HIGH COURT OF CHATTISGARH BILASPUR
Tax Case No 43 of 2007
Ms Simplex Castings Limited
...Petitioners
Versus
Union of India & Others
...Respondents
! Ms Ritu Mishra counsel for the petitioner
^ Shri Bhishma Kinger standing counsel for the respondents
CORAM: Honble Shri Satish K Agnihotri & Honble Shri Manindra Mohan Shrivastava J
Dated: 16/02/2010
: Judgement
ORDER ORAL
Passed on this 16th day of February 2010
Appeal under Section 35 G of the Central Excise Act 1944
Per Satish K. Agnihotri, J.
1. This appeal under section 35G of the Central Excise
Act, 1944 (for short `the Act, 1944′) arises from the
final order No.258-261/ 07-SM (BR) dated
27.12.2006 passed by the Customs, Excise & Service Tax
Appellate Tribunal, Principal Bench, New Delhi in Appeal
No.E/513-516/2005-SM.
2. The facts, in nutshell, are that the appellant-
company is engaged in the manufacture of excisable goods.
The appellant-company was also availing Duty credit on the
input used in or in relation to manufacture of the
aforesaid finished goods in terms of Rule 57-A of the
Central Excise Rules, 1944 (for short `the Rules, 1944″).
The appellant availed irregular Duty credit of
Rs.2,67,364/-, Rs.71,024/- and Rs.1,00,878/- against
certain invoices issued by M/s.Jain Udyog, and M/s.Tara Re-
Rolling Mills, Tedesara. Three show-cause-notices being
C.No.V (72) 15-63/Off/98/Adj/21351-56 dated 9.9.1999
involving Modvat credit of Rs.2,67,364/- availed during
the period September, 1994 to August, 1995; C.No.V (Ch:
72) 15-73/ Off/JC/2000/Adj/5123 dated 7.3.2000 involving
Modvat credit of Rs.71,024/- availed during the period
March, 1995 to April, 1995; and C.No.V (MOD) 15-
03/R/RJN/BHI/2000/Adj/16470 dated 9.8.2000 involving
Modvat credit of Rs.1,00,878/- availed during the period
August, 1995 to October, 1995 were issued to the appellant
proposing disallowing and recovery of aforesaid Modvat
Credit from the appellant under Rule 57(I)(II) of the
Rules, 1944 read with section 11-A of the Central Excise
Act, 1944 (for short `the Act, 1944′) by invoking the
extended period of five years. The show-cause-notice also
proposed penalty against the appellant under Rule 173 Q of
the Rules, 1944 along with mandatory penalty equivalent to
the amount disallowed under Rule 57I[4] of the Rules, 1944
read with section 11AC of the Act, 1944. The appellant
filed detailed reply to the show-cause-notices. According
to the appellant, it produced documentary evidence in its
support.
3. The adjudicating authority i.e. the Assistant
Commissioner, Customs & Central Excise, Division-II,
Bhilai, after going through the evidences on record, came
to the conclusion that the appellant has received no
inputs and there was only paper transaction between the
appellant and the supplier. It was also recorded that the
unit of the supplier was closed during the relevant
period. However, Modvat invoice was issued in favour of
the appellant to facilitate the appellant to avail Modvat
credit.
4. Thereagainst the appellant preferred an appeal before
the Commissioner of Central Excise (Appeals), Raipur,
being appeal No.219-222/RPR.II/2004. The Commissioner of
Central Excise (Appeals), Raipur, by its order dated
25.11.2004 confirmed the demands after denying the credit
taken in respect of inputs received by the appellant and
upheld the findings recorded by the adjudicating authority
i.e. the Assistant Commissioner, Customs & Central Excise,
Division-II, Bhilai.
5. Being aggrieved by the aforesaid order, the appellant
preferred an appeal before the Customs, Excise & Service
Tax Appellate Tribunal, Principal Bench, New Delhi in
Appeal No.E/513-516/ 2005-SM. The Customs, Excise &
Service Tax Appellate Tribunal after having heard learned
counsel for the appellant as well as departmental
representative of the respondent observed as
under :
“3. In this case, the allegation
is that appellants had not received
any inputs and only received the
invoices and availed the credit.
The Revenue conducted the
investigation at the supplier end
and it was found that the supplier
of inputs received the goods from
SAIL and same are sold to some
other buyers. In investigation from
transporter shows that gods were
not transported to appellants
place. In the circumstances, I find
no infirmity in the impugned order.
