Vashist Ispat Product and Lakshmi Vs. Cce - Court Judgment

Excerpt:
1. these two appeals have been preferred against the common order of the commissioner (appeals) made on 22nd march, 2005 by which he upheld the order-in-original confirming the demand of rs. 45,467/- against the appellant (appeal no. e/2224/2005), m/s lakshmi steel rolling mills, and imposed penalty of rs. 45,467/- upon the appellant (appeal no.e/2223/2005), m/s vashist ispat product, under rule 13 of the cenvat credit rules, 2002.2. according to the revenue, on scrutiny of er-1 return for the month of march, 2003 filed by the appellant, m/s lakshmi steel rolling mills (the original noticee no. 1), it was observed that, they had taken cenvat credit of rs. 1,94,830/- on 95.510 mts of iron and steel, which was ship breakage input, sold to it "as such" by the other appellant, m/s vashist ispat product, (the original noticee no. 2). the appellant, m/s vashist ispat product, had received the inputs from m/s vijay sharma & sons through the invoices on which the said appellant had availed the cenvat credit of rs. 1,49,373/-. according to the revenue, as per the provisions of sub-rule (4) of rule 3 of the cenvat credit rules, 2002, the appellant, m/s vashist ispat product, was required to reverse only an amount equal to the cenvat credit taken by them i.e rs. 1,49,373/- in respect of the said inputs at the time of their clearance "as such" to m/s lakshmi steel rolling mills, and only that was the amount available as cenvat credit to the appellant, m/s lakshmi steel rolling mills, as per the provisions of rule 3(5) of the said rules. in the show cause notice issued on these appellants, it was alleged that, since the appellant, m/s vashist ispat product, was going to opt for full exemption under ssi notification no. 8/2003 w.e.f. 01.04.2003, the said appellant was required to reverse the cenvat credit involved on the stock of inputs lying "as such" or contained in the finished goods.according to the revenue, the cenvat credit balance of rs. 48,809/- would have remained unutilized on 31.03.2003 and would have lapsed under rule 9(2) of the cenvat credit rules, 2002, in view of the said appellant having opted for availing full exemption under notification no. 8/2003. in order to avoid such a situation, the said appellant devised a method of clearing 95.510 mts of inputs "as such" at a very high assessable value of rs. 12,750/-per mt, reversing the cenvat credit after calculating the duty on that amount, which was contrary to the provisions of rule 3(4) of the cenvat credit rules, 2002.3. on the above allegations being established on the basis of material on record, recovery of extra credit of rs. 45,467/-was ordered against the appellant, m/s lakshmi steel rolling mills, along with interest.however, penalty proceedings were dropped against that appellant on the ground that it had not violated any provision of law by taking the credit to the tune of the amount shown in the invoices. for the appellant, m/s vashist ispat product, it was held that, they had knowingly and deliberately passed on excess cenvat credit, over and above the duty actually paid by the original manufacturer, in their invoices issued to the appellant, m/s lakshmi steel rolling mills, and had thus facilitated availment of extra credit of rs. 45,467/- by that appellant. the appellant, m/s vashist ispat product, was, therefore, held liable for penal action under rule 13 of the cenvat credit rules and a penalty of rs. 45,467/- was imposed on it.4. the appellate commissioner came to a finding that, as per the provisions of rule 3(4) of the said rules, the appellant, m/s vashist ispat product, was required to reverse the amount of cenvat credit taken on the inputs as the same were cleared by them "as such".however, at the time of clearance, the said appellant paid duty (by reversal), of rs. 1,94,840/- from their cenvat credit account, though as per rule 3(4) of the said rules, the said appellant was required to reverse only rs. 1,49,373/-. thus, credit of rs. 45,467/- was in excess of the actual credit that could have been lawfully taken. the plea that some of the material of high quality was sold at a premium by the appellant, m/s vashist ispat product, to the appellant, m/s lakshmi steel rolling mills, was rejected and it was observed that, even if higher value may have been charged, the cenvat credit could have been reversed only to the extent that it was taken at the time of receipt of the inputs. as regards the contention that, though the show cause notice referred to the provisions of section 11ac for proposing penal action against the appellant, m/s vashist ispat product, the penalty was imposed under rule 13 of the cenvat credit rule, 2002, the commissioner (appeals) held that, mere wrong mention of section 11ac in the show cause notice did not vitiate the action taken against that appellant.5. the learned counsel appearing for the appellants in both these appeals, has contended that, the appellant, m/s vashist ispat product, by selling the goods at a higher value to the other appellant, has, in fact, paid a higher amount of duty and therefore there was no revenue loss caused by the higher sale price. it was submitted that, since cenvat credit was available to the appellant, the payment was lawfully made by utilizing that credit. it was submitted that, merely because the said appellant had opted for the benefit of the ssi exemption notification from 1.4.2003, no adverse inference could have been drawn from the fact that, any portion of the cenvat credit was not allowed to lapse. it was, therefore, submitted that, the penalty imposed on the appellant, m/s vashist ispat product, was not justified. it was also submitted that, the penalty was imposed under rule 13 of the said rules, which was not alleged against this appellant in the show cause notice. the learned counsel further argued that, since the penalty proceedings were dropped against the appellant, m/s lakshmi steel rolling mills, on the ground that it had not committed any violation of the provisions of law, no malafide intention could have been attributed to the appellant, m/s vashist ispat product, in respect of the same transaction. it was further submitted that, the amended rules of 2002 were brought into force from 1st march, 2003 and the position prior to that, under the rules of 2001, was different as per which, when the goods were removed "as such", an amount equal to the duty of excise leviable on such goods at the rate applicable on the date of such removal, was required to be paid. it was, therefore, submitted that, the payment by the appellant, m/s vashist ispat product, from the cenvat account to the extent of the duty worked out on the higher value of the goods, could not have been described as any a malafide arrangement. the learned counsel also argued that, the appellant, m/s lakshmi steel rolling mills, had not violated any provisions of law and was entitled to take the credit of the duty on the basis of the invoices under which the goods were purchased by it. it was submitted that, both the firms were independent and there was no allegation that the transactions