1. The Appellants are in appeals against Order-in-Original No. 10-NS-ADJN-2009 dated 31.03.2009 and 15-NS-ADJN-2009 dated 28.05.2009 passed by the Commissioner of Customs, Central Excise & Service Tax, Faridabad, Delhi-IV.
Since all the appeals are emanating from the same investigation, they are taken up together and a common order is being passed.
2. In Appeal No. E/2554/2009:
2.1 The appellants are engaged in manufacture of various types of Forgings for Automobile parts such as Gears, Shafts, Pitman Arm, Suspension etc. falling under Chapters 72, 82, 84 of Central Excise Tariff. Pursuant to an investigation done by DGCEI against M/s. Haryana Steel & Alloys Ltd. (M/s. HSAL), it was revealed that M/s. HSAL were clandestinely clearing SS Flats to certain manufacturers in Delhi and Jodhpur and to cover such clandestine clearances, they were issuing Cenvatable invoices to some of the manufacturers located in Chandigarh, Faridabad and Rohtak showing clearance of A.S. & M.S. Ingot/Bars of Rods and Ferro Alloys without dispatching any goods to them so that such recipients could avail Cenvat Credit on the invoices without receiving the corresponding goods.
2.2 As per intelligence, M/s. Blue Stampings & Forgings Ltd. (M/s. BSFL) was one such company. Investigation was therefore launched and details of consignments dispatched from M/s. HSAL to M/s. BSFL were prepared. Neither M/s. HSAL nor M/s. BSFL could produce any documents showing transportation of the said goods. M/s. BSFL were repeatedly asked to produce the GRs and other transport documents showing the actual transportation of the consignments of Alloys Billets & Bars and Rods from M/s. HSAL. Despite various opportunities provided to M/s. BSFL, they did not submit the transport documents. The statements of owners and partners of the transporter companies and some truck owners were recorded, who stated that they had transported the goods loaded from the factory of M/s. HSAL only to Jodhpur, Ahmedabad and Delhi and not to other places. The statements of Executive Director of M/s. HSAL and M.D. of M/s. HSAL as well as of Shri Pawan Mantri, Director of M/s. BSFL were also recorded. Based on these investigations, a show cause notice was issued to M/s. BSFL for fraudulently availing Cenvat Credit of Rs. 36,58,996/- on the invoices issued by M/s. HSAL without receiving any goods. The matter was adjudicated and the Commissioner confirmed the demand of Cenvat Credit and imposed an equal amount of penalty. Against the said order, the party is in appeal before this Tribunal.
3. In Appeal No. E/2146-2147/2009:
3.1 The appellants are engaged in manufacture of Steel forgings and are availing the credit of duty paid on inputs and capital goods. The appellants procure steel rounds from manufacturers of such goods and from dealers. It was alleged that the appellants in connivance with M/s. Dev Enterprises, a registered dealer, obtained cenvatable invoices without physical receipt of goods and availed Cenvat credit fraudulently.
3.2 Briefly, on the basis of intelligence, three registered dealers were simultaneously visited by Department, one of whom was M/s. Dev Enterprises, Faridabad. It was alleged that Sh. Ram Bilas Bansal, Prop. of M/s. AVI Steel Traders, another such dealer, hatched a conspiracy in connivance with other beneficiaries to pass on the Cenvat credit to various manufacturers and registered dealers without any physical receipt/delivery of goods. It was found that Sh. Ram Bilas Bansal planned to purchase cenvatable invoices without physical receipt of goods from certain manufacturers based in Sonepat and Rohtak. Statement of Sh. Ram Bilas Bansal, Prop. of M/s. AVI Steel Traders, was recorded. On the basis of his statement, it was found that he was purchasing goods from M/s. Haryana Steel & Alloys, Sonepat, M/s. Vikas Steel Alloys, Sonepat, M/s. Giriraj Concast (P) Ltd., Rohtak and M/s. Vishal Metal Casting (P) Ltd., Sonepat. Sh. Bansal of AVI Steel Traders was allegedly procuring clients for M/s. Dev Enterprises who was issuing cenvatable invoices on M/s. BSFL. Statements of the transporters and owners of the vehicles were also recorded. Financial transactions were also investigated. Statement of Sh. Ashok Bansal, Prop. of M/s. Dev Enterprises, was also recorded. On the basis of his statement and statements of other persons, a show cause notice was issued.
3.3 In the adjudication proceedings, the adjudication authority vide order dated 31.03.2009, has denied the CENVAT credit Rs. 8,17,729/- and has imposed equivalent penalty on appellant No. 1 besides imposing a penalty of Rs. 1,16,000/- on Sh. Pawan Mantri on the ground that no inputs have been received against the invoices on which credit has been taken. Aggrieved from the same, the appeals have been filed by the appellants M/s. BSFL and Sh. Pawan Mantri.
