Hon'ble Aditya Nath Mittal, J.
1. These three Central Excise Appeals under Section 35-G of the Central Excise Act, 1944 (the Act) arise out of orders passed by the Customs, Excise & Service Tax Appellate Tribunal dated 7.4.2008 by which the Tribunal has confirmed the Order-in-Original and the Appellate order, the demand and the penalty imposed and the confiscation of land, building, plant, machinery, to be released on payment of redemption fine.
2. We have heard Shri Praveen Kumar, learned counsel appearing for the appellants. Shri R.C. Shukla appears for the Commissioner of Central Excise.
3. Brief facts giving rise to these appeals are that M/s Jai Shree Industries (India) and M/s Jai Shree Steels established by late Sudarshan Kumar, now represented by his son Shri Ashwani Kumar are partnership firms. The units were registered under the Central Excise Act for manufacturing goods under Chapter 72 of the Central Excise Tariff Act, 1985. Shri Sudrshan Kumar died in the year 2000.
4. The officers of the Central Excise Department, Meerut visited the factory premises on 3.12.1992, on the intelligence collected by the department that the firms are procuring substantial quantity of steel from SAIL and IISCO, and coal from M/s Coal India Ltd at controlled rates but are selling such steel and coal at a premium in the open market. They were reported to be fabricating the central excise records, wage register, labour register, and central excise records showing receipt of inputs and production of goods. They were not carrying on any manufacturing activity in both the units and were clandestinely showing production only on papers. In order to obtain higher quota of coal, some more firms were floated by the partners of these two units and bills for inputs were being procured from such units. Some of these firms were existing only on paper and were also issuing bills for supply of inputs like M.S. rounds. On the basis of these bills, credit was taken and most of the inputs were being shown as scrap. The scrap was being cleared to the Ingot manufacturers on payment of duty from credit taken on the inputs. The Ingot manufacturers were not receiving any scrap but were taking central excise gate passes to avail Modvat Credit. The buyers of scrap were making the payments by cheques to these two firms on depositing in their bank accounts, which were encashed on the same date. The cash was paid back to these firms. Similarly these firms were making payments to the firms, which issued bills for input by depositing cash in the bank and then cheques were issued, which were got encashed from the bank and cash was taken back from these firms. The steel and coal were sold at a premium in the open market and Modvat Credit was being taken by the Ingot manufacturers on the basis of gate passes of the scrap while there was no manufacturing activity.
5. The officers of the Central Excise Collectorate, Meerut, on their visit on 3.12.1992 found that the premises of both the factories located at D-14/15, Sector 17, Kavi Nagar Industrial Area, Ghaziabad and at D-16, Sector 17, Kavi Nagar, Industrial area, Ghaziabad, were closed with no manufacturing activity. There was 5 to 6 feet high grass growing in the factory premises. The Central Excise Officers caused scrutiny of raw material registers in Form IV, RGI for forgings and RGI for scrap from the years 1988-89 to December, 1992 and found that the entire records were forged and fabricated. A show cause notice was given to both the firms as well as Shri Sudarshan Kumar and Shri Ashwani Kumar partners of the firms giving the entire details of the inspections and the registers of raw material and manufacture with the allegations as follows:-
"18. And whereas from the above recitals, it further appears that M/s J.I. and M/s J.S. have contravened following provisions of Central Excise Rules, 1944:-
(i) Rule 576 in as much as credit was taken on the inputs without actual receipt of the same.
(ii) Rule 57F in as much as the credit was utilized towards payment of duty on scrap while actually there was no production of scrap.
(iii) Rule 173G (iv) in as much as raw material Register in form IV and Register of daily Production in RG1 was wrongly maintained in as much as neither there was any receipt of the inputs nor there was any production of forgings & scrap was entered with the intention of issuing Central Excise Gate passes of scrap on payment of duty from RG23A Pt. II and on the basis of these Gate passes credit was taken by the Ingot manufactures.
(iv) Rule 173Q (1)(bb) in as much as M/s J.I. and M/s J.S. have taken credit of duty in respect of inputs which were actually not received by the. They were in full knowledge of the fact that the inputs are not being received and bills for inputs were being got manipulated from the suppliers.
