Pasondia Steel Profiles Ltd. vs The Commissioner of Central Excise

The present appeal has been filed against the order dated 25.10.10/29.10.10 passed by the Customs and Service Tax Appellate Tribunal, Principal Bench, New Delhi, whereby the applications for grant of waiver for pre-deposit of CENVAT credit demand and penalty has been partly allowed and the Tribunal has directed the Appellants to deposit a sum of Rs. 12,00,00,000/- within a period of eight weeks from the date of the order.

We have heard Shri A.P. Mathur, learned Counsel appearing for the Appellants and Shri S.P. Kesarwani, learned Senior Standing Counsel appearing for the Respondents and have perused the impugned judgment and order dated 25.10.10/29.10.10 passed by the learned Single Judge giving rise to the present appeal, the grounds taken in the memo of appeal and the documents filed along with it.

Shri A.P. Mathur, learned Counsel for the Appellants submitted that for grant of waiver of deposit of the duty and penalty, the Tribunal is required to consider only as to whether the interest of the revenue is safeguarded or not. According to him, interest of the revenue is amply safeguarded for the simple reason that the amount of set off of canvat credit has been adjusted by the Appellant towards payment of duty on the finished goods. Even if it is assumed that finished goods has not been manufactured it shall not cause any loss to the revenue and, therefore, the Tribunal had committed error in partly allowing the waiver application and directing to deposit a sum of Rs. 12 crores out of the demand of Rs. 12,12,66,764/- and of like amount of penalty.

The submission made by Shri A.P. Mathur is wholly misconceived. For considering the case of grant of stay or waiver of realization of the demand/penalty, the authority has to consider the existence of prima facie case, balance of convenience and suffering of irreparable loss in case stay/waiver is not granted. The plea that the interest of the Revenue is amply safeguarded may be an additional factor to be considered while granting stay/waiver. The Tribunal has found that the raw-materials purchased by the Appellant were not utilized in the manufacture of finished goods and the Appellant had fraudulently adjusted the amount for paying Central Excise duty on the finished goods, which the Appellant could not have done so. The Tribunal on the basis of material and evidence on record and on the basis of submissions made by the parties, have recorded categorical findings that the Appellants have failed to make-out prima facie case in its favour for waiver of the amount of duty and penalty.

The Tribunal while disposing of the applications has held as follows.:

Coming to the question as to whether the Appellant have established prima facie case in their favour, we find that the allegation against the Appellant is of various serious nature that during the period from April, 2003 to December, 2005 they took CENVAT credit amounting to Rs. 12,13,66,764/- on the basis of the invoices for purchase of HR coils from SAIL, but instead of using those HR coils in their factory for manufacture of CR strips, the HR coils were sold as such, and only bogus manufacture of CR strips was shown in their records and thereafter the sale of CR strips was shown to various customers under their invoices, without actually selling any material and thereby enabling the so called buyers of CR strips to take CENVAT credit on the basis of such bogus invoices. There is no dispute about the fact that during the period of dispute there was no power connection in the Appellant''s factory and except for the period from July 2002 to December 2003, when the Appellant claim to have a hired a 1250 KVS generator, during the remaining period they had only the generators with total capacity of 428 KVA which were not sufficient for operating the rolling mills in their factory. The transporter Shri A.J. Singh in his statement has stated that the HR coils after being lifted from the SAIL stock yard at Ghaziabad were being directly taken to the premises of M/s. Jain Cutter and M/s. Saaras (Cutters) India P. Ltd. for slitting and after slitting the same were not brought back to the factory premises of Appellant No. 1 but were sold out from the factory premises of the M/s. Jain Cutter (Appellant No. 4) and M/s. Saaras (Cutters) India P. Ltd. (Appellant No. 5). Shri Yashpal Sharma, Dy. GM of the Appellant company in his statements dated 21/2/06, 27/2/06, 6/3/06 and 10/3/06 has admitted that during the period of dispute, there was no production of CR coils but still the production of CR strips and scrap but but the sale of CR coils/strips was being shown to various parties, some of which are M/s. Bharti Trading Company and M/s. Ashushi Steels. The statements of Shri Yashpal Sharma recorded u/s 14 of the Central Excise Act by a Gazetted Officer have not been retracted by him and resiling from such statements at the stage of appeal has no meaning and, therefore, we are of prima facie view that these statements of Shri Yashpal Sharma have to be treated as admissible evidence. We also find that the statements of Yashpal Sharma are corroborated by the statement of Shri Upender Goyal, Director of the Appellant No. 1, wherein he has explained in much greater detail the modus operandi of taking bogus CENVAT credit and passing on the same. The huge outstanding of sale proceeds to the tune of Rs. 43,00,00,000/- due from only two buyers-M/s. Bhagwati Trading Co. and M/s. Ashushi Steel are clear indications that the sales of CR strips by the Appellant No. 1 to these companies were not genuine sales and, therefore, we have no reason to disbelieve the statements of Shri Yashpal Sharma and Shri Upender Goyal in this regard.

6.1 As against the above evidence against the Appellant No. 1, 2 and 3, no concrete evidence has been produced by them in support of their claim that the Department''s allegations are incorrect or that they were indeed manufacturing the CR strips out of the HR coils being purchased by them.

In view of the above, we hold that the Appellant have not been able to establish prima facie case in their favour and as such it is the Department, which has a strong case against them. As regards the conduct of the Appellants, the nature of the allegations against them, which prima facie appear to be supported by concrete evidence on record, are of very serious nature and amount to a massive fraud. In view of these circumstances, applying the principles laid down by Hon''ble Supreme Court and various High Courts as discussed in para 5 to 5.4 above, we are of the view that this is not a case for total waiver from the requirement of pre-deposit. We, therefore, direct the Appellant No. 1 to deposit an amount of Rs. 12,00,00,000/- (Rupees Twelve Crores) within a period of eight weeks from the date of this order.

Before us Sri A.P. Mathur did not establish that the findings recorded by the Tribunal is incorrect and are not based on any relevant material on record. He only emphasized that as the interest of Revenue is amply safeguarded, the Tribunal ought to have allowed full and complete stay/waiver of the demand and penalty.

We fully agree with the view as expressed by the Tribunal. The fraudulent act of adjustment of cenvat credit on the part of the Appellant is writ large on the face of the various documents/order and do not call for any lenient view.

So far as the question of undue hardship is concerned, we have perused the documents filed before the Tribunal. In the application only a bald statement has been made that the Applicant is facing financial hardship and no supportive documentary evidence was filed along with the application. In the absence of any relevant material and evidence to establish that the Appellant was really facing financial hardship the Appellant would not be entitled to claim stay/waiver as of right.

In view of the foregoing discussions, we do not find any legal infirmity in the order passed by the Tribunal.

The appeal fails and is dismissed.