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Commissioner of Central Excise, Guntur v/s M/s G.S. Alloys Castings Ltd. & Another

    Central Excise Appeal Nos. 1982 & 1983 of 2010 (Arising out of the Order-in-Appeal Nos. 22 & 23/2010 (G) CE dated 01.04.2010, passed by the Commissioner of Central Excise, Customs & Service Tax (Appeals), Guntur)

    Decided On, 14 October 2011

    At, Customs Excise Service Tax Appellate Tribunal South Zonal Bench At Bangalore


    For the Appellant : Ms. Sabrina Cano, DR. For the Respondent : R. Dakshinamurthy, Advocate.

Judgment Text

These appeals filed by the department are directed against the appellate Commissioner’s order setting aside Order-in-Original No. 05/2009-C.E. dated 29.5.2009 passed by the Assistant Commissioner. The original authority had, in adjudication of Show-Cause Notice dated 20.1.2009, passed the following order :

'(i) I hereby order that Rs. 2,60,309/- (Rupees two lakhs sixty thousand three hundred and nine) is to be recovered from M/s GS Alloy Castings Ltd., Unit-II, Surampalli towards the wrong credit availed by them fraudulently under rule 14 of Cenvat Credit Rules, 2004 read with section 11A of Central Excise Act 1944 and the amount of Rs. 2,60,309/- already paid by them is hereby appropriated against the above demand.

(ii) I hereby order that interest at applicable rate shall be paid by M/s GS Alloy Castings Ltd., Unit-II, under rule 14 Cenvat Credit Rules 2004 read with section 11AB of Central Excise Act, 1944.

(iii) I hereby impose a penalty of Rs. 2,60,309/- (Rupees two lakhs sixty thousand three hundred and nine) under rule 15 (2) of the Cenvat Credit Rules, 2004.

(iv) I hereby impose a penalty of Rs. 65,000/- (Rupees Sixty five thousand only) on Shri Grandhi Ramji, Managing Director of M/s Sree Tirumala Steel Rolling Mills Pvt. Ltd., Visakhapatnam under rule 26 of Central Excise Rules, 2002.

(v) I hereby impose a penalty of Rs. 65,000/- (Rupees Sixty five thousand only) on Shri Ashok Garg of M/s Usha Enterprises, Hyderabad under rule 26 of Central Excise Rules, 2002.'

In a common order passed by the Commissioner (Appeals) in the appeals filed by the aggrieved parties, the above Order-in-Original stands set aside. The appellate authority found that the lower authority had ignored the documentary evidence submitted by M/s G.S. Alloy Castings Ltd. in support of their plea of receipt of raw material in the factory under cover of the relevant invoices. The appellate authority on this basis held that the finding to the contra recorded by the lower authority is without any legal basis. The appellate authority further relied on an affidavit filed by one Shri D. Srinivasa Rao, Authorised Signatory of Srinivasa Transport, wherein the deponent stated that they had supplied certain lorries (mentioned in the affidavit) to M/s Sree Tirumala Steel Rolling Mill Pvt. Ltd. on the dates mentioned in the aforesaid invoices, for transport of MS scrap from their premises to M/s GS Alloy Castings Ltd. (respondent in appeal No. E/1982/2010). This affidavit of Shri Srinivasa Rao was not one of the documents relied upon by the respondent before the adjudicating authority. Obviously, the appellate authority allowed the party to adduce fresh evidence at the appellate stage.

2. In appeal No. E/1982/2010, I find that the order passed by the Commissioner (Appeals) is not sustainable in law. The respondent in this appeal had taken CENVAT credit in April 2008 on four invoices issued by M/s Sri Tirumala Steel Rolling Mill Pvt. Ltd. The invoices described the goods as ‘CE billets’. The Managing Director of the supplier-company described the goods as ‘Crop End billets’. The respondent claimed that they received scrap under cover of the said invoices from M/s Sri Tirumala Steel Rolling Mill Pvt. Ltd. The show-cause notice issued by the department alleged that the respondent had fraudulently availed and utilized CENVAT credit of the duty paid on input/raw material mentioned in the said invoices without physical receipt of the material in the factory. This allegation was denied and the demand of duty contested by the respondent. The adjudicating authority held that the credit in question had been availed fraudulently without receipt of the material/input mentioned in the relevant invoices. As the party had already paid the amount, the same was appropriated by the adjudicating authority. Equal amount of penalty was imposed on the respondent under Rule 15 (2) of the CENVAT Credit Rules, 2004. Separate penalties were imposed on two other parties including Shri Ashok Garg of M/s Usha Enterprises (respondent in appeal No. E/1983/2010). The decision of the Assistant Commissioner (adjudicating authority) was set aside by the Commissioner (Appeals) in the manner already discussed.

3. The Revenue is aggrieved, mainly, on the ground that the Commissioner (Appeals) is not correct in having found that there was no corroborative evidence in support of the demand. The appellant has also relied on case law on preponderance of probability to justify the findings recorded by the original authority. The appellant has particularly referred to the description of the goods given in four invoices (No. 871 dated 27.3.2008 and Nos. 875, 876 & 878 dated 31.3.2008 issued by M/s Sree Tirumala Steel Rolling Mill Pvt. Ltd.). The material was described as ‘CE billets’ in those invoices whereas the respondent had placed orders for supply of scrap. It is further stated that ‘CE billets’ mentioned in the invoices were not physically received in the respondents factory. It is stated that, even according to the affidavit, what was transported from the premises of the input supplier to the premises of the respondent was scrap and not ‘CE billets’. The learned DR has focused on these aspects mentioned in the memo of appeal and has urged that the impugned order be set aside.

4. The learned Counsel for M/s GS Alloy Castings Ltd. has argued in support of the appellate Commissioner’s decision. There is no representation for Shri Ashok Garg who has sought adjournment of hearing. The reason stated in the adjournment letter is that he was unable to appoint a counsel in the matter. A copy of the appeal memo was issued to him in July 2011. Enough time was available to the respondent to appoint a counsel. The adjournment request, therefore, cannot be acceded to.

5. After considering the submissions, I am of the view that there is substance in the submissions made by the appellant. From the Order-in-Original, it appears that all the evidentiary materials on record were duly considered by the adjudicating authority. The affidavit in question was not before that authority. Even the assessee (GS Alloy Castings Pvt. Ltd.) did not rely on any such affidavit in their reply to the show-cause notice. It is surprising to note that the appellate authority chose to permit the assessee to bring on record the said affidavit. There is nothing on record to indicate that the new evidence was allowed to be adduced for valid reason. A crucial fact was either overlooked or ignored by the appellate authority and the same is that an amount equal to the credit in question was paid by the assessee prior to issue of show-cause notice and the same was appropriated by th

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e adjudicating authority. Coupled with this is the fact that the said payment was not under protest and that this payment was made close on the heels of admission of lapse under Section 14 of Central Excise Act. It appears, this aspect did not weigh with the appellate authority. I am, therefore, of the view that the order passed by the Commissioner (Appeals) should be set aside. It is ordered accordingly. The learned Commissioner (Appeals) is requested to take a fresh decision on all the issues without regard to the affidavit of Shri D. Srinivasa Rao. Needless to say that a decision needs to be taken on the said issues on the basis of the materials which were available on record of the original authority. Both the appeals stand allowed by way of remand.