(v) 173Q (1) (bbb) in as much as they have willfully issued Gate passes for scrap by debiting duty from RG23A Pt. II with intent to facilitate the buyers to avail of credit of duty in respect of steel scrap which was not permissible to the buyers under Central Excise Rules because no scrap was actually cleared by M/s. J.I. M/s J.S. and no scrap was received by the buyers.
19. And whereas it further appears that for contravention of provisions of above Rules M/s J.I. and M/s J.S. have rendered themselves liable for penal action under Rules 1730(1)(a), 1730(1)(b), 173Q(1)(bb) and 173Q(1)(bbb) of Central Excise Rules, 1944.
20(i).And whereas it further appears that the wrongly availed credit is recoverable from M/s J.I. and M/s J.S. by invoking extended period under proviso to Rule 571(1)(i) because there was willful mis-statement and suppression of facts by them in as much as:
(a) No input was actually received by them but Central Excise records like RG23A Pt. I, Form IV Register and RG12 returns showing receipt of inputs only on paper were fabricated similarly even though there was no production of scrap, RG1 Register and RT12 returns were fabricated showing production of scrap.
(b) The bills of receipt of inputs were procured from 3 suppliers which were fully controlled by the partners of M/s J.I. and M/s J.S. the fact that no input is being received and only bills for inputs were being procured was in full knowledge of the partners of M/s J.I. and M/s J.S. but credit was taken on the basis of such manipulated bills with malafide intention of availing credit.
(c) The Registers for wages and salaries were fabricated in as much as the signatures of the workers do not tally on the revenue stamps. These Registers were fabricated with malafide intention of showing the same to various departments that both these units are engaged in the manufacturing activity while in fact there was no manufacturing activity.
20(ii).And whereas it further appears that since there was willful mis-statement and suppression of fact by M/s J.I. and M/s J.S. extended period of 5 years is invokable for demanding wrongly taken credit as per proviso to Rule 571(1)(i).
21. And whereas it further appears that M/s J.I. have utilized the wrongly availed credit to the tune of Rs. 1,00,33,926.26 (Rs. 91,47,678.80 as B.E.D. And Rs. 8,86,247.46 as S.E.D.) during the period July 88 to December 92. They were having a credit balance of Rs.5,65,455.70 as on 31.12.92. The total credit amounting to Rs.1,05,99,381.96 is recoverable from them under proviso to Rule 571(1)(i) of Central Excise Rules.
22. And whereas it further appears that Ms J.S. during the period July 88 to December 92 have utilized the wrongly availed credit to the tune of Rs. 96,26,129.75 (Rs. 87,876.88 ans B.E.D. & Rs.8,68,252.87 as S.E.D.) They were having a credit balance of Rs.16,79,103.25 as on 31.12.92. The total credit amounting to Rs.1,13,05,23.00 is recoverable from them under proviso to Rule 571(1)(i) of Central Excise Rules 1944.
23. Now, therefore, M/s jay Shree Industries (India) are required to show cause to the Collector, Central Excise, North U.P. Collectorate, Bhaisali Ground, Meerut as to why:-
(i) The credit amounting to Rs. 1,05,99,381.96 wrongly availed by the on inputs should not be recovered from them under proviso to Rule 571(1) of the Central Excise Rules, 1944.
(ii) penalty should not be imposed on them under Rule 173Q1(bb) and 173 1(bbb) of the Central Excise Rule, 1944.
(iii) Why Land, Building Plant, Machinery, Materials, Conveyance etc. should not be confiscated under Rule 1730(2)(b)(i) of the Rule ibid.
24. Now, therefore, M/s Jay Shree Steels are hereby required to show cause to the Collector, Central Excise, North U.P. Colectorate, Bhaisali Ground, Meerut as to why:-
(i) the credit amounting to Rs. 1,13,05,233.00 wrongly availed by them on inputs should not be recovered from them under proviso to Rule 57I(1) of the Central Excise Rules, 1944.
