{"id":195618,"date":"2007-04-18T00:00:00","date_gmt":"2007-04-17T18:30:00","guid":{"rendered":"https:\/\/www.legalindia.com\/judgments\/gujarat-setco-clutch-ltd-and-vs-c-c-e-on-18-april-2007"},"modified":"2015-07-11T15:26:39","modified_gmt":"2015-07-11T09:56:39","slug":"gujarat-setco-clutch-ltd-and-vs-c-c-e-on-18-april-2007","status":"publish","type":"post","link":"https:\/\/www.legalindia.com\/judgments\/gujarat-setco-clutch-ltd-and-vs-c-c-e-on-18-april-2007","title":{"rendered":"Gujarat Setco Clutch Ltd. And … vs C.C.E. on 18 April, 2007"},"content":{"rendered":"
Customs, Excise and Gold Tribunal – Ahmedabad<\/div>\n
Gujarat Setco Clutch Ltd. And … vs C.C.E. on 18 April, 2007<\/div>\n
Equivalent citations: 2007 (118) ECC 425, 2007 ECR 425 Tri Ahmedabad<\/div>\n
Bench: A Wadhwa, V T M.<\/div>\n<\/p>\n
<\/pre>\n
ORDER<\/p>\n
M. Veeraiyan, Member (T)<\/p>\n
1. This is an appeal against the order of Commissioner No. 40\/VDR-II\/MP\/2004 dated 28.10.2004.\n<\/p>\n
2. Heard both sides.\n<\/p>\n
3. The relevant facts, in brief, are as follows:\n<\/p>\n
(a) The appellant company manufactures – Clutch plates, cover assembly etc. meant for supply to M\/s Tata Engineering & Locomotives Company Ltd. (TELCO)<\/p>\n
(b) The officers intercepted a consignment on 21.7.2002 for which no entry with regard to removal of the said goods had been made in the excise records and seized the same. Duty involved on the seized goods worked out to Rs. 1,17,211\/-. On follow-up, the officers commenced investigation regarding Cenvat credit taken by the appellant company on the goods reportedly returned by M\/s TELCO and the investigation was in progress.\n<\/p>\n
(c) On 9.4.2003, the officers conducted physical verification of the finished products lying in the factory and the same did not tally with the daily account register, accordingly, seized the goods not accounted and valued at Rs. 40,91,769.86 involving central excise duty of Rs. 6,54,683\/-.\n<\/p>\n
(d) The goods which have been dispatched to M\/s Telco under 263 invoices relating to the period from February 2001 to January 2003 were shown to have been returned to the appellant company after a delay of 2 to 3 months in each case. They have claimed that the goods have been returned by M\/s TELCO and they have received the same in terms of Rule 16 of the Central Excise Rules; though they prepared the credit notes for the goods returned they retained the credit notes in their factory.\n<\/p>\n
(e) M\/s TELCO have categorically stated that they have never received goods covered under the said 263 invoices; in the first place as they have not received the goods they have also not rejected. According to Senior Officer of M\/s TELCO, Thane – “I have also perused the credit notes issued by M\/s Gujarat Setco Clutch Ltd., Kalol said to have been issued in our favour and hereby confirm that we have not received any credit notes issued by M\/s Gujarat Setco Clutch Ltd., Kalol in our favour on the basis of confirmation received from the respective warehouses.”\n<\/p>\n
(f) Show cause notice was issued proposing to deny the credit on the ground that the documents were fabricated and no goods were received back in the appellant company as claimed in the return invoices.\n<\/p>\n
4. Commissioner has found that charges were sustainable and disallowed the Cenvat credit amounting to Rs. 59,46,244\/- and ordered recovery under the provisions of Rule 12 of the Cenvat Credit Rules, 2001\/2002 read with proviso to Section 11A(1) of Central Excise Act, 1944. In addition, he demanded interest on the fraudulently taken credit, imposed penalty of Rs. 59,46,244\/- on the appellant company under Section 11AC of the Central Excise Act. He also imposed penalty of Rs. 5 lakhs on the appellant company under Rule 25(1) of the Central Excise Rules, 2001-2002. He also imposed a penalty of Rs. 5 lakhs on the managing director of the appellant company under Rule 26. Hence the present appeals.\n<\/p>\n
5. Learned Advocate, inter alia, submitted the following:\n<\/p>\n
(a) There are vague allegations in the show causes notice that the goods in the first place were not removed; that the department is not denying that the duty has been paid in respect of goods covered under these 263 invoices. If the goods were not originally cleared from the factory and the duty has been paid taking of credit even on fictitious documents, cannot be held to be wrong.\n<\/p>\n
