By TIOL News Service

NEW DELHI, NOV 04, 2013: THIS is a Revenue appeal.

The respondents are manufacturers of Dense Phase Pneumatic Conveyor System, and the inputs being used by them are HR Coils, MS Plates, MS Channel, MS Angles etc. on which they availed CENVAT credit.

The dispute in this case is in respect of HR Coils which according to the respondent, were purchased by them during the period from 27.04.2004 to 04.11.2005 from two registered dealers M/s. Rishav Trading Co. and M/s. Bansal Structural.

M/s. Bansal Structural and M/s. Rishav Trading in the invoices issued by them to the respondent have mentioned the source of the goods sold by them as - M/s. Pasondia Steel Profiles Pvt. Ltd., Ghaziabad. The invoices issued by the above mentioned registered dealers also mentioned Truck Nos. in which goods covered by the invoices had been transported. Sh. Manoj Jain, Prop. M/s. Rishav Trading and Sh. G.K. Bansal of M/s. Bansal Structural, in their statements stated that the goods shown as purchased under the bills of M/s. Pasondia Steel (CR Strips and CR Sheets) were actually purchased from the market through broker and such procured goods were shown as manufactured by M/s. Pasondia Steel in the invoices issued by them. They further stated that there was no direct dealing with M/s. Pasondia Steel Ltd and all payments were made by cheques through the brokers.

The investigation in the case against M/s. Pasondia Steel Ltd. had indicated that while during the period of dispute, M/s. Pasondia Steel Ltd. purchased HR Coils from SAIL for manufacture of CR Sheets/Strips but there were no manufacturing facilities in their factory inasmuch as while they did not have any power connection or provision for generation of electricity through D.G.Sets, but they still had shown production of CR Sheets from HR Coils and had shown the sales of CR Sheets/Strips to various dealers under their invoices and thereby had illicitly passed on CENVAT Credit, through bogus invoices.

The Department, however, was of the view that in view of the background of M/s. Pasondia Steel their sales of HR Coils to the above mentioned registered dealers were also bogus, and hence the Transactions of the registered dealers with the Respondents were also bogus.

The Respondents were accordingly issued SCN for demand of CENVAT Credit amounting to Rs.5,55,455/- along with interest and also for imposition of penalty.

While the adjudicating authority confirmed the demand, the Commissioner (A) set aside the order observing that there is no evidence to show that the transactions of the respondent with M/s. Rishav Trading and M/s. Bansal Structural with regard to purchase on HR Coils are bogus.

As mentioned, Revenue is before the CESTAT and justifies the order passed by the adjudicating authority.

The respondent submitted that disputed item in this case is HR Coils and notwithstanding the investigation CENVAT Credit Rules permit a manufacturer to clear the inputs as such on reversal of the CENVAT Credit, that there is no evidence to show that M/s. Pasondia Steel had merely issued invoices showing the sale of HR Coils without any actual supply, that neither Sh. Manoj Jain nor Sh. G.K. Bansal in their statements have made any admission that no HR Coils were received, that in their statements bogus transactions are admitted only in respect of CR Strips/Sheets, while the goods involved in this case are HR Coils, that the truck Nos., in which the goods had been transported are mentioned in the invoices, but no enquiry has been made with the owners of the trucks, that evidence showing that the transactions of sale of CR Sheets by M/s. Pasondia Steel were bogus is of no relevance to this case as the goods purchased were HR Coils, that there is nothing in the statements of Sh. Manoj Jain and G.K. Bansal from which it can be concluded that their transaction with M/s. Pasondia Steel regarding purchase of HR Coils were bogus and that in view of this, there is no infirmity in the impugned order.

The Bench inter alia observed -

"5.…Though statements of Sh. Manoj Jain, Prop. of M/s. Rishav Trading and Sh. G.K. Bansal Director of M/s. Bansal Structurals were recorded, there is nothing in these statements from which it can be inferred that they had not purchased HR Coils from M/s. Pasondia Steel. What they have admitted is the fictitious nature of their transactions with M/s. Pasondia Steel regarding CR Strip & CR Sheets. But their statements are totally silent about their transactions regarding purchase of HR Coils from M/s. Pasondia Steel. On this point neither any questions was put to them, nor have they made any statement. Thus, the statements of Sh. Manoj Jain and Sh. G.K. Bansal do not in any manner support the Department's allegation with regard to HR Coils.

6. It is also seen that invoice issued by the registered dealers mentioned the Truck Nos. in which the goods covered under the invoices had been transported. But absolutely no enquiry has been conducted with the truck owners. The entire case of the Department against the Respondent relies upon the evidence with regard to fictitious nature of the transactions of M/s. Pasondia Steel regarding the supply of CR Sheets by showing their bogus productions and bogus sale. But this evidence is of no relevance to this case where the claim of the respondent is they have purchased HR Coils from two dealers i.e. M/s. Rishav Trading & M/s. BansalStructurals, who, in turn, claim that the HR Coils in question, had been purchased by them from M/s. Pasondia Steel. There is no dispute that M/s. Pasondia Steel were purchasing HR Coils from Steel Authority of India Ltd. and it is possible that some quantity of HR Coils may have been sold by them as such to the above mentioned registered dealers after reversing the CENVAT Credit. Though this aspect could have been checked …there is no evidence produced by the Department to show that M/s. Pasondia Steel had not sold any HR Coils to these two registered dealers."

Holding that there is no infirmity in the order of the Commissioner(A), the Revenue appeal was rejected.

(See 2013-TIOL-1637-CESTAT-DEL)