4. Ld. Advocate appearing for the appellants made the following submissions:
(a) In relation to Appeal No. E/2554/2009:
(i) The whole case of the revenue is based on the statements of certain persons of M/s. HSAL and transportation agencies. There is little corroboration of these statements in general.
(ii) The mandatory requirements of Section 9D of the Central Excise Act, have not been followed before conclusively relying on the statements. The omission to follow the mandatory requirements of Section 9D is fatal to the adjudicating proceedings. Reliance in this regard was placed on the following decision of Hon'ble Punjab and Haryana High Court:-
Ambika International & Another vs. Union of India and Another : 2016-TIOL-1238-HC-P & H-CX
(iii) The allegation of non-supply of goods by Haryana Steel is sought to be supported by, (i) statement of Shri Ramesh Rawat, E.D. of Haryana Steel and (ii) statements of owners of the transport companies and trucks.
(iv) As far as statement of Shri Rawat is concerned, it is inadmissible. He is a co-accused in this case.
(v) Statements of transport companies and truck owners are replete with many inaccuracies and contradictions.
(vi) The statements of persons of M/s. Bedi and truck owners thus have little evidentiary value.
(vii) Statements of 2 persons of M/s. HSAL, who were ordering trucks, were not recorded.
(b) In relation to Appeal No. E/2146-2147/2009:
I. The whole case of revenue is based on the statement of one person, Sh. Ashok Bansal, prop. of M/s. Dev Enterprises.
II. The requirement of Section 9D of the Central Excise Act, has not been followed before conclusively relying on the statement of Sh. Ashok Bansal.
III. Reliance in this regard is placed on the decision of Hon'ble Punjab & Haryana High Court in the case of Ambika International & Another vs. U.O.I. & Another : 2016-TIOL-1238-HC-P & H-CX.
IV. Sh. Ashok Bansal is also an accused in the proceedings before the adjudicating authority. Statement of a co-accused is not a reliable evidence unless corroborated.
V. The appellants always knew about the existence of M/s. Dev Enterprises from their personal knowledge.
VI. Statement of Sh. Ashok Bansal is not corroborated in any appeal by any other evidence. Hence not reliable.
VII. The appellants had been duly accounting for all the inputs received in their unit and the goods manufactured out of the inputs. The goods manufactured by the appellants were cleared on payment of appropriate duty. There are standard norms for the input-output ratio.
VIII. Out of 33 invoices, investigation has been done with respect to only two invoices credit of Rs. 67,522/- has been done. He fairly admitted that in the two invoices motorcycle and moped had been verified as vehicles. No investigation, even if done, has been brought on record, with respect to remaining 31 transactions.
5. Ld. AR appearing on behalf of the Revenue reiterated the findings of the Commissioner (Appeals) and highlighted the following evidences in support of the Revenue:
(a) In relation to Appeal No. E/2554/2009:
(i) Statement of Sh. Ramesh Rawat, Executive Director of M/s. HSAL. The supplier has admitted that they had diverted the goods to Rajasthan and have given only invoices to the appellants. (Para 24 of the impugned order).
(ii) Investigations conducted at the end of Transporters. Statements of the transporters were conducted who have denied having transported the goods to appellants premises. (paras 13 to 20 of the impugned order).
(iii) Diversion of goods to Jodhpur. (paras 21 to 24) Invoices No. 475 & 478 both dated 20.07.2005 were issued by M/s. HSAL to appellants and truck Nos. HR 38 D 3030, HR 55 A 3684 were mentioned therein. Same trucks were shown to have transported goods, on same day, of HSAL to parties of Jodhpur, as per records resumed. On investigation the Directors of HSAL have admitted issuing only invoices to the appellants.
(iv) Voluntary deposit. The appellants deposited the Cenvat credit during investigation.
(b) In relation to Appeal No. E/2146-2147/2009:
(i) Statement of Sh. Ashok Bansal, Prop. of M/s. Dev Enterprises (Para 97 of the impugned order), wherein he has admitted of having issued invoices only, without supply of the goods to appellants.
(ii) Supplier has explained the settlement of payments. The supplier has elaborated on the mechanism (Para 98 of the impugned order) adopted for the settlement of the payments between him and the appellants when the goods were not transacted and only invoices were given to the appellants on which they were availing cenvat credit.
(iiii) Mention of Non-transport vehicles. In two cases the vehicles, shown to have transported goods, have been found to be non-transport vehicles (Para 98 of the impugned order).
(iv) Burden of Proof shifts to the appellants. When in two cases [referred in (ii) above)], vehicles have been admittedly held as non-transport vehicles and the invoices have been entered in the appellants records showing receipt of goods, then how the receipt of inputs for other 31 invoices, does not come under a cloud.
