Commissionr Of Central Ecise ,Mum vs M/S Mahindra Ltd And Ors
2017 Latest Caselaw 79 Bom

 suresh                                         10-CEXAG-85.2006.doc

          IN THE HIGH COURT OF JUDICATURE AT BOMBAY
              ORDINARY ORIGINAL CIVIL JURISDICTION
                CENTRAL EXCISE APPEAL NO.85 OF 2006


 Commissioner of Central Excise,
 Mumbai-V, 5th Floor, Utpad Shulk
 Bhavan, Plot No.C-24, Sector-E,
 Bandra Kurla Complex, Bandra (E),
 Mumbai - 400 051.                                    ....  Appellant

          - Versus -

 1. M/s. Mahindra & Mahindra Ltd.
     (Auto Divn.), Akurli Road, Kandivali,
     Mumbai - 400 101.

 2. M/s. Mehta Trading Corporation,
     301-302, Vertex Vikas, 'A' Wing,
     Opp: Andheri Rly. Station,
     Andheri (E), Mumbai - 400 069.

 3. M/s. Agarsha Enterprises,
     211, Loha Bhavan, P.D'Mello Road,
     Mumbai - 400 009.

 4. M/s. Kohinoor Trading Co.,
     224, Kolsa Bundar Road,
     Darukhana, Mumbai - 400 010.

 5. M/s. Ayushman Steels Ltd.,
     A-69, MIDC Area, Taloja,
     Dist: Raigad - 410 206.

 6. M/s. Loha Ispat Ltd.,
     A-69, MIDC Area, Taloja,
     Dist: Raigad - 410 206.


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 7. M/s. B. Melaram & Sons
     Powder Works Bunda,
     Darukhana, Mumbai - 400 010.

 8. M/s. M.H. Steel Corporation,
     220, Kolsa Bundar Road,
     Darukhana, Mumbai - 400 010.               ....  Respondents

                               WITH
                CENTRAL EXCISE APPEAL NO.154 OF 2006

 The Commissioner of Central Excise
 & Customs, Kendriya Rajaswa Bhavan,
 Gadkari Chow, Nashik - 422 002.                ....  Appellant

          - Versus -

 1. M/s. Business Combine Ltd.,
     Plot No.16, MIDC, Satpur, 
     Nashik.

 2. M/s. Kohinoor Trading Co.,
     224 - A, Kolsa Bundar Road,
     Darukhana, Mumbai - 400 010.

 3. M/s. H.H. Steel Corporation,
     220, Kolsa Bundar Road,
     Darukhana, Mumbai - 400 010.

 4. M/s. National Steel Traders,
     (2nd Stage Dealer),
     175, Vidyanagary Marg,
     Santacruz (E), Mumbai.

 5. M/s. Mehta Trading Corporation,
     (2nd Stage Dealer),
      301-302, Vertex Vikas,
      A-Wing, Opp: Andheri Railway


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      Station, Andheri (E),
      Mumbai - 400 069.                         ....  Respondents

                               WITH
                CENTRAL EXCISE APPEAL NO.155 OF 2006

 The Commissioner of Central Excise
 & Customs, Kendriya Rajaswa Bhavan,
 Gadkari Chow, Nashik - 422 002.                ....  Appellant

          - Versus -

 M/s. H.H. Steel Corporation,
 220, Kolsa Bundar Road,
 Darukhana, Mumbai - 400 010.                   ....  Respondent

                               WITH
                CENTRAL EXCISE APPEAL NO.157 OF 2006

 The Commissioner of Central Excise
 & Customs,Kendriya Rajaswa Bhavan,
 Gadkari Chow, Nashik - 422 002.                ....  Appellant

          - Versus -

 M/s. National Steel Traders,
 (2nd Stage Dealer),
 175, Vidyanagary Marg,
 Santacruz (E), Mumbai.                         ....  Respondent

                               WITH
                CENTRAL EXCISE APPEAL NO.158 OF 2006

 The Commissioner of Central Excise
 & Customs, Kendriya Rajaswa Bhavan,
 Gadkari Chow, Nashik - 422 002.                ....  Appellant

