Case Law Details
Star Alloys & Chemicals Pvt. Ltd. Vs. CCE & ST (CESTAT Delhi)
CESTAT has held that in the case of GTA service, CENVAT credit is available, therefore extended period cannot be invoked.
Learned Advocate submits that whatever service tax was payable by them on the said GTA services, the same was available as a credit to them. As such, the entire situation was revenue neutral, in which case the longer period of limitation would not apply. In as much as the demand has been raised by invoking the extended period, the same is barred by limitation.
I find that admittedly, the service tax paid by the appellant on reverse charge basis, in respect of GTA services was availed to them as credit, thus leading to revenue neutral situation. Tribunal in the case of Reliance Industries vs. CCE, Mumbai – 2016 (44) S.T.R. 82 (Tri. – Mum.) has held that extended period cannot be invoked in the case of revenue neutral situation. As such, on this ground itself, the demand against the appellant is not sustainable. The same is accordingly set aside.
FULL TEXT OF THE CESTAT JUDGEMENT
As per facts on record, the appellant is engaged in manufacture of Ferro Vanadium and Ferro Molybdenum falling under Chapter 72 of the Central Excise Tariff Act, 1985. The officer of Central Excise visited the factory premises of the appellant on 27/02/2013. Accordingly, a show cause notice has been issued to the appellant, on the following issues :-
(i) demand of Rs. 37,60,496/- on the basis of documents of the transporters i.e. M/s TCI XPS (Third Party);
(ii) Demand of Rs. 2,78,700/- on alleged shortages of raw material and finished goods ;
(iii) Demand of Rs. 73,139/- on the basis of photocopies of two invoices bearing no. 33 and 34, both dated 11/01/2013 issued to M/s R.L. Enterprises, D-55, Moti Nagar, New Delhi ;
(iv) Demand of Rs. 38,934/- on the basis of a diary, which contains one entry showing ‘Cash Sale, 300 kg., Aditya Metacom @ Rs. 1,050/- ;
(v) Demand of Service Tax of Rs. 61,199/- on the ground that the appellant availed the GTA services but not paid tax as service recipient.
2. Accordingly, show cause notice dated 30/04/2014 was issued to the appellant for the period 2009-2010 to 2012-2013, which was confirmed by the learned Adjudicating Authority vide order dated 29/01/2016 and upheld by the learned Commissioner (Appeals) vide impugned order dated 10/05/2017.
3. After hearing both the sides, I find that demand of Rs. 37,60,496/- is based upon the documents recovered from the premises of one transporters and arriving at a finding that the said transporter has transported number of consignments of the appellant for which no sales invoices were issued.
The appellants have assailed the said demand on the ground that the same is solely based upon the records of the transporters without there being any corroborative evidence. Reliance is placed upon Hon’ble Allahabad High Court decision in the case of Continental Cement Company vs. Union of India reported as 2014 (309) E.L.T. 411 (All.), wherein it was held as under :-
“12. Further, unless there is clinching evidence of the nature of purchase of raw materials, use of electricity, sale of final products, clandestine removals, the mode and flow back of funds, demands cannot be confirmed solely on the basis of presumptions and assumptions. Clandestine removal is a serious charge against the manufacturer, which is required to be discharged by the Revenue by production of sufficient and tangible evidence. On careful examination, it is found that with regard to alleged removals, the department has not investigated the following aspects :
(i) To find out the excess production details.
(ii) To find out whether the excess raw materials have been purchased.
(iii) To find out the dispatch particulars from the regular transporters.
(iv) To find out the realization of sale proceeds.
(v) To find out finished product receipt details from regular dealers/buyers.
(vi) To find out the excess power consumptions”.
4. Apart from above, there are number of decisions laying down that the findings of clandestine removal cannot be upheld on the basis of the documents recovered from third party premises. Reference can be made to Tribunal’s decision in the case of Raipur Forging Pvt. Ltd. vs. P.D. Industries Pvt. Ltd. reported as 2016 (335) E.L.T. 297 (Tri. – ), CCE & ST, Raipur vs. P.D. Industries Pvt. Ltd. reported as 2016 (340) E.L.T. 249 (Tri. – Del.) and also Hon’ble Punjab & Haryana High Court decision in the case of CCE & ST, Ludhiana vs. Anand Founders & Engineers reported as 2016 (331) E.L.T. 340 (P&H).
5. In view of the foregoing, I find no justifiable reason to uphold the said demand. The same is accordingly set aside alongwith setting aside of penalty on the said count.
