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CX – Allegation is that supplier of machinery had no manufacturing facility but merely issued cenvatable invoices – onus u/r 9(6) of CCR satisifed by assessee as machinery was available in factory during inspection: CESTAT

2019-TIOL-2097-CESTAT-DEL

IN THE CUSTOMS EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
NEW DELHI

Excise Appeal No. 50994/2018 (SM)

Arising out of Order-in-Appeal No.39(SM)CE/JPR/2018, Dated: 30.01.2018
Passed by the Commissioner (Appeals), Central Excise & CGST, Jaipur

Date of Hearing: 19.03.2019
Date of Decision: 29.03.2019

M/s WMW METAL FABRICS LTD

Vs

COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX
JAIPUR-I

Appellant Rep by: Shri Dileep Shivpuri, Adv.
Respondent Rep by: Shri K Poddar, DR

CORAM: Anil Choudhary, Member (J)

CX – Case of the Revenue is that the capital goods purportedly received under the cover of invoices (on which CENVAT credit has been availed) have been cleared by the supplier who did not have any manufacturing facility and was issuing invoices without any physical clearance – credit denied on the ground that Trade Mark, Number, Name of the manufacturer or any other specification relating to capacity/speed, year of the manufacture etc. was not visible on any part of the capital goods on the basis of which it could be ascertained that the machinery parts stated to have been installed were the same as received by the assessee under the cover of impugned invoices – Sr. GM of the appellant in his statement submitted that on the basis of invoice of the supplier they were made to believe that the same would have been manufactured by them only – it was held by the lower appellate authority that the appellant failed to discharge the obligation cast upon them in terms of Rule 9(6) of Cenvat Credit Rules – appeal to CESTAT.

Held: Bench finds that the show cause notice is defective for non-joinder of essential parties – Also there is lack of sufficient evidence by the Revenue – appellant has discharged its onus as required by them under Rule 9(6) of the CCR, 2004 as it is an admitted fact that the particular machinery part/capital goods were found available in their factory at the time of inspection – appellant has utilized statutory way-bill (Form VAT-47), and has made the payment by Account Payee cheques, both to the supplier and to the transporter – Oral evidences recorded are not reliable, being in violation of the provisions of Section 9D of the CE Act – Show cause notice is, therefore, not maintainable as the same is presumptive and more by way of wild allegation – impugned order is set aside and appeal is allowed – appellant is entitled to consequential benefit including the refund of cenvat credit reversed and the amount paid by way of interest through PLA – Adjudicating Authority is directed to grant refund within a period of 60 days: CESTAT [para 10]

Appeal allowed

FINAL ORDER NO. 50448/2019

Per: Anil Choudhary:

The issue in this appeal is whether the appellat has wrongly taken cenvat credit on purchase of capital goods.

2. The appellant is engaged in manufacture of SS Wire Cloth, which is mainly used in the Paper Industries for spreading and drying of the wet paper. The appellant acquired two consignments of capital goods viz. Electronic Driven Rapier Weft Feeding System (3700 MM and 5350 MM) vide Invoice No.84 and 85 dated 10.05.2011 and 11.5.2011 of M/s. Satabadi Tie-Up (P) Ltd., 17, Nabin Chandra Das Road, Kolkata-700 090. The assessee further claimed that since the said capital goods were installed on loom no.1 and 3 in their factory, they took cenvat credit of the duty paid thereon in their capital goods credit account as per the following entry:-

E.No.Cenvat A/c wrongly taken (capital goods)Amount (BED) 50%Ed.CessS. & H.CessTotal
34/18.5.201112375024751237127462
35/18.5.201181250162581283687
02/01.04.201212375024751238127463
03/01.04.201281250162581383688
Total41000082004100422300

3. Whereas, on verification at the capital goods supplier’s end, the said M/s. Satabadi Tie-Up Ltd. was found to have been working only on papers i.e. the unit was allegedly issuing only invoices for alleged clearance of excisable goods without any physical clearance, as there was no manufacturing facility found to exist within the said premises. A show cause notice C.No.V(30)33/CE/AE/STUPL/KOL-III/11/PT-1 dated 28.06.2013, in this regard, was also issued to M/s.Shatabadi Tie-Up Pvt. Ltd., by the jurisdictional Commissioner of Central Excise, Kolkata-III.

