ORDER
T. Anjaneyulu, Member (J)
1. The present appeals are filed aggrieved by the impugned order passed by the Commissioner, Central Excise & Customs, Vapi. The impugned order confirms the demand of an amount of Modvat credit of Rs. 7,82,912/- under Rule 57 I of erstwhile Central Excise Rules, 1944 read with Section 11A(2) of the Central Excise Act, 1944 on M/s. Pooja Enterprises which is a main appellant and also ordered for recovery of the amount of Modvat credit in balance of Rs. 7,005/-while imposing penalty of Rs. 5.00 Lakhs. Further, the impugned order also imposes personal penalties on other appellants. Hence this appeal.
2. The main appellants i.e. M/s. Pooja Enterprises at the relevant time was, inter-alia, engaged in the business of manufacturing Aluminium Wires and Zinc Wires. It was a Small Scale Unit, as such availing the benefit of Notification No. 175/86-CE dated 01.03.1986. After post July 1998, the appellants became a proprietory concern of M/s. Shree Stalco Engineering Pvt. Ltd. On 20.07.1988, the appellants premises were searched by the officers of the Central Excise in connection with alleged contraventions of the provisions of Rule 173B, Rule 173C, Rule 173F, Rule 173G(1) read with Rule 9(1), Rule 173G(2) read with Rule 52A, Rule 173G(4) read with Rules 53 and 226, Rule 57A, Rule 57B, Rule 57F(3) and Rule 57G (2) of the erstwhile Central Excise Rules, 1944. In this connection various records such as personal ledger Account (PLA), RG 23 Part I and II Central Excise Challans, Central Excise GPI, files containing records of purchase made by the appellants, all records and documents pertaining to the bank transactions with various banks, records and documents in relation to the transport of goods to and from the appellants premises, all records pertaining to the receipt, issue and consumption of various consumables required to run the machineries installed at the appellants premises, files containing electricity consumption records etc. were taken over by conducting various panchanamas.
3. During the course of investigation statements of various persons were recorded under force and duress. The initial statement of Shri Hariprasad Taparia, Proprietor of M/s. Shri Venkatesh Metal Corporation dated 20.07.1998 was retracted very next day. In so far as the statement of Shri. Hariprasad Taparia, Proprietor of Shri Venkatesh Metal Corporation is totally exculpatory and support the appellants case.
4. By a Show Cause Notice dated 28.01.1989, it was alleged that the appellants had claimed to have manufactured and cleared Aluminium Wire from their factory by filing false and improper classification list and fraudently claimed and availed of the concessional rates of duty provided under the said Notification No. 175/86, claiming themselves as an SSI unit with the deliberate and fraudulent intention to evade payment of central excise duty by issuing fake invoices in lieu of proper price list and by purportedly determining and paying Central Excise Duty on the said goods without having manufacture and cleared by them from January 1987 onwards merely to fulfill the requirement of Rule 173F of the said Rules. It was further, alleged that the Appellants had paid the Central Excise Duty leviable on the said goods by debit entry in their PLA and/or in a manner prescribed for such payment prior to the clearance of the said goods without actual clearance thereof only to fulfill the requirement under Rule 173G(1) read with Rule 9(1). It is also alleged that the appellants had willfully entered wrong/ incorrect particulars in the prescribed statutory records such as RG1 and RG23A Part I & II, Central Excise Gate Passes etc. to fraudulently show receipt of raw materials from various buyers without actual receipt of the same, to fraudulently show clearances to M/s. Shree Venkatesh Metal Corporation (SVMC) and M/s. Western India Metal Industries (WIMI) without actual manufacture thereof. This, according to the said notice was done to allow/facilitate WIMI to avail wrong credit/higher notional credit in respect of such goods. The appellant was, therefore, called upon to show cause to the Respondent as to why the alleged fraudulent Modvat credit of Rs. 7,82,911.92 availed by the appellant during the period January 1987 to 26.05.1988 ought not to be denied and recovered from them under Rule 571 of the said Rules as amended by Notification No. 28/88 dated 06.10.1988 read with provisions of Section 11A(1) of the said Act and credit balance of Central Excise duty as on 20.07.1988 totally amounting to Rs. 7,004.97 in their RG23A Part II account should not be disallowed and recovered from them under Rule 57 of the said Rules and penalty ought not to be imposed on them under 52A and/or Rule 173Q and/or Rule 226 of the said Rules and also why land, building, plant, machinery, materials etc, apart from proposing personal penalties.
5. By an order dated 21.01.1998 the Respondent confirmed all the allegations and demanded the Modvat credit as stated (supra) while imposing penalties.