between them were not genuine.6. the learned authorised representative for the department, on the other hand, supported the reasoning and findings of the authorities below and contended that, the malafide intention on the part of the appellant, m/s vashist ispat product, was evident from the fact that, though the said appellant had opted for full ssi exemption under the notification no. 8/2003 and the cenvat credit balance of rs. 48,809/- would have lapsed from 01.04.2003, the benefit of the credit was passed on to the other appellant. it was submitted that, such excess utilization of credit balance was not warranted under rule 3(4) of the rules of 2002. it was also submitted that, the penalty imposed on the appellant, m/s vashist ispat product, was justified.7. the material on record clearly discloses that, the cenvat credit taken by the appellant, m/s vashist ispat product, in respect of the quantity of inputs, which it sold to the other appellant at a higher value, was rs. 1,49,373/-. according to the appellant, m/s vashist ispat product, better quality scrap was sorted out for the sale of the inputs "as such" to the appellant, m/s lakshmi steel rolling mills, and, therefore, higher value was justifiably charged under the invoices, when the clearance of goods was made "as such".7.1 it would appear from the provisions of rule 3(4) of the cenvat credit rules, 2002 that, when the inputs on which cenvat credit was taken are removed "as such" from the factory, the manufacturer of the final product was required to pay an amount "equal to the credit availed in respect of such inputs" and such removal was required to be under the cover of an invoice, referred to in rule 7. the invoice under rule 7 was required to be issued in terms of the provisions of the said rules of 2002. therefore, no amount higher than the amount, equal to the credit availed in respect of the inputs sold under such invoice, could have been mentioned therein, contrary to the provisions of sub-rule (4) of rule 3 of the said rules. admittedly, these rules were in force when the inputs were cleared "as such". the particulars of the invoices, under which these goods were sold "as such" given in annexure-a to the show cause notice, showed that all the invoices were of 30th march, 2003 and 31st march, 2003. obviously, therefore, the duty amount of rs. 1,94,840/- could not have been passed on to the appellant, m/s lakshmi steel rolling mills, in the face of the specific provision of sub-rule (4) of rule 3 that an amount equal to the credit availed, which was rs. 1,49,373/-, was to be paid in respect of such inputs. both the authorities below have, therefore, correctly held that, the appellant, m/s vashist ispat product, had wrongly utilized the credit to the extent of rs. 45,467/-and that the appellant, m/s lakshmi steel rolling mills, was not entitled to avail that excess credit under the invoices under which the goods were sold. it is obvious that, the invoices issued under rule 7 were required to adhere to the provisions of sub-rule (4) of rule 3 and the appellant, m/s lakshmi steel rolling mills, could not have, therefore, lawfully availed the extra cenvat credit of rs. 45,467/-, which could not have been passed on to it by the appellant, m/s vashist ispat product, being in excess of the amount equal to the credit, which was availed by it.8. these two appellants; m/s vashist ispat udyog, appellant, and m/s lakshmi steel rolling mills, appellant, have throughout asserted that, they were manufacturers of iron and steel rolled products holding separate central excise registrations. during the course of the arguments, the learned counsel, who appeared for both the appellants, had contended that, their transactions were genuine and they were independent concerns and, therefore, the purchaser, m/s lakshmi steel rolling mills, could not be blamed for having taken the full cenvat credit for the inputs. when it was pointed out by the court, from their respective memoranda of appeals that, both these appeals, though in the pompous names of firms, were, in fact, only sole-proprietory concerns of mr. p. vashist and mr. vinod vashist, the learned counsel was taken aback and he said that, he did not know about this and was under the impression that they were independent partnership firms. if the names of these sole-proprietors had appeared as manufacturers and assessees, as ought to be done under the relevant legal provisions, as will presently be seen, there would have been a natural consequential inquiry, whether these individuals running business in the names of proprietary concerns were "related" persons. in fact, excise registrations contemplated by rule 9 can be done only of person(s) who are manufacturers and such person(s) alone can be the assessees. a proprietary concern has no legal existence of its own and is not a person like a company or a living individual. the use of the prefix "messers" in a proprietary name misleads the public at large and the officials, by suggesting that it is a body of persons. a registered partnership firm would be a group of persons who are its partners and will collectively be manufacturers and assessees, though doing a business in the name of their partnership firm. only a registered partnership firm can sue or be sued in the firm's name, that too for convenience sake. beyond that, it has no juristic personality. the scheme of the said act and the rules contemplates, registration and assessment of individuals or juristic persons, and not of mere business names of sole-proprietors. an individual himself will be the manufacturer and assessee, even if he does his activities under more than one business names of his sole-proprietory concerns. one can effectively thwart an inquiry into "relationship" -so important for ascertaining the genuineness of transaction value -by projecting proprietory concerns of different names to create an illusion that the transactions are between different entities; though in reality their proprietor being the same, cannot transact with himself. there cannot be contractual relations with one's own self and, therefore, no legal contractual transactions can be recognized amongst the sole proprietory concerns created by the same individual showing inter se business activities in such different names. there cannot be any independent contractual relationship between mere business names when the proprietor is the same person. it cannot be easily ascertained from the assumed business names of sole proprietory concerns, whether they are owned by the same proprietor and if there are different proprietors, whether they are "related" in the context of the need for valuation inquiries.9. the word "manufacturer", under section 2(f) of the central excise act, 1944 shall include not only person who employs hired labour in the production or manufacture of the excisable goods, but also any person who engages in their production or manufacture on his own account.thus, a manufacturer has to be a person, living or juristic. a sole-proprietory concern is not a juristic person and cannot, of its own, be a manufacturer or producer. for the purpose of section 