4. The officers of the Anti-Evasion Jaipur-I, on receiving information from the Commissioner of Central Excise, Kolkata-III, visited the factory premises of the assessee on 13.10.2011 and post inspection recorded the statement of Shri J.N. Bhargava, Sr. G.M. under Section 14 of the Central Excise Act, 1944, wherein he admitted the receipt of the said two consignments under consignment Note No.JS-01 dated 10.05.2011 and JS-02 dated 11.5.2011 both issued by the transporter namely M/s.Round India (Regd.), 68, Cotton Street, Kolkata, and installed in their factory at loom no.1 and 3. However, on being asked, they failed to show any Trade Mark, Number, Name of the manufacturer or any other specification relating to capacity/speed, year of the manufacture etc. on any part of the capital goods on the basis of which it could be ascertained that the machinery parts stated to have been installed on loom no.1 and 3 were the same as received by the assessee under the cover of impugned invoices.

5. Whereas, in his statement dated 24.01.2012, Shri Vishnu Murarka, Proprietor of the transporter i.e. M/s.Round India (Regd.), 68, Cotton Street, Kolkata, revealed that the related consignment Note No.JS-01 dated 10.05.2011 and JS-02 dated 11.05.2011 had been issued by him on the request of one Shri Suresh Saraogi for a consideration of Rs.200; that neither the booking nor any transportation was arranged in this regard and only consignment note/bill were issued; that on receipt of the cheque of the billed amount and after getting the said amount deposited in the bank, he paid back the money to Mr. Saraogi in cash.

6. Whereas, when confronted with the above statement of Shri Vishnu Murarka of the said transporter, Shri J.N. Bhargava, Sr. G.M. of M/s. WMW Metal Fabrics Ltd. 53, Industrial Area, Jhotwara, Jaipur, in his statement dated 3.10.2013 tendered under Section 14 of the Central Excise Act, 1944 stated that though he had seen the machine parts at the time of their receipt, yet he was not aware of anything written or embossed/mark on the body of the machine parts, on the basis of which the same can be identified with the relevant invoice or with the manufacturer i.e., M/s. Satabadi Tie up (P) Ltd., Kolkata. He had also denied having received any sort of packing list containing any sort of Trade Mark/Number/Name of the manufacturer or any other specification relating to capacity/speed, year of the manufacturer or any other specification relating to capacity/speed, year of the manufacture, accompanied with the machine parts or its invoice. He simply stated that on the basis of invoice of the supplier they were made to believe that the same would have been manufactured by them only. Finally, admitting the mistake he deposited the cenvat credit (under protest) so taken along with interest i.e Rs.4,22,300/- (C.Ex. Duty including cess)+ Rs.141450/- (interest)in the following manner:-

E.No.Cenvat A/c wrongly taken (capital Goods)Amount (BED)Ed.CessS & H CessTotalInterestTotalReversal (Entry No.) Paid through PLA
34/18.5.2011123750247512371274635197520/08.10.2013
35/18.5.2011812501625812836873412521/08.10.2013
02/01.04.2012123750247512381274633341222/08.10.2013
03/01.04.2012812501625813836882193823/08.10.2013

7. Under the aforementioned facts and on inquiry by the Revenue, it appeared to Revenue that the appellant appears to have not received the capital goods and have taken cenvat credit, which appeared to be not admissible to them. Accordingly, the show cause notice dated 4.7.2014 was issued proposing to demand cenvat credit of Rs.4,22,300/- including cess with proposal to appropriate the amount already deposited and further, the deposit of interest of Rs.1,41,450/- through PLA. Further, penalty was proposed under Rule 15 of CCR, 2004 read with Section 11 AC of the Central Excise Act, 1944. The show cause notice was adjudicated on contest. The proposed demand was confirmed and appropriated and further, equal amount of penalty was imposed under Rule 15 of the CCR Rules, 2004 read with Section 11 AC of the Act. Being aggrieved, the appellant preferred appeal before the Commissioner (Appeals), who has been pleased to reject the appeal observing that the appellant failed to discharge the obligation cast upon them in terms of Rule 9(6) of Cenvat Credit Rules. Being aggrieved, the appellant is before this Tribunal.