(b) The goods were initially cleared on the basis of tentative requirement given by M\/s Telco and the goods reached the destination; when they were not accepted by M\/s. Telco the goods were naturally returned back by the same transporter and there has been 2 to 3 months delay.\n<\/p>\n
6. Learned DR submitted that it was a carefully planned modus operandi of the appellant company in taking Cenvat credit on fictitious documents without actual return of the goods.\n<\/p>\n
7. We have carefully considered the rival submissions. It is noticed that the goods were meant for M\/s Telco. The appellant company claimed that the goods were originally cleared by them on payment of duty and the goods have been rejected by M\/s Telco and the same have been returned back to their factory and therefore, credit has been taken under Rule 16. M\/s Telco has categorically denied to have received the consignment in the first place and also claimed that they have not rejected any of the consignments in question. M\/s Telco also has submitted that credit notes said to have been issued in their favour have not been received by them. The appellant company has explained that they have prepared credit notes and these were not actually forwarded to M\/s. Telco as the goods covered by these invoices were returned back to them under the cover of the same invoices.\n<\/p>\n
8.1 Commissioner has clearly held that not even a single instance where the assessee has made payment for demurrage for abnormal stay of these consignments at Pune has been shown.\n<\/p>\n
8.2 Commissioner has also held that the appellants are silent on the charges of non-payment of transport charges for the return transport of goods back to their factory. He has also held that the appellant have shown the goods as returned by fabricating documents though the same have not reached in their factory and cleared fresh goods clandestinely in the guise of re-despatch of returned goods. He has taken note of the fact that there was huge quantity of unaccounted goods valued at Rs. 40,91,769.86 as on 9.4.2003. He has also held that in respect of these invoices, neither there was any evidence of sending of the goods to Telco nor there was any evidence of goods having been returned by M\/s Telco and the only conclusion which can be drawn was that the goods covered under these invoices had been diverted somewhere else and though goods were never returned but still the records showing their return were fabricated and the credit of duty paid on the goods at the time of their clearance was taken.\n<\/p>\n
9. It is not in dispute that the goods covered under these 263 invoices where originally cleared by the appellant factory on payment central excise duty. What is disputed by the commissioner is the claim that these consignments were returned back to the factory and that only the documents have been received and credit has been taken and that fresh unaccounted goods have been cleared as if they have been reprocessed after receipt by them. It is to be understood that while charge of clandestine removal has to be established by the department, the claim for return of the goods with a view to take the benefit of Cenvat credit has to be proved by the assessee. The appellant’s claim that they have tentatively cleared higher quantity and that the goods have been returned by M\/s Telco was not substantiated. If it was a bona fide transaction, it does not stand to reason that the appellant prepare the credit notes and keep the same to themselves without sending to M\/s. Telco. They are not able to produce any evidence as to where they stored the goods in Pune for such along time, why no demmurage was paid and how the goods were transported back without payment of freight for return journey. All there goes to knock the foundations of their claim that the goods were rejected and returned by M\/s. Telco and consequently received in their factory. It is to be remembered that the burden of proving that the goods have been returned to the factory and they are eligible to take Cenvat credit is naturally on the appellant and not on the department. The clear admission that the goods have not been received in the first place by Telco and it was not rejected by them and they have not received the credit notes prove the claim of the department that the goods have not been received back and the documents\/accounts were only fabricated to show return of the goods with a view to take credit wrongly. Therefore, the findings of the Commissioner in this regard and denial of credit to the tune of Rs. 59,46,244\/- and imposition of equal penalty under Section 11AC, demand of interest on the fraudulently taken credit are sustainable. However, as regards the penalty imposed on the Managing Director, as no direct or reliable evidence on his personal involvement in the manipulation of the records is found, the penalty imposed on him cannot be sustained.\n<\/p>\n