4, "assessee" is defined in sub-section (3)(a) thereof, to mean the person who is liable to pay the duty of excise under the act and includes his agents. any prescribed person who is engaged in the production or manufacture or any process of production or manufacture of specified goods is required to get himself registered with proper officer, as required by section 6 of the said act. therefore, registration can be done only of such prescribed person, and not of a sole-proprietory concern, which by itself is not a person. the practice of giving registration in the name of a proprietory concern and not the person, who is the proprietor, is contrary to the provisions of the said act and is capable of perpetuating frauds due to the real name of the person concerned being camouflaged by the assumed proprietory name. the word "assessee", as defined in rule 2(c) of the central excise rules, 2002, means any person who is liable for payment of duty or a registered person of a private warehouse. under rule 4, duty is payable on removal of excisable goods by every person who produces or manufactures or stores in a warehouse. thus, none of the provisions of the act or the rules warrants recognition of mere sole proprietory name as manufacturer or assessee, who would be liable to pay the duty. only a person living or juristic can be registered for the purposes of the act and will be liable to assessment and payment of duty irrespective of any name/names that he may adopt for doing the proprietory business.all the excise registrations and assessments under the act and the rules are required to be done in the name(s) of the persons concerned even when they run their proprietory business in different names. in fact, the practice of registering manufactures in the name of proprietory concerns, appears to have been unwittingly recognized by a seemingly innocuous but a most damaging instruction in note 5 which has crept in the prescribed form a1, which was substituted w.e.f.1.10.2002. the said form is prescribed for application for central excise registration, in the context of rule 9 of the central excise rules, 2002. surprisingly, though section 6 of the act clearly contemplated registration of a person who is engaged in the production or manufacture of excisable goods, the newly introduced instruction no.5 of the proforma application a1 requires that, name of the registrant should be the name and style in which the registrant is likely to carry out the business. this shady instruction 5 was wholly uncalled for and is contrary to the scheme of the act and the rules, and is capable of perpetrating mischief and fraud by shielding the names of the real persons who are engaged in the manufacture of excisable goods and are required to be registered under section 6 of the act read with rule 9 of the central excise rules, 2002, which refer to the registration of the person who produces or manufactures the excisable goods. it will be noticed that, no such instruction ever existed in the earlier proforma application for registration. this is evident from the earlier proforma a1 issued under rule 9 of the rules of 2001, which required a request being made to the superintendent of central excise to issue a registration certificate under rule 9 for the purposes indicated in the schedule to that proforma. in that schedule, name and address of the person applying for the registration was required to be mentioned.there was absolutely no scope for registering the name of any "non-person"; and the details of the properties, persons, directors as the case may be, were also required to be given. in the same way, even in the still earlier proforma in form r1 under the central excise rules of 1944, the application for registration was required to be made by the person in whose name the registration certificate was required to be issued. the application was to be made in the name of the person (living or juristic) applying and not in any other name. thus, there never was any possibility of giving excise registration in the names of sole-proprietory concerns. in view of the substantive provisions of section 6 of the said act and rule 9 of the said rules, instruction no.5 in the proforma application form a1 is ultra vires the scope of the said statutory provisions. all excise registrations and assessments are required to be done in the name(s) of the persons concerned even when they run proprietory business in different names. it will be for the parliament, the rule making authority, the board and the excise officials to recognize the potential mischief and large scale abuse that is caused by allowing the excise registrations and doing assessments in the names of proprietory concerns and not in the names of the real persons who are the manufacturers and assessees, and take appropriate remedial measures.10. as held above, the excess cenvat credit was wrongly availed by the appellant, m/s vashist ispat product, and, therefore, its recovery with interest, was justified. no penalty was imposed on the appellant, m/s lakshmi steel rolling mills. however, penalty of equal amount of rs. 45,467/- has been imposed on the appellant, m/s vashist ispat product, under rule 13 of the cenvat credit rules, 2002. though there is an allegation of malafide intention made against the said appellant in the show cause notice, in the context of the penalty proposed under section 11-ac, it appears that the adjudicating authority has resorted to rule 13 holding that rule 11ac was wrongly mentioned in the show cause notice. under rule 13 of the cenvat credit rules of 2002, utilization of cenvat credit on account of fraud, wilful mis-statement etc. is separately dealt with under sub-rule (2) and penalty in terms of section 11-ac of the act is prescribed. however, in cases where there is simple breach of rules, penalty is prescribed under sub-rule (1) of rule 13, which may not exceed the duty on the excisable goods or ten thousand rupees, whichever is greater. the appellant, m/s vashist ispat product, was not entitled to make the payment of any amount, from the cenvat account, higher than the amount equal to the credit availed in respect of the inputs cleared. however, since sub-rule (4) of rule 3 was brought into force only from 1st march, 2003 and all the transactions occurred during that month, it may not be possible to conclusively allege that the said appellant had taken or utilized the credit on account of fraud etc. since it cannot be conclusively held that, the appellant, m/s vashist ispat product, was harbouring a guilty mind requisite for invoking sub-rule (3) of rule 13, it would be appropriate, in the facts and circumstances of this case, to reduce the penalty imposed on the appellant, m/s vashist ispat product from rs. 45,467/- to rs. 10,000/- (rupees ten thousand only). accordingly, the excise appeal no. 2224 of 2005 of the appellant, m/s lakshmi steel rolling mills is dismissed; and the excise appeal no. 2223 of 2005 of the appellant, m/s vashist ispat product, is partly allowed.11. the registrar is directed to forward a copy of this judgment to the government of india, ministry of finance, north block, new delhi.