IN respect of the penalty, I find
that Commissioner (Appeals) has set
aside the penalty imposed under
Section 11AC. However, imposed
penalty under Section 173-Q which
provides penalty upto three times
of value of offending goods. In the
present case the penalties were
imposed maximum to the value of the
goods. Therefore, I find no ground
to interfere with the quantum of
penalty also. The appeals are
dismissed. ”6. The appellant has pleaded the following substantial
questions of law in the memo of appeal subsequently by way
of amendment, which reads as under :
“SUBSTANTIAL QUESTIONS OF LAW
(1) Whether the learned Appellate
Tribunal failed to exercise
its jurisdiction while granted
unconditional stay and
confirmed vide stay order
No.547-50/05 NB SM dated
26.05.2005 that the Appellant
have filed documentary
evidence in support of the
receipt and use of material
and payments made to
suppliers, the same facts were
not taken into account while
passing the Final Order
appealed against.(2) Whether the learned Appellate
Tribunal failed to exercise
its jurisdiction by ignoring
the Additional Grounds of
Appeal filed by the appellant
vide letter dated 25.10.2004
along with copies of RG 23 A
Part-I, Stores Receipt
Voucher, Ledger Account with
suppliers, weighment slips
wherever available in support
of the fact that full material
was received, accounted for,
paid for, & consumed in the
manufacture of the final
excisable products on the
Appellant & 2.(3) Whether the learned Appellate
Tribunal failed to exercise
its jurisdiction by not
mention the Additional Grounds
of Appeal filed by the
appellant and appreciate that
imposition of Mandatory
Penalty under Rule 571(4) read
with Section 11AC equivalent
to the amount of Central
Excise Duty confirmed against
the Appellant No.1 & 2 for a
period prior to its enactment
was not legal. The Appellate
Commissioner, therefore, set
aside the Order in Original to
that extent. However, the
Appellate Commissioner failed
to give any finding to prove
that the impugned goods were
not received or consumed in
the manufacture of excisable
final products of Appellant
and arbitrarily upheld the
demand of Central Excise Duty
& Penalty under Rule 173Q of
the Central Excise Rules, 1944
imposed on Appellant vide
Order in Appeal No.
219-222/RPR-II/2004 dated
25.11.2004.(4) Whether the learned Appellate
Tribunal failed to exercise
its jurisdiction ignoring
several documentary evidence
filed by the Appellant & 2 in
support of receipt of goods,
and use in the manufacture of
excisable final products.However, the Appellate
Commissioner had failed to
appreciate that if the
Appellant did not receive the
impugned inputs, then how was
it possible for the Appellant
to manufacture the final
excisable goods from inputs
not received at all ? Thus,
the impugned inputs were not
only received and accounted
for, and payments made to the
supplier by cheque but also
the impugned inputs were
issued for manufacture of
final excisable goods, which
were later on cleared on
payment of appropriate amount
of Central Excise Duty.
