Suzuki Spinners vs Commissioner Of C.E And Ors

Dinesh Mehta, J.

By way of the instant petition, the petitioner has sought review of the order dated 10.5.2018, passed by a coordinate Bench of this Court, whereby its appeal (No.23/2018) filed under Section 35G of Central Excise Act, 1994 challenging the order dated 7.11.2017 passed by the Central Excise and Service Tax Appellate Tribunal, New Delhi (hereinafter referred to as CESTAT for short) was dismissed.

When this review petition was listed for admission, the Division Bench (of which one of us was a member) issued notices, as the facts stated in the memo of review petition and duly asserted by learned counsel for the petitioner, prima facie, led it to believe that the Division Bench deciding the petitioner's appeal (Appeal No.23/2018) vide order dated 10.5.2018, has fallen into an apparent error of facts and law. So much so, not only were the notices issued; but an interim order restraining the respondents from taking coercive recovery action against the petitioner was also passed.

The assessee's contention found favour with the Division Bench on 1.8.2018, while hearing the review petition for admission, that once the credit of Rs.50,00,611/- availed by the assessee stood reversed, what could be the justification for the Commissioner Excise to pass an order of recovery of such amount, much less imposing penalty?

The unequivocal assertion made by the counsel has been that initially in the month of June, 2011 the asessee had availed CENVAT credit of Rs.50,00,611/- of the duty paid on purchase of capital goods, which credit was reversed on 27.9.2011, consequent to the letters dated 26.7.2011 and 11.8.2011 issued by the concerned Superintendent of Excise. According to the petitioner despite reversal of the credit on 27.9.2011, the Commissioner of Excise issued a show cause notice for recovery of the said credit and ultimately passed a final order dated 2.9.2017; whereby not only a recovery of CENVAT credit was ordered, but a penalty to the tune of Rs.20 lacs under Rule 15(1) of CENVAT Credit Rules, 2004 was also inflicted upon the assessee.

After service of the notice, when the matter was being considered for admission on 3.10.2018, again the same assertion was made by Mr. Neeraj Kumar Jain, learned counsel for the review petitioner that since the assessee had reversed the CENVAT credit of Rs.50,00,611/-, pursuant to the letter written by the department, the adjudicating authority was not justified in raising demand of such CENVAT credit and imposing huge penalty of Rs.20 lacs.

In support of his arguments, learned counsel navigated us through the letters dated 28.7.2011, 11.8.2011 and 20.9.2011 (page nos.19, 21 and 22 annexed with the memo of appeal) vis-à-vis letters dated 9.9.2011 and 27.9.2011 (Annex.2 annexed with the memo of appeal) to show that the assessee had duly reversed the credit vide entry no.54 dated 1.8.2011, made in the RG-23 maintained by the assessee. Mr. Jain confidently gave corroboration of these facts from the order dated 27.8.2015, passed by the Commissioner, Central Excise, Udaipur, placed as Annexure-5 with the memo of appeal.

Being convinced with such contentions, which were prima facie, verifiable from the record, not only the Bench, even the counsel for the revenue seemed convinced; yet he sought some time to complete his instructions, perhaps thinking, why would the Commissioner order for recovery of the CENVAT credit and impose a penalty, when the assessee himself had reversed the credit even prior to issuance of show cause notice. The matter was thus adjourned to 24.10.2018.

On 24.10.2018, in view of the request made on behalf of learned counsel for the petitioner, the matter was adjourned to 29.10.2018.

On such date, the counsel for the revenue could not resist his expression of shock and at the outset informed that "the assessment order dated 27.8.2015 which has been filed by the petitioner, alongwith his memo of appeal is not complete". "Three crucial pages of the order have not been filed", he exclaimed, while showing us the complete order.

On the next date, i.e., 5.12.2018, Mr. Neeraj Kumar Jain, now a perturbed counsel, began his submissions with an excuse that the order dated 27.8.2015 as filed, has been filed due to inadvertence and at least he is not a party to the assessee's ploy or attempt of misleading the Court. At this juncture, he tried to make out a different case altogether and started finding fault in the order passed by the CESTAT; completely dehors the case set up by him in the review petition.

We did not let him advance such arguments, as they were beyond the scope of review, as this Court had rejected the petitioner's Appeal No.23/2018, vide a detailed order dated 10.5.2018.

We also record that on such revelation, learned counsel for the petitioner sought permission to withdraw the review petition, obviously on realizing that the petitioner has landed in troubled water.

The reason why the assessee's counsel took a detour from the case he had set up in the review petition is not far to seek. The remaining leaves/page nos.4,5 and 6 of the order dated 27.8.2015 which have now been placed by the department has brought to fore a telling fact that the review petitioner-assessee had again availed the CENVAT credit of the disputed amount of Rs.50,00,611/- on 1.7.2012, which finds mention in para no.12 and 14 of the order.