          - Versus -


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 M/s. Mehta Trading Corporation,
 (2nd Stage Dealer),
 301-302, Vertex Vikas, A-Wing, 
 Opp: Andheri Railway Station, 
 Andheri (E), Mumbai - 400 069.                              ....  Respondent


 Ms P.S. Cardozo i/by Mr. Vipul A. Bajpayee for the 
 Appellant in all appeals.
 Mr. Anil R. Wani with Ms Supriya Devergudi i/by
 M/s. ANS Law Associates for Respondent No.1 in
 CEXA-85/2006.
 Mr. V. Sridharan, Senior Counsel with Mr. Prakash
 Shah & Mr. Jas Sanghavi i/by M/s. PDS Legal for
 Respondent No.2 in CEXA-85/2006 and Respondent
 No.1 in CEXA-158/2006.
 Mr. Ashutosh Mishra i/by Mr. P.K. Shetty for 
 Respondent No.1 in CEXA-154/2006. 


                                     CORAM: S.C. DHARMADHIKARI &
                                                    B.P. COLABAWALLA, JJ.

DATE : FEBRUARY 27, 2017

ORAL JUDGMENT (Per Shri S.C. DHARMADHIKARI, J.) :

1. These appeals of the Revenue were admitted on

substantial question(s) of law.

2. The substantial question of law on which Central

suresh 10-CEXAG-85.2006.doc

Excise Appeal No.85 of 2006 was admitted reads thus:-

" Whether it was correct and proper for the Tribunal to set aside the impugned order-in-original and allow modvat credit in question when due to indifference in the description of goods in the subject invoices, no correlation could be established between the input scrap actually received and used in the manufacture of excisable goods and the scrap described in the invoices under which input scrap was received? "

3. The substantial questions of law on which the other

four appeals were admitted are common to all the appeals and

they read as under:-

" (A) Whether on the facts and in the circumstances of the case and in law, the CESTAT was right in allowing the Modvat/Cenvat Credit availed by M/s Business Combine on the invoices of M/s. Mehta Trading Corporation and M/s Steel Traders and setting aside the demand for Rs.1,05,18,891/- confirmed by the Commissioner of Central Excise under Rule 57(i)(ii) read with Rule 57AH(i) and Rule 12 of Central Excise Rules, 2001 read with proviso to section 11A of the Central Excise Act, 1944?

(B) Whether on the facts and in the circumstances of the case and in law, the CESTAT was justified in setting aside the penalty of Rs.1,05,18,891/- equal to amount of duty imposed by the Commissioner Central Excise upon M/s Business Combine Ltd. under Rule 13(O) of the

suresh 10-CEXAG-85.2006.doc

CENVAT Credit Rules, 2001 read with section 11AC of Central Excise Act, 1944?

(C) Whether the CESTAT was justified in setting aside the order of the Commissioner of Central Excise in respect of interest at the appropriate rate on the duty amount of Rs.1,05,18,891/- under the provisions of Rule 57-I(5) read with Rule 57AH(i) of CENVAT Credit Rules, 2001 and section 11AB of the Central Excise Act, 1944?

(D) Whether the CESTAT was justified in law in setting aside the imposition of penalty of Rs.2 lacs each on M/s M.H. Corporation, M/s Kohinoor Trading Corporation, M/s Mehta Traders Corporation, M/s National Steel Traders, Mumbai under Rule 209A read with Rule 26(2) of the Central Excise Rules, 2002? "

4. We would take the facts from Central Excise Appeal

No.85 of 2006. A common order was passed by the Customs,

Excise & Service Tax Appellate Tribunal (CESTAT), West Zonal

Bench at Mumbai allowing the appeals of the assessees. This

order is dated 23-11-2005.

5. The Revenue had relied on the findings in the order

passed by the Commissioner of Central Excise, Mumbai-V, styled

as the Order-in-Original. That was founded on a show cause

notice. That show cause notice alleges that M/s. Mahindra &

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Mahindra (Auto Divn.) Ltd., Kandivali (East), Mumbai is a

holder of Central Excise Registration. The said assessee

manufactures motor vehicles and parts thereof, including

castings of motor vehicles parts manufactured in their Foundry.