Judgment:
1. These two appeals have been preferred against the common order of the Commissioner (Appeals) made on 22nd March, 2005 by which he upheld the order-in-original confirming the demand of Rs. 45,467/- against the appellant (Appeal No. E/2224/2005), M/s Lakshmi Steel Rolling Mills, and imposed penalty of Rs. 45,467/- upon the appellant (Appeal No.E/2223/2005), M/s Vashist Ispat Product, under Rule 13 of the Cenvat Credit Rules, 2002.

2. According to the Revenue, on scrutiny of ER-1 Return for the month of March, 2003 filed by the appellant, M/s Lakshmi Steel Rolling Mills (the original noticee No. 1), it was observed that, they had taken CENVAT credit of Rs. 1,94,830/- on 95.510 MTs of iron and steel, which was ship breakage input, sold to it "as such" by the other appellant, M/s Vashist Ispat Product, (the original noticee No. 2). The appellant, M/s Vashist Ispat Product, had received the inputs from M/s Vijay Sharma & Sons through the invoices on which the said appellant had availed the CENVAT credit of Rs. 1,49,373/-. According to the Revenue, as per the provisions of Sub-rule (4) of Rule 3 of the CENVAT Credit Rules, 2002, the appellant, M/s Vashist Ispat Product, was required to reverse only an amount equal to the CENVAT credit taken by them i.e Rs. 1,49,373/- in respect of the said inputs at the time of their clearance "as such" to M/s Lakshmi Steel Rolling Mills, and only that was the amount available as CENVAT credit to the appellant, M/s Lakshmi Steel Rolling Mills, as per the provisions of Rule 3(5) of the said Rules. In the show cause notice issued on these appellants, it was alleged that, since the appellant, M/s Vashist Ispat Product, was going to opt for full exemption under SSI Notification No. 8/2003 w.e.f. 01.04.2003, the said appellant was required to reverse the CENVAT credit involved on the stock of inputs lying "as such" or contained in the finished goods.

