IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
WEST ZONAL BENCH AT AHMEDABAD
COURT - II
Appeal No.E/805,814-816/2007-SM (Application Nos.E/Others/13376,13378,13380/2014)
Arising out of: OIA No.150 to 153/2007(Ahd-I), dt.28.03.2007
Passed by: Commissioner of Central Excise & Customs (Appeals), Ahmedabad
For approval and signature:
Mr.M.V. Ravindran, Hon ble Member (Judicial)
1. Whether Press Reporters may be allowed to see the No
Order for publication as per Rule 27 of the CESTAT
(Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the No
CESTAT (Procedure) Rules, 1982 for publication
in any authoritative report or not?
3. Whether their Lordships wish to see the fair copy of Seen
the order?
4. Whether order is to be circulated to the Departmental Yes
authorities?
Appellant:
M/s Vinny Overseas Pvt.Ltd., Shri Hiralal J. Parekh, Shri Devichand M. Munot
Respondent:
CCE Ahmedabad-I
Represented by:
For Assessee: Shri Paritosh Gupta, Adv.
For Revenue: Shri Manoj Kutty, Superintendent (AR)
CORAM:
MR.M.V. RAVINDRAN, HON BLE MEMBER (JUDICIAL)
Date of Hearing:10.06.2014
Date of Decision:18.07.2014
Order No. A/11388-11391 / 2014 dtd 8/7/2014
Per: M.V. Ravindran
1. All these four appeals are filed against the same Order-in-Appeal, hence these are being disposed of by a common order.
2. Appeal No.E/805/2007 is filed by the Revenue against the impugned order, only on the ground that the first appellate authority has erred in extending the benefit to the assessee of cum duty assessable value on the illicit clearances and also reduction of mandatory penalty as per the provisions of Section 11AC of Central Excise Act, 1944. Other three appeals are filed by the assessee and two individuals against the very same order, challenging upholding of demand of duty, interest thereof and penalties imposed.
3. Firstly, the miscellaneous application filed by the appellants need to be taken up for disposal.
4. Heard both sides on the miscellaneous application.
5. Ld.Counsel appearing on behalf of the assessee appellants submit that the grounds which are taken in the miscellaneous applications were not urged in the appeals filed by the assessee and the individuals by oversight. It is his submission that these grounds were taken before the adjudicating authority as well as the first appellate authority and they are not in the nature of new grounds or new pleas, but they are the submissions made before the lower authorities and due to oversight, were not taken up in these appeals.
6. Ld.Departmental Representative, on the other hand, submits that these are all question of facts which should not be considered at this juncture.
7. After giving careful consideration to the submissions made by both sides and on perusal of the records, I find that the pleadings which are taken in the miscellaneous applications go to the root of the matter that needs to be decided by me in these cases. I also find that the appellants had been agitating this point before the lower authorities. Hence, I allow the applications for urging the grounds which were not taken in the main appeal memoranda.
8. The relevant facts that arise for consideration, after filtering out the unnecessary details, are that the officers of Central Excise, Headquarter (Preventive), Ahmedabad searched the premises of M/s Vinny Overseas Pvt.Ltd. (hereinafter referred to as main appellant) and conducted physical stock verification in the presence of some of the Directors of the main appellant. On comparing such details, it was noticed that there was shortage of 1,05,993 L.Mtrs of finished man made fabrics. The preventive officers recorded statements of Shri Hiralal Shah and main appellant paid the duty liability within 5 days of its detection. It transpires that in a follow up action, further searches were conducted and after detailed investigation, show cause notices were issued to the main appellant as well as the individuals, directing them to show cause as to why the Central Excise duty be not demanded from them for clandestine removal of the goods, why interest be not demanded and penalties be imposed. The adjudicating authority, after considering the submissions made on behalf of all the three appellants, confirmed the demands with interest and also imposed penalties. Aggrieved by such an order, all the appellants preferred appeals before the first appellate authority. The first appellate authority, after following the due process of law, did not agree with the contentions raised by the appellants, upheld the order of the adjudicating authority, but granted partial relief to the appellants by accepting the contention that duty liability needs recalcuation on cum-duty price.