8. Ld. Counsel for the appellant states that the show cause notice is bad for non-joinder of essential parties, being the supplier – Shatabadi Tie Up Pvt. Ltd. and the transporter, M/s. Round India (Regd). Further, the alleged report received from the Commissioner of Central Excise, Kolkata-III has not been supplied nor made relied upon documents. Further, the Revenue has failed to examine its witnesses during the course of adjudication proceedings. Shri Vishnu Murarka, Proprietor of Round India (Registered) and the concerned persons, Director of M/s.Shatabadi Tie Up Pvt. Ltd. Further, it is an admitted fact that during the inspection of the premises, the officers of the Department found the relevant capital goods i.e.Electronic Driven Rapier Weft Feeding System (3700 MM and 5350 MM) installed and functioning with the machines. Further, the appellant has admittedly received the capital goods, which was purchased by way of upgradation of their manufacturing machinery. The appellant has also utilized statutory documents viz. waybill – form VAT-47 under the State VAT Rules. Such declaration is pre-authenticated document issued by the Sales Tax Department, which is machine serialed and the appellant maintains proper records of the usage of such way bills, which are part of its sales tax records. In the copy of the VAT-47, Invoice No. and date along with the amount, name of transporter, Sl.No. and the truck no. are also mentioned. Further, the name of the consignor along with its Tin no. is mentioned. Further, the supplier of the capital goods has issued proper tax invoice-cum-excise invoice. The supplier is also registered under the Central Excise Provisions. The invoice also contains the various details as required along with the details of excise duty and the sales tax. The invoice is also accompanied with the GRs/Transporter’s documents. The GRs also contains the invoice number, way bill number, etc., as required. Further, the goods were dispatched on May, 2011 in two truck loads from Kolkata and the goods have been received and entered in the records of the appellant including the RG-23-C with Entry No.34-35. Further, the appellant has made payment for the said capital goods by Account Payee Cheques through its Head Office located at Kolkata and also paid to the transporter by cheque. It is further argued that the value of the capital goods is about Rs.18 lakhs and Rs.26 lakhs respectively. Further, such goods are very specific and machinery items to be attached to the existing machinery for upgradation. The goods are not general goods like Iron & Steel Scraps. It is further argued that the appellants has discharged their onus and as such, they prayed for allowing the appeal with consequential benefits.

9. Ld. AR for the Revenue has relied upon the impugned order. He has also filed copy of report dated 12.03.2019, received from Asstt. Commissioner (Adjn.), CGST & CX, North, Kolkata, which states that the show cause notice dated 28.06.2013 issued to Satabadi Tie-Up (P) Ltd., have been adjudicated vide order-in-original No.40/Commr/CGST & CX/KOL/North/2018-19 on 30.10.2018 holding the transaction as sham and demanding the duty collected, under Section 11 D of the Act, along with penalty.

10. Having considered the rival contentions, I find that the show cause notice is defective for non-joinder of essential parties. Also there is lack of sufficient evidence by the Revenue. Further, I find that the appellant has discharged its onus as required by them under Rule 9(6) of the Cenvat Credit Rules, as it is an admitted fact that the particular machinery part/capital goods were found available in their factory at the time of inspection. The Revenue has raised the doubt as the said part of Machinery does not have any serial number and manufacturer’s name, etc. Further, the appellant has utilized statutory way-bill (Form VAT-47), and has made the payment by Account Payee cheques, both to the supplier and to the transporter. The oral evidences recorded are not reliable, being in violation of the provisions of Section 9D of the Act. In view of the above findings, I find that the show cause notice is not maintainable as the same is presumptive and more by way of wild allegation. Accordingly, the appeal is allowed and the impugned order is set aside. The appellant is entitled to consequential benefit including the refund of cenvat credit reversed and the amount paid by way of interest through PLA. The Adjudicating Authority is directed to grant refund within a period of 60 days from the date of receipt of this order.

(Order pronounced on 29.03.2019)

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