According to the Revenue, the CENVAT credit balance of Rs. 48,809/- would have remained unutilized on 31.03.2003 and would have lapsed under Rule 9(2) of the CENVAT Credit Rules, 2002, in view of the said appellant having opted for availing full exemption under Notification No. 8/2003. In order to avoid such a situation, the said appellant devised a method of clearing 95.510 MTs of inputs "as such" at a very high assessable value of Rs. 12,750/-per MT, reversing the CENVAT credit after calculating the duty on that amount, which was contrary to the provisions of Rule 3(4) of the CENVAT Credit Rules, 2002.

3. On the above allegations being established on the basis of material on record, recovery of extra credit of Rs. 45,467/-was ordered against the appellant, M/s Lakshmi Steel Rolling Mills, along with interest.

However, penalty proceedings were dropped against that appellant on the ground that it had not violated any provision of law by taking the credit to the tune of the amount shown in the invoices. For the appellant, M/s Vashist Ispat Product, it was held that, they had knowingly and deliberately passed on excess CENVAT Credit, over and above the duty actually paid by the original manufacturer, in their invoices issued to the appellant, M/s Lakshmi Steel Rolling Mills, and had thus facilitated availment of extra credit of Rs. 45,467/- by that appellant. The appellant, M/s Vashist Ispat Product, was, therefore, held liable for penal action under Rule 13 of the CENVAT Credit Rules and a penalty of Rs. 45,467/- was imposed on it.

4. The Appellate Commissioner came to a finding that, as per the provisions of Rule 3(4) of the said Rules, the appellant, M/s Vashist Ispat Product, was required to reverse the amount of CENVAT credit taken on the inputs as the same were cleared by them "as such".

However, at the time of clearance, the said appellant paid duty (by reversal), of Rs. 1,94,840/- from their CENVAT credit account, though as per Rule 3(4) of the said Rules, the said appellant was required to reverse only Rs. 1,49,373/-. Thus, credit of Rs. 45,467/- was in excess of the actual credit that could have been lawfully taken. The plea that some of the material of high quality was sold at a premium by the appellant, M/s Vashist Ispat Product, to the appellant, M/s Lakshmi Steel Rolling Mills, was rejected and it was observed that, even if higher value may have been charged, the CENVAT credit could have been reversed only to the extent that it was taken at the time of receipt of the inputs. As regards the contention that, though the show cause notice referred to the provisions of Section 11AC for proposing penal action against the appellant, M/s Vashist Ispat Product, the penalty was imposed under Rule 13 of the CENVAT Credit Rule, 2002, the Commissioner (Appeals) held that, mere wrong mention of Section 11AC in the show cause notice did not vitiate the action taken against that appellant.