(ii) Penalty should not be imposed on them under Rule 173 Q(1)(bb) and 173 Q(1)(bbb) of the Central Excise Rules, 1944.
(iii) why land, Building, Plant, Machinery, materials, conveyance etc. should not be confiscated under Rule 1730(2)(b)(i) of the rules ibid.
25. Shir Sudarshan Kumar, partner of M/s Jay Shree Industries (India) and M/s Jay Shree Steels is also required to show cause to the Collector, Central Excise, Meerut as to why penalty should not be imposed on him under Rules 1730(1)(bb) and 1730(1)(bbb) of the Rules ibid for fabricating the Central Excise documents with the intention of enabling the ingot manufactures to avail the Modvat Credit on the strength of GP1s of Scrap.
26. Shri Ashwani Kumar, partner of M/s Jay Shree Industries (India) and M/s Jay Shree Steels is also required to show cause to the Collector, Central Excise, Meerut as to why penalty should not be imposed on him under Rules 1730(1)(bb) and 1730(1)(bbb) of the Rules ibid for fabricating the Central Excise documents with the intention of enabling the ingot manufactures to avail the Modvat Credit on the strength of GP1s of Scrap.
27. The said M/s Jay Shree Industries (India) and M/s Jay Shree Steels are here by directed to produce at the time of showing cause all the evidence upon which they intend to rely in support of their defence.
28. The said M/s Jay Shree Industries (India) and M/s Jay Shree Steels should also indicated in their written explanation whether they wish to be heard in person before the case is adjudicated.
29. If no cause is shown against the action proposed to be taken within 30 days of the receipt of this notice or they do not appear before the adjudicating officer when the case is posted for therein, the sale shall be decided expedite on the basis of evidence on record without any further reference to them.
30. This show cause notice is issued without pre-judice to any other action that may be taken against the said M/s M/s Jay Shree Industries (India) and M/s Jay Shree Steels under any other law for the time being in force.
Sd/-
28.7.93 (Collector) Central Excise, Meerut"
6. The firms and their partners submitted identical replies. The Commissioner of Central Excise, Meerut vide his Order-in-Original dated 13/14.8.1997 ordered for recoveries from the firms under Rule 57-I of the Central Excise Rules, 1944 on account of the Modvat Credit fraudulently availed & utilised. Further a penalty of Rs. 25 lacs each was imposed on the firms under Rule 173-Q of the Central Excise Rules, 1944, and a penalty of Rs. 5 lac each was imposed upon late Shree Sudershan Kumar and Shri Ashwani Kumar.
7. The appellant filed appeal in the Tribunal. During the proceedings of appeal, the Assistant Commissioner of Central Excise served notices of order of attachment of the factory premises. The Tribunal allowed the stay application subject to condition that the appellant shall not dispose of the factory premises without its premises, until the attachment order remains in force.
8. It is alleged that during the pendency of the proceedings the appellants came to know, that the firms, to whom the central excise gate passes were issued, were also issued show cause notices by the department and an order was passed by the Commissioner of Central Excise, Meerut whereby Modvat credit availed by the respective firms against the gate passes issued by the appellant was denied and penalty was imposed upon them.
9. When these facts were brought to the notice of Tribunal on 28.5.2007 an order was passed that both the parties will ascertain the position of the connected cases against the appellant-buyers. The Additional Commissioner issued directions to provide the details required by the Tribunal, in response to which the Assistant Commissioner, Central Excise Division-V, Ghaziabad intimated the Tribunal that the demand against 21 parties, who were buyers from the appellants were confirmed through the Order-in-Original and the stay orders were set aside and the matter was remanded by the Tribunal on 2.11.1995. Some of the firms preferred to settle the issue either by depositing the entire amount or by applying under the compounding scheme; 16 out of these 21 parties went in appeal before the Tribunal, which were allowed and the matter was remanded but no records pertaining to fresh adjudication after remand were available in the office. The Additional Commissioner directed the respective Divisional Officer to intimate the latest position of the case of the buyers.