(5) Whether the learned Appellate
Tribunal failed to exercise
its jurisdiction by ignoring
that, the Appellant had
approached to Respondent No.2
for a decision on the limited
point that if the Appellant
did not receive the impugned
inputs, then how was it
possible for the Appellant to
manufacture the final
excisable goods from inputs
not received at all ? The
Respondent No.2, at the time
of personal hearing of stay
matter, correctly admitted
that prima-facie the facts of
the case were in favour of the
Appellant, that the Appellant
had produced before
authorities all documentary
evidence to establish receipt
of inputs. The Respondent
No.2 also correctly admitted
that sufficient amount was
deposited by the Appealer to
safeguard the interest of
Revenue. Therefore, the
Appellate Tribunal granted
unconditional stay to the
Appellant vides stay order
No.547-50/05 NB/SM dated
26.05.2005. However, in sharp
contrast, at the time of final
hearing, the learned Appellate
Tribunal only went by the
records relied upon by the
Investigating Officers and not
by those documents/arguments
put forth on record before the
Appellate Tribunal.Accordingly, it has been
stated in Para No.1 of the
Order appealed against “in the
impugned order, after going
through the evidence on
record, the finding is that
the appellant have received no
inputs and there was only
paper transaction between the
appellants and supplier. The
finding is also that the unit
of supplier of input was
closed during the relevant
period. However, modvatable
invoices were issued in favour
of the present appellants to
facilitate availment of modvat
credit. Against this finding,
the contention of the
appellant is that actually
they have received the inputs
and entries were made in the
statutory record. It is also
contended by the appellants
that they have sufficient
balance in their modvat
account as the appellants were
also exporting the goods
without payment of Duty. The
appellants will not get any
benefit by availing the wrong
modvat credit. The appellants
also submitted that in some
cases, there are weighment
slips, which show that the
inputs were received by the
appellants”.(6) Whether the learned Appellate
Tribunal failed to exercise
its jurisdiction by stating in
para 3 of Final Order, that
“In this case, the allegation
is that appellants had not
received any input and only
received the invoices and
availed the credit. The
Revenue conducted the
investigation at the supplier
end and it was found that the
supplier of inputs received
the goods from SAIL and it was
sold to some other buyers. The
investigation from transporter
shows that goods were not
transported to appellant’s
place. In the circumstance, I
find no infirmity in the
impugned order”.(7) Whether the learned Appellate
Tribunal failed to exercise
its jurisdiction by ignoring
the complete track record
filed by the Appellant showing
the following :a. Receipt of inputs,
b. Issue of inputs for
manufacture of excisable
final products,
c. Payments made by cheque
to the supplier.d. Manufacture of excisable
final product in the
factories of Appellant,
and,
e. Clearance of final
excisable products from
respective factories of
the Appellant on payment
of appropriate amount of
Duty.(8) Whether the learned Appellate
Tribunal failed to exercise
its jurisdiction by not
appreciating that if the
Appellant did not receive
inputs, then how and from
which inputs did they
manufacture the excisable
final products ? So also, if
the supplier was closed, then
why the Returns filed by the
suppliers showing
manufacturing activity within
their factory were finally
assessed and not objected to
by the Revenue ? The learned
Appellate Tribunal also failed
to appreciate that if the
documents show that the inputs
were received, used in the
manufacture and excisable
final products and the goods
so manufactured were cleared
on payment of Duty by the
Appellant, then how could
modvat credit be denied to
them for any lapse at the end
of the supplier manufacturer,
if any ? The learned Appellate
Tribunal – Respondent No.2
have grossly erred in coming
to a decision that the
Appellant & 2 have irregularly
availed Modvat Credit in the
instant case & that the
impugned goods were not
received by the Appellant & 2
in their factory. The
Respondent No.2 has also along
discussed the fraud committed
by the suppliers but has
miserably failed to
substantiate the charge of
collusion of Appellant & 2
with the supplier with an
intention to evade Duty & also
has failed to prove any act of
omission or commission on the
part of the Appellant & 2. The
learned Appellate Tribunal has
thus, upheld such defective &
incomplete findings of the
Adjudicating Authority and
Appellate Commissioner. The
Respondent No.2 failed to
appreciate that it has simply
been stated in the Order in
Original that the Appellant &
2 countered & he could not
give any satisfactory
explanation to the same. Now
this is certainly a debatable
issue. Either the Appellant &
2 could not satisfactorily
explain or the learned
adjudicating authority was not
satisfied with his reply. The
learned Adjudicating
Authority, the Appellate
Commissioner as well as the
Respondent No.2 also failed to
even discussed on the facts
that if :a. M/s Jain Udyog, Tedesara
and M/s Tara Re-rolling
Mills, Tedesara were
closed,
b. Did not have power or had
no electricity
generation,
c. Did not receive raw
material in the factory
premises for 3 full
years.a. How the payment of Duty
on goods not manufactured
by the supplier
manufacturers was being
accepted.b. How was their RT-12 Return showing manufacture of goods within their factory premises being finally assessed, and, c. How the concernedAuthority was accepting
their Invoice Book
intimation every time ?
(9) Whether the learned Appellate
Tribunal failed to exercise
its jurisdiction by ignoring
that, the charges against M/s
Jain Udyog, Tedesara and M/s
Tara Re-rolling Mills,
Tedesara have although been
confirmed on the serious
ground of mis declaration,
suppression of facts with
intention to evade payment of
Central Excise Duty, no Duty
or Penalty has been ordered to
be recovered from them & the
Appellant who has reimbursed
the amount of Central Excise
Duty charges in the invoices
of M/s Jain Udyog, Tedesara
has been disallowed Modvat
Credit as well as Penalty has
been imposed under Rule 173Q.