5. The learned Counsel appearing for the appellants in both these appeals, has contended that, the appellant, M/s Vashist Ispat Product, by selling the goods at a higher value to the other appellant, has, in fact, paid a higher amount of duty and therefore there was no revenue loss caused by the higher sale price. It was submitted that, since CENVAT credit was available to the appellant, the payment was lawfully made by utilizing that credit. It was submitted that, merely because the said appellant had opted for the benefit of the SSI Exemption Notification from 1.4.2003, no adverse inference could have been drawn from the fact that, any portion of the CENVAT credit was not allowed to lapse. It was, therefore, submitted that, the penalty imposed on the appellant, M/s Vashist Ispat Product, was not justified. It was also submitted that, the penalty was imposed under Rule 13 of the said Rules, which was not alleged against this appellant in the show cause notice. The learned Counsel further argued that, since the penalty proceedings were dropped against the appellant, M/s Lakshmi Steel Rolling Mills, on the ground that it had not committed any violation of the provisions of law, no malafide intention could have been attributed to the appellant, M/s Vashist Ispat Product, in respect of the same transaction. It was further submitted that, the amended Rules of 2002 were brought into force from 1st March, 2003 and the position prior to that, under the Rules of 2001, was different as per which, when the goods were removed "as such", an amount equal to the duty of excise leviable on such goods at the rate applicable on the date of such removal, was required to be paid. It was, therefore, submitted that, the payment by the appellant, M/s Vashist Ispat Product, from the CENVAT account to the extent of the duty worked out on the higher value of the goods, could not have been described as any a malafide arrangement. The learned Counsel also argued that, the appellant, M/s Lakshmi Steel Rolling Mills, had not violated any provisions of law and was entitled to take the credit of the duty on the basis of the invoices under which the goods were purchased by it. It was submitted that, both the firms were independent and there was no allegation that the transactions between them were not genuine.

6. The learned Authorised Representative for the Department, on the other hand, supported the reasoning and findings of the authorities below and contended that, the malafide intention on the part of the appellant, M/s Vashist Ispat Product, was evident from the fact that, though the said appellant had opted for full SSI exemption under the Notification No. 8/2003 and the CENVAT credit balance of Rs. 48,809/- would have lapsed from 01.04.2003, the benefit of the credit was passed on to the other appellant. It was submitted that, such excess utilization of credit balance was not warranted under Rule 3(4) of the Rules of 2002. It was also submitted that, the penalty imposed on the appellant, M/s Vashist Ispat Product, was justified.

7. The material on record clearly discloses that, the CENVAT credit taken by the appellant, M/s Vashist Ispat Product, in respect of the quantity of inputs, which it sold to the other appellant at a higher value, was Rs. 1,49,373/-. According to the appellant, M/s Vashist Ispat Product, better quality scrap was sorted out for the sale of the inputs "as such" to the appellant, M/s Lakshmi Steel Rolling Mills, and, therefore, higher value was justifiably charged under the invoices, when the clearance of goods was made "as such".

7.1 It would appear from the provisions of Rule 3(4) of the CENVAT Credit Rules, 2002 that, when the inputs on which CENVAT credit was taken are removed "as such" from the factory, the manufacturer of the final product was required to pay an amount "equal to the credit availed in respect of such inputs" and such removal was required to be under the cover of an invoice, referred to in Rule 7. The invoice under Rule 7 was required to be issued in terms of the provisions of the said Rules of 2002. Therefore, no amount higher than the amount, equal to the credit availed in respect of the inputs sold under such invoice, could have been mentioned therein, contrary to the provisions of Sub-rule (4) of Rule 3 of the said Rules. Admittedly, these Rules were in force when the inputs were cleared "as such". The particulars of the invoices, under which these goods were sold "as such" given in Annexure-A to the show cause notice, showed that all the invoices were of 30th March, 2003 and 31st March, 2003. Obviously, therefore, the duty amount of Rs. 1,94,840/- could not have been passed on to the appellant, M/s Lakshmi Steel Rolling Mills, in the face of the specific provision of Sub-rule (4) of Rule 3 that an amount equal to the credit availed, which was Rs. 1,49,373/-, was to be paid in respect of such inputs. Both the authorities below have, therefore, correctly held that, the appellant, M/s Vashist Ispat Product, had wrongly utilized the credit to the extent of Rs. 45,467/-and that the appellant, M/s Lakshmi Steel Rolling Mills, was not entitled to avail that excess credit under the invoices under which the goods were sold. It is obvious that, the invoices issued under Rule 7 were required to adhere to the provisions of Sub-rule (4) of Rule 3 and the appellant, M/s Lakshmi Steel Rolling Mills, could not have, therefore, lawfully availed the extra CENVAT credit of Rs. 45,467/-, which could not have been passed on to it by the appellant, M/s Vashist Ispat Product, being in excess of the amount equal to the credit, which was availed by it.

