Ajay Sharma, Member (J)
1. These appeals have been filed by the Appellants-brokers assailing the order dated 10.10.2012 passed by the Commissioner, C.Ex., Cus & Service Tax, Nasik by which the learned Commissioner confirmed the demand raised in the show cause notice dated 21.11.2011 against M/s. Surabhi Corporation for availing ineligible Cenvat credit in contravention of various provisions of Cenvat Credit Rules, 2004 r/w. Section 11A(4) of Central Excise Act, 1944 with applicable interest & penalty and separate penalty was also imposed on the appellants herein i.e. brokers under Rule 26, Central Excise Rules, 2002 for their acts of omission(s) and commission(s). We are not aware of any appeal filed by any of the co-noticees except the appellants herein which we are disposing of by this order.
2. The issue involved herein is whether the learned commissioner is justified in confirming the penalty on the appellants under Rule 26 ibid?
3. The facts leading to the filing of the instant appeal are stated in brief as follows. Through detailed investigation it has come to the knowledge of the Revenue that during the period November, 2006 to November, 2007 M/s. Surabhi Corporation (referred to as “the assessee”) had availed Cenvat Credit of Rs.1,67,84,392/- in contravention of various provisions of Cenvat Credit Rules, 2004 by fraud, collusion, suppression of facts and willful misstatement which, according to them is recoverable from the assessee as they had shown utilization of inadmissible Cenvat credit for payment of Central Excise duty without any manufacturing activity and without removing any finished excisable goods. They were passing on ineligible Cenvat credit to their customers without actually supplying any goods with the invoices, so issued by them. There was no such company in existence at the premises declared in their Central Excise Registration and the premises was also procured on the strength of forged document. As per investigation the assessee neither purchased any ‘Polyester Yarn’ nor manufactured any ‘Polyester Grey Fabric’. It has come into light during investigation that the appellants herein i.e. the brokers were also involved in the procuring of polyester yarn form various manufactures in the name of the assessee and in turn selling the same in the open market to other unregistered powerloom owners/weavers and were supplying only the invoices to the assessee without any goods on the strength of which the assessee were availing in-admissible Cenvat credit. Accordingly, a show cause notice dated 21.11.2011 was issued to the assessee, the appellants and also to other co-noticees i.e. transporters etc. which was culminated into the Order-in-Original dated 10.10.2012 i.e. the impugned order.
4. Learned counsel for the appellants submit that none of the appellants have physically dealt with the yarns in issue and therefore they are not liable to penalty u/r. 26 ibid as the same is imposable only when the excisable goods are physically dealt with by the person with knowledge of liability of confiscation. In support of his submission learned counsel placed reliance on the decision of the Larger Bench of the Tribunal in the matter of Steel Tubes of India Ltd. vs. CCE, Indore; 2007(217) ELT 506 (Tri.-LB). According to learned counsel, the appellants were not aware about the mode of disposal of yarns by the assessee. He also submits that the appellants have not prepared the invoices nor they have influenced or abetted or asked the yarn manufacturers to prepare the invoices with oblique motives to pass on the ineligible Cenvat credit nor any such allegation has been made in the show cause notice against them. Learned counsel further submits that the statement of appellant Sajjan Mohan Tibrewal was recorded by the DGCEI officers under duress and coercion and that while taking the statements it was told to the said appellant that this will be used to nail the assessee and he will not be harassed by the department. He also submits that the appellants have no concern with the assessee. Per contra learned Authorised Representative appearing on behalf of Revenue submits that the appellants being brokers have played pivotal role in diverting the polyester yarn, the principal input required in manufacture of Polyester Grey fabric to small weavers and making the invoices available to the assessee in order to enable them to avail ineligible Cenvat credit and therefore they have abetted in the fraudulent availment of input credit by the assessee and therefore the penalty under Rule 26 ibid has rightly been imposed on them. In support of his submissions, learned Authorised Representative placed reliance on the decision of the Tribunal in the matters of Sofiyan Ashraf Rajwani vs. CCE&C, Nashik ; 2017 (135) ELT 559 (Tri.-Mum) and Shri P. Ganesh, Director-Commercial, M/s. Hitech Mineral Industries (Covai) Pvt. Ltd. vs. CCE, Salem; 2022-TIOL-693-CESTAT-MAD.