Those were falling under Chapter 87 of the First Schedule to the

Central Excise Tariff Act, 1985 (for brevity's sake hereinafter

referred to as "the said goods"). The allegation is that there was

a Modvat Scheme enabling the availing of credit on inputs. That

existed prior to 31-3-2000. The allegation is that Rule 57A, Rule

57AA, Rule 57G and Rule 57AE(2)(a) which were brought in by

the Cenvat Credit Scheme have been violated with an intent to

evade the payment of central excise duty. The allegation is that

the assessee Mahindra & Mahindra, in collusion with the central

excise registered dealers, have fraudulently availed

Modvat/Cenvat Credit on Punched Bundled Cold Rolled Closed

Annealed Scrap, known as Market Scrap or Bazar Scrap

generally generated during the process of manufacture of

stamping, lamination, PP Caps, etc., received from such dealers

in place of the original goods, namely, Off Cuts of M.S. Sheets,

suresh 10-CEXAG-85.2006.doc

M.S. Scrap, Ferrous Waste & Scrap, C.R. Trimming Scrap, CR &

Silicon Scrap, CRC Steel Scrap, Iron & Steel Scrap, etc., which

have been shown in the duty paying documents for the purpose

of availment of Modvat/Cenvat Credit. In other words, the

registered dealers have substituted the goods received from the

original manufacturers as described in the duty paying

documents and in its place supplied punched bundled scrap of

CRCA to Mahindra & Mahindra and to further facilitate the

availment of Modvat/Cenvat Credit on such substituted goods.

These original manufacturers had issued modvatable documents

giving reference of the particulars mentioned in the original duty

paying documents received from the original

manufacturers/suppliers against the punched bundled scrap of

CRCA. After elaborating all these allegations, the Revenue relied

upon several searches carried out at the premises of the said

Mahindra & Mahindra. The Revenue relied upon certain

photographs of the samples, the samples which were examined,

the reports thereof and the statements of various officials of

Mahindra & Mahindra as also of the suppliers.

suresh 10-CEXAG-85.2006.doc

6. The duty evasion, according to the Revenue, stands

established by these materials. Based on the same that the

Order-in-Original was passed by the Competent

Official/Authority.

7. There were appeals and which came to be preferred

by all these aggrieved parties.

8. The main order was delivered in the case of

M/s. Business Combine Limited and others on 15-7-2005. In that

the Tribunal concluded that it is not possible to agree with the

Revenue and for the reasons recorded in that order. The

Tribunal's conclusion on each of the findings in the Order-in-

Original are set out. The main issue was, whether the

description of CRCA scrap actually observed and M.S. Off Cuts,

etc., mentioned on the duty documents would lead to a

conclusion that the inputs allegedly received and taken credit

were not covered by the duty paid documents. The Tribunal held

that the Commissioner was carried away into believing the

suresh 10-CEXAG-85.2006.doc

statement of functionaries of Mahindra & Mahindra that M.S.

Sheet Off Cuts were not received but orders were placed for

supplying CRCA sheet punched scrap and the same was

received. One Mr. Patankar, Senior Material Manager and

Mr. Barve stated before the authorities that CRCA sheet punched

scrap was received. However, the Tribunal has faulted the

Commissioner for having not referred to the statements in their

entirety. In para 2.3 of the order passed in the case of

M/s. Business Combine Limited, the Tribunal refers to the

Statement of one Mr. Barve. That statement was that in the

Modvat invoice the description is Off Cuts of M.S. Sheet and in

commercial invoice it is mentioned as CRCA scrap. The Off Cuts

of M.S. Sheets are also a type of CRCA scrap though there is a

difference in the wordings or description. The Tribunal holds

that no material is shown to the Tribunal Members to come to a

conclusion that CRCA scrap is not the Off Cuts of sheets. The

Tribunal comes to a factual finding that when duty has been

paid on a lesser value, then the remedy is not to deny the benefit

of credit of actual duty paid but was to alert the manufacturers

suresh 10-CEXAG-85.2006.doc

that proceedings can commence to enhance the scrap values.

