JSK Industries Pvt Limited vs Commissioner Of Central Excise & ST, Vapi

Ramesh Nair, Member (J)

The facts in brief are that the appellants are engaged in the manufacture of excisable goods viz. Aluminum Wire Rod/Conductor falling under Chapter Heading No. 76 and 72 of first schedule to the Central Excise Tariff Act, 1985,

The appellants were in the process of starting operations in their Sayli factory during the period February 2008 March 2008. The appellants did not have electricity connections in their factory at the initial stage and therefore the factory was operated by Diesel Generator Set.

2.1 The Appellants avail Cenvat credit on the inputs, capital goods and input services used in the relation to the manufacture of finished goods.

2.2 M/s. Hiren Aluminium Limited (for short "Hiren Aluminium") is another Company which was having a manufacturing unit in Rakholi village in Silvassa where they were engaged in the manufacture of aluminium conductors. Subsequent to the period in dispute in the present appeal, the factory situated at Rakholi of M/s Hiren Aluminium was purchased by the appellants. However, for the purpose of reference in the present appealHiren Aluminium, Rakholi is referred to as Hiren Aluminium or HirenAluminium, Unit II.

2.3 During the period in dispute, M/s. Hiren Aluminium Unit-1, had a memorandum of understanding (MoU) with M/s. Nalco to purchase aluminium ingots. The appellants during the relevant period did not have any MoU with NALCO to purchase aluminium ingots. The appellants therefore purchased aluminium ingots from NALCO on account of M/s. Hiren Aluminium, Unit-1. The invoice issued by NALCO show the name of the buyer as M/s. Hiren Aluminium, Unit-I and the consignee name as the appellants and the address of the consignee mentioned in the invoices is of Sayli factory of the appellants.

2.4 During the transit of aluminium ingots from NALCO to the appellants M/s. Hiren Aluminium, Unit-1 had sold aluminium ingots to the appellants and raised commercial invoices. The aluminium ingots were thus purchased from Hiren Aluminium and received by the appellants from NALCO and accordingly credit was taken by the appellants on the invoices issued by NALCO. There is no dispute on this fact.

2.5 After the receipt of such aluminium ingots in the factory of the appellants, the appellants took credit and removed the same under Rule 4(5) of Cenvat Credit Rules to Hiren Aluminium Unit-II at Rakholi. The ingots so sent to M/s. Hiren Aluminium, Unit-II under Rule 4(5)(a) were converted into, wire rods. The wire rods in turn were converted into stranded wires by the appellants and paid Excise Duty on stranded wires as credit on ingots used in the manufacture of stranded wires was taken by the appellants. The duty so paid on stranded wires was taken as credit by Hiren Aluminium, Unit-II. Hiren Aluminium, Unit-II converted stranded wires into aluminium conductors. Hiren Aluminium, Unit-II cleared the said conductors on payment of appropriate excise duty. There is no dispute on the fact that the excise duty has been paid on aluminium conductors cleared from Hiren Aluminium, Unit-II.

2.6 A separate investigation was undertaken against Hiren Aluminium. In the course of said investigation, the premises of the Appellants was also searched, statements of various officials were recorded during the course of said investigation. After the completion of investigation, show cause notice dated 30.08.2011 came to be issued to Hiren Aluminium demanding Cenvat Credit wrongly availed without physical receipt of goods from the Appellants. The Appellants were also made co-noticee in the said show cause notice.

2.7 The very same investigation and statements and show cause notice has been relied upon by the department in the present show cause notice issued to the Appellants proposing to deny credit of Rs. 1,40,78,429/-on the ground that the said inputs were cleared as such in open market without reversing Cenvat credit and were not cleared to Hiren Aluminium as otherwise contended by the Appellants. The show cause notice also proposed to confiscate total quantity of 778.347 MT of Aluminium Ingots alleged to be cleared clandestinely without reversing Cenvat credit. Penalties were also proposed to be imposed on co-noticees. The said show cause notice was adjudicated by the learned Commissioner vide order-in-original dated 31.12.2014 whereby the entire amount of Cenvat credit of Rs. 1,40,78,429/-was confirmed along with interest and equal amount of penalty and redemption fine. Hence the present appeal.