Having waded through these pages we are convinced that the assessee had contrivedly kept these pages while conveniently concealing these facts. It will be apt to reproduce the relevant extract from the adjudicating order so as to ward off attempt of this kind by the petitioner in future:-

"12. I have carefully gone through the show cause notice, case records and the written as well as oral submissions made by the assessee in their defence. In the show cause notice it has been alleged that the noticees have availed cenvat credit on the capital goods which were exclusively used for manufacture of exempted goods cleared under notification No.30/2004-CE dated 09.07.2004 in contravention of the provisions of rule 6(4) of Cenvat Credit Rules, 2004. The assessee have come forward and stated that they have initially taken the credit amounting to Rs.50,0061/- during the month of June, 2001 but on persuasion by the range Superintendent, the noticee debited the amount of Rs.50,00,611/- vide entry No.54 dated 01.08.2011 in RG-23C Part-II register and intimated accordingly to the Range Superintendent vide their letter dated 09.09.2011. The said Cenvat Credit was again taken as credit during the month of July, 2012 as they had paid duty during the month of January 2012 in respect of particular consignment. They submitted that there is no condition under Rule 6(4) of Cenvat Credit Rules, 2002 that the capital goods should be put to use immediately for manufacture of dutiable goods.

Here it is pertinent to mention that initially the assessee took the said credit of Rs.50,00,611/- in the month of June 2011 on capital goods when they were operating under exemption Notification No.30/2004-CE dated 09.07.2004 in the continue period upto July 2011 and on having been pointed out by the Range officer, they reversed the credit in the month of August 2011. It is further observed that the assessee again intimated vide their letter dated 12.01.2012 that they have received new orders and proposed to clear part of the goods on payment of duty and accordingly they are taking credit in their capital goods cenvat account. Later on after issue of SCN on 01.06.2012 the assessee again took suo-moto credit of this disputed amount in their cenvat account in the month of July, 2012. Further, it is also worth mentioning that only in the month of January 2012, the assessee cleared certain goods in one consignment on payment of duty amounting to Rs.24,291/- and on being asked detail thereof vide letter dated 06.03.2012 by Range Officer, the assessee never replied the same."

The facts, which have emerged from perusal of the complete order and record unfirls as under: -

Impugned period June, 2011 Superintendent of Excise asked the petitioner 26.7.2011 to reverse the credit 11.8.2011 & Petitioner reversed the credit 27.9.2011 Petitioner wrote a letter informing that he is 12.1.2012 opting out from exemption route Petitioner allegedly started paying duty Jan., 2012 Show cause notice issued by the 1.6.2012 Superintendent Assessee again availed credit of (Rs.) 1.7.2012 50,00,611/-

In light of the facts narrated above, there remains no room for ambiguity that the entire case projected by the assessee, duly stated in memo of review petition is nothing but an attempt to hoodwink the Court with concealed facts and camouflaged document. We are having no doubt that it was a concerted attempt on the part of the petitioner, in asmuch as the petitioner has at numerous places highlighted the fact that the assessee had reversed the credit, while completely hiding the fact that such credit was again availed by the assessee on 1.7.2012.

A few of such assertions made by the assessee needs to be noticed to fathom the extent of falsehood, an unscrupulous assessee can tread:

"......Upon the advice of the respondents before issuance of show cause notice the present petitioner reversed the amount of CENVAT Credit. Despite the reversal of the amount of CENVAT Credit, the adjudicating authority passed the order in original, therefore, in violation of provisions of section 11A(2)(b), demand by disallowing CENVAT Credit, imposing interest and penalty has been created against the petitioner.

..........(page no.4 of review petition)

......Be that as it may the present petitioner upon advise of the officers of the respondents before issuance of Show Cause Notice reversed the amount of CENVAT Credit and in the present case the revenue effect is neutal."

.........(page no.5 of the review petition)

.......Though the impugned CENVAT Credit was entered in RG-23 Register but was not utilized. Before its utilization, on the advice of Officers of Central Excise, the amount of CENVAT Credit was reversed much prior of issuance of show cause notice. Applying the ratio decendi of final order dt. 25.2.2016, the disallowance of CENVAT Credit and levy of interest and penalty upon the petitioner is absolutely illegal, arbitrary and unjustified.

........(page No.8 of the review petition)"

In view of the facts obtaining in the present case, it is clear beyond any pale of doubt that the review petitioner has made a conscious attempt to misguide this Court by filing an incomplete copy of the order dated 27.8.2015. The assessee has rather kept the relevant part of the order under its sleeves, so as to substantiate its stand that the assessee had reversed the credit of Rs.50,00,611/- on 27.9.2011 itself, much prior to the issuance of show cause notice and to impress upon the court that nothing remained to be recovered from him; and that the impugned recovery of the CENVAT credit and levy of penalty was totally unwarranted and arbitrary.

