hearing that the assessee does not have any machinery to flatten the strips/ sheets to make them thinner to suit their requirement. This exposes the attitude of the assessee. Instead of establishing that they correctly availed of the credit on the raw materials of required specification, which were received and accounted for, the assessee prefers indirect offensive! It is their fundamental responsibility to establish that the assessee received strips and coils of correct dimension. I find that it is not the case of Department to prove if the assessee was possessing machinery for flattening the strips and coils to attain required width. Neither it is the Department's case whether the assessee procured strips/ coils of higher dimension and they removed as such without using them in the manufacture of their final product. What is alleged is that the assessee procured no raw materials of the dimensions shown in the dealers' documents and hence they are disentitled to the modvat credit on such invoices.
I observe that the assessee Company wrongly availed of the modvat credit based on the invoices issued by registered dealers. A reputed establishment by itself and having experience for several years in Central Excise matters, the assessee should have the wisdom of assuring that the raw materials received by them were of correct specification they contracted for. They should have immediately rejected the entire material if they were not of required specifications. Perpetuating the errors committed by their suppliers of raw materials eyeing towards the huge modvat credit that could fetch them, which otherwise would lead to leakage of revenue, is nothing but an offence and calls for stringent punishment apart from recovery of wrong credit. During the course of investigation, I observe, the investigating officers gave ample opportunities to the assessee to produce details of freight, octroi. If the assessee's intention was bonafide enough, they could have submitted the payment had received materials of thickness beyond 10 mm or not. In other words, I would have simply convinced the rate of hot rolled/ cold rolled sheets and coils thickness-wise so that I could apprehend or conclude if the assessee received materials below 10 m thickness or not. Instead of submitting the said information, the assessee engaged in diverting tactics and tried to blame the registered dealers by stating that the dealers had not given the particulars of the raw materials such as thickness, etc.
& confirmed the proposal of reversal of credit & imposed penalty on the assessee. Hence this appeal by the assessee.
2.1 After hearing both sides & considering the material on record it is found- a) The Show Cause Notice & the Commissioner arrive at conclusions of the goods not having been received based on the that the assessee could not produce any evidence of transportation from dealers premises to the factory of the assessee & on failure to produce freight & octroi vouchers. They rely on the statement of one K. Mehta proprietor of the dealer M/s Shipyard Company. This is the only statement out of the more than a score of dealers involved as supplies whose statement recorded is relied by the Department. This relied upon statement very clearly discloses.
"On being asked as to who used to pay the Octroi charges from deliveries made to M/s Basant Rubber factory Limited which is situated inside the Octroi unit. I have to state that as per the statement of M/s Basant Rubber Factory Limited Octroi & freight charges are to be borne by our company and the details of the freight payment and octroi if any shall be submitted by me." From the emphasized portion of this statement, relied upon by Revenue, it is apparent that goods were to be paid for & paid on basis of factory door delivery and the freight & octroi was to be borne out by M/s Shipyard Company. The non production/availability of freight & octroi payment vouchers with the assessee, which is the botton on which the foundation of charge of non receipt of the inputs is being based, would crack and the entire case would fall.
It is not brought on record by Revenue that the freight & octroi charges were paid by M/s Shipyard or not as promised by him in the statement relied. The assessee can only produce such vouchers of payments which they have made. They have, as per evidence relied, not paid and were not required to pay freight & Octroi. Putting the onus on the appellant to produce such payment proof & thus liability on them is not called for since no onus lies on them to produce that evidence as per the relied upon material.
............I have been shown in statement of Shri Pravin M. Jethwani Director of M/s Basant Rubber Factory Limited where he has clearly mentioned that the M.S. Plate of only following thickness is required by them and no other thickness is required by them or used by them.
Thickness of M.S.Plate required by M/s Basant Rubber Factory Ltd 3.15MM, 3.5MM, 4MM, 5MM, 6MM, 8MM, 10MM. I confirm that any company M/s shipyard Co has supplied M.S.Plate of only the above thickness namely as given such as 3.15 MM, 3.5MM, 4MM, 5MM, 6MM, 8MM & 10MM"........