5. We have heard learned counsel for the appellants and learned authorised representative on behalf of Revenue and perused the case records including the written submissions alongwith case laws placed on record by the respective sides. Since the penalty has been imposed on the appellants under Rule 26 ibid therefore the same is reproduced hereunder:-
“Rule 26. Penalty for certain offences. –
(1) Any person who acquires possession of, or is in any way concerned in transporting, removing, depositing, keeping, concealing, selling or purchasing, or in any other manner deals with, any excisable goods which he knows or has reason to believe are liable to confiscation under the Act or these rules, shall be liable to a penalty not exceeding the duty on such goods or two thousand rupees, whichever is greater.
(2) Any person, who issues -
(i) an excise duty invoice without delivery of the goods specified therein or abets in making such invoice; or
(ii) any other document or abets in making such document, on the basis of which the user of said invoice or document is likely to take or has taken any ineligible benefit under the Act or the rules made thereunder like claiming of CENVAT credit under the CENVAT Credit Rules, 2004 or refund, shall be liable to a penalty not exceeding the amount of such benefit or five thousand rupees, whichever is greater.”
This rule has two parts; first part is not relevant for our purpose as the show cause notice has been issued to the appellants herein for abetting in making the invoices on the basis of which the assessee has taken ineligible Cenvat credit. So far as the argument of learned counsel, that no such allegation of abetment has been made in the show cause notice, is concerned, we find same to be not correct as a specific allegation of abetment has been made against the appellants in the show cause. Now we have to see whether their actions made them liable for penalty under Rule 26(2) ibid. The said clause clearly mentions that any person who issues or abets in making an excise duty invoice without delivery of goods specified therein or issues any other document or abets in making such document on the basis of which the user of said invoice or document is likely to take or has taken any ineligible benefit under the Act or the rules made thereunder like claiming of CENVAT credit under the CENVAT Credit Rules, 2004 or refund, shall be liable to a penalty not exceeding the amount of such benefit or five thousand rupees, whichever is greater.
6. It is the specific case of the department against the appellants that being brokers they managed to procured the raw material i.e. polyester yarn from the manufacturers in the name of assessee and diverted these goods in the open market and supplied the invoices to the assessee on the basis of which the assessee has availed ineligible Cenvat credit. The case in hand is mainly facts based. The case of the department is substantially based on the statements recorded u/s. 14 of Central Excise Act, 1944. In his statements Rajesh Deepak Shah-Proprietor of Surabhi Corporation (Assessee herein) mentioned that he had never purchased polyester yarn for the assessee and never supplied polyester grey fabrics to any party under the name of Surabhi Corporation. He also stated to have started M/s. Shah Fabrics in the name of his father Deepak Shah as per advice of Brijesh Shah. While checking the details of the transporter it has come to notice of the department that the address given on the lorry receipts issued by M/s. Nakoda Roadlines, Malegaon is fake address and it was a vacant godown without there being existence of any roadlines. The invoices accompanied with lorry receipts issued by M/s. Nakoda Roadlines, Malegaon were without any vehicle numbers mentioned on the receipts. Mr. Kurdaram Durgaprasad Kulria-proprietor of M/s. Nakoda Roadlines in his statements u/s. 14 admitted that no grey fabric was transported under those lorry receipts and that he was allured by Brijesh Shah & Rajesh Shah to issue the lorry receipts and in turn they promised to compensate him by giving him commission of Rs.1000/- per lorry receipt. Another transporter in the name of M/s. Suhel Roadlines, Malegaon through its Manager Mr. Manoj Siddique admitted in this statements that although the names of M/s. Shah Fabrics and M/s. Surabhi Fabrics were appearing on the invoices as consignees but the goods were never delivered to them and that the same were diverted to other parties. Similarly Mr. Anand Nagarmal Agarwal-Proprietor of Supreme Freight & Carriers in his statements has admitted that although the brokers have prepared cash receipts in the name of M/s. Shah Fabrics and M/s. Surabhi Corporation but no goods were delivered to them and the same were delivered to other parties as per instructions of the brokers. Now coming to the statements of the brokers (appellants herein), Mr.Sajjan Tibrewal in his statements recorded u/s. 14 ibid (RUD- 27) has stated that he is in the business of Yarn broking since last 28 years; that he is carrying out said business in the name of M/s. Ghanshyam Textile and M/s. Tibrewal agencies on commission basis; that the parties, who want to purchase yarn, were approaching him and place orders; that as per these orders, he was informing the Yarn manufacturing companies to send yarn to Malegaon; that on the invoices the name and address of the purchasers were mentioned; that after receiving the yarn through the transporter, the material was delivered to the concerned parties as mentioned on the invoices; that though the name of the broker was not appearing on the invoices, but they were receiving the commission. Shri Tibrewal further stated that Shri Rajesh Shah approached him in the month of August, 2006 and requested for giving invoices in the name of M/s Shah Fabrics and M/s Surabhi Corporation without supply of yarn from the Yarn manufacturing companies; that Shri Shah promised to give C-forms for sales tax exemption; that to save the sales tax against C-forms, he agreed to give invoices in the name of M/s Shah Fabrics and M/s Surabhi Corporation, without supplying yarn; that Shri Rajesh Shah placed many orders for yarn in the name of M/s Shah Fabrics and M/s Surabhi Corporation during the period from November 2006 to December 2007; that as per these orders, he received yarn through M/s Suhel Roadlines and M/s Supreme Freights and Carriers; that after receiving the Yarns along with the invoices (meant for the transporters) in the name of M/s Shah Fabrics and M/s Surabhi Corporation, he used to give only invoices to Shri Rajesh Shah and sold the accompanying yarn to other Yarn weavers; that from the Yarn weavers, he used to get crossed cheques in the name of M/s Advance Finstocks Pvt. Ltd., which was a banking company; that he used to deposit these cheques to M/s Advance Finstocks Pvt. Ltd. and in turn, they were issuing cheques in the name of Yarn manufacturing companies, located at different cities; that he used to give photo copies of these cheques to Shri Rajesh Shah; that he did not receive any commission from him.