6. Aggrieved by the said order, the appellants have preferred an appeal before the Tribunal and the tribunal by order dated 16.10.1998 remanded the matter back to the Commissioner for supply of the relied upon documents and giving reasonable opportunity of having access to copy them and to dispose of all the cases after personal hearing. In pursuance to the said order, the appellant’s advocate and also on its own on numerous occasions written to the respondents and his sub-ordinates to provide the documents and the appellants were asked to contact the office of the Senior Departmental Representative, Fort, Mumbai for supply of photo copies of the seized records. Despite of its personal visit and correspondence between the appellant and the Departments office and the ld. SDR did not provide large number of documents including those relied upon by the Department like PLA, RG23 Part I & II Registers. Despite of such situation, the ld. Commissioner (Adj.) disposal of the matter once again by passing an ex-parte order confirming the demands. Hence the present appeal.
7. The appellants assailed the impugned order by raising the following contentions:
i) The impugned order has been passed in gross breach of the principles of natural justice. The appellants have not provided with the documents relied upon in the notice so as to enable them to properly reply. It is incumbent and mandatory for the respondent to have furnished the documents relied upon in the notice.
ii) In absence of supply of documents it can not be expected to appreciate the facts of receipt of the raw material, the manufacture of final product and its clearance on payment of Central Excise Duty.
iii) Absolutely, there was no fault on the part of the appellants, if the proceedings are delayed by the officers of the respondent. After almost for the period of ten years, it was candidly accepted by the Department, before the tribunal, the documents were not provided.
iv) The allegation of the Department that the appellants have not manufactured the goods at all and therefore, credit availed by it on inputs is remanded part by the Department is not tenable in view of the decision in the case of Vinayak Industries v. CCE , wherein it is held that as there is no case for the Department to seek recovery of the said credit and same would be an academic exercise.
v) The period involved in the Show-Cause-Notice dated 28.01.1989 is from Jan’ 1987 to 26.05.1988. There is no willful mis-declaration and / or suppression on the part of the appellant. The larger period invoked is without any warrant or justification and, therefore, the impugned order needs to be set aside. The decision in the case of CCE v. Reghuvir (India) Ltd. , Rule 57I is relied upon to emphasize the point that prior to 06.10.1998 any notice invoking Section 11A(1) of the Central Excise Act for recovery of Modvat credit is not maintainable.
vi) Penalty can not be imposed both on the Proprietor and the firm as held in case of Pragati Press v. CCE which has been approved by the Hon’ble High Court in .
8. The learned DR Shri. Dewalwar, in his arguments support the Impugned order passed by the Commissioner and further raised the following contentions:
i) The appellants never received Aluminium wire rods and never manufactured wires nor cleared the same. Only the Gate Passes have been recorded and issued. But they have received only documents i.e. invoices for movement of goods (Raw materials). This aspect has been proved from the various statements recorded including that of Mr. Pramod Kumar Taparia. The appellants have wrongly availed the Cenvat credit when they did not receive any goods. They have not used any raw material in the activity of manufacture of final product since they have not received raw material. This fact is proved from statements recorded by the officers concerned including that of Mr. Pramod Kumar Taparia. The invoices on which transport vehicles were shown with Numbers pertains to Rickshaws, Motor Cycles, Pick-up vans, Tankers and Private Buses etc. This information is gathered from the office of R.T.O. and same has been discussed in Para 6 of the Order-in-Original. The aforesaid vehicles can not be expected to transport the goods. The Statement of the WIMI reveals that the functioning of the office of M/s. Pooja Enterprises, Shri Venkatesh Metal Corporation, WIMI, Mumbai and Alcost India Corporation was being carried out from same office. That there is no record for user of Furnace Oil and also payment of Ocroi duty and Sales Tax etc. These findings are given in Para 11 and 12 of the Order-in-Original.