8. These two appellants; M/s Vashist Ispat Udyog, appellant, and M/s Lakshmi Steel Rolling Mills, appellant, have throughout asserted that, they were manufacturers of iron and steel rolled products holding separate Central Excise Registrations. During the course of the arguments, the learned Counsel, who appeared for both the appellants, had contended that, their transactions were genuine and they were independent concerns and, therefore, the purchaser, M/s Lakshmi Steel Rolling Mills, could not be blamed for having taken the full CENVAT credit for the inputs. When it was pointed out by the Court, from their respective Memoranda of Appeals that, both these appeals, though in the pompous names of firms, were, in fact, only sole-proprietory concerns of Mr. P. Vashist and Mr. Vinod Vashist, the learned Counsel was taken aback and he said that, he did not know about this and was under the impression that they were independent partnership firms. If the names of these sole-proprietors had appeared as manufacturers and assessees, as ought to be done under the relevant legal provisions, as will presently be seen, there would have been a natural consequential inquiry, whether these individuals running business in the names of proprietary concerns were "related" persons. In fact, excise registrations contemplated by Rule 9 can be done only of person(s) who are manufacturers and such person(s) alone can be the assessees. A proprietary concern has no legal existence of its own and is not a person like a company or a living individual. The use of the prefix "Messers" in a proprietary name misleads the public at large and the officials, by suggesting that it is a body of persons. A registered partnership firm would be a group of persons who are its partners and will collectively be manufacturers and assessees, though doing a business in the name of their partnership firm. Only a registered partnership firm can sue or be sued in the firm's name, that too for convenience sake. Beyond that, it has no juristic personality. The scheme of the said Act and the Rules contemplates, registration and assessment of individuals or juristic persons, and not of mere business names of sole-proprietors. An individual himself will be the manufacturer and assessee, even if he does his activities under more than one business names of his sole-proprietory concerns. One can effectively thwart an inquiry into "relationship" -so important for ascertaining the genuineness of transaction value -by projecting proprietory concerns of different names to create an illusion that the transactions are between different entities; though in reality their proprietor being the same, cannot transact with himself. There cannot be contractual relations with one's own self and, therefore, no legal contractual transactions can be recognized amongst the sole proprietory concerns created by the same individual showing inter se business activities in such different names. There cannot be any independent contractual relationship between mere business names when the proprietor is the same person. It cannot be easily ascertained from the assumed business names of sole proprietory concerns, whether they are owned by the same proprietor and if there are different proprietors, whether they are "related" in the context of the need for valuation inquiries.

9. The word "manufacturer", under Section 2(f) of the Central Excise Act, 1944 shall include not only person who employs hired labour in the production or manufacture of the excisable goods, but also any person who engages in their production or manufacture on his own account.

Thus, a manufacturer has to be a person, living or juristic. A sole-proprietory concern is not a juristic person and cannot, of its own, be a manufacturer or producer. For the purpose of Section 4, "assessee" is defined in Sub-section (3)(a) thereof, to mean the person who is liable to pay the duty of excise under the Act and includes his agents. Any prescribed person who is engaged in the production or manufacture or any process of production or manufacture of specified goods is required to get himself registered with proper officer, as required by Section 6 of the said Act. Therefore, registration can be done only of such prescribed person, and not of a sole-proprietory concern, which by itself is not a person. The practice of giving registration in the name of a proprietory concern and not the person, who is the proprietor, is contrary to the provisions of the said Act and is capable of perpetuating frauds due to the real name of the person concerned being camouflaged by the assumed proprietory name. The word "assessee", as defined in Rule 2(c) of the Central Excise Rules, 2002, means any person who is liable for payment of duty or a registered person of a private warehouse. Under Rule 4, duty is payable on removal of excisable goods by every person who produces or manufactures or stores in a warehouse. Thus, none of the provisions of the Act or the Rules warrants recognition of mere sole proprietory name as manufacturer or assessee, who would be liable to pay the duty. Only a person living or juristic can be registered for the purposes of the Act and will be liable to assessment and payment of duty irrespective of any name/names that he may adopt for doing the proprietory business.

All the excise registrations and assessments under the Act and the Rules are required to be done in the name(s) of the persons concerned even when they run their proprietory business in different names. In fact, the practice of registering manufactures in the name of proprietory concerns, appears to have been unwittingly recognized by a seemingly innocuous but a most damaging instruction in note 5 which has crept in the prescribed Form A1, which was substituted w.e.f.

