ORDER
Archana Wadhwa, Member (J)
1. Briefly stated the facts of the case are as under :
The first appellants, M/s. R.K. Induction Industries P. Ltd. are engaged in the manufacture of MS ingots and were during the material period for the purposes of the said appeal availing the Modvat credit on the ship breaking scrap received by it and used in the manufacture of their final product. On 18-8-1992 appellants factory was visited by the Central Excise Division, Jaipur and the stock lying in the appellants factory was verified. Statement of Shri Asgar Ali, authorised signatory of the appellants was also recorded on the said date. It was disclosed that they were purchasing scrap from various manufacturer of ship breaking scrap directly as also from the various local scrap dealers and traders. In the said statement, it was also disclosed by him that the scrap was purchased from the local scrap dealers and traders was received by them on FOB basis and freight was being paid by the suppliers of the scraps. Various documents were also seized from the appellants factory. Based upon the scrutiny of the documents so seized, enquiries were conducted from the various scrap dealers who had supplied the material to the appellants. All the scrap dealers in question in their statements deposed that they had supplied the scrap to the appellants under the cover of their invoice-cum-challan. The Department conducted further enquiries in respect of the registration number for the trucks mentioned in the said invoices-cum-challans from the regional transport authorities. The said truck numbers mentioned in the challans of the scrap dealers was also reflected in the Dharamkanta slips of the Dharamkanta which weighed the trucks in question. On enquiry as regards the registration number of the trucks, it was found by the Department that the registration numbers as disclosed in the challans as also in the Dharamkanta slips were not that of the trucks but were of various other vehicles which were incapable of carrying huge quantity of 9 to 10 MTs. of scraps. Such wrong mentioning of registration number was found by the Department in respect of 25 invoices issued by the four scrap dealers who are also appellants before the Tribunal against the same common impugned order. Based upon the above enquiries, proceedings to deny the Modvat credit of Rs. 1,89,722.16 were initiated against the main appellants, i.e. M/s. R.K. Induction Industries P. Ltd. as also the other four appellants mentioned supra who were the suppliers of the scrap in question. As a result of these proceedings, Order-in-Original dated 30-10-1995 impugned before the Tribunal was passed by the Commissioner of Central Excise, Jaipur vide which Modvat credit as proposed in the show cause notice was confirmed against the first appellants and a penalty of Rs. 50,000/- was imposed. Penalty of Rs. 10,000/-was imposed on each scrap dealer under the provisions of Rule 173Q(1)(bbb).
2. Arguing on behalf of the appellants, Shri P. Malik, learned Chartered Accountant submitted that the case against the appellants has been made out only on the basis of the enquiry report of the RTO which is to the effect that the registration numbers mentioned in the invoices-cum-challans of the scrap dealers was not of trucks but was of either two-wheelers or other vehicles which were not capable of carrying huge quantity of scraps in question. He submitted that apart from the above enquiry report there is no other evidence to corroborate the charges levelled against the appellants. In respect of the enquiry report, he submitted neither the said enquiry report of RTO nor the query framed by the Department has been given to them and only a gist of the same has been mentioned in the annexure of the show cause notice. He pleaded the enquiry report is of March to May, 1993 whereas the invoices or the challans were issued by the scrap dealers during the period April, 1992 to July, 1992 and as such the said enquiry report cannot be said to be contemporaneous in respect of the period involved and as such cannot be validly relied upon by the Department. He further submitted that there is every possibility that during this period of one year the registration numbers of the vehicles might have changed and this fact has not been brought on record by the enquiry report. He also submitted that payments against the consideration of the scrap received under the cover by the said invoice were made by them by cheque and the sales tax declaration forms were issued against those transactions. From this he concluded that the sales were genuine and the scrap in question was duly received by them under the cover of challans as also the gate passes which were duly endorsed by the scrap dealers in their favour. He also submitted that the Department has failed to brought on record evidence to the effect as to whom the scrap in question has been sold if the appellant No. 1 is not the actual receiver of the goods as covered by the said documents. The Department has also not put on record any evidence to show as to how the manufacturer has procured such a huge quantity of scrap, if the same is not under the cover of the said invoices. For his above submissions, he relies upon the Tribunal decision in the case of Arsh Castings P. Ltd. v. CCE reported in 1995 (10) RLT 638 (CEGAT) and submits that the ratio of the above judgment squarely applies to the instant case and should be followed. Lastly he submitted that the demand in question is squarely barred by limitation inasmuch as the show cause notice was issued after a period of six months from the relevant date. Arguing on this aspect, he submitted that RT 12 return along with the invoices and gate passes in question were being filed by them regularly with their jurisdictional excise authorities and the same registration numbers were disclosed in the invoices. No objection was ever raised by the Central Excise authorities. He also submitted that it is based upon the same set of information that subsequently a case has been made out against them and nothing new has come up on record for the Department to level a charge of suppression against the appellants and to justifiably invoke the larger period of limitation. As regards the penalties of Rs. 10,000/- imposed upon the four appellants (Sl. Nos. 2 to 5) learned advocate submitted that the same has been imposed under Rule 173Q (1)(bbb). He read the said Rule and submitted that they are not covered by the provisions of the said Rule and as such imposition of penalty on these appellants is not justified.