9. Ld.Counsel appearing on behalf of the main appellant and other two individuals, after giving overall picture of the issue involved, submits that the demand can be bifurcated into three different demands against which he is making following submissions:-
(a) Demand of Rs.2,54,883/- on shortages found during the course of Panchnama is being disputed on the ground that the Panchnama in the appellant s premises had begun at 09.00 hrs in the morning and ended at 11.00 Hrs in the night i.e. after 14 hours. It is his submission that during the entire proceedings, huge stock of fabrics lying in the premises of the appellant could not have been verified and counter-checked to the quantity shown as closing stock in the stock register maintained by the appellant. It is his submission that the stock checking was done in a haphazard manner, overlooking various stock lying in process at various departments of the appellant s factory. It is his submission that the judgment of the Tribunal in the case of Hira Steels Ltd 2006 (206) ELT 783 is a guiding factor and stock checking being defective, demands are not sustainable. It is also his submission that though there is an allegation of shortage, no further investigation has been conducted by the Department for establishing clandestine clearances such as no statements of buyers, movement of money as private record were recovered. It is his submission that the ratio of the decision of the Tribunal in the case of M/s Suzler Processors Ltd - 2013 (293) ELT 258 would be applicable in this case as in that case, the Tribunal, in similar facts & circumstances, has held that when there is application for fixing of annual capacity to discharge duty under compounded levy scheme was pending, the demand of shortages was unacceptable and dropped by the Tribunal. He would submit that the appellant had also filed an application for discharge of duty under compounded levy scheme in May 2001 and subsequent to search, the said application was rejected in October 2001.
(b) As regards the demand of Rs,.15,78,888/- confirmed on the basis of folding report, it is his submission that these demands are also not tenable as there is no evidence in any manner to establish clandestine removal on the part of the appellant. It is his submission that even during the recording of statements of the Director on 21.06.2001, no quantity has been determined and put forth to the Director as clandestinely removed and only on 11.06.2002, a worksheet was prepared and put to the Director as the quantity cleared without payment of duty. It is his submission that the basis on which the worksheet was prepared by the departmental authorities, has not been brought on record nor it is indicated that this information was retrieved during the search. It is his submission that very veracity of the worksheet prepared by the Department and consequential demands raised and confirmed pursuant thereto, is doubtful. It is also his submission that the Department has relied upon the statements recorded during investigation to suggest that there was clandestine removal and accepted by the concerned parties, but Department has failed to appreciate that serious allegations like clandestine removal are to be established by further corroborative evidences. He would rely upon the decision of the Hon'ble High Court of Gujarat in the case of Nissan Thermoware 2011 (266) ELT 45 (Guj), Tejwal Dyestuff Industries 2007 (216) ELT 310. It is also his further submission that the chart shows the allegations of clandestine removal as noted in the worksheet prepared by the Department even if improper as in response to worksheet which was provided with the show cause notice, appellant submitted a list and details of all the invoices/ARE 4, under which the goods were removed and charged by the Department as clandestinely removed. It is also his submission that the appellant had submitted all the copies of relevant documents to the lower authorities, which has been totally ignored. It is his submission that for the demands raised in (a) and (b), general argument is that during the relevant period, the appellant was functioning under compounded levy scheme based upon an application made by him on 11.05.2001 and had relied upon various documents to show that they have discharged the duty liability as per the ascertained production capacity.
(c) As regards the demand of Rs.80,663/-, the said demand is based upon the un-reliable private record and statements of co-accused. It is his submission that the Department has not adduced any tangible or concrete evidence to establish a case of clandestine removal. It is his submission that in any case, it is a settled law that statement of co-accused cannot be blindly relied upon to confirm a demand under the serious charge of clandestine removal.
