Commissioner of Central Excise and Service Tax Vs Kamilbhai Zanulbhai Vashi & Ors. (CESTAT Ahmedabad)
Summary: CESTAT Ahmedabad dismissed four Revenue appeals seeking personal penalties against Shri Kamilbhai Z. Vashi and other co-noticees after noting that Revenue’s appeal against the main assessee, M/s. Taha Wires Pvt Ltd, arising from the same adjudication order had already been dismissed. The dispute originated from a Show Cause Notice dated 03.10.2007 alleging wrongful availment of CENVAT credit of Rs.3,93,98,286/- on copper ingots/wire bars of Sri Lankan origin allegedly without actual receipt of the inputs. Penalties had also been proposed against the director and transporters under Rule 26 of the Central Excise Rules, 2002 and other provisions.
DGCEI had alleged that Taha Wires used non-duty-paid scrap for manufacturing copper wires while availing CENVAT credit on duty-paid invoices without physically receiving the invoiced inputs. The original adjudication order dated 20.04.2011 confirmed demands, interest and penalties. However, CESTAT, by order dated 08.01.2019, set aside that order and remanded the matter for de novo adjudication. In the remand proceedings, the Principal Commissioner, Central GST & Central Excise, Daman, passed the Order-in-Original dated 16.07.2019 in favour of the noticees by dropping the proceedings. Revenue thereafter filed separate appeals against Taha Wires and the four co-noticees.
The Tribunal recorded that Revenue’s appeal against the main respondent, Taha Wires Pvt Ltd, had already been dismissed vide Final Order No. A/10092/2022 dated 11.02.2022. In that order, the Tribunal had found that Revenue failed to establish clandestine diversion of the disputed inputs or substitution thereof by locally procured scrap. There was no evidence identifying alleged buyers, no evidence of transportation or financial flow-back relating to diversion, and no evidence regarding procurement of substituted scrap. On the other hand, statutory records, bank payments, CHA records, job-work challans, job-work registers and RG23A Part-I & II supported actual receipt and utilisation of the inputs.
The earlier order also noted that all 124 consignments were supported by job-work records under Rule 4(5)(a) of the CENVAT Credit Rules, 2004 read with Notification No. 214/86-CE. No discrepancies were found during searches at the assessee’s factory or the job worker’s premises. The case rested principally on third-party evidence such as transporter statements, RTO records and check-post records, while such statements were either retracted or contradicted in cross-examination. CESTAT had therefore upheld the dropping of proceedings against Taha Wires.
In the present appeals, the Departmental Representative admitted that the appeal against the main assessee had been dismissed and further stated that no new grounds had been taken for imposing penalties upon the present respondents. CESTAT held that once the appeal against the principal assessee had been dismissed, nothing survived against the co-noticees in the absence of any independent or new ground for personal penalty. The Tribunal accordingly held that personal penalties could not be imposed, found no merit in Revenue’s appeals and dismissed all four appeals.
List of Cases Discussed / Relied Upon
- Nissan Copper Pvt. Ltd. Vs CCE, 2014 (313) ELT 449 (Tri. Ahmd.) — relied upon in the earlier Taha Wires order regarding evidentiary value of job-work records in disputes concerning alleged non-receipt of inputs.
- Akshay LPG Valves Vs CCE, 2016 (337) ELT 129 (Tri. Hyd.) — relied upon in the earlier order concerning job-work records as relevant evidence against allegations of non-receipt of inputs.
- STI Industries Vs CCE, 2015 (325) ELT 910 (Tri. Ahmd.) — cited in support of the respondent’s case regarding CENVAT credit and evidentiary value of records.
- Commissioner Vs Dhanlaxmi Tubes & Metal Industries, 2012 (282) ELT 206 (Guj.) — Gujarat High Court decision treated as applicable because of similarity concerning copper inputs, suppliers, transshipment at Delhi and transporter.
FULL TEXT OF THE JUDGMENT/ORDER OF CESTAT AHMEDABAD
This appeal is directed against the impugned Order-in-Original passed by the Principal Commissioner, Central GST & Central Excise-Daman wherein he has dropped the proceedings initiated vide Show Cause Notice bearing F. No. DGCI/AZU/36-35/2007-08 dated 03.10.2007 against M/s. Taha Wires Pvt Ltd.
1.1 The facts of the case in brief are that M/s. Taha Wires Pvt Ltd were engaged in the manufacture of copper wires by the process of drawing of continuous cast/rolled copper wire rods. The copper wire rods were either imported from the manufacturers thereof or got manufactured by M/s. Taha Wires Pvt Ltd on job work basis from raw materials through different job workers. M/s. Taha Wires Pvt Ltd were availing Cenvat Credit under the Cenvat Credit Rules, 2004 on the inputs purchased by them.