This admission, not only would induce us to set aside the charge of non receipt of the inputs by the assessee but also confirm that plates/sheets of various thickness as required by M/s Basant Rubber factory were only being received. There is no change in the notice that the quantum of duty depicted in the dealers invoices were incorrect or and excess quantum of credit than that depicted, than as shown in the documents were entered by the assessee in the Registers. Therefore, in correct or and non mention of the thickness on the dealers documents will not call for denial of the credit & or hold the same to be ineligible. The reliance placed by the Ld.
Advocate on the decisions of this tribunal in case of G.M.I.Super Sets Agencies (2001 (136) ELT 1022 Chaphekar Engg (2000 (117) ELT 61 & Ajanta Composite 2001 (138) ELT 1031 is well founded & is followed and on that grounds, credit cannot be denied.
c) The Annexure 'A' to show cause notice clearly admits the alleged thickness to have been received in the factory therefore, we find no reason to deny the credit on the grounds of non receipt of inputs.
The Ld. Advocate has also demonstrated form the copy of M/s Shipyard Company sr Invoice No. 55 & 66,67,68 & the challan number issued by them, the corresponding weigh Bridge record slips at Bhadup, Invoices & Credit Register entries, that the chain of receipt of the inputs on which credit was availed is proved. We find therefore no reason to conclude that input were not received.
d) We have considered the submission of utility & non usefulness of the different kind of gauge thickness made by the Ld DR. From the statements of Shri K. Mehta, as relied by Revenue, & extracted herein above, it is seen that the assessee admittedly uses a wide range of gauge thickness inputs for different end uses. No case is therefore proved of non utility/usefulness as was being urged to prove these receipts being for credit entry only. There is no material on record of what were the gauge thickness actually used other than what orders have been admittedly placed on M/s Shipyard Company & admitted by Shr. K. Mehta to have been supplied. There is no reason to believe that final products have not been made & cleared on duty. There is no material collected by the investigators on the actual payments having not made for the alleged fictitious receipts of inputs to prove the same to be a paper entry for only taking credit on duty paying documents as was the intelligence with the officers who initiated the enquiry.
e) The allegation of a particular chapter heading been mentioned in the document to indicate the actual thickness & that was not the import received could be a result of the dealers not being very accurate in the noting of particulars on the invoices issued by them. The no value/price differential evidence brought on record to show a deliberate beneficial attempt in such mistakes allegations cannot defeat the credit & lead one to conclude that inputs did not come.
f) It is brought on record that Purchase Orders were placed for a specific thickness by this ISO9001 company in writing, after March 1999 in all cases. On receipt good receipt notes were prepared which show the thickness of the material received & after inspection entries are made in Credit Registers. The adjudicators findings, of no complaints about order placed & directs pointed out therefore cannot be upheld. g) No statutory requirement of submission or finishing of Information on Purchase Advice shown. Non compliance finding on this account therefore cannot be a ground for suppression as held in a series of cases of this Tribunal to invoke the larger period. The recording in para 31 of the impugned order about the process of Quality Control Tests would confirm that the assessee received the inputs for which the purchase orders were placed. There is no cause made out to uphold the demand & penalty.
h) The appellants submitted that it is not their case that they reckoned the thickness of the plats by further processing the same.
It is their case that plates of whatever thickness which were received were covered by dealers duty paying documents & therefore non possession of machine for flatting, to obtain required dimension was not relevant. The adjudicators finding in this regard are to be held as inelevant & it is to be held that. They have used the inputs as ordered & received.
i) The plea limitation in this case is also required to be upheld as no suppression/mis-declaration etc by the assessee has been established. They have filed the declaration, copies of invoices, audited by the Department for clerical errors, if any, on part of the dealers employers the assessee cannot be held responsible.
j) When no reasons are found on merits & on limitation the notice is based. Therefore order on the reversal of credit, penalty cannot be upheld as arrived on the appellant.
3. In view of the findings, the order is set aside & this appeal allowed.