10. It is his submission that the impugned order be set aside and appeals be allowed.
11. Ld.Departmental Representative, on the other hand, would draw my attention to the Order-in-Original and Order-in-Appeal. It is his submission that the appellant has not made out any case as the shortage which was detected during stock verification is un-contested in as much as the stock have been verified in front of Panchas and the Directors of the appellant company and not before any junior officers of the company. It is his submission that no objection was raised to stock taking during the course of panchnama or during the statements recorded of the directors. The contention that huge stock could not be verified in just 14 hours is totally untenable as no such doubt was raised when the stock taking was undertaken, in the presence of the directors. It is his submission that the Annexure B to the Panchnama clearly indicates that lots were themselves missing and it is not a case of partial shortage of lots and this was accepted by Shri Hiralal J. Parekh in his statement, dt.08.06.2001, specifically indicating that they might have been sold to unknown buyers on cash basis without accounting for the same in statutory records. He would rely upon the decision of the Tribunal in the case of M/s Auora Foam Pvt.Ltd. 2011 (271) ELT 104 (Tri-Del) for the proposition that even no objection was taken during stock taking, the same cannot be objected to at the appellate stage. As regards the illicit removal charge on the appellant for demand of Rs.15,78,888/-, it is his submission that the said demand is raised on the folding report which was found hidden in lump of fabric in the folding department. It is his submission that it is on record that these reports were prepared by the folding contractors of the firm and was admitted in his statement dt.08.06.2001. He would also submit that incriminating documents were recovered from the adjacent folding house premises owned by Shri Hiralal J. Parekh, Director of the main appellant. It is his further submission that one Shri Devichand M. Munot has admitted that MMF without any Central Excise invoices is an indicator that main appellant as engaged in clandestine removal of its goods. It is his submission that Shri Hiralal J. Parekh, in his various statements, had admitted to this fact. It is also his submission that these arguments would apply to the third demand of Rs.80,663/-. As regards the plea of the appellant that they are operating under compounded levy scheme during the date of search, it is his submission that it is undisputed that an application dt.18.05.2001 was made by the appellant to operate under compounded levy scheme to the Commissioner of Central Excise, Ahmedabad. It is his submission that CCE vide an order dt.12.10.2001 has rejected the application for compounded levy on various grounds against which an appeal filed before Hon'ble High Court, but withdrawn by the appellant. It is his submission that as per Rule 96ZZA(ii) of Central Excise Rules, 1944, a manufacturer makes his application to pay the provisional duty as per compounded levy scheme, however, of application is dismissed, then duty will have to be paid on ad-valerom basis and such duty is to be adjusted with the duty already paid provisionally, are the provisions which will apply in this case. It is his submission that the appellant s claim as to the duty was paid under compounded levy in the month of June 2001, is also incorrect as the invoices submitted by the appellant vide letter dt.17.08.2006 before the adjudicating authority also are incorrect as they had themselves during the month of May and June, paid the duty under ad valerom basis. It is his submission that the worksheet prepared on the basis of folding book indicate that the folding of the fabric was done in the month of May 2001, hence the duty liability would arise as during the relevant period, the appellant was not operating under compounded levy scheme. It is his submission that the plea of the appellant that the goods were actually removed under the cover of invoice, is also incorrect as it can be seen that majority of the invoices have been issued subsequent to the date of search i.e. 07.06.2001 and this shows that it is an after-thought on the part of the assessee to show lot numbers in the invoices issued subsequent to the date of search to claim the benefit of illicit clearances.
12. I have considered the submissions made at length by both sides and perused the records. The written submissions filed by both sides during the hearing and post hearing are taken on record and considered by me while arriving at conclusion.
13. The main issue in these cases is whether the main appellant had engaged himself in clandestine removal of the goods during the material period which is as per the show cause notice Annexure B during the period May and June 2001 based upon the folding book recovered.
14. At the outset, I would like to record that entire case can be disposed of based on the factual matrix as below:-
(i) As regards the demand of duty on illicit removal of 26,534 L.Mtrs, wherein an amount of Rs.80,663/- has been confirmed, I find that the purchasers of the materials M/s DCM Fabrics have clearly recorded a statement which clearly indicate that they have received this quantity of fabrics from the appellant without any duty paying documents or under cover of any invoice. It is seen that the said statement of the buyer is not retracted by him, hence in my considered view, appellant has not made out any case for setting aside the demand of Rs.,80,663/-.
(ii) As regards the demand of illicit removal of 5,19,371 and 1,05,993 L.Mtrs found as shortage during stock taking on 07.06.2001, appellant has case in his favour for more than one reason.
Firstly, as noticed from the records that this demand is raised on the basis of folding record in formchits No.14/16/17 pages of the folding book seized under Panchnama and shortages, at the factory premises of the appellant. Though, various statements are recorded indicating therein that the goods were cleared illicitly, on deeper perusal of the records, I find that the said lot numbers which were recorded in the worksheet prepared were properly answered by the appellant when they filed reply to the show cause notice. I find that in one of the lot numbers i.e. 39 mentioned in the worksheet and considered as illicitly removed, was, in fact, removed by the appellant under invoice dt.07.05.2001, 08.05.2001, under ARE4s on payment of duty. The worksheets prepared by the appellant gives clear details as to the invoice number and the amount of duty liability discharged against the lot numbers which were alleged to have been removed clandestinely. I also find that there are various entries in the worksheet attached to the show cause notice which are either overlapping or appearing twice in the said worksheet.