1.2 An intelligence collected by the officers of DGCEI, Vadodara indicated that M/s. Taha Wires Pvt Ltd were using non-duty paid scrap for the manufacture of their final products and were wrongly availing Cenvat credit on duty paid invoices without actual receipt of the inputs against such documents. They searched the factory premises of M/s. Taha Wires Pvt Ltd on 10.02.2006 and again on 21.12.2006 and resumed relevant documents and records under respective Panchnamas. They also resumed other documents and records during the course of investigations. After completing investigation, they issued Show Cause Notice dated 03.10.2007 to M/s. Taha Wires Pvt Ltd for recovery of Cenvat Credit of Rs. 3,93,98,286/- wrongly availed on copper ingots / wire bars of Sri Lankan origin cleared from ICD Tughalaqabad under Rule 12 of the Cenvat Credit Rules, 2004 along with proposal to impose penalty under Rule 15(2) of Cenvat Credit Rules and Rule 25 of the Central Excise Rules, 2002. It was also proposed to impose personal penalty on it’s Director Shri Kamilbhai Z. Vashi (Appellant) under Rule 26 of the Central Excise Rules, 2002 and Rule 13 of erstwhile Cenvat Credit Rules, 2004 or Rule 15 of Cenvat Credit Rules, 2002 and on Shri Rajesh Sharma, Proprietor of M/s. Kamya Transport Co., Shri Navrattan Lal Sharma, Proprietor of M/s. Singhal Road Carriers and Shri Satish B Agrawal, Partner of M/s. Time and Space Haulers (all appellants) under Rule 26 of the Central Excise Rules, 2002.
1.3 The Show Cause Notice was adjudicated by the Commissioner of Central Excise and Customs, Vapi vide Order-in-Original dated 20.04.2011, whereby he confirmed the demands raised in the Show Cause Notice along with interest and penalty on various noticees. Aggrieved with the above Order-in-Original, M/s. Taha Wires Pvt Ltd, Shri Kamilbhai Z. Vashi, it’s Director, Shri Rajesh Sharma, Proprietor of M/s. Kamya Transport Co., Shri Navrattan Lal Sharma, Proprietor of M/s. Singal Road Carriers and Shri Satish B Agrawal, Partner of M/s. Time and Space Haulers filed Appeals before Hon’ble CESTAT which vide order no. A/10150-10154/2019 dated 08.01.2019 set aside the Order-in-Original and remanded back the case for de novo adjudication. In remand proceedings, the Adjudicating Authority passed the impugned Order-in-Original dated 16.07.2019 in favour of the Noticees. Feeling aggrieved with this order, Revenue filed Appeal Nos. 12574/2019 and 12575-12578/2019 before this Tribunal.
2. The learned Counsel for the appellant submitted that the department’s appeal bearing no. E/12574/2019 against the impugned order dated 16.07.2019 in the case of main party M/s. Taha Wires Pvt Ltd was dismissed. The learned Counsel further submitted that as the appeal filed by the department against the main respondent / assessee has been dismissed by the Tribunal, the present appeals would not survive. He has prayed that the present appeals filed by the department may be dismissed.
3. The learned AR admitted that the Adjudicating Authority vide impugned order dated 16.07.2019 dropped the demand against M/s. Taha Wires Pvt Ltd against which Revenue filed appeal before the Tribunal which too, was dismissed vide final order no. A/10092/2022 dated 11.02.2022. Learned AR further submitted that no new grounds have been taken by the department regarding imposition of penalty against the present respondents. He prayed that suitable order may be passed on merits of the case.
4. No one from the side of respondents appeared before the Tribunal for arguments. However, written submissions as per records have been considered.
5. We have heard Learned AR and perused the records.
6. Admittedly, against the impugned order dated 16.07.2019 passed by the learned Principal Commissioner, Central GST and Central Excise, Daman, five Appeals had been filed by the department i.e. one against the respondent M/s. Taha Wires Pvt Ltd and the rest four against present respondents. The appeal filed by the department against M/s. Taha Wires Pvt Ltd was dismissed by the CESTAT vide final order no. A/10092/2022 dated 11.02.2022.
6.1 In the above mentioned final order, the Tribunal has held as follows:-
15. From the overall grounds of appeal, we observed that the Revenue has strongly relied upon the investigation conducted with RTO, Commercial Tax authorities and certain documents and statements of transporters to establish that goods were not transported from Delhi to Daman but the same were supplied in and around Delhi. We find that there is no investigation and no evidence to establish alleged clandestine disposal of disputed inputs in or around Delhi and not even a single alleged buyer out of 1670 MT is brought on record. Similarly, there is no details of transportation of goods or about financial transactions or about any flow back from the suppliers or from the alleged buyers. Therefore, the alleged clandestine disposal of the disputed inputs remains unsubstantiated, despite some stray evidence relied upon in the show cause notice.