10. In view of the above, the appeal filed by the appellant company is rejected and the appeal by the Managing Director is allowed.\n<\/p>\n
(Pronounced in the open Court on 2.2007)<\/p>\n
Archana Wadhwa, Member (J)<\/p>\n
1. As I do not find myself in agreement with the order proposed by my learned brother, Shri M. Veeraiyan, Member (Technical), I am recording a separate order.\n<\/p>\n
2. First of all, I find that Commissioner vide his impugned order has also confiscated seized goods worth Rs. 40.91 lakhs approximately with an option to the appellant to redeem the same on payment of redemption fine of Rs. 10 lakhs. Order proposed by learned Member (Technical) is silent on the above aspect. Similarly, the penalty of Rs. 5 lakhs stands imposed upon M\/s Gujrat Setco Clutch Ltd., under Rule 25(1) of the Central Excise Rules 2001\/2002, in addition to imposition of penalty under Rule 13(2) of Cenvat Credit Rules and under Section 11AC of Central Excise Act. Though the penalty imposed under Section 11AC, equivalent to amount of credit disallowed, stands confirmed in the order of learned Member (Technical), there is no order in respect of imposition of penalty of Rs. 5 lakhs on the appellant under Rule 25(1) of Central Excise Rules 2001\/2002. Further, as the findings of my learned brother as regards the denial of modvat credit and imposition of penalty, as arrived at by him, are not being concurred with by me, a separate order in respect of the same is being recorded;\n<\/p>\n
3. The said credit, which has been availed by the appellant on the basis of original invoices issued by them, showing clearance of the goods to M\/s Tata, in terms of provisions of Rule 16, stands disallowed by adjudicating authority on the ground that the same has been availed on the basis of forged documents. During the course of detailed investigation conducted by Revenue, statements of various persons were recorded. The main fact which has emerged in the statement of representative of the appellant company is that they are mainly supplying their finished goods to M\/s Telco as original equipment manufacturer and such goods are being delivered to M\/s Telco at their various factories located at different places as also to their duty paid godowns from where such goods were being sold by M\/s Telco to retailers and in the open market. Shri K.B. Patel, authorized signatory of the company, in his statement recorded on 10.4.03 had deposed that there was a policy of not selling goods in open market directly effective from 15.2.03, in view of an agreement entered into by them with M\/s Telco. As such, it has come on record, in the shape of various statements of the appellant’s representative that they were supplying the goods mainly to M\/s Telco. The second factor which uniformly emerges from the statements of various representatives of the appellant company is that there has been rejection from M\/s Telco earlier also i.e. for the period prior to the period involved in the present appeal and the finished goods have been received back in the factory either due to rejection by purchaser or due to the delivery not being accepted by the customers, such rejected goods are sent directly to production section of the company for carrying out necessary repair\/repacking etc.<\/p>\n
4. The adjudicating authority has held against the appellant on the ground that M\/s Telco’s representative Shri Prosenjit Sengupta, in his statement recorded on 30.10.02 had deposed that no excisable goods (disputed in the present appeal) were received by them and as such not rejected. Further, same doubts have been expressed by him as regards payment made to the transporter for return journey of goods, the time gap between original clearance and return of the same, and the storage of the goods at Pune. Reference has been made to the transporter’s statement recorded on 16.4.03. It is seen that Shri Abdul Rehman, proprietor of M\/s Amin Transport & Trading Co., has deposed in his statement that whenever M\/s Telco, Pune has refused to take the delivery of the goods, on the ground that there was no schedule for the said goods, the same was being taken back from Pune to the appellant’s factory at Kalol in the same truck. He has also clarified that the goods were always being unloaded at the premises of Telco at the destination shown in LR and in no case, the goods were being unloaded other than the place shown in the LR as well as invoices given by M\/s Gujrat Setco Clutch Ltd.\n<\/p>\n