Secondly, I do find that there is no denial of the fact that the main appellant had filed an application on 18.05.2001 to operate under compounded levy scheme with CCE Ahmedabad. The said application on the date of visit was not rejected by the authorities and after visit of the authorities in the factory premises of the appellant, appellant having not received any rejection letter, continued to clear the goods manufactured by them under the compounded levy scheme. It is noticed from the records that the appellant had prepared invoices during the period, clearly indicating therein that they are operating under compounded levy scheme as per the provisions. It cannot be held against the appellant that he having filed an application for paying duty on the ascertained annual production capacity, as per the notification issued under Section 3A of Central Excise Act, 1944 and rules made thereunder, that he had removed the goods clandestinely during the period. The entire worksheet of the Revenue indicate that the productions were done in the month of May, barring few entries, they were done from 11.05.2001 which would fall under the application filed by the appellant on 18.05.2001 indicating to operate under compounded levy scheme. There is no dispute that the main appellant had discharged the Central Excise duty liability after 18.05.2001 under compounded levy scheme and paid the duty liability through PLA. In my considered view, the charge of illicit removal cannot be confirmed against the appellant on this factual matrix, which indicate that the appellant to his subsequent application made on 18.05.2001 has paid the duty under the compounded levy scheme.
Fourthly, I find that both the lower authorities have conveniently dis-regarded this main plea of the appellant before them and have confirmed the demands raised without addressed to the fact that duty liability has been discharged by the appellant after 18.05.2001 under compounded levy scheme. Though the ld.Departmental Representative submits that the said application was rejected by the authorities on 12.10.2001, I find that before rejection of said application, the fact that the appellant was discharging the duty liability on such goods, is not denied. Even if we consider that the Commissioner has rejected the application filed by the appellant to operate under compounded levy scheme, it would not indicate that the clearance of 5,19,371 and 1,05,993 L.Mtrs were illicitly removed in as much as the rejection of the application made by the appellant, at the most, would require re-consideration of value and discharge of duty liability under different headings and it cannot be held that there was clandestine removal of the goods by the appellant. On perusal of records, I find that there is no such allegation in the show cause notice. My this view is fortified by the order of this Bench in the case of Suzler Processors Ltd (supra) wherein it was held as:
4.?The question required to be decided in the present appeal is as to whether the non-maintenance of record by the appellant during the intervening period of filing the application and rejection of the same by the Commissioner, which resulted in shortages of grey fabrics and final product would call for confirmation of duty of Rs. 3,00,020/-. As per the appellant during the said period, they discharged their duty liability under compounded levy scheme, which does not take into consideration each and every clearances and duty is required to be paid on the lump sum basis. There is nothing on record to show that the goods found short were not included in the goods cleared under compounded levy scheme, on which the duty already stand discharged on monthly basis. It is also noticed that the appellants prayers for working under the compounded levy scheme was rejected only in October, 2001. As such in August, 2001, when their factory was visited by the officers, they were working under the compounded levy scheme and were discharging their duty liability accordingly. It is not the Revenue s case that such shortages were not part and parcel of the clearances effected under compounded levy scheme on which duty already stand paid by the appellants. As such, by extending the benefit of doubt to the appellant, we find no justification in separate confirmation of demand of Rs. 3,00,020/-. Accordingly, we set aside the impugned order and allow the appeal filed by the assessee.
15. In view of this, I hold that the demand of duty raised on the appellant on the charge of clandestine removal of 5,19,371 & 1,05,993 L.Mtrs is unsustainable and liable to be set aside and I do so.
16. Now, I take up the issue of imposition of interest and penalties on the appellant. I have already held that the demand of Rs.80,663/- needs to be upheld against the appellant, interest liability on such amount also arise on the appellant, which needs to be discharged.
17. As regards the penalties to be imposed on the main appellant on the amount of Rs.80,663/-, since I have come to conclusion that the appellant is liable to discharge this duty liability, equivalent amount of penalty on the same needs to be imposed on the main appellant and I do so.
18. As regards the penalties imposed on the individuals, I find that though they are considered as instrumental for imposition of penalty under the provisions of Rule 26 of Central Excise Rules, 2002, since I have set aside the major demand, a token penalty of Rs.10,000/- (Rupees Ten Thousands only) each on Shri Hiralal J. Parekh and Shri Devichand M. Munot is imposed.