1.10.2002. The said form is prescribed for application for central excise registration, in the context of Rule 9 of the Central Excise Rules, 2002. Surprisingly, though Section 6 of the Act clearly contemplated registration of a person who is engaged in the production or manufacture of excisable goods, the newly introduced instruction No.5 of the proforma application A1 requires that, name of the registrant should be the name and style in which the registrant is likely to carry out the business. This shady instruction 5 was wholly uncalled for and is contrary to the scheme of the Act and the Rules, and is capable of perpetrating mischief and fraud by shielding the names of the real persons who are engaged in the manufacture of excisable goods and are required to be registered under Section 6 of the Act read with Rule 9 of the Central Excise Rules, 2002, which refer to the registration of the person who produces or manufactures the excisable goods. It will be noticed that, no such instruction ever existed in the earlier proforma application for registration. This is evident from the earlier proforma A1 issued under Rule 9 of the Rules of 2001, which required a request being made to the Superintendent of Central Excise to issue a Registration Certificate under Rule 9 for the purposes indicated in the Schedule to that proforma. In that Schedule, name and address of the person applying for the registration was required to be mentioned.

There was absolutely no scope for registering the name of any "non-person"; and the details of the properties, persons, directors as the case may be, were also required to be given. In the same way, even in the still earlier proforma in Form R1 under the Central Excise Rules of 1944, the application for registration was required to be made by the person in whose name the registration certificate was required to be issued. The application was to be made in the name of the person (living or juristic) applying and not in any other name. Thus, there never was any possibility of giving excise registration in the names of sole-proprietory concerns. In view of the substantive provisions of Section 6 of the said Act and Rule 9 of the said Rules, instruction No.5 in the proforma application Form A1 is ultra vires the scope of the said statutory provisions. All excise registrations and assessments are required to be done in the name(s) of the persons concerned even when they run proprietory business in different names. It will be for the Parliament, the rule making authority, the Board and the excise officials to recognize the potential mischief and large scale abuse that is caused by allowing the excise registrations and doing assessments in the names of proprietory concerns and not in the names of the real persons who are the manufacturers and assessees, and take appropriate remedial measures.

10. As held above, the excess CENVAT credit was wrongly availed by the appellant, M/s Vashist Ispat Product, and, therefore, its recovery with interest, was justified. No penalty was imposed on the appellant, M/s Lakshmi Steel Rolling Mills. However, penalty of equal amount of Rs. 45,467/- has been imposed on the appellant, M/s Vashist Ispat Product, under Rule 13 of the CENVAT Credit Rules, 2002. Though there is an allegation of malafide intention made against the said appellant in the show cause notice, in the context of the penalty proposed under Section 11-AC, it appears that the adjudicating authority has resorted to Rule 13 holding that Rule 11AC was wrongly mentioned in the show cause notice. Under Rule 13 of the CENVAT Credit Rules of 2002, utilization of CENVAT credit on account of fraud, wilful mis-statement etc. is separately dealt with under Sub-rule (2) and penalty in terms of Section 11-AC of the Act is prescribed. However, in cases where there is simple breach of rules, penalty is prescribed under Sub-rule (1) of Rule 13, which may not exceed the duty on the excisable goods or ten thousand rupees, whichever is greater. The appellant, M/s Vashist Ispat Product, was not entitled to make the payment of any amount, from the CENVAT account, higher than the amount equal to the credit availed in respect of the inputs cleared. However, since Sub-rule (4) of Rule 3 was brought into force only from 1st March, 2003 and all the transactions occurred during that month, it may not be possible to conclusively allege that the said appellant had taken or utilized the credit on account of fraud etc. Since it cannot be conclusively held that, the appellant, M/s Vashist Ispat Product, was harbouring a guilty mind requisite for invoking Sub-rule (3) of Rule 13, it would be appropriate, in the facts and circumstances of this case, to reduce the penalty imposed on the appellant, M/s Vashist Ispat Product from Rs. 45,467/- to Rs. 10,000/- (rupees ten thousand only). Accordingly, the Excise Appeal No. 2224 of 2005 of the appellant, M/s Lakshmi Steel Rolling Mills is dismissed; and the Excise Appeal No. 2223 of 2005 of the appellant, M/s Vashist Ispat Product, is partly allowed.

11. The Registrar is directed to forward a copy of this judgment to the Government of India, Ministry of Finance, North Block, New Delhi.