Further, if payment of Central
Excise Duty at the end of M/s
Jain Udyog, Tedesara and M/s
Tara Re-rolling Mills,
Tedesara has not been
disputed, then how Modvat
credit can be denied to the
Appellant and how Central
Excise Duty can be demanded
from Appellant on the same
goods twice ?(10) Whether the learned Appellate
Tribunal failed to exercise
its jurisdiction by ignoring
that, the Respondents have not
disputed the following facts :
a. Payments for the purchase
of the inputs have been
made through cheque;b. The inputs in question
have been used in the
manufacture of final
products, which have been
cleared on payment of
Duty;c. The department has not
been able to prove that
any other alternative raw
material was received and
used in the final
products;d. The RT-12 return have
been assessed finally by
the Range Officers which
contents all the
documents including (the
invoices under disputed)
on the basis of which the
Modvat Credit has availed
and utilized;e. How the concerned
Authority was accepting
their Invoice Book
intimation every time ?
f. How can the same goods
suffer Central Excise
Duty twice – one at the
manufacturer supplier end
and two at the Appealer’s
end ?(11) Whether the learned Appellate
Tribunal failed to exercise
its jurisdiction by ignoring
the case of Commissioner of
Central Excise, Chandigarh vs.
Neepaz Steels (India) reported
in 2007 (213) E.L.T. 100 (Tri-
Del.) held that :Penalty on registered
dealer – Inputs, non
supply of – Vehicle
Numbers mentioned in
invoices alleged to be
not of Good Transport
Vehicle – Dealer received
payment from various
manufacturers through
cheques and Demand draft
and inputs supplied were
duly received by the
manufacturers and used
goods manufactured which
were cleared on payment
of duty – No evidence
that manufacturers used
some alternative raw
materials then which was
mentioned any invoices –
Penalty set aside – Rule
25 of the Central Excise
Rules, 2002.
(12) Whether the learned Appellate
Tribunal failed to exercise
its jurisdiction by ignoring
the complete track record
filed by the Appellant showing
the following :
a. Receipt of inputs,
b. Issue of inputs for
manufacture of excisable
final products,
c. Payments made by cheque
to the supplier.
d. Manufacture of excisable
final product in the
factories of Appellant,
and,
e. Clearance of final
excisable products from
respective factories of
the Appellant on payment
of appropriate amount of
Duty.
(13) Whether the learned Appellate
Tribunal failed to exercise
its jurisdiction by not
appreciating that if the
Appellant did not receive
inputs, then how and from
which inputs did they
manufacture the excisable
final products ? So also, if
the supplier was closed, then
why the Returns filed by the
suppliers showing
manufacturing activity within
their factory were finally
assessed and not objected to
by the Revenue ?
(14) Whether the learned Appellate
Tribunal failed to exercise
its jurisdiction by not
appreciating that if the
documents show that the inputs
were received, used in the
manufacture and the Appellant
cleared excisable final
products so manufactured on
payment of Duty, then how
could modvat credit be denied
to them for any lapse at the
end of the supplier
manufacturer, if any ?”
7. The above-stated substantial questions of law are in
the form of grounds. The first question of law (sic)
ground is with regard to grant of unconditional stay in
favour of the appellant by interim order. Question No. 2
(sic) ground is vague as it does not disclose asto whether
these facts were brought into the notice before the
adjudicating authority or the Commissioner, Appeals.
Question No. 3 (sic) ground is purely a question of fact.
Question No. 4 (sic) ground is vague as no documentary
evidence produced has been detailed. Questions No. 5 to 14
(sic) grounds are pure question of facts and it does not
raise any substantial question of law warranting admission
under the provisions of section 35G of the Act, 1944 which
is a pre-requisite condition before admitting the appeal.
8. It is well settled principle of law that the
substantial question of law has to be framed on the
findings available on record not on any conjecture or
surmises. (See Commissioner of Income Tax v. P.
Mohanakala1).