19. The rest of the impugned order is set aside barring the findings as recorded hereinabove.
20. As I have disposed of all the appeals of the appellants on merit, the Revenue s appeal also stand disposed of.
21. All the appeals are disposed of as indicated hereinabove.
(Pronounced in Court on 18.7.2014)
(M.V. Ravindran)
Member (Judicial)
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2
WEST ZONAL BENCH AT AHMEDABAD
COURT - II
Appeal No.E/805,814-816/2007-SM (Application Nos.E/Others/13376,13378,13380/2014)
Arising out of: OIA No.150 to 153/2007(Ahd-I), dt.28.03.2007
Passed by: Commissioner of Central Excise & Customs (Appeals), Ahmedabad
For approval and signature:
Mr.M.V. Ravindran, Hon ble Member (Judicial)
1. Whether Press Reporters may be allowed to see the No
Order for publication as per Rule 27 of the CESTAT
(Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the No
CESTAT (Procedure) Rules, 1982 for publication
in any authoritative report or not?
3. Whether their Lordships wish to see the fair copy of Seen
the order?
4. Whether order is to be circulated to the Departmental Yes
authorities?
Appellant:
M/s Vinny Overseas Pvt.Ltd., Shri Hiralal J. Parekh, Shri Devichand M. Munot
Respondent:
CCE Ahmedabad-I
Represented by:
For Assessee: Shri Paritosh Gupta, Adv.
For Revenue: Shri Manoj Kutty, Superintendent (AR)
CORAM:
MR.M.V. RAVINDRAN, HON BLE MEMBER (JUDICIAL)
Date of Hearing:10.06.2014
Date of Decision:18.07.2014
Order No. A/11388-11391 / 2014 dtd 8/7/2014
Per: M.V. Ravindran
1. All these four appeals are filed against the same Order-in-Appeal, hence these are being disposed of by a common order.
2. Appeal No.E/805/2007 is filed by the Revenue against the impugned order, only on the ground that the first appellate authority has erred in extending the benefit to the assessee of cum duty assessable value on the illicit clearances and also reduction of mandatory penalty as per the provisions of Section 11AC of Central Excise Act, 1944. Other three appeals are filed by the assessee and two individuals against the very same order, challenging upholding of demand of duty, interest thereof and penalties imposed.
3. Firstly, the miscellaneous application filed by the appellants need to be taken up for disposal.
4. Heard both sides on the miscellaneous application.
5. Ld.Counsel appearing on behalf of the assessee appellants submit that the grounds which are taken in the miscellaneous applications were not urged in the appeals filed by the assessee and the individuals by oversight. It is his submission that these grounds were taken before the adjudicating authority as well as the first appellate authority and they are not in the nature of new grounds or new pleas, but they are the submissions made before the lower authorities and due to oversight, were not taken up in these appeals.
6. Ld.Departmental Representative, on the other hand, submits that these are all question of facts which should not be considered at this juncture.
7. After giving careful consideration to the submissions made by both sides and on perusal of the records, I find that the pleadings which are taken in the miscellaneous applications go to the root of the matter that needs to be decided by me in these cases. I also find that the appellants had been agitating this point before the lower authorities. Hence, I allow the applications for urging the grounds which were not taken in the main appeal memoranda.
8. The relevant facts that arise for consideration, after filtering out the unnecessary details, are that the officers of Central Excise, Headquarter (Preventive), Ahmedabad searched the premises of M/s Vinny Overseas Pvt.Ltd. (hereinafter referred to as main appellant) and conducted physical stock verification in the presence of some of the Directors of the main appellant. On comparing such details, it was noticed that there was shortage of 1,05,993 L.Mtrs of finished man made fabrics. The preventive officers recorded statements of Shri Hiralal Shah and main appellant paid the duty liability within 5 days of its detection. It transpires that in a follow up action, further searches were conducted and after detailed investigation, show cause notices were issued to the main appellant as well as the individuals, directing them to show cause as to why the Central Excise duty be not demanded from them for clandestine removal of the goods, why interest be not demanded and penalties be imposed. The adjudicating authority, after considering the submissions made on behalf of all the three appellants, confirmed the demands with interest and also imposed penalties. Aggrieved by such an order, all the appellants preferred appeals before the first appellate authority. The first appellate authority, after following the due process of law, did not agree with the contentions raised by the appellants, upheld the order of the adjudicating authority, but granted partial relief to the appellants by accepting the contention that duty liability needs recalcuation on cum-duty price.