6. Heard the parties and perused the records.
7. In Appeal No. E/2554/2009:
7.1 I find that the case of the department has extensively relied on the statements of Sh. Ramesh Rawat, Executive Director of M/s. HSAL, statement of Sh. Jasbir Singh and Sh. Vijay Kumar of M/s. Bedi Golden Transport, Sh. Jaspal Singh, Partner of National Freight Carrier and a few truck owners. Besides, the statement of Sh. Pawan Mantri, Director of M/s. BSFL has also been relied.
7.2 The main argument of the Ld. Advocate is that the requirement of Section 9D of the Central Excise Act has not been followed before conclusively relying on the statement. According to him, the requirements of Section 9D are mandatory. He has relied upon the judgment of Hon'ble Punjab & Haryana High Court in the case of Ambika International & Another vs. Union of India and Another : 2016-TIOL-1238-HC-P & H-CX. He has also advanced following other contentions:
(i) The statements of persons of transport companies and/or truck owners have no evidentiary value, as they did not issue the GRs and had little knowledge about the exact use of the trucks.
(ii) The absence of statements of relevant two persons of Haryana Steel who were ordering trucks and preparing GRs is a serious omission.
(iii) He has also stated that the statement of Sh. Rawat is also inadmissible since he is co-accused.
(iv) He has also referred to inaccuracies and contradictions in the statement of transport companies and truck owners.
7.3 I also find that Ld. A.R. has drawn attention to para 24 of the adjudication order:
24. During the course of scrutiny of records of M/s. Manak Overseas Ltd., Jodhpur and M/s. Rishab Trading Company, Jodhpur, it has been observed that SS Flats were received by them on the bills/invoices issued by M/s. Vigyan Udyog Corporation on 20.7.2005 transferred in vehicle numbers HR 38D 3030 and HR 55A 3684 (RUD 15 & 16). On the same dates M/s. HSAL had issued invoices to M/s. BSFL for the dispatch of Alloy Steel Bars & Rods and transported through two vehicles. Therefore, the said trucks could not have been carried the goods shown to have been transported under the said invoices issued by M/s. HSAL to M/s. BSFL.
I find that Ld. Adjudicating Authority has given no clear finding on the above evidence. Hence, it needs to be examined afresh by the Adjudicating Authority.
7.4 I find that the contention of the Ld. Advocate that the adjudicating authority did not follow the requirements of Section 9D of the Central Excise Act, 1944 is correct. I also find that the adjudicating authority has not referred to the exceptions mentioned in Section 9D while relying on the statements of Sh. Ramesh Rawat (ED of M/s. HSAL), Sh. Pawan Mantri and Sh. Jaspal Singh (Partners of M/s. Delhi-Kolkata Carrier), Sh. K.C. Sharma, Sh. Bankebihari and Sh. Jagpal Singh (Co-owners of the Trucks). I find that almost the entire case is built on the statements of these persons and other corroborative evidence requires admission of these statements as evidence. It is settled law that the adjudicating authority cannot straight away rely upon the statements recorded during the investigation unless the conditions set out in Section 9D of the Act are fulfilled. In this regard, Hon'ble Punjab & Haryana High Court in the case of M/s. Ambika International & Another vs. U.O.I. & Another: 2016-TIOL-1238-HC-P & H-CX has held as under:
14. In view of the fact that the case of the petitioners is essentially premised on Section 9D of The Central Excise Act, 1944, it would be appropriate to reproduce the said provision, in extenso, thus:
"9D. Relevancy of statements under certain circumstances.-(1) A statement made and signed by a person before any Central Excise Officer of a gazetted rank during the course of any inquiry or proceeding under this Act shall be relevant, for the purpose of proving, in any prosecution for an offence under this Act, the truth of the facts which it contains,-
(a) when the person who made the statement is dead or cannot be found, or is incapable of giving evidence, or is kept out of the way by the adverse party, or whose presence cannot be obtained without an amount of delay or expense which, under the circumstances of the case, the Court considers unreasonable; or
(b) when the person who made the statement is examined as a witness in the case before the Court and the Court is of opinion that, having regard to the circumstances of the case, the statement should be admitted in evidence in the interests of justice.
(2) The provision of sub-section (1) shall, so far as may be, apply in relation to any proceeding under this Act, other than a proceeding before a Court, as they apply in relation to a proceeding before a Court."
15. A plain reading of sub-section (1) of Section 9D of the Act makes it clear that clauses (a) and (b) of the said sub-section set out the circumstances in which a statement, made and signed by a person before the Central Excise Officer of a gazetted rank, during the course of inquiry or proceeding under the Act, shall be relevant, for the purpose of proving the truth of the facts contained therein.