9. The appellant has raised the questions of law, which
are not questions of law, but the grounds on facts
without, there being any consideration before the
authorities below. The appellant has failed to produce
any document to demonstrate that the questions (sic)
grounds raised hereinabove were raised before the
Commissioner of Central Excise (Appeals), Raipur as well
as before the Customs, Excise & Service Tax Appellate
Tribunal, Principal Bench, New Delhi and thereon, the
finding has been recorded. Thus, the above stated
questions of law, in our considered opinion, do not
constitute questions of law much less the substantial
questions of law.
10. Section 35G of the Act, 1944 reads as under :
35G. Appeal to High Court.-(1) An
appeal shall lie to the High
Court from every order passed in
appeal by the Appellate Tribunal
on or after the 1st day of July,
2003 (not being an order
relating, among other things, to
the determination of any question
having a relation to the rate of
duty of excise or to the value of
goods for the purposes of
assessment), if the High Court is
satisfied that the case involves
a substantial question of law.
11. Section 260-A of the Income Tax Act, 1961 (for short
`the Act, 1961′) reads as under :
“260A. Appeal to High Court.-(1) An
appeal shall lie to the High Court
from every order passed in appeal
by the Appellate Tribunal 2[before
the date of establishment of the
National Tax Tribunal], if the High
Court is satisfied that the case
involves a substantial question of
law.
12. The provisions of Section 35G of the Act, 1944 and
the provisions of the Section 260-A of the Act, 1961 are
pari materia. Thus, the Supreme Court in P. Mohanakala
(supra) dealing with the provisions of Act, 1961 with
regard to question of law observed as under :
“26. Relying on the decisions of
this Court in Bejoy Gopal Mukherji
v. Pratul Chandra Ghose and Orient
Distributors v. Bank of India Ltd.
Shri Iyer, learned Senior Counsel
contended that issue relating to
the propriety of legal conclusion
that could be drawn on basis of
proved facts gives rise to a
question of law and, therefore, the
High Court is justified in
interfering in the matter since the
authorities below failed to draw a
proper and logical inference from
the proved facts. We are unable to
persuade ourselves to accept the
submission. The findings of fact
arrived at by the authorities below
are based on proper appreciation of
the facts and the material
available on record and surrounding
circumstances. The doubtful nature
of the transaction and the manner
in which the sums were found
credited in the books of accounts
maintained by the assessee have
been duly taken into consideration
by the authorities below. The
transactions though apparent were
held to be not real ones. May be
the money came by way of bank
cheques and paid through the
process of banking transaction but
that itself is of no consequence.”
13. Further in Paras Ship Breakers Limited v.
Commissioner of Central Excise2, the Supreme Court
observed as under:
“16. In terms of Section 35-G of
the Central Excise Act, the High
Court, thus, could entertain an
appeal only if a question of law
arose. No question of law having,
thus, arisen for consideration
before the High Court, we are of
the opinion that the impugned
judgment does not suffer from any
legal infirmity.”
14. The Supreme Court, while considering the substantial
question of law in Sir Chunilal V. Mehta and Sons Ltd. v.
Century Spinning and Manufacturing Co. Ltd.3, observed as
under :
“6. We are in general agreement
with the view taken by the Madras
High Court and we think that while
the view taken by the Bombay High
Court is rather narrow the one
taken by the former High Court of
Nagpur is too wide. The proper
test for determining whether a
question of law raised in the case
is substantial would, in our
opinion, be whether it is of
general public importance or
whether it directly and
substantially affects the rights of
the parties and if so whether it is
either an open question in the
sense that it is not finally
settled by this Court or by the
Privy Council or by the Federal
Court or is not free from
difficulty or calls for discussion
of alternative views. If the
question is settled by the highest
Court or the general principles to
be applied in determining the
question are well settled and there
is a mere question of applying
those principles or that the plea
raised is palpably absurd the
question would not be a substantial
question of law.”
15. The ratio laid down in Sir Chunilal V. Mehta (supra)
was referred approvingly in Mahindra and Mahindra Ltd. v.
Union of India and Another4.
16. Needless to say if there is no substantial question
of law involved, the appeal has to be dismissed. (See
Boodireddy Chandraiah and Others v. Arigela Laxmi and
Another5).
17. Applying the well-settled principles of law to the
facts of the case on hand and for the reasons mentioned
hereinabove, the appellant has not raised any question of
law much less the substantial questions of law warranting
admission under the provisions of Section 35G of the Act,
1944.
18. In the result, the appeal is dismissed for want of
substantial question of law.
19. There shall be no order asto costs.
J u d g e