Shri Anand Nainawati, learned Counsel appearing on behalf of the appellant submits that the entire case is based on the investigation carried out and show cause notice dated 30.08.2012 issued to M/s. Hiren Aluminium as evident from the impugned order. He submits that the said show cause notice has been settled by the Settlement Commission, Mumbai wherein on the issue of under valuation in respect of finished goods was admitted by the Company and duty was paid. As regards the issue of denial of credit in respect of inputs received from the appellant is concerned, the Settlement Commission vide its order dated 29.08.2013 dropped the demand on the ground that there is no dispute that duty was paid by M/s. JSK Sayli Unit from where Hiren Aluminium has received the ingots therefore, on the basis of a Settlement Commission order, the allegation made against the appellant has no basis. Accordingly, the charge of clandestine removal of ingots by appellant does not exist. He submits that entire case is based on the statements of transporters who have not been cross-examined. He further submits that there is absolutely no evidence that ingots so received from M/s. NALCO had been transported elsewhere without using in the manufacture of finished goods. Therefore this presumption of department has no basis particularly on the findings of the order of Settlement Commission in the case of M/s. Hiren Aluminium.

3.1. He submits that as regards the transaction of aluminium ingots from appellant to Hiren Aluminium under Rule 4(5)(a), there is no dispute particularly after the order of Settlement Commission and it was also affirmed that Hiren Aluminium has manufactured wire rods and which in turn used in the manufacture of standard wire. Therefore, allegation of clandestine removal of ingots purchased from Hiren Aluminium which was sold by NALCO has no basis. He also submits that it is impossible to manufacture the quantity of conductors without receiving the ingots which are in dispute. The appellant have cleared 786.083 MTs ingots to Hiren Aluminium, Unit-II during the period February, 2008 and March 2008. The ingots so received were converted into wire rods. Wire rods in turn converted into standard wire and then conductors are manufactured. Without using the ingots which are in dispute, it is impossible to manufacture conductors on which duty of excise has been paid and accepted by the department. He placed reliance on the following judgments:-

(a) Senthil Kumar Soaps Works vs. CCE – 1997 (89) ELT 77 (Tri.)

(b) Sharma Chemicals vs. CCE – 2001 (130) ELT 271 (Tri.)

(c) Lloyds Metal Engineering Limited vs. CCE – 2004 (175) ELT 132

3.2 He further submits that the entire demand is barred by limitation on the ground that the present case relates to February 2008 to March 2008. The Panchanamas were recorded on 17/18.07.2008. The statement of transporter and employees of the appellant were recorded and based on the statements of the department issued a show cause notice dated 30.08.2011 to Hiren Aluminium, Unit-II with a proposal to deny credit on standard wires without alleging that the credit taken on ingots by the appellant is incorrect. After the elapse of almost five years of the event, the show cause notice dated 06.03.2013 has been issued to the appellant. The delay of five years in issuing show cause notice clearly shows that there was difference of opinion in the department with regards to the evidences collected by the department. Therefore, the entire information was known to the department in 2008 itself. Since then no show cause notice has been issued to the appellant for denial of credit on ingots. He submits that department sought to appreciate events occurred in October 2008 with a lapse of almost five years, the appellants are not able to find out what was the position way back in 2008-09 therefore, in view of these facts the entire demand is time-barred.

3.3 As regards the confiscation of goods and consequent redemption fine, he submits that goods are not available for confiscation therefore, in view of the Larger Bench decision in the case of Shiv Kripa Ispat Pvt. Limited vs. CCE &Cus. Nasik – 2009 (235) ELT 623 and CC, Mumbai vs. Rishi Ship Breakers – 2009-TIOL-388-CESTAT-MUM-LB, redemption fine cannot be imposed.

Shri Tara Prakash, learned Deputy Commissioner (AR) appearing on behalf of the Revenue reiterates the findings of the impugned order.