3. Shri Nayyar, learned JDR appearing for the respondent Commissioner argued that as per the report of the RTO registration number of the vehicle shown as truck in the invoices is proved to be not of the trucks but of various other vehicles. Referring to the statement annexed to the show cause notice, Shri Nayyar argued that in respect of one registration number, there is no corresponding vehicle at all as reported by the RTO and in respect of the other vehicle number the same has been shown to be a Station Wagon Model 1972. From this he concludes that the appellants were indulging into malpractice of issuing invoices in respect of scraps which were not being transported or supplied to the transporter or supplied to the manufacturer and were putting any registration number on the invoices. He also submits that neither the appellant manufacturer nor the appellants trade dealers have been able to produce even a single truck for verification purposes till this long span of 5 years as also promised by them in their initial statement made before the investigating officers. He further points out that no effort has been made by the appellants to make separate enquiry from the RTO and to rebut the evidence produced by the Department in the shape of the RTO’s report. This not having been done by the appellants they are deemed to have accepted the said report of the original transport authority. He also drew the attention of the Bench to the reasoning of the adjudicating authority that both the parties, that is, the suppliers as well as the receiver of the scrap in question, in their statements before the investigating officers have denied payment of freight charges to the transporters. This non-payment of the freight charges to the transporters strengthens the department case as no transport would ply his truck without payment for the job done. As regards the appellants contention that the payment was made by cheque and the transactions were covered by their sales tax declaration, he submits that it is a legal facade to give a colour of genuineness to the transactions which have otherwise not taken place. He also submits that the Department is not required to prove his case to a mathematical precision and is required to prove a case with the pre-ponderance of probabilities, as laid down by the Supreme Court in the well famous case of D. Bhoormal – 1983 (13) E.L.T. 1546 (S.C.), which is relevant for purposes of making out a case against the accused. He further submitted that having initially prove the registration numbers to be wrong by making enquiries from the RTOs and also from the non-payment of freight charges, the burden to prove otherwise shifts to the appellants who are required to rebut the evidence produced by the Department. As regards the limitation, Shri Nayyar submitted that as the case is based upon the enquiries made subsequently by the Department and fraud detected as a result of those enquiries, normal period of six months is not applicable and the extended period has been rightly invoked by the adjudicating authority. In respect of the penalties imposed upon the four appellants, he draws the attention of the Bench to the impugned order and submits that the same has been imposed under Rule 173Q(1)(bbb) read with Rule 209A of the Rules for wrongly facilitating the assessees in availing Modvat credit on the basis of fake endorsed gate passes.
4. I have considered the submissions made by both the sides. I find that the case against the appellants has been made out primarily on two grounds. Firstly, on the basis of the enquiry report of the RTO as regards, the registration numbers of the vehicles and secondly on the basis of the fact of non-payment of freight charges to the transporters. As regards the enquiry report of the RTO’s giving the type of vehicle numbers against each registration number, I find that though the said enquiry report was not handed over to the appellants in toto, the gist of the same was, however, served upon the appellants in the shape of annexure to the show cause notice. Annexure B to the notice gives the details of the vehicle and the type of the vehicle carrying the registration number as reflected in the invoices. A scrutiny of the same reveals that in respect of two registration numbers, there is no vehicle in existence. The other vehicles carrying the registration numbers as shown in the invoices are motor cycle, medium truck, agriculture truck, scooter, Ford Jeep, TVS Suzuki etc. etc. It is not possible for these vehicles to carry huge quantum of scrap in question. I also find that as against at least 25 registration numbers covering 25 transactions, the appellants have not been able to show even in respect of one registration number that the RTO’s report is not correct. In fact, no efforts seems to have been made by the appellants to rebut this evidence prodviced by the Department. I also find that it is an admitted fact on record based upon the statements of the manufacturers as also of the suppliers that both the parties have denied payment of freight charges to the transporters. Whereas the manufacturers have deposed that the material was received by them on FOB basis and as such the freight charges were borne by the suppliers, the suppliers have stated that freight charges were not paid by them but were paid by the manufacturers. The learned advocate appearing on behalf of the appellants have admitted the above position as regards the fact of non-payment of freight charges. I find that this fact is strong enough to tilt the weight of evidence in favour of the Department. No transporter would ply his truck without the consideration being paid for the same. As regards the appellants reliance in the case of Arsh Castings Pvt. Ltd., I find that the facts of the case are not similar to the facts of the instant case. The Modvat credit in