I have referred to the above statements only to show that the goods manufactured by the appellant were being cleared by them to M\/s Telco and in as much as it is Revenue’s case also that M\/s Amin Transport & Trading Co. was their regular transporter, it has come on record that the goods were being unloaded only at Telco premises and nowhere else and were also being returned back to the appellant premises when M\/s Telco has refused to take the delivery of the same on the ground of no schedule. It is the appellant’s contention that much reliance can not be placed on Telco’s representative’s statement, because it is not always that the goods are cleared from factory as per schedule and they also clear the goods in anticipation of the order, which are sometimes not accepted by Telco and are returned. The above contention of the appellant gets supported by two statements of the proprietor of M\/s Amin Transport & Trading Co. To the similar effect is statement of other employees of M\/s Amin Transport & Trading Co. The above position was also clarified by Shri Harish Sheth, Managing Director of the company in his statement recorded on 28.4.03. He has stated that the goods were returned from Telco mainly if the schedule were changed when the requirement comes later and on return of the goods, the same were checked for rust and quality of the oil and re-inspected before supplying that to the party. He also deposed that the goods were being returned from outside the gate of Telco’s various establishments for the reason as stated above and due to this reason there was no entry in Telco’s record for the receipt of goods. As such it is seen that Telco’s representative’s statement that there is no record of receipt and rejection of the goods gets explained from the above statement of Shri Sheth read with statement of proprietor of M\/s Amin Transport & Trading Co. when he deposed that sometime M\/s Telco refused to take delivery of the goods on the ground that there was no schedule for the delivery of the goods and as such, goods were taken back to the appellant’s factory. In such scenario, the statement of Telco’s representative can not be made basis for arriving at a finding that the goods were not received back.\n<\/p>\n
5. In any case, I find that the Revenue’s case is that goods were originally cleared but the same were not received back and credit has been availed on the basis of forged document. If that be so, the statement of Telco’s representative that the goods were not received by them at all, goes against the Revenue’s own stand. It is not clear from the case made out by Revenue as to whether they are doubting the first clearance of goods to Telco under the cover of Central Excise invoices or the doubt is about the receiving back of goods as returned goods or a subsequent clearance of the goods by utilization of the credit of the duty availed by the appellant in respect of the returned goods in terms of provisions under Rule 16.\n<\/p>\n
6. Rule 16 of Central Excise Rules of 2001\/2002, is to the following effect:\n<\/p>\n
 Rule 16. Credit of duty on goods brought to the factory. – (1) Where any goods on which duty had been paid at the time of removal thereof are brought to any factory for being re-made, refined, re-conditioned or for any other reason, the assessee shall state the particulars of such receipt in his records and shall be entitled to take CENVAT credit of the duty paid as if such goods are received as inputs under the CENVAT Credit Rules, 2002 and utilize this credit according to the said rules.\n<\/p>\n