16. Section 9D of the Act came in from detailed consideration and examination, by the Delhi High Court, in J.K. Cigarettes Ltd. vs. CCE: 2009 (242) ELT 189 (Del) : 2009-TIOL-478-HC-DEL-CX. Para 12 of the said decision clearly holds that by virtue of sub-section (2) of Section 9D, the provisions of sub-section (1) thereof would extend to adjudication proceedings as well.
There can, therefore, be no doubt about the legal position that the procedure prescribed in sub-section (1) of Section 9D is required to be scrupulously followed, as much in adjudication proceedings as in criminal proceedings relating to prosecution.
17. As already noticed herein above, sub-section (1) of Section 9D sets out the circumstances in which a statement, made and signed before a gazetted Central Excise Officer, shall be relevant for the purpose of proving the truth of the facts contained therein. If these circumstances are absent, the statement, which has been made during inquiry/investigation, before a gazetted Central Excise Officer, cannot be treated as relevant for the purpose of proving the facts contained therein. In other words, in the absence of the circumstances specified in Section 9D(1), the truth of the facts contained in any statement, recorded before a gazetted Central Excise Officer, has to be proved by evidence other than the statement itself. The evidentiary value of the statement, insofar as proving the truth of the contents thereof is concerned, is, therefore, completely lost, unless and until the case falls within the parameters of Section 9D(1).
18. The consequence would be that, in the absence of the circumstances specified in Section 9D(1), if the adjudicating authority relies on the statement, recorded during investigation in Central Excise, as evidence of the truth of the facts contained in the said statement, it has to be held that the adjudicating authority has relied on irrelevant material. Such reliance would, therefore, be vitiated in law and on facts.
7.5 Same view was taken by Hon'ble P & H High Court in the following cases and the respective adjudicating authorities were directed to re-adjudicated the show cause notices by following the procedure contemplated by Section 9D of the Act.
(i) M/s. Jindal Drugs Pvt. Ltd. vs. UOI CWP No. 12714 of 2016 dt. 21.06.2016
(ii) M/s. Fine Aromatics vs. UOI - CWP No. 12749 of 2016 dt. 22.06.2016
7.6 In view of the above, I find that the adjudicating authority has not followed the procedure laid down under Section 9D of the Act. In that circumstance, the adjudication order is liable to be set aside and the matter requires to be adjudicated afresh after following the procedure laid down under Section 9D of the Act and by following the principles of nature justice.
8. In Appeal No. E/2146-2147/2009:
8.1 In the above appeal, the evidence is mainly in the form of the statements of Sh. Ashok Bansal, Sh. Ram Bilas Bansal, Sh. Pawan Mantri, Sh. Naresh Rawat and Sh. Ramesh Rawat. However, while relying on these statements, the mandatory requirement of Section 9D of the Act has not been followed. As pointed out in para 7.4 and para 7.5 of my findings in relation to Appeal No. E/21
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46-2147/2009 above, which I am relying on for this appeal as well, the procedure of Section 9D of the Act has to be followed by the adjudicating authority. For that purpose, the impugned order is also liable to be set aside except to the extent of confirmation of duty on the goods purportedly carried by two vehicles (HR 29G 7019 and HR 29G 7079), which have been to be found as motorcycle and moped and which have been verified to be so by the transport authority and not disputed by the appellants. It is evident that goods could not have been received by appellant in the vehicles mentioned in the invoices. In this regard, reliance is placed on the judgment of Hon'ble Punjab & Haryana High Court in the case of Rajeev Alloys vs. CCE, Chandigarh 2009 (247) ELT 27 (P & H). Accordingly, the demand in respect of invoices pertaining to those two vehicles is upheld along with interest and equivalent penalty thereon. However, the same will be re-quantified by the adjudicating authority. 8.2 In view of the foregoing, the impugned order (except in relation to two vehicles mentioned in para 8.1) is liable to be set aside and the matter is remanded back to the adjudicating authority to re-adjudicate the matter after following the procedure laid down under Section 9D of the Act and by following the principles of nature justice. 9. In the result, (i) in appeal No. E/2554/2009, the matter is remanded back to the adjudicating authority for fresh adjudication by following provisions of Section 9D of Central Excise Act, 1944. (ii) in appeal No. E/2146-2147/2009, (a) the demand in relation to invoices pertaining to vehicles No. HR 29G 7019 and HR 29G 7079 is upheld. The matter is remanded back to adjudicating authority to re-quantify the duty, interest and equivalent penalty in respect of these invoices. (b) Except for (a) above, the matter is remanded back for fresh adjudication by adjudicating authority by following provisions of Section 9D of Central Excise Act, 1944. 10. The appeals are disposed off in above terms.