2004 (97) ECC 127 (Tri)

CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL

West Zonal Bench -- Mumbai

S.S. Sekhon, Member (T) and T. Anjaneyulu, Member (J)

Shaper Chemical Ltd. & Ors.

Versus

Commissioner of Central Excise, Mumbai-VII

Appeals No. E/3452 to 3456, 3490, 3572, 3568, 3569, 3578 to 3581/00 Mum

[Arising out of Order-in-Original 5/2000/M-VII dated 22.6.2000 passed by the Commissioner of Central Excise, Mumbai VII]

Order No. A/275-287/WZB/2004-C-II, dt. 21.5.2004, Certified on 2.6.2004

Confiscation & Penalty (C. Excise)

Clandestine removal -- Credit has been availed by assessee only on documents without receipt of any goods, the question of liability of any goods to confiscation does not arise and has not been determined -- Since it is a case of revenue itself that there were no goods which actually moved, the liability of penalty under Rule 209A and Rule 173Q arrived only on account of role in fraudulent availment of credit cannot be up held -- Rules 209A, 173Q of CER -- Section 11AC of CEA.

Appeal allowed

PRESENT :

Shri V.S. Nankani, Adv. for the appellants.

Shri Sanjay Singhal, DR for the respondent.

Per : S.S. Sekhon

Officers of the Headquarters Preventive, Mumbai VII Commissioner, Central Excise, pursuant to an intelligence carried out search/stock taking operation and a Show Cause notice pursuant to enquiry made was issued No. V/Adj(15/Seiz)48/98/M-VII dated 18.8.1998 to 17 notices therein to show cause as to why --

(i) Modvat credit of Rs. 1,26,17,981 wrongly availed by M/s Shaper Chemicals Ltd. (hereinafter referred to as `Shaper') on goods not received in the factory during the period 1995 to September 1997 should not be disallowed and recovered under Rule 57I(1) of the Central Excise Rules, 1944.

(ii) Amounts Rs. 8,49,621 & Rs. 20.00 lakhs paid by them in RG23A and TR 6 challans should not be confirmed.

(iii) Central Excise duty of Rs. 2,45,666 on raw material found short should not be confirmed.

(iv) Excess stock of raw material and finished goods not be ordered to be confiscated.

(v) Penalty and interest not be imposed/demanded.

Show Cause Notices were also issued to the supplier of Shaper M/s Rang Rasayan Udyog dt. 14.9.1998, M/s Pradeep Shetye Pvt. Ltd. dt. 28.1.1999, the supplier of the alleged documents on which credit was availed when no goods have been stated to have been supplier were also decided by the Commissioner as the issue involved was same.

2. After hearing the notices and considering the submissions, the Commissioner found --

(a)(I) Statements recorded could be relied.

(ii) there is material to conclude, based on statements recorded, that though duty paid invoices moved and credits were availed, no goods went to the 4 suppliers from Shaper as investigated into by the officers and no finished goods were received back by Shaper. There was material on record to conclude that false production entries were made and recorded in RG1 to cover up the false receipt of the raw materials which in fact were never recorded.

(iii) Consequently the charges made in the Show Cause Notice were to be upheld.

(b)The following orders were passed:

(i) disallowance of Rs. 1,26,17,981 being Modvat credit wrongly availed by Shaper on strength of invoices issued under Rule 52A without actually receiving the materials (as per details in Annexure A to a Notice) and recovery thereof ordered after appropriating Rs. 20.00 lakhs & Rs. 84,962 for already paid.

(ii) Confirmed duty of Rs. 24,566 being duty on raw material found short as per Annexure C and appropriation of that amount already paid.

(iii) Confiscation of excess stock of raw material valued at R 1,77,974 and finished goods valued at Rs. 3,00,700 as per Annexures D & E to the Notice and to be redeemed on payment of fine of Rs. 25,000.

(iv) Penalty of Rs. 1,26,17,981 on Shaper under Rule 57I (4) read with Section 11AC was imposed alongwith penalty of Rs. 20.00 lakhs under Rule 173Q read with Rules 210 & 226 and interest under Section 11AB was demanded in respect of Modvat disallowed.