10. The Tribunal, by its order dated 2.11.1995 in order to serve the principle of natural justice, directed de-novo proceedings after granting personal hearing before re-adjudication of cases. In compliance thereof fresh notices were issued on 19.3.1996 to the appellants to submit their defence reply to the show cause notice dated 27.7.1993 by 12.4.1996. The notices returned undelivered on which the appellants were again requested to file their submissions with copy of letters to the advocates. These notices were also sent to their advocates Shri R.A. Yadav. The letters/notices were served by pasting it on 14.8.1996 on their premises. The firms appeared through their advocate Shri R.A. Yadav and submitted replies. After detailed discussions and findings in which large scale frauds were detected, the Commissioner of Central Excise, Meerut-I by his order dated 12.8.1997 confirmed the demands. The recovery under Rule 57-I of the Central Excise Rules, 1944 is on account of the Modvat Credit fraudulently availed/utilised and penalties under Rule 173-Q. The recovery of Rs. 1,05,99,381.96 was directed against M/s Jai Shree Industries (India) and penalty of Rs. 25 lacs along with confiscation of land, building, plant, machinery with option to redeem the same on payment of Rs. 30 lacs. Similarly, the recovery of Rs. 1,13,05,233/- was directed against M/s Jai Shree Steels under Rule 57-I of the Central Excise Rules, 1944 on account of Modvat Credit fraudulently availed & utilised and penalty of Rs. 25 lacs under Rule 173-Q of the Central Excise Rules, 1944. The land, building, plant, machinery of M/s Jai Shree Steels were also confiscated with an option to redeem the same on payment of Rs. 30 lacs. The personal penalty of Rs. 5 lacs was also imposed upon the noticee no. 3 Shri Sudershan Kumar, partner of these firms and Rs. 5 lacs on Shri Ashwani Kumar, the other partner both for fabrication of central excise documents with the intention of enabling the ingot manufacturers to avail the Modvat Credit on the strength of GP1's of scrap.
11. The Tribunal by its order dated 7.4.2008 dismissed the appeals. It found that the demand was confirmed on the ground that the appellants availed credit without receiving the inputs and utilized the same towards payment of duty showing manufacture of goods out of input so received. The appellants had not undertaken any manufacturing activity and had not received any inputs. They had only taken credit, which was wrongly passed on to the customers without manufacturing any excisable goods.
12. The Tribunal did not accept the argument that the appellants had shown clearance of goods on payment of duty to the customers, who had availed the credit and proceedings were initiated against those customers and demands were confirmed, the appellants could not be penalized. It also considered the submissions that some portion of the amount of the show cause notice was shown to be reversed and hence the demand on such portion could not be confirmed. The submissions were not accepted on the ground that the appellants had availed the credit without receiving the inputs and passed on the same to the customers without supply inputs, as such or manufacture of goods. The credit, which was wrongly taken and also shown to be utilized was thus recoverable. The Tribunal observed in paragraph-6 as follows:-
"6. Admitted facts of the case are that the appellant had not received any inputs regarding which they had availed the credit and also had not manufactured any excisable goods. The appellant firstly had taken credit which was not available to them and thereafter by showing the clearance of manufactured goods to the customers utilized the same. In view of this undisputed facts, we find that the appellants are not entitled for credit and also not entitled to utilize the same. Rule 571 of the Rules provides for recovery of credit wrongly availed of or utilized in an irregular manner. In view of the above facts, we find no infirmity in the impugned order and the appeals are dismissed."
13. We do not find any substance in the argument of Shri Praveen Kumar, that on the purchase of ingots and coal of which the price was paid by the appellant to SAIL and IISCO and Coal India Limited, the appellants were entitled to credit which they had passed on to the customers and for which their customers had either reversed the credit or compounded the amount which should have been taken into consideration and reduced in the demand made against the appellant and further that no penalties could be imposed on the appellants.