7. Similarly Mr. Pansari in his statement u/s. 14 ibid (RUD-26) has stated that that he is in the business of Yarn Broking since last 3 years; that the companies/firms, who want to purchase yarn, place their orders on the Yarn manufacturing company; that the Yarn manufacturing company then informs the broker(s) about their deal and according to the orders, send the yarn to Malegaon through transporters; that after receipt of yarn to Malegaon, the transporter informs the yarn broker about the same, who then inform the purchaser about receipt of the yarn at Malegaon; that along with the Yarn, duplicate copy of the invoice, delivery challan and packing list are also received by the transporters; that the transporter gives delivery challan and packing list to the yarn brokers; that while taking delivery of yarns from transporters, the purchasers receive the duplicate copy of invoice; that the yarn brokers receive the cheques from the purchasers and send to the Yarn manufacturing company by post and receive commission for such transactions; that M/s Surabhi Corporation have purchased maximum yarn through them; that such yarn used to come through M/s Suhel Roadlines and M/s Supreme Freights and Carriers; that he has done brokerage for 234 consignments for M/s Surabhi Corporation and received commission in cash. Shri Pasari was then shown the statements dt.01.03.2008 of Shri Rajesh Shah, which clearly establishes non-existence of any factory in the name of M/s Surabhi Corporation. He was then asked to whom said yarn was delivered and it was stated that one of the person from the yarn mills used to give the name and phone no. of the person of M/s Surabhi Corporation whoever comes for delivery; that he does not know to whom he has given the delivery of yarn received in the name of M/s Surabhi Corporation; that the person who was coming to take delivery of goods for M/s Surabhi Corporation was bringing the cheques in the name of other firms or in the name of financial companies and not in the name of M/s Surabhi Corporation; that he has not kept detailed information of the person(s), who used to come to take delivery of yarn for M/s Surabhi Corporation.
8. It is relevant to mention that the appellant-Mr. Sajjan Mohan Tibrewal, vide his statement dated 8.9.2008 admitted his guilt. He tried to retract it belatedly while replying the show cause, by stating that the same was recorded under duress and coercion as he was told by DGCEI offices that the same would be used only to trap the assessee and that he would not be harassed by the department. The reasoning given by the appellant Sajjan Mohan Tibrewal in his so-called retraction (which has not filed with the appeal for perusal) does not seems to be convincing and we are of the view that the same has been rightly rejected by the authority below being afterthought. He would have asked for the cross-examination of the transporter or the banking company who have named him specifically in their respective statements. The allegations made by the department against appellant Mr. Tibrewal got corroborated from the said statements and more particularly the statement of Shri Dilip Kundanlal Jain, Manager of M/s. Advance Finstocks Pvt. Ltd. (RUD-28) who in his statements u/s. 14 ibid has stated that M/s. Advance Finstocks are a banking company; that they were engaged in the business of taking payable cheques from Malegaon branch (which is submitted by the traders) and providing them the cheques payable at different cities as per their demand, after deducting commission @ 0.050%. On being asked to submit the file of Shri Rajesh Shah, Proprietor of M/s Surabhi Corporation, Shri Jain submitted that the file contains the vouchers of their company, in which description of cheques showing amount of different banks are mentioned; that all the description of cheques mentioned in the vouchers are submitted by Shri Sajjan Tibrewal of Malegaon.