16. Similarly as regards the department’s case about substitution of the disputed inputs by scrap procured from market, there is not even a semblance of evidence showing details as to any single supplier of the alleged substituted scrap or about transportation thereof or any financial transaction with the alleged supplier of the alleged substituted scrap. This shows that department’s two pronged alleged case of clandestine disposal of disputed inputs and its substitution by procurement of scrap has no legs to stand on.
17. As regards the positive documentary evidence from CHAs, the CHAs have admitted that they had cleared the goods from the Customs, ICD Tughlakabad and arranged loading of the disputed inputs in trucks of different transporters for dispatch to Surat/Daman. This fact cannot be brushed aside. Full value of the disputed inputs has been paid by cheque. Similarly full payments have been made to the concerned CHAs, transporters etc. The respondent have also paid service tax on GTA paid to the transporters for transporting the goods. The disputed inputs were delivered directly to the job workers for conversion of Copper Ingots/Bars/Scraps into wire rods, as the respondent did not have the facility of furnace, Rolling Mill etc. to convert Copper Ingots/Bars/Craps into wire rods.
18. There is absolutely full proof of record of every single consignment of total 124 consignments having been received by the job workers and returned the job worked goods to the respondent in terms of Rule 4(5)(a) of Cenvat Credit Rules, 2004 read with Notification No. 214/86-CE. The crucial facts about receipt of disputed inputs and its utilization for the manufacture of final product stand corroborated and proved by the following statutory-cum-official documentary evidence:
a) RG23A Part-I & II maintained by the Respondent
b) Full payment through Bank to the various suppliers.
c) Payment to CHAs and transporters by cheque or by cash as per law.
d) Job work challans in Annexure-II, Registers maintained in Annexure-IV by the Appellant and Annexure-V by the job worker for processing of the disputed inputs in to intermediate product in terms of Rule 4(5)(a) read with Notification No.214/86-CE.
19. We find that Revenue has not questioned the investigation of statutory and official documentary evidence of respondent. In the cross examination of CHAs and one transporter, they deposed about actual handling and transportation of the disputed inputs. Except for the statement of Shri Kamil Vashi, no statement was recorded from any of the employees or representatives of the respondent. Shri Kamil Vashi has categorically averred in the statement that they had received the inputs and used in the manufacture of final products.
20. The DGCEI officers raided the respondent’s factory on 10.02.2006 and 21.12.2006 but no discrepancy was found either in the stock of inputs or stock of finished goods. The job worker M/s. Paramount Rolling was also summoned and enquired at their end. All the relevant documents for job work procedure were produced before the investigating agency under the cover of letter dated 17.02.2006 of M/s. Paramount Rolling and there was no discrepancy found as regards stock of the disputed inputs or stock of job worked goods. We find that except for relying on third party evidence, i.e. transporter, RTO and Highway Check Post records, the investigating officers have not carried out any investigation, nor produced evidence to prove their two fold case of clandestine disposal of disputed inputs and its substitution by locally purchased scrap. The department’s sole reliance is as under in their appeal:-
(a) Various Road Transport Authorities to ascertain the names of the owners, nature of vehicles, load carrying capacity etc. in respect of purported transportation of inputs to the factory of M/s Taha Wires Pvt. Limited.
(b) Custom House Agents, who cleared and transported imported consignments from ICD, Tughlaquabad to Shahadra/UP border.
c) The owner/operator of the vehicles shown to have used for transportation of imported consignments from Delhi to M/s Taha Wires Pvt. Limited, Daman.
d) Transporters who had shown to have effected the transportation of goods from Delhi to M/s Taha Wires Pvt. Limited, Daman.
e) The Director of M/s Taha Wires Pvt. Limited, Shri Kamilbhai Zanubhai Vashi.
21. We find that there were in fact more than 12 transporters but the investigating officers have felt complacent by recording statements of only two transporters, namely M/s. Time & Space Haulers and M/s. Singal Road Carrier. Therefore, the enquiry conducted with these two transporters who have transported only 10 consignments out of 124 consignments, that too the investigation is not conclusive against these transporters. It cannot be concluded that the goods have not been transported to Daman. It is further seen that Shri Atul Navrattan Lal Sharma representative of M/s. Singal Road Carrier who was cross-examined, has categorically deposed that they had actually transported the disputed inputs as per LRs and received all payments from the Respondent for the transportation. Similarly, Shri Sanjay Sharma, CHA from M/s. R.U. Import Export Pvt. Limited has also categorically deposed that his statement was involuntary and that he had arranged for transport of the disputed inputs to Surat/Daman.
