[Order per : Archana Wadhwa, Member (J)]. - All the three sets of stay petitions are being disposed of together as the issue involved is identical though the same arise out of the 3 different impugned orders passed by Commissioner confirming demands of duties along with confirmation of interest against M/s. Metal Gems, M/s. Met India and M/s. Mehta Tubes Pvt. Ltd. and imposing penalties on them as also on other applicants/appellants in terms of the provisions of Rule 26 of Central Excise Rules, 2002. Extensive arguments stand made in support and against the stay petitions by both the sides duly represented by Shri C. Hari Shankar, Advocate/ Shri S.N. Kantawala, Advocate and Dr. M.K. Rajak, SDR.
2. The three main appellants M/s. Metal Gems, M/s. Met India and M/s. Mehta Tubes P. Ltd. are engaged in the manufacture of copper pipes/copper flats/copper tubes falling under Chapter 74 of the Central Excise Tariff Act, 1985. During the relevant period, the appellants imported re-melting copper ingots and wire bars after purchasing the same on high sea sale basis, paid countervailing duty (CVD) leviable thereon and availed the Cenvat credit accordingly. The dispute in the present appeals relates to the availment of credit of countervailing duty paid by the appellant on the allegations and findings that the said inputs were actually not received by the appellants in their factories and the appellants have wrongly shown the receipt and consumption of the same in the manufacture of the final product, which was cleared on payment of duty. The allegations and findings are that the said imported ingots stand diverted by the appellants in the open market and instead they have purchased inferior quality goods from the market for replacing the imported inputs and used the same in the manufacture of their final product.
3. For arriving at the above finding, the Adjudicating Authority has mainly relied upon the fact that during the transportation of the ingots cleared from Delhi Customs to the factory premises located at Daman, the same has to be passed through various check posts. Enquiries conducted from the check posts have established that there is no stamp of any check post on the lorry receipts issued by the transporter M/s. Time & Space Haulers, which was required to be affixed on such documents in respect of trucks passing through the check posts. The Revenue has also relied upon the fact that the records/documents maintained by the transporter at Delhi office as well as UP border branch, there is nothing mentioned regarding issuance of lorry receipts, indicating thereby that such lorry receipts issued by the transporter were not in the ordinary course of their business. Further reliance has also been placed upon the records maintained by the appellants in support of the findings that imported copper ingots were neither received by them nor consumed inasmuch as during the days when such ingots were received, melting furnaces records indicate that furnaces were shut down/slowed down due to unavailability of raw materials. Further the statements of various persons stand relied upon. Part of the demand also stands confirmed on the allegations and findings of clandestine manufacture of final product.
4. As against the above, appellants have strongly contended that the impugned order passed by Commissioner is based upon presumptions and assumptions inasmuch as the duty paid raw material stands received by them, recorded in their Cenvat account and duly utilized in the manufacture of their final product, which was cleared on payment of duty. The Revenue has relied upon flimsy evidences of non-stamping of LRs at the check posts, which enquiries are unreliable inasmuch as all entry points into Gujarat are not covered by such enquiry, there are alternative routes which might be taken by the transporters. They have further relied upon report of Department of Information Technology, GOI revealing rampant corruption at check posts and inherent unreliability of check post records; that even in cases of admitted transportation, the check post records do not reflect such passing through of the trucks; discrepancies between report of Jt. Director of Transport, Gujarat and Sales Tax Check Post officials etc. Further it stands argued before us that apart from alleging that the imported ingots stand diverted by the appellant in the local market, there is no investigations as regards the alleged buyer of the said imported goods. There is also no evidence of receipt of any sale proceeds by the said appellants, there is no proof of transportation of imported goods to any other place, around Delhi border. There is no statement on record admitting that the goods have been sold in the local market. Further the appellants have contended that admittedly they have manufactured the final product on which duty has been paid thus indicating that the inputs in question were used by them. Further, the Department’s suggestion that such inputs were procured from the local market as ‘kabadi scrap’ is also devoid of any merits inasmuch as the Department has not been able to establish, on record, any supplier of such ‘kabadi scrap’ or any evidence of purchase of the same or transportation of the same etc. As such, submits ld. Advocate that the entire case of the Revenue is based upon mere presumptions and not on any concrete evidences on record. He also submits that import price of copper ingot and bars is almost equal to the market prices of copper scrap and as such, appellants do not gain anything by substituting the copper ingots with the local material. Further there is a specific ban on use of ‘kabadi scrap’ fixed vide consent order dated 12-1-1998 by the Pollution Control authorities. The appellants’ final product require high grade raw material, which is meant for the Railways and delivery is effected only after inspection of the goods by the Railway’s Quality Control Department. They also produced on record the technical experts’ opinion indicating that the furnace was in good condition till date thus suggesting that good quality raw materials were used. Ld. Advocate also submits that the statements relied upon by the adjudicating authority do not inspire confidence in the Revenue’s case and in most of the cases and they were either retracted or were given by the persons who were not even having any knowledge about the manufacturing activity at the factory and were looking Marketing or other areas and were located at Ahmedabad. The statements of Shri R.V. Mehta, who according to the Department, masterminded the entire fraud are exculpatory and he has nowhere admitted any diversion of imported ingots in the market and substitution of the same by scrap.