9. So far as the submission of learned counsel about the applicability of the decision of the Larger Bench of the Tribunal in the matter of Steel Tubes of India Ltd.(supra) is concerned we are of the view that the same would have been applicable had the department issued the show cause to them for acquiring possession or dealing with the excisable goods which they know or has reason to believe are liable to be confiscated under the act, which is not the case herein. The appellants have been show caused under Rule 26 for abetting in making such documents on the basis of which the assessee have taken ineligible Cenvat credit which has been confirmed by the learned in the impugned order. Had the show cause been issued for acquiring possession or dealing with the excisable goods liable for confiscation, then also this reliance was not available to learned counsel, as the Hon’ble Gujarat High Court in the matter of Sanjay Vimalbhai Deora vs. CESTAT; 2014(306) ELT 533 (Guj.) has held that the person would render himself liable for penalty under rule 26 ibid even if the goods are not confiscated or have not been rendered for confiscation. The Special Leave Petition (SLP) filed against the said order was dismissed by the Hon’ble Supreme Court by upholding the order of the Hon’ble Gujrat High Court which has been reported in 2014 (309) ELT A131 (S.C.).
10. From the perusal of the evidences collected in the form of documents and statement of concerned persons it is clear that the assessee was not in existence at the premises declared in their Central Excise Registration certificate but they managed to obtain the registration on the basis of forged documents for manufacturing ‘Polyester Grey Fabric’. They neither purchased any polyester yarn nor ever manufactured any polyester grey fabric. The broker i.e. Mr. Sajjan Tibrewal managed to purchase polyester yarn from the yarn mills in the name of the assessee and supplied invoices to the assessee without accompanying the goods on the basis of which the assessee managed to avail inadmissible Cenvat credit. He was selling the polyester yarn, which he purchased from the yarn mills, to other power loom owners/ weavers at Malegaon against the payment in the name of third party through crossed cheques. Thereafter the cheques were deposited by him with a banking company M/s. Advance Finstock P. Ltd., Malegaon, who after taking commission @0.05%, were issuing cheques in the name of the assessee, the photocopies of which were also found in the records of the assessee.
11. From the statements it has been proved beyond any doubt that the brokers were instrumental in availing of ineligible Cenvat credit by the assessee for payment of central excise duty without manufacturing/ removing any excisable goods and also for passing on the said Cenvat credit to their customers on the basis of the invoices only without supplying any goods to them. This has been established through the ER-1 returns also. Involvement of appellant Sajjan Tibrewal in the fraud has been proved beyond doubt as it has been corroborated by other statements also. He knowingly involved in the fraud as he himself admitted in his statement about his role, retraction of which was much belatedly and was rightly held by the authorities below as afterthought. No doubt there is a complete network in order to defraud the government exchequer. A careful scrutiny of all the statements placed on record, be it the assessee or the transporter or brokers etc. completed the chain of events and proved it beyond any doubt that the appellant Sajjan Tibrewal abetted in making the invoices on the basis of which the assessee has availed ineligible Cenvat Credit without setting up any factory for manufacturing polyester yarn. The said Sajjam Tibrewal played a vital role in diverting the polyester yarn, the main raw material/input required for manufacturing Polyester Grey Fabric, to small weavers and making available the invoices to the assessee who in turn availed Cenvat credit on those invoices. He procured the yarn from Surat etc., took possession of the same and diverted it to small weavers.
12. So far as another appellant Mr. Pankaj Hari Pansari is concerned, although he also to some extent is liable for availing of ineligible Cenvat credit by the assessee but he cannot be said to be abetted the same as no knowledge or motive can be attributed to him in view of the evidences/ statements procured during the investigation . He can be said to be negligent but his actions cannot made him liable for any penalty under Rule 26 ibid. Nowhere it has come in any of the statements that he knowingly given the delivery of yarn received by him to some other persons unrelated to the assessee. His fault was that he did not ensure that the persons who took the delivery of polyester yarn are from the assessee company only and delivered the yarn to the persons whose names and phone numbers have been informed to him in the name of the persons of the assessee, by someone from the yarn company only from time to time and he did not keep the detailed information of those persons who used to take delivery of yarn for the assessee. Unlike appellant Sajjan Mohanlal Tibrewal, Mr. Pankaj Pansari nowhere made any admissions. Therefore, on the facts we are of the view that the department has failed to make any case against the appellant Mr. Pankaj Pansari beyond reasonable doubt.
13. In view of the discussions made hereinabove, we confirm the impugned order and dismiss the Appeals so far as imposing penalty against the appellant Mr. Sajjan Mohanlal Tibrewal is concerned and set aside the same qua the appellant Pankaj Hari Pansari by allowing his appeal.