22. We also found that there is not a single statement of any supplier to the effect that the disputed inputs were not supplied to the Respondent and were supplied to some third parties. There is no evidence that some third party have made payments to the suppliers of the disputed inputs. The statements of transporters are not corroborated with any evidence. The entire case of the department is based on the record of the transporters and only on the basis of third party statements or record, the demand for denial of Cenvat credit cannot be sustained. It is also fact on record that there is no investigation made at the factory of the respondent and no statement of any production staff or excise/ stores staff is recorded. There is no allegation of flow back of money from the suppliers to the respondent. This fact is not under dispute that the respondent was preparing job work challans in Annexure –II and entries were also made in the Annexure-IV Register. The records maintained by the job worker were also produced before the investigating officers. But no discrepancy has been found at the job worker’s premises. When the investigating officers visited the factory of the respondent as well as that of the job workers, they did not find any discrepancy about the inventory of inputs or final products. There is neither any investigation nor an iota of evidence that the respondent had procured the inputs from open market for substitution of the disputed inputs.
23. This is also fact on record that respondent have also entered the disputed inputs in their RG23A Part-I & II and have also shown the consumption of the same for manufacture of the final product. This plea does not stand rebutted by the Revenue. The disputed inputs have also been entered in the official stores ledgers and used in the manufacture of final products, which are cleared on payment of duty. Consequently, the denial of credit on the sole ground that the vehicles numbers were not found to be genuine cannot be made the basis for arriving at a conclusive finding against the respondent. The consideration for the disputed inputs was paid through cheques and freight payments were made through cheques or vouchers is the evidence in favour of the respondent.
23. The most important part is that there is absolutely no evidence brought on record to show as to how the huge quantity of the disputed inputs has been disposed off clandestinely and how and from which source the alleged substituted inputs were procured. This aspect of absence of evidence should suffice to cut the roots of the allegation, as there are ample and sufficient records and documentary evidence to prove that there was no shortage of the disputed inputs. The finished goods were manufactured and cleared on payment of duty and that there is not a single piece of evidence to prove source and manner of procurement of any substituted inputs.
24. We find that the case of the department is built up mainly on recorded statements of a few transporters of the disputed inputs. As the statements were retracted or contradicted during cross-examination, there has to be some other evidence sufficient to conclude that the disputed inputs was actually not received. The statements of co-accused necessarily need to be corroborated by some independent evidence. On the other hand, statutory records, job work challans, job work registers, RG23A Part-I & II records etc., all stand in favour of the respondent. Since all these statutory records are not under dispute then the burden rests heavily upon the Revenue to establish with cogent evidence that the inputs were not actually received in the factory. Mere third party evidence like transporter’s statements, RTO reports, Check Post records etc. which were not examined, cannot suffice to prove the department’s case.
25. The respondents rely on the following judgments:-
(a) 2014 (313) ELT 449 (Tri. Ahmd.) Nissan Copper Pvt. Ltd. vs. CCE
(b) 2016 (337) ELT 129 (Tri. Hyd.) Akshay LPG Valves vs. CCE
(c) 2015 (325) ELT 910 (Tri. Ahmd.) STI Industries vs. CCE
26. In the above judgments also, the job work records constituted reliable and relevant evidence to disprove the department’s case of non-receipt of inputs. We find that the above judgments support the respondent’s case. The respondent also get support from the judgment of Hon’ble Gujarat High Court in the case of Commissioner vs. Dhanlaxmi Tubes & Metal Industries – 2012 (282) ELT 206 (Guj.) for the reason that in this case also the inputs were the same, i.e. Copper Ingts, secondly, the suppliers were also the same and thirdly, the inputs were also supplied by transshipment at Delhi and lastly, the transporter was also the same i.e. M/s. Singal Road Carrier. The most of the facts of the above judgment are same as in the present case also. Therefore, the ratio of aforesaid jurisdictional High Court judgment in the case of Dhanlaxmi Tubes & Metal Industries (supra) is applicable in the case.
27. As per our above discussion and findings, we find that the department could not establish beyond doubt that the alleged inputs were diverted in or around Delhi and not transported to Daman to the Respondent. Therefore, the Adjudicating Authority has rightly dropped the proceeding of the show cause notice. Accordingly, we uphold the impugned order and dismiss the Revenue’s appeal.”
6.2 The learned AR could not inform us whether any appeal has been filed against the above mentioned order dated 11.02.2022. When the appeal against the main respondent / assessee has been dismissed by the Tribunal then, nothing remains against the present respondents / co-noticees. No new grounds have been taken by the department for imposition of penalty against the present respondents. Therefore, personal penalties could not be imposed against the present respondents. We are of the view that the present appeals filed by the Revenue have no merit and they are liable to be dismissed.
7. Consequently, the appeals are dismissed.
(Order pronounced in the open Court on 20.08.2026)