Whereas the facts are completely contrary to what has been portrayed by the petitioner. The fact of the matter is that at the time of motion hearing and even on 4.10.2018, neither this Court nor the counsel for the revenue could imagine that the order dated 27.8.2015 as placed by the assessee is not a complete order and the pages containing paras nos.9 to 17 of the order have been missing/willfully withheld.

We surely turned down Mr. Jain's request to allow him to withdraw the review petition; as permitting such dishonest litigant to withdraw the petition and letting him go scot free would set wrong precedent.

Needless to mention that but for the false assertions made by the petitioner, duly supported by an affidavit and counsel's submissions in tune with such assertions, the Division Bench (of which one of us was a member), would have hardly issued notices and granted interim protection to the assessee, that too in a review petition. It is thus clear that the petitioner has succeeded in his endeavour to defraud the court to a great extent.

We have no hesitation in admitting that but for the revelation made by the counsel for the revenue that the order dated 27.8.2015, as filed is incomplete, we felt that the petitioner has a strong case in its favour and we were about to pronounce as such.

However, with the revelation of the facts, the case of the petitioner falls flat on the ground. Confronted with such situation, we are reminded of some judgments of the Supreme Court, wherein the litigants coming with false pleas and tainted hands have been dealt with appropriately. It will not be out of place to cite those precedents and reproduce relevant excerpts from those precedents:-

(A) Vijay Syal and Ors Vs. State of Punjab & Ors. (2003) 9 SCC 401:

"In order to sustain and maintain sanctity and solemnity of the proceedings in law courts it is necessary that parties should not make false or knowingly, inaccurate statements or misrepresentation and/or should not conceal material facts with a design to gain some advantage or benefit at the hands of the court, when a court is considered as a place where truth and justice are the solemn pursuits. If any party attempts to pollute such a place by adopting recourse to make misrepresentation and is concealing material facts it does so at its risk and cost. Such party must be ready to take consequences that follow on account of its own making. At times lenient or liberal or generous treatment by courts in dealing with such matters are either mistaken or lightly taken instead of learning proper lesson. Hence there is a compelling need to take serious view in such matters to ensure expected purity and grace in the administration of justice".

(B) A. Shanmugam Vs. Ariya Kshatriya Rajakula Vamsathu Madalaya Nandhavana Paripalanai Sangam Represented by its President and Ors. (2012) 6 SCC 430:

"3. The ultimate object of the judicial proceedings is to discern the truth and do justice. It is imperative that pleadings and all other presentations before the court should be truthful.

Once the curt discovers falsehood, concealment, distortion, obstruction or confusion in pleadings and documents, the court should in addition to full restitution impose appropriate costs. The court must ensure that there is no incentive for wrong doer in the temple of justice. Truth is the foundation of justice and it has to be the common endeavour of all to uphold the truth and no one should be permitted to pollute the stream of justice.

(C) V. Chandrasekaran and Ors. Vs. The Administrative Offcier and Ors. (2012) 12 SCC 133:

"35. The judicial process cannot become an instrument of oppression or abuse, or a means in the process of the court to subvert justice, for the reason that the court exercises its jurisdiction, only in furtherance of justice. The interests of justice and public interest coalesce, and therefore, they are very often one and the same. A petition or an affidavit containing a misleading and/or an inaccurate statement, only to achieve an ulterior purpose, amounts to an abuse of process of court."

Instant case impels us to record our strong exception towards the contumacious conduct of the petitioner and equally irresponsible, if not indulging attitude of the counsel, in filing tempered documents in a bid to mislead the Court. We are shocked, to find the Court's sacrosanct proceedings being polluted by the petitioner for its material interest and malafide intentions.

We are of the firm opinion that such litigants should be handled with heavy hands and saddled with exemplary costs.

While dismissing the present review petition, we hereby impose a cost of Rs.5 lacs upon the petitioner, for abuse of process of law. The cost aforesaid be deposited within a period of 30 days with the Rajasthan Legal Services Authority. The cost once deposited will be used for rehabilitation or compensation to the victims of sexual abuse.

While parting with the judgment and imposing cost on the petitioner, we would like to caution the learned counsel that our abstinence from taking any stern action against him may not be construed to be a testimony of his innocence.

He ought to have been more cautious and vigilant at least while setting up an entirely new case in the review petition. Had he read the order carefully as purportedly supplied to him, (missing the relevant pages) perhaps things would have been different. With the hope and belief that good sense will prevail over him and having spent number of years in this Court as a counsel, he would now realize the need of requisites fairness, forthrightness and fortitude, this sacred profession demands from him.

We nevertheless accept his apology, though expressed orally while arguing the case.