As is seen from above, the said rules permits the assessee to avail Cenvat Credit of duty paid originally at the time of clearance of excisable goods from their factory if the goods are received back in the factory, subject to entry of particulars of such receipts in his record. There is no further requirement in the said rules like intimation of the receipt of returned goods in the appellant’s factory to their jurisdictional Central Excise officers or verification of such returned goods, in contradistinction to the earlier Rule 173H. Admittedly the goods were originally cleared on payment of duty. It is the same duty which has been availed as credit by the appellant on return of the goods. It is not understood as to how the appellant gets benefited by paying some amount of duty and then crediting the same in its record at the time of return of the goods, in as much as the entire situation would be Revenue’s neutral. It is also seen that prior to introduction of Rule 16, the appellant was also receiving back goods from their buyers in terms of the provisions under Rule 173H and were following the due procedure. Even during the period prior to 1.7.01 (when Rule 16 was introduced), the appellant were receiving back the rejected goods and were availing the benefit of Rule 173H. As such, in my view, it can not be said that receiving back of the goods after 1.7.01, was fraudulent and with an intention to avail modvat credit. It is beyond my understanding as to how the assessee gets benefited by first paying “XX amount of duty” and then crediting the same “XX amount of duty” in his record. The goods originally cleared under Central Excise invoices of Telco has been received back by the appellant on ground of “No schedule” as is also clear from Telco’s representative’s statement that such goods were not received by them. The said statement also stands relied by the Revenue. If the goods were not received by Telco, they have either to come back to the assessee’s factory or there is a chance of same getting diverted in the open market. There is no evidence and according to, much less any allegation in Revenue’s case that such goods originally cleared by appellant stands diverted in the open market. If that be so, the second route of return of the goods has to be accepted.\n<\/p>\n
6. The denial of credit on the basis of the Central Excise Invoices originally raised on the ground that there is no explanation about the storage of the goods for a period of 2-3 months in between or there being no proof of payment of transportation charges to the transporter for return journey, in my view, are not sufficient ground for holding against the appellant. In any case, it has come on record that the appellant had produced LR for return of goods, cash vouchers for payment of transport charges. As such, the discrepancies pointed out by the Revenue which in any case stands explained by the appellant to major extent, can not be made the basis for doubting the fact of return of the goods to the appellant’s factory. As such, records and documents maintained by the appellant in the ordinary course of their business, can not be doubted on the minor discrepancies, when there is no evidence for holding the same as manipulated or forged.\n<\/p>\n
7. The adjudicating authority has further held that such modvat credit wrongly availed by them was used for payment of duty by showing the re-despatch of rectified goods which in fact, were fresh goods and not accounted for in the daily stock account register. However, I find that there is no not even an iota of evidence on record to show that the fresh goods were cleared in the guise of rectified goods and the above observations and findings of the adjudicating authority seems to be figment of his imagination. At one point (Para 4.8), Commissioner is recording “in reality the goods had neither reached the premises of M\/s Telco nor had been rejected by them”. However, I fail to understand as to how the above findings would act prejudice to the appellant’s claim. For example, if an item manufactured by the appellant is cleared to Telco on payment of duty of Rs. 100\/-, but the same does not reaches factory of Telco and comes back to the appellants factory, in which case, they again availed the credit of Rs. 100 originally paid by them. How they are enriched in the above transaction?\n<\/p>\n
8. In view of my foregoing discussion, I am of the view that impugned order denying the credit amount of Rs. 59,46,244\/- to the appellant is not justified. The same is, accordingly, set aside along with setting aside the personal penalty. In any case, it is further noted that the consolidated personal penalty stands imposed under the provisions of Rule 13(2) read with Section 11AC. It is settled law that such combined penalty is not in accordance with the provisions of law in as much as apportionment of same can not be done at the appellant’s level. In this regard, I rely upon the following paragraph from the Tribunal’s Order No. A\/798 & 799\/WZB\/Ah’bad\/07 dt.13.04.07 in Gujrat Apar Polymers, which discusses the law on the point.\n<\/p>\n