6. Further, the demand of Rs. 2,78,700/- stands confirmed in respect of shortages of raw materials and finished goods detected at the time of visit of the officers. Appellants have strongly contended that the entire stock verification was conducted on eye estimation basis and there was no real shortages. Even if it is accepted to be correct stock verification, the shortages are only to the extent of 22 M.T. and 7 M.T. out of the huge stock of the goods which can happen on improper accounting, manufacture of sub-standards goods or wastages in the process of manufacture. They have relied upon following decisions to impress upon their argument that such shortages cannot lead to clandestine removals and cannot be made the basis for confirmation of demand :-
(a) K. Rolling Mills Pvt. Ltd. and others vs. CCE, Raipur – 2018 (2) TMI 1557 ;
(b) CCE, Kanpur vs. Minakshi Castings – 2011 (274) E.L.T. 180 (All.)
(c) CCE & ST, Ludhiana vs. Anand Founders & Engineers – 2016 (331) E.L.T. 340 (P&H) and
(d) Shahi Exports Pvt. Ltd. vs. CCE & ST, Ghaziabad – 2017 (347) E.L.T. 310 (Tri. – ).
I find that apart from the shortages, there is virtually no other evidence on record to reflect upon the clandestine activities of the appellant. As per the settled law such shortages, by themselves, cannot lead to the fact of clandestine removals so as to justify confirmation of demands. Reference can be made to the Hon’ble Allahabad High Court decision in the case of Minakshi Castings reported as 2011 (274) E.L.T. 180 (Allahabad) as also the Hon’ble Punjab & Haryana High Court in the case of CCE, Ludhiana vs. Nexo Products (India) reported as 2015 (325) E.L.T. 106 (P&H) and to another decision of the Hon’ble Punjab & Haryana High Court in the case of CCE & ST, Ludhiana vs. Anand Founders & Engineers reported as 2016 (331) E.L.T. 340 (P&H). Its stand held on the above decisions that the clandestine removal charges based on shortages in stock cannot be upheld in the absence of any other evidence brought on record by the Revenue showing such illegal activities on the part of an assessee. The said decisions stand followed by the Tribunal in many numbers of cases.
In as much as in the present case the entire case of the Revenue is based upon the shortages detected at the time of visit of the officers, without there being any other evidence, I find no reasons to uphold the demand.
6. As regards the confirmation of Rs. 73,179/- based upon the photocopies of two invoices issued by M/s R.L. Enterprises and demand of Rs. 38,934/- based upon an entry found in the diary, I found Revenue has not conducted further investigation even the Director of appellant company has given an exculpatory statement. The names of the buyers were available with the Revenue but neither any investigation was conducted at their end or at the end of the raw materials supplier. The Tribunal in the case of Vikram Cement (P) Ltd. vs. CCE, Kanpur – 2012 (286) E.L.T. 615 (Tri. – Del.) has held that the clandestine removal demands required to be upheld on the basis of positive evidences and in the absence of the same, demand cannot be confirmed on the basis of some entries etc. The said decisions stand confirmed by Hon’ble Allahabad High Court in the case of Commissioner vs. Vikram Cement (P) Ltd. – 2014 (303) E.L.T. A82 (All.). Even in the case of CIT vs. Dhingra Metal Works – 2010 – TIOL – 693 – HC – DEL – IT, it was held that inculpatory statement by itself is not sufficient without the matters having been further investigated. Accordingly, I find no reasons to confirm the said demands and set aside the same.
7. Further, demand of Rs. 61,199/- stands confirmed in respect of service tax payable by the appellant on the GTA services, so received by them. The appellant have admitted the service tax to the tune of Rs. 28,690/- and in respect of the balance amount have submitted that the transporters have themselves discharged the service tax liability. However, it is seen that the said contention of the appellant has not been established by production of sufficient evidences.
Learned Advocate submits that whatever service tax was payable by them on the said GTA services, the same was available as a credit to them. As such, the entire situation was revenue neutral, in which case the longer period of limitation would not apply. In as much as the demand has been raised by invoking the extended period, the same is barred by limitation.
I find that admittedly, the service tax paid by the appellant on reverse charge basis, in respect of GTA services was availed to them as credit, thus leading to revenue neutral situation. Tribunal in the case of Reliance Industries vs. CCE, Mumbai – 2016 (44) S.T.R. 82 (Tri. – Mum.) has held that extended period cannot be invoked in the case of revenue neutral situation. As such, on this ground itself, the demand against the appellant is not sustainable. The same is accordingly set aside.
8. In view of the above, the impugned orders are set aside and appeal is allowed with consequential relief to the appellant.
(Order pronounced in open court on 06/04/2018.)