9. I have heard the matter elaborately and considered the submissions made by both sides. I have gone through the case records including the impugned order passed by the learned Commissioner (Adj.). This matter has been remanded back by the Tribunal order No. 2247-62/98/WZB dated 16.10.1998 for de-novo proceedings with a direction that the appellants be provided with the copies of documents or given opportunity of making copies at their expenses. Thereafter, giving reasonable time to submit their reply and to be heard and pass orders in accordance with law. Despite the same, the appellants have raised defence in the de-novo proceedings that out of 942 documents in seizure only 41 documents could be obtained, as such copies of remaining are yet to be supplied. Thereafter, further request was made for inspection of remaining documents so that the copies can be obtained and the cross examination of material witnesses can be done. It appears that the appellants and other noticees were informed to obtain copies of the documents from Sr. Departmental Representative, out they informed vide letter dated 26.03.2004 thereafter contacted SDR office for the purpose of obtaining the documents, but did not get any response. The ld. SDR was directed to once again to supply the copies of the documents and noticees were informed about the said fact through the letter dated 10.05.2004 to contact the SDR to obtain the documents, but noticees did not reply. In this regard further, correspondence went on between the Department and SDR and JDR and Noticees. Ultimately, the Dy. Commissioner (Prev.) vide his letter dated 06.08.2004 informed that the copies of the relevant documents were handed over to the party on 03.08.2004. Basing on such reply the adjudicating authority came to conclusion that the relied upon documents have been very much supplied. As a matter of fact, the noticees through their letter dated 21.08.2004 informed that they did not receive the Register RG-I, RG 23 Part I & II and PLA Register without which it is impossible to establish quantity wise detail of duty taken credit for input and duty debited for output. They have also expressed that they have no intention to prolong the matter and once again requested for supply of documents. But the learned Commissioner (Adj.) came to conclusion basing on the report of Dy. Commissioner (Prev.) that the noticees have inspected the relevant records for 48 days through out the year 1988 to 1991 and that the noticees are having the copies of the records relied upon in the Show-Cause-Notice. In this context, I am to observe that the Commissioner (Adj.) erred in coming to such conclusion without proper enquiry. He ought not to have been given so much credence to the report of the Dy. Commissioner (Prev.), Mumbai, when in fact such records were not furnished. Mere fact of the absence of the Noticees on the date of personal hearing shows that their resentment futile exercise in attending the enquiry without valid defence for want of record. They visited the office of SDR on number of times to obtain documents but in vain. This fact is evident from the correspondence made by the Noticees, even after fixing the personal date of hearing and directions given there on for supply of such documents. Had the appellants and other notices have received the copies of all the documents, they would not have put forth such a contention once again before this tribunal. There is no satisfactory evidence on record to negate the said contention. Therefore, I am to hold that the adjudicating authority has denied the principles of natural justice whereby the defence of the appellants is prejudiced.
10. The Adjudicating Authority appears to have discussed the merits of the case even in the absence of effective defence put forth and in the absence of the appellants. It is observed that M/s. Pooja Enterprises, Silvassa received only Gate passes from WIMI, Mumbai, as such there is only paper transaction for the purpose of fraudulently availing the credit. Even the clearance shown in the name of M/s. Pooja Enterprises also on paper transactions only in as much as the materials claimed as has been removed, but not supplied to WIMI, Mumbai. Thereafter, they were not availing facility of Modvat credit and the same requires to be reversed to the tune of Rs. 7,82,912/- and the balance amount of Rs. 7,005/- lying with them as on 28.12.1988 which is also recoverable under Rule 57 I of Central Excise Rules, 1944.
11. It is pertinent to note that the appellants have paid duty on the clearances of goods, has been accepted by the Department, though their contention is that no manufacturing activity and no clearance took place. On other hand Department admits Modvat credit demand taken on the goods received should be reversed. The Adjudicating authority is simply relying upon the statements of the staff members of the WIMI, Mumbai. They are Mr. H.B. Thakkar and Mr. B.V. Shimpi. These employees were in the day shift whereas the goods were received in the evening or in the late night as goods are coming from Silvassa. Apparently the investigating officers have not enquired the statement of any staff members of Bharat Aluminium Company Ltd., and Hindustan Aluminium Corporation Ltd., or the transporters who had transported the goods to the factory of the appellants. The staff of the appellants are not record in this regard. It is a contention of the appellants that they have received Aluminium Wire Rods and supplied the wire. That there is no suppression, mis-declaration or clandestine removal of the goods and maintained the record in order and correctly.
12. It is a significant to note that the Department did not object for payment of the duty on clearances of the final product. If the contention of the Department is to be accepted that no manufacturing activity took place, as such there arise no liability of duty payment, but in fact, the duly amount has been received which amounts to effective reversal of the credit availed, as per the following decisions:
i) CCE , Ahmedabad v. Narayan Plast 2005 (179) E.L.T. 20 (S.C)
ii) CCE, Vadodara v. Narmada Chematur Pharmaceuticals Ltd. 2005 (179) E.L.T. 276 (S.C.)
iii) PSL Holdings Ltd. v. CCE, Rajkot
13. Thus, whole exercise is of revenue neutrality. Therefore, the confirmation of the demand and penalty on M/s. Pooja Enterprises the main appellant and on M/s. WIMI, Mumbai and M/s. Alcost Metal Corporation and personal penalties on other appellants is not sustainable. Thus the impugned order suffers both on the ground of violation of principles of natural justice and as well as on the ground of revenue neutrality. Accordingly, the impugned order is herby set aside. In the result, all the appeals are allowed.
(Pronounced in court on 10.10.2006)