We have carefully considered the submissions made by both the sides and perused the record. We find that in the present case the appellant was denied Cenvat credit on the aluminium ingots which was initially sold by NACLO to Hiren Aluminium who in turn sold the same ingots to the appellant. The appellant have taken invoice issued by NALCO wherein the appellant was shown as consignee. To this extent, there is no dispute by the department. The case of the department is that the appellant have taken credit on Aluminium ingots and thereafter it was removed without payment of duty as the same was not used in the manufacture. This allegation is solely based on the statements of transporter however, the transporter was not cross-examined and as per section 9D of Central Excise Act, 1944. It is mandatory on the part of the Adjudicating Authority to do examination in chief and thereafter allow the noticee for cross-examination for the witness which in the present case was not done by the Adjudicating Authority. Therefore, the statement of transporter cannot be relied upon. Moreover, the entire investigation and the witnesses were used for issuing show cause notice dated 30.08.2011 t oHiren Aluminium wherein the charge was that M/s. Hiren Aluminium has not received ingots sent by the appellant. Accordingly, the Cenvat credit availed by Hiren Aluminium on the same ingots was sought to be denied. The case of M/s. Hiren Aluminium was settled by the Settlement Commission, Mumbai wherein the Settlement Commission has given following findings :-

“5.3 On the question of eligibility of Cenvat credit of Rs.1,59,39,047/-, the Bench notes that the Revenue has not disputed the fact that duty of equivalent amount was paid by JSK Sayli unit on the stranded wires cleared to the applicant. If this payment is not disputed, there is no reason why credit cannot be allowed to the applicant i.e. JSK Unit 2. Further, the applicants have established through facts and figures that the quantity of aluminium conductors manufactured by the applicant could not have been possible without receiving the corresponding amount of stranded wires from Sayli Unit. Further, the said quantity of stranded wires would not have been possible without receipt of equivalent amount of aluminium wire rods which again would not have been possible without the receipt of aluminium ingots. There is no dispute on the fact that the aluminium ingots were procured from a third party, M/s NALCO, on payment of CE duty and the final product, Aluminium conductors were cleared on payment of duty.”

From the above clear findings of the Settlement Commission, the fact was established that the aluminium ingots were procured by the appellant from NALCO on payment of Central Excise duty. The said ingots were removed by the appellant to Hiren Aluminium (now known as JSK Industries Pvt. Limited, Unit-2) and the Hiren Aluminium after converting the ingots into wire rods returned to the appellant and in turn, the appellant have converted the same into standard wire and the standard wire was sold to Hiren Aluminium, Unit-2 for manufacture of Aluminium Conductors and such Aluminium Conductors were cleared on payment of duty. Therefore, the entire chain, right from procurement of aluminium ingots from NALCO upto the delivery of aluminium conductors, the transaction was established and accepted by the Settlement Commission. This finding was given by Settlement Commission after considering the investigation and all the evidences which were also relied upon in the appellant’s present case. Therefore, once all those investigation and evidence have been appreciated and Settlement Commission has come to the conclusion as reproduced above, there is no scope for the Adjudicating Authority to rely upon the same evidences for taking contrary view to the findings given by the Settlement Commission and to confirm the demand of Cenvat credit. Therefore there is no material evidence with the department to establish their charge of clandestine removal of ingots on which the appellant has taken Cenvat credit.

As regards the submissions made by the appellant that the demand is time-barred, we find that there is no dispute that the present case relates to period February 2008 to March 2008 and entire investigation was carried out in a case made out against Hiren Aluminium in the show cause notice dated 30.08.2011 for denial of Cenvat credit on standard wires wherein there was no allegation that the credit taken on ingots by the appellant was made. Thereafter the appellant was served a show cause notice dated 06.03.2013. In these facts, it is absolutely clear that entire information about the transaction were available with the department way back in October 2008 even then the department took five years to issue show cause notice to the appellant. Therefore, the demand is clearly time-barred.

As regards imposition of redemption fine, we find that firstly, as we have held that the appellant have not cleared aluminium ingots clandestinely and demand on that count is not sustainable consequently, no confiscation can be made and no consequential redemption fine will sustain. Secondly, without prejudice, we also find that the goods on which redemption fine was imposed was not available for confiscation. It is settled legal position by the Larger Bench of this Tribunal in the case of Shiv Kripa Ispat Pvt. Limited (supra) as well as in Rishi Ship Breakers – 2009-TIOL-388-CESTAT-MUM-LB (supra) that in case goods are not available, no redemption fine can be imposed therefore, on both counts, redemption fine imposed on the appellant is not sustainable.

As per our above discussion and findings, the impugned order is not sustainable hence, the same is set-aside. Appeals are allowed with consequential relief, if any, in accordance with law.