(v) Penalties were imposed on the following under Rule 209A of the Central Excise Rules, 1944 for the role in fraudulent availment of Modvat credit. The persons are S/Shri K.N. Nikorawalla, Managing Director, D. Chaturvedi, Store Keeper, Girish Muraka, Company Secretary, K.N. Nikorawala, Director of M/s Shaper and Shri Pradeep Shetye, Director of M/s Pradeep Shetye Pvt. Ltd. Vijay Puri, proprietor of M/s Rang Pasayani Udyog, S.S. Ghate, Director of M/s Aricon Fine Chem Pvt. Ltd. & M/s Capris Chemicals (P) Ltd., Shri Raj Kuam Makharia, Director of M/s Maya Rasayan Ltd., S.K. Suratkar, Partner of M/s Epsilon Industries, Deepak Shah, partner of M/s Chemida Enterprises, Shri Parikshit Shah, partner of Chemida Enterprises, Sunil Patel, Director M/s Clarisis Organic Ltd. M.R. Tiwari, Director of M/s Paramed Pvt. Ltd. Boob, Director of M/s Mangalam Rasayan Pvt. Ltd., Pankaj Shah, Proprietor of M/s Parshavnath Traders, Sarna, Director of M/s Savi Chemicals Pvt. Ltd.

(i) Disallowance of credit of Rs. 15,636,350 and appropriation of amount of Rs. 502771.72 with penalty of Rs. 15,36,650 under Section 11AC, Rs. 3 lakhs and Rule 173Q read with Rule 57I with Rule 226.

ii) Penalty under Rule 209A on proprietor Shri V. Puri and Shaper for fraudulent availment of Modvat credit alongwith penalty on K.N. Nikorawala, Managing Director of M/s Shaper, M.D. Chaturvedi, Storekeeper of Shaper.

(d) In case of Show Cause Notice to M/s Pradeep Shetye Pvt. Ltd.

The Commissioner disallowed credit of Rs. 23,05,250 and appropriated of Rs. 8 lakhs paid. Confirmed duty demand of Rs. 1,55,409 shortage raw material and Rs. 27,936 on finished goods and duty on goods sent for reprocessing and not received back along with equivalent penalty of Rs. 23,05,250 under Section 11AC read with Rule 57I and penalty of Rs. 4 lakhs under Rule 173Q and Rule 226 with penalty under Rule 209A for fraudulently availing of Modvat credit on Shri Pradeep Shetye, Shri K.N. Nikorawala, Managing Director of Shaper, Shri R.R. Umbre, Production Manager of M/s Pradeep Shetye Pvt. Ltd.

Heance these appeals.

3. After hearing both sides and considering the materials on record, it is found:

(a) Since there are no goods to be moving, as found by the Ld. Commissioner and credit was been availed only on documents without receipt of any goods, the question of liability of any goods to confiscation does not arise and has not been determined. To effect and uphold penalty liability goods should have been found to be liable to confiscation. Since it is the case of Revenue itself that there was no goods which actually moved, the liability under rule 209A arrived only on account of role in fraudulent availment of credit cannot be upheld. All appeals as regards rule 209A are to be allowed after setting aside the order of penalty under the rule.

(b) Since no goods have moved the penalty under rule 173Q read with other rules cannot be approved as far as alleged fraudulent Modvat credit is concerned, as penalty under rule 173Q is related to value of the goods and since goods are admittedly as per the case of Revenue not to exist the, value thereof cannot. Penalty under rule 173Q read with the rules is to be set aside.

(c) As regards the eligibility to credit, it is the submission of Shaper in the reply to the notice to the adjudicator submitted as under:

"3.......The company has prepared the same chart by adding transport details against each entry in Annexure A to the Show Cause Notice to show the physical movement of the intermediate products from the 14 parties to the company..."

No findings on this chart are arrived at, which was required. The order is issued without considering the defence reply. It is to be set aside and remitted back to the adjudicator. He should rehear the appellants in all the three notices and redetermine the alleged eligibility to credit. Thereafter, penalty, if required under Rule 226 and or Rule 210 of the Central Excise Rules for the credit entries made but not permissible be determined.

4. In view of the findings arrived, the appeals are allowed in above terms as regards penalty under rule 209A and 173Q. The other appeals remitted for rehearing and de novo adjudication on all issues.

5. Appeals disposed of in above terms.

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