14. In the Order-in-Original the Commissioner had in the de-novo proceedings recorded findings that the ingots and coal were sold in the open market and that no forgings or scrap were actually cleared by the firms. The appellants had manufactured the records and had shown the forgings and the scrap to be transported on vehicles, which were either non-existent or were registered as motorcycle, scooter, moped, cars, vans, tankers, buses etc. Paragraphs 49, 50, 51 and 52 of the Order-in-original relevant for the purpose are quoted as below:-
"49. Enquiries were conducted from the transport authorities regarding registration of the vehicles. The letter from different transport authorities stating therein the type of vehicles and the name of the owners are contained in annexures H-1 to H-5 of the Show Cause Notice. I find that number of vehicles as per details given in annexure-1 on which scrap has been shown as transported from the factory premises of M/s J.I and M/s J.S. are motor cycles, scooters, mopeds, cars, vans, tankers buses, etc. From the chart at annexure-1 and MG, it is noticed that 368 consignments of scrap weighing 7001.43 M.T and 37 consignments of forgings weighing 555.43 M.T. have been transported from the factory premises of M/s J.I and M/s J.S. on such vehicles. As the vehicles like buses, scooters, cars etc. mentioned above are neither used for transporting scrap or forgings nor are capable of transporting such huge quantities weighing 15 to 20 MT, I hold that only Central Excise Gate Passes were issued by M/s J.I and J.S. and no scrap or forgings were actually transported from their factory premises.
50.Again from the charts at annexure M1, M2 and M3, it is observed that 281 consignments of scrap weighing 5260.325 M.T. And 67 consignments of forgings weighing 1009.720 M.T. respectively have been transported on trucks whose truck owners as per their statements (annexure J1 to J18) have denied any such transportation from the factory premises of M/s J.I and M/s J.S.. Hence, at least 735 consignments weighing 13826.905 MT of scrap and forgings have been shown as transported on non-commercial vehicles or on vehciles or on truck owners who have denied any such transportation. The only defence put forth against this is that the Truck numbers may have been forged which I find hard to accept in such a large no. of cases.
51. It is further observed that as per Annexure H1 to H4 to the Show Cause Notice some of the vehicles belonging to CRPF, Soil Survey Officer, G.M. Govt. Milk Scheme, Municipal Corporation, U.P.S.T.C. etc. have also been shown as used for transporting iron and steel scrap/forgings which could never have been utilised for transporting the said goods. Obviously the party has been filling in the vehicle Nos. at random without any thought or care as to their genuineness to cover fake removal on paper.
52. In view of the above facts, I hold that no scrap or forgings were actually transported but only Central Excise Gate Passes were issued by M/s J.I and M/s J.S. To different manufacturers to enable them to avail Modvat credit on the strength of the same without actual supply of material and to use such credit for payment of duty on goods manufactured by them with intent to evade payment of duty. As no scrap or forgings were actually transported from the factory premises of M/s J.I and M/s J.S. no such scrap or forgings were either manufactured by them."
15. In the Order-in-Original, findings of fact have been recorded that the forgings and inputs, which are cut to size and are thereafter heated in coal furnace and then hammered to a required shape. These inputs are normally billets, blooms, ingots, slabs and very thick rounds. The appellant firms had fraudulently shown these inputs to be purchased, whereas a large part of these inputs were M.T. Plates, which could not be forged. In the financial years in question the appellants had also shown purchases of huge quantities of inputs from M/s Devi Dayal Iron & Steels Co. of Ghaziabad and M/s Goel Traders which appears to be shown as only on paper, without actual receipt of inputs. Similarly the purchases were shown from M/s Rameshwar Steels Pvt Ltd and M/s Shriram Steels Centres, which had supplied huge quantity of M.S. Ingots to the firm but not even a single gate pass was submitted by these two suppliers. In the same way M/s Honey Steels and M/s Ram Singh Steel Traders were also shown to be supplying the inputs. Summons were issued to both the companies, which were returned undelivered.
16. We do not find any error of facts or law in the Order-in-Original dated 12.8.1997 and the order of the Tribunal dated 7.8.2008, in which findings have been recorded that the appellants availed the credit without receiving the inputs and had shown to pass them on to the customers without supplying inputs as such or manufacture of goods. The credit was wrongly taken and was also utilized.
17. All the three Central Excise Appeals are accordingly dismissed.
Dt.04.12.2012 RKP/