that case was sought to be denied to the manufacturer on the ground that the same was availed by them on the basis of bogus gate passes. The said charges of bogus gate passes was based upon the statements of the suppliers who were not produced for cross-examination. In the circumstances, it was contended before the Tribunal in that case that non-production of the persons whose statements were relied upon as the sole basis against the appellants was in violation of principles of natural justice and statements were to be kept out of consideration. It was, in these circumstances, the Tribunal held that the allegations of bogus gate passes was not sustainable against the appellants. In the instant case, I find that the enquiry report of the RTO has not been challenged by the appellants nor is there any prayer for cross-examination of the RTO so as to test the veracity of the report given by him. The appellants main thrust of argument is that the said report is March/May, 1993 whereas the vehicles in question were used during the period April, 1992 to July, 1992 and as such during this period there might have been change in the registration number of the vehicles. I do not find sufficient force in the said plea of the appellants. Firstly, there is nothing in the report to suggest that the registration numbers in all the 25 vehicles have been changed recently. Secondly, I find that against some of the registration numbers there are no vehicles at all. Thirdly, some of the vehicles shows against the registration number are two-wheelers which carry a separate series of registration which are not inter-transferable with the series of four-wheeler. Lastly the appellants have also not put on record anything to doubt the said verification report. In the circumstances, I find that the Department has placed on record sufficient material to show that the said vehicles as reflected in the invoices of the scrap dealers was not actually used by them because of the simple reason that the same are not capable of carrying heavy weight scraps. Non-use of the trucks having been proved the inevitable conclusion which flows from the same is that the waste and scrap in question were never transported to the appellants No. 1. As such the Modvat credit of duty availed by appellants No. 1 on the basis of the endorsed gate passes which accompanied the invoices has been rightly disallowed by the adjudicating authority.
5. As regards the limitation of six months, I do not find much force in the plea of the learned authorised representative of the appellants. The Modvat has been denied to the appellants No. 1 based upon the enquiries conducted by the Department and as a result of those enquiries the transactions have been found to be fictitious. It is not in the ordinary course that based upon the material supplied by the manufacturer that the demand has been raised. When the very basis of the transactions have been doubted and have now been found to be fictitious, the invocation of the larger period of limitation was justified on the part of the Department. Accordingly, I hold that the demands are not barred by limitation.
6. As regards the personal penalty of Rs. 50,000/- on appellants No. 1, that is, M/s. R.K. Induction Industries P. Ltd. is concerned, in view of my findings above, the same is sustainable against the appellants.
7. As regards the penalties on the other four appellants, a quantum of Rs. 10,000/- has been imposed on each of them under Rule 173Q(1)(bbb). No doubt the order part of the impugned order mentions that the said Rule has to be read with Rule 209A, I find from the reasoning recorded in Paragraphs 17 of the impugned order that the adjudicating authority has justified imposition of penalty upon these four appellants under Rule 173Q(1)(bbb). The said part is reproduced below for better appreciation :-
“The contention of the scrap traders/dealers that they are beyond the scope of imposition of any penalty under Rule 173Q(bbb) of the Rules is not tenable. This point has already been discussed in the preceding Para 11 above, therefore, there is no necessity to discuss it again here.”
I also find from a reading of the show cause notice that the same proposes imposition of penalty under the proviso of Rule 173Q(bbb) and there is no whisper bringing these appellants under Rule 209A. Even the ingredients of the Rule 209A have not been mentioned in the show cause notice. It is admitted by the learned JDR that 173Q(1)(bbb) does not apply to the four appellants as they are neither manufacturers nor producers nor registered warehouse keepers at the material point of time. However, he submits that the mentioning of Rule 209A in the order portion of the adjudicating order is sufficient to impose penalties upon the traders. I do not agree with this submission of the learned JDR. Rule 173Q(1)(bbb) and Rule 209A work in different arena. The ingredients of Rule 209A were not even mentioned in the show cause notice in which case it might have been a case of wrong mentioning of the Rules. Even the reasoning adopted by the adjudicating authority in the Paragraph 17 as reproduced above reflects upon the fact that penalty has been definitely imposed under Rule 173Q(1)(bbb). As the said Rule is not applicable to the four appellants and as the provisions of Rule 209 A have not been invoked at all in the show cause notice or in the order itself, I hold that penalty upon these four appellants, i.e., M/s. Delux Steel Products (P) Ltd., M/s. Ramesh Trading Co., M/s. Shivam Steels and M/s. Steels, is not sustainable.
8. In view of my discussion in the preceding paragraphs, appeal filed by M/s. R.K. Induction Industries P. Ltd. is rejected. The four appeals filed by M/s. Delux Steel Products (P) Ltd., M/s. Ramesh Trading Co., M/s. Shivam Steels and M/s. Soham Steels are allowed with consequential relief, if any.