 3. After considering the submissions made by both sides and after having gone through the various relied upon judgments, I find that Tribunal in case of Singam Mark & Co. v. CCE Salem as , has held that composite penalty under two different provisions of law can not be accepted without the requisite split up. Similarly, in case of Avdel (India) Private Ltd v. CCE Mumbai , Tribunal set aside the personal penalty on the ground that a composite penalty under Section 11AC and Rule 173Q is not permissible. In case of Lauls Ltd. v. CCE New Delhi , it was observed that in case of composite penalty, it can not be made out as to which part is imposed under Section 11AC and what amount is under Rule 173Q. The Tribunal further observed that apportion of penalty cannot be done in appeal and accordingly set aside the personal penalty. Similarly, in case of Punjab Recorder Ltd. v. CCE Chandigarh , penalty was set aside on the ground that a composite penalty imposed under Rule 173Q and under Section 11AC can not be apportioned.\n<\/p>\n
9. For the same reason, I find no justification for imposition of penalty of Rs. 5 lakhs on M\/s Gujrat Setco Clutch Ltd. under the Rule 25 of Central Excise Rules.\n<\/p>\n
10. As regards confiscation of the goods, I find that the said goods were placed under seizure on 9.4.03, on the ground that they were not entered in RG1 record. The appellant vide their letter dt. 10.4.03 canvassed as under:\n<\/p>\n
THAT 250 Pressure Plates Assemblies of 352 mm and 1.75″ splined size, were in Polythene Bags only and were still required to be packed in Corrugated Boxes, with proper Lables;\n<\/p>\n
AND THAT 166 Pressure Plates Assemblies of 352 mm and 1.5″ splined size, were in Corrugated Boxes but the said Boxes, were not provided Lables, Brand Name, Size and all other details;\n<\/p>\n
AND THAT other Assemblies were though put up in Corrugated Boxes but the same, were not labeled;\n<\/p>\n
AND THAT the Items of DP Assembly and PP Assembly, in case of 350 Diameter, constitute a set of Clutch and in case of Clutch of size of 352 mm, released bearing Assembly, is the third one required to constitute a set and unless such sets are prepared the goods, do not become finished excisable goods;\n<\/p>\n
AND THAT the Appellants, had a practice of final clearance to be given by their Quality Engineer and thereafter only the goods are accounted for in the Daily Stock Account.\n<\/p>\n
The Commissioner while confiscating the goods has not referred to the above contention of the appellant. In any case, the goods were lying in the factory and according to the various decisions including Larger Bench decision in the case of Bhilai Conductors, the same were not liable for confiscation in the absence of any evidence of their intended clearance without payment of duty. As such, I find no reason for confiscation of the same.\n<\/p>\n
11. In view of the foregoings, I set aside the impugned order in totality and allow both the appeals with consequential relief to the appellant.\n<\/p>\n
 Difference of Opinion<\/p>\n
1. Whether the denial of modvat credit of Rs. 59,46,244\/- along with interest and penalty of equivalent amount imposed upon M\/s Gujrat Setco Clutch Co. Ltd. has to be upheld as recorded by learned Member (Technical) or the same has to be set aside, as observed by learned Member (Judicial)?\n<\/p>\n
2. As to whether the penalty of Rs. 5 lakhs imposed under the provisions of Rule 25 of Central Excise Rules has to be set aside, as held by Member (Judicial), but not considered by Member (Technical)?\n<\/p>\n
3. Whether the confiscation of the seized excess found goods has to be set aside, as held by Member (Judicial) and not considered by Member (Technical)?<\/p>\n","protected":false},"excerpt":{"rendered":"
Customs, Excise and Gold Tribunal – Ahmedabad Gujarat Setco Clutch Ltd. And … vs C.C.E. on 18 April, 2007 Equivalent citations: 2007 (118) ECC 425, 2007 ECR 425 Tri Ahmedabad Bench: A Wadhwa, V T M. ORDER M. Veeraiyan, Member (T) 1. This is an appeal against the order of Commissioner No. 40\/VDR-II\/MP\/2004 dated 28.10.2004. […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"","_lmt_disable":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[1],"tags":[],"class_list":["post-195618","post","type-post","status-publish","format-standard","hentry","category-judgements"],"yoast_head":"\nGujarat Setco Clutch Ltd. 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