The credit cannot be denied as availed. The Tribunal concluded

that there is no material on record to indicate that Off Cuts are

differently valued from CRCA sheet scrap per unit. In fact the

charge are of higher values for CRCA scrap than M.S. Sheet Off

Cut scrap is the case of the Revenue. It is in these circumstances

that the Tribunal referred to all the factual data and brought on

record. From paras 2.3 onwards, the Tribunal has referred to the

relevant statements and has arrived at the conclusion that the

duty, interest and penalty orders deserve to be set aside. The

Tribunal found that denial of credit on the dealers' invoices

cannot be upheld when no efforts are made to bring this activity

of the dealers under excisable manufacture. If the dealers' status

is not questioned, then, their records, as maintained, cannot be

faulted. The Tribunal found that the quantum of credit as

availed of cannot be denied because as per the documents, there

is nothing to indicate that the physical quantity is short or that

there is duty quantum difference which could be said to be

found. The Tribunal has found that there is no allegation or

suresh 10-CEXAG-85.2006.doc

finding of short receipt of scrap than as shown as quantity in the

Modvat Credit availing documents mentioned/accompanying

the goods. Even if scrap from two or more lots has got mixed

and part of the consignment of these mixed lots is sent, no

excess or short quantity than that shown on duty paid

documents is alleged or found to be dispatched from both

dealers and received by the assessee.

9. To our mind, therefore, the Tribunal found that

there are no reasons for taking a different view in the other

appeals. In fact in the order passed in Mahindra & Mahindra's

case, the Tribunal has held that it can safely rely on the order

passed in the case of M/s. Business Combine Limited. No

attempt can be countenanced for distinguishing the view taken

in that case for the simple reason that an argument and loosely

canvassed on the basis of recovery of a solitary umbrella handle

in one of the bundles of the scrap would not enable it to hold

that it was a bazar scrap which was physically received and the

documents indicating duty paid scrap from the various

manufacturers/dealers were received which do not cover the

suresh 10-CEXAG-85.2006.doc

said goods. Such an argument cannot be accepted. It is in these

circumstances that no order has been passed.

10. From a perusal of the paper-book in the main

appeals, we find that the attempt of the Revenue while arguing

these appeals is to try and convince this Court that a vital piece

of evidence has been over-looked and the Tribunal's order is

perverse. However, merely contending thus is not enough. The

questions of law is based on the argument and seriously

canvassed that the CESTAT failed to appreciate that the assessee

Mahindra & Mahindra did not inform the Department that they

received only punched bundled scrap of CRCA against the

description of goods in the subject invoices. Then the argument

was that the employees of the assessee Mahindra & Mahindra

admitted in unequivocal term that only CRCA punched sheet

scrap, in bundle form, was received by them and no other scrap

was received. Thus, we cannot reappreciate or reappraise the

materials placed on record. The Tribunal did not appreciate that

all the documentation such as vendor audit, purchase order,

delivery challan and commercial invoices reflect that the

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assessee received only CRCA punched sheet scrap, in bundle

form while the Modvat invoices were issued by the dealers

carrying different description altogether.

11. We have seen from the record that the assessee

throughout argued that all types of scraps were used by them

(Mahindra & Mahindra). There was, therefore, no need to give

any specific instructions for supplying a particular variety of

scrap. How that scrap can be used in induction furnace was duly

explained. This is not, therefore, a case of irregular availment of

the Modvat Credit. In such circumstances, we cannot undertake

the exercise as desired by the Revenue's counsel.

12. We find that the order passed by the CESTAT and

referring to all the materials on record cannot be termed as

perverse or vitiated by any error of law apparent on the face of

the record. The argument that there should be co-relation

established between the input scrap actually received and used

in the manufacture of excisable goods and the scrap described in

the invoice under which the input scrap was received does not

suresh 10-CEXAG-85.2006.doc

merit any acceptance. Eventually when the documents placed on

record themselves point out that all types of scrap were utilised

by the assessee, then, one cannot just pick and choose any

statement or single out a document to deny the Modvat Credit.

The fraud, as alleged, has thus not been established and proved.

13. We find no merit in any of these appeals. They are

dismissed with no order as to costs.

(B.P. COLABAWALLA, J.) (S.C. DHARMADHIKARI, J.)