The appellants have made a strong grievance of the fact that they have requested for cross-examination of the witnesses, whose statements were relied upon in the show cause notice and have submitted before the Adjudicating Authority at the time of preliminary hearing that detailed submissions would be filed by them after completing the cross-examination of the witnesses and after supply of some of the documents. The impugned orders stand passed by the Commissioner by denying the opportunity of cross-examination and without dealing with the submissions made by them vide their letter dated 18-12-2007 inasmuch as the impugned order was passed on 14-12-2007 i.e. before the filing of the written submissions. Ld. Advocate has submitted that vide their reply dated 18-12-2007, which does not stand considered by the adjudicating authority, ample materials which, inter alia includes reports received under RTI Act, recommendations in the Surveillance Audit Report issued by Shri Sudhir Patki, Lead Auditor, International Standards Certifications, concerning ISO 9001 : 2000 standards, Expert opinion of Chief Executive Officer of International Copper Promotion Council, Weighment slips of trucks with inputs at Daman, acknowledgements of LRs, orders placed by various reputed buyers stipulating the condition of usage of particular raw materials and taking delivery after inspection in factory, fairly showed that the goods were transported to Daman and used in the manufacture of finished goods. He also submits that in the said reply, they have also placed evidence on record in the shape of reports received under RTI Act from the check post authorities to buttress their arguments that such reports are not reliable and even in admitted cases of transportation, the entries were not made. He has also pointed out to an alternative route of transportation through NH 3 via Maharashtra border. Further Central Government’s report also stands relied upon to show that several transport vehicles run on fake/duplicate “registration numbers” and “permits” to avoid any fine and penalty and also to avoid the mandatory “passing” by RTO authorities. It also stands contended in the said written submissions that reliance on the statement of Shri Praveen B. Aggarwal, Head of Accounts Dept. of the transporter at Ahmedabad, who was not connected with the transportation, was not justified.
5. In view of the above submissions, ld. Advocate prays that the impugned order be set aside and the matter be remanded for de novo adjudication inasmuch as the pleas advanced by the appellants in their above written submissions do not stand considered by the adjudicating authority.
6. After hearing both the sides and after going through the impugned orders, we agree with the ld. Advocate that the impugned orders stand passed by the Commissioner in violation of principles of natural justice. The appellants’ submission made at the time of hearing to allow cross-examination of the witnesses and to adjudicate the matter after filing reply have lot of prima facie merits. Similarly, if the Revenue intends to rely upon the statements of various persons, it is necessary for the appellants to check the veracity of the same by the tool of cross-examination. It is settled issue that when Revenue is relying upon retracted statements of the co-accused, which are being disputed by the assessee and the material evidence produced on record doubting the reliability and correctness of the same, it was obligatory for the Adjudicating Authority to offer the said witness for cross-examination. The said proposition does not need the support of any precedent decisions as the same is well settled law. Especially when some of the statements recorded by the Revenue during the course of investigations (e.g. Shri Mehta’s statement) are not inculpatory and do not admit any divergence of imported raw material and their substitution with the local scrap.
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