Indo Furnace (P.) Ltd. vs Union of India (UOI)

T.S. Thakur, C.J.—Rule 12CC of the Central Excise Rules, 2002, empowers the Central Government to specify the nature of restrictions

including suspension of registration as a measure aimed at preventing evasion of excise duty. Rule 12AA of the CENVAT Credit Rules, 2004,

similarly confers power upon Central Government to provide for certain measures necessary to prevent misuse of the CENVAT Credit. In

exercise of the power so vested the Central Government have issued a Notification No. 32/2006-CE(NT), dated 30-12-2006, declaring that

where a manufacturer, first stage or second stage dealer, or an exporter including a merchant exporter is prima facie found to be knowingly

involved in any of the acts enumerated therein, an officer authorized by the Board may order withdrawal of the facilities or impose the restrictions

specified in para 2 of the said notification. Paras 1 and 2 of the notification to the extent, the same are relevant may be extracted at this stage:

Deterrent against tax evaders: Withdrawal of facilities from manufacturers, registered dealers or exporters indulging in tax evasion. - In

pursuance of Rule 12CC of the Central Excise Rules, 2002, and Rule 12AA of the CENVAT Credit Rules, 2004, the Central Government,

hereby declares that where a manufacturer, first stage or second stage dealer, or an exporter including a merchant exporter is prima facie found to

be knowingly involved in any of the following:

(a) removal of goods without the cover of an invoice and without payment of duty;

(b) removal of goods without declaring the correct value for payment of duty, where a portion of sale price, in excess of invoice price, is received

by him or on his behalf but not accounted for in the books of account;

(c) taking of CENVAT credit without the receipt of goods specified in the document based on which the said credit has been taken;

(d) taking of CENVAT credit on invoices or other documents which a person has reasons to believe as not genuine;

(e) issue of excise duty invoice without delivery of goods specified in the said invoice;

(f) claiming of refund or rebate based on the excise duty paid invoice or other documents which a person has reason to believe as not genuine;

an officer authorized by the Board may order for withdrawal of facilities or impose certain restrictions as specified in para 2 of this Notification.

Facilities to be withdrawn and imposition of restrictions.:(1) Where a manufacturer is prima facie found to be knowingly involved in committing

the offences as specified in para 1, the following restrictions may be imposed on the facilities, namely:

(i) the facility of monthly payment of duties may be withdrawn and the assessee shall be required to pay excise duty for each consignment at the

time of removal of goods;

(ii) payment of duty by utilization of CENVAT credit may be restricted and the assessee shall be required to pay excise duty without utilizing the

CENVAT credit....

The petitioner has in the present case suffered an order of withdrawal of the facility of monthly payment of excise duty for a period of six months

from 22-5-2009 to 22-11-2009. The impugned order further directs that payment of excise duty by utilization of CENVAT credit as provided

under Rule 3(4) of the CENVAT Credit Rules, 2004, shall also be stopped with effect from 22-5-2009 to 22-11 -2009. During this period, the

petitioner is required to pay excise duty without utilizing CENVAT credit. The petitioner, however, has been permitted to take CENVAT credit

during this period, which can be utilized for payment of duty after the expiry of the period aforementioned. The operative part of the order of

withdrawal of CENVAT credit reads:

(i) The facility of monthly payment of excise duty by M/s. Indo Furnace (P.) Ltd., Hissar, as provided under Rule 8(1) of the Central Excise

Rules, 2002 is ordered to be withdrawn and they are required to pay excise duty for each consignment at the time of removal of the goods with

effect from 22-5-2009 to 22-11-2009.

(ii) Payment of excise duty by utilization of CENVAT credit as provided under Rule 3(4) of the CENVAT Credit Rules, 2004, is ordered to be

stopped with effect from 22-5-2009 to 22-11-2009. During this period, they are required to pay excise duty without utilizing CENVAT credit.

However, they are permitted to take CENVAT credit during this period which can be utilized for payment of duty after the aforesaid period is

over.

Aggrieved by the withdrawal of the facility mentioned above, the petitioner has filed the present writ petition.

We have heard learned Counsel for the parties and perused the record. The order under challenge came to be passed when an officer of Anti

Evasion Branch, Government of India, Department of Revenue deputed to the factory premises of the petitioner saw a vehicle coming out of the

factory premises. On interception, the vehicle was found to be carrying 9.9 MT of M.S. Girder, without any accompanying invoice. Investigation

revealed that the vehicle was being used for clandestine removal of the goods without an invoice and without payment of duty. Stock taking of

finished goods and raw material, further revealed a shortage of 346 MT of M.S. Girders and 349 MT of M.S. Ingots. Besides, 59,393 litres of

Furnace Oil was also found short, on which Cenvat credit had been taken. The total duty evasion was estimated to be Rs. 20,24,747. The incident

regarding the removal of goods without payment of duty was corroborated by the statement of the driver, Sh. Joginder Sharma, who admitted that

no invoice had been given to him for the excisable goods loaded in the vehicle. Sh. Satish Kaushik, Manager and authorized signatory of the

petitioner also admitted in his statement that the goods carried in the vehicle were cleared without payment of duty and were meant for sale in the

market. Sh. Vinod Agarwal, Director of the company too admitted to such clandestine removals of finished goods without payment of duty. It was

on the basis of the admissions so made by the responsible officers and representatives of the company that the impugned order was issued

withdrawing the facilities referred to earlier for a limited period of six months.

In the course of the hearing before us the factual aspects of the incident prima facie establishing the removal of goods without cover of invoice

and without payment of duty were not assailed by the learned Counsel for the petitioner. Even otherwise the statement of Sh. Satish Kaushik

referred to in the order has been recorded in the handwriting of Sh. Satish Kaushik himself in which Sh. Kaushik has clearly admitted that the

shortage detected in the stock had occurred due to the clearance of goods/material without issuing invoices and without payment of Central Excise

Duty. He has also admitted that the material found loaded in the vehicle intercepted by the Anti Evasion Wing was meant to be sold in the open

market and no excise duty was paid on the same. The admissions attributed to Joginder Sharma, Driver of the vehicle and Sh. Vinod Agarwal

have also not been either explained or withdrawn. Such being the position, a case for action in terms of Rule 12CC of the Central Excise Rules,

2002 and Rule 12AA of the CENVAT Credit Rules, 2004 read with the notifications issued under the same, the relevant part whereof has been

extracted above, was clearly made out against the petitioner. If the removal of goods without the cover of invoice and without payment of duty was

prima facie established, as was the position in the instant case, the facilities referred to in para 2 of the Notification extracted earlier could be

ordered to be withdrawn as a measure of deterrence against such unauthorized removal and evasion of duty. The power to withdraw such facilities

is clearly available to the authorized officer in terms of para 2 of the notification (supra). That being so, we find no justification for our interference

with the impugned order. The challenge to Rule 12CC of the Central Excise Rules, 2002 and Rule 12AA of the CENVAT Credit Rules, 2004 or

the notification issued in exercise of the said power conferred under the rules, we need to mention, was not pressed by learned Counsel for the

petitioner, nor was any other point urged for our consideration.

In the result, this petition fails and is hereby dismissed but in the circumstances without any order as to costs.