9. Ld.Counsel appearing on behalf of the main appellant and other two individuals, after giving overall picture of the issue involved, submits that the demand can be bifurcated into three different demands against which he is making following submissions:-
(a) Demand of Rs.2,54,883/- on shortages found during the course of Panchnama is being disputed on the ground that the Panchnama in the appellant s premises had begun at 09.00 hrs in the morning and ended at 11.00 Hrs in the night i.e. after 14 hours. It is his submission that during the entire proceedings, huge stock of fabrics lying in the premises of the appellant could not have been verified and counter-checked to the quantity shown as closing stock in the stock register maintained by the appellant. It is his submission that the stock checking was done in a haphazard manner, overlooking various stock lying in process at various departments of the appellant s factory. It is his submission that the judgment of the Tribunal in the case of Hira Steels Ltd 2006 (206) ELT 783 is a guiding factor and stock checking being defective, demands are not sustainable. It is also his submission that though there is an allegation of shortage, no further investigation has been conducted by the Department for establishing clandestine clearances such as no statements of buyers, movement of money as private record were recovered. It is his submission that the ratio of the decision of the Tribunal in the case of M/s Suzler Processors Ltd - 2013 (293) ELT 258 would be applicable in this case as in that case, the Tribunal, in similar facts & circumstances, has held that when there is application for fixing of annual capacity to discharge duty under compounded levy scheme was pending, the demand of shortages was unacceptable and dropped by the Tribunal. He would submit that the appellant had also filed an application for discharge of duty under compounded levy scheme in May 2001 and subsequent to search, the said application was rejected in October 2001.
(b) As regards the demand of Rs,.15,78,888/- confirmed on the basis of folding report, it is his submission that these demands are also not tenable as there is no evidence in any manner to establish clandestine removal on the part of the appellant. It is his submission that even during the recording of statements of the Director on 21.06.2001, no quantity has been determined and put forth to the Director as clandestinely removed and only on 11.06.2002, a worksheet was prepared and put to the Director as the quantity cleared without payment of duty. It is his submission that the basis on which the worksheet was prepared by the departmental authorities, has not been brought on record nor it is indicated that this information was retrieved during the search. It is his submission that very veracity of the worksheet prepared by the Department and consequential demands raised and confirmed pursuant thereto, is doubtful. It is also his submission that the Department has relied upon the statements recorded during investigation to suggest that there was clandestine removal and accepted by the concerned parties, but Department has failed to appreciate that serious allegations like clandestine removal are to be established by further corroborative evidences. He would rely upon the decision of the Hon'ble High Court of Gujarat in the case of Nissan Thermoware 2011 (266) ELT 45 (Guj), Tejwal Dyestuff Industries 2007 (216) ELT 310. It is also his further submission that the chart shows the allegations of clandestine removal as noted in the worksheet prepared by the Department even if improper as in response to worksheet which was provided with the show cause notice, appellant submitted a list and details of all the invoices/ARE 4, under which the goods were removed and charged by the Department as clandestinely removed. It is also his submission that the appellant had submitted all the copies of relevant documents to the lower authorities, which has been totally ignored. It is his submission that for the demands raised in (a) and (b), general argument is that during the relevant period, the appellant was functioning under compounded levy scheme based upon an application made by him on 11.05.2001 and had relied upon various documents to show that they have discharged the duty liability as per the ascertained production capacity.
(c) As regards the demand of Rs.80,663/-, the said demand is based upon the un-reliable private record and statements of co-accused. It is his submission that the Department has not adduced any tangible or concrete evidence to establish a case of clandestine removal. It is his submission that in any case, it is a settled law that statement of co-accused cannot be blindly relied upon to confirm a demand under the serious charge of clandestine removal.
10. It is his submission that the impugned order be set aside and appeals be allowed.
11. Ld.Departmental Representative, on the other hand, would draw my attention to the Order-in-Original and Order-in-Appeal. It is his submission that the appellant has not made out any case as the shortage which was detected during stock verification is un-contested in as much as the stock have been verified in front of Panchas and the Directors of the appellant company and not before any junior officers of the company. It is his submission that no objection was raised to stock taking during the course of panchnama or during the statements recorded of the directors. The contention that huge stock could not be verified in just 14 hours is totally untenable as no such doubt was raised when the stock taking was undertaken, in the presence of the directors. It is his submission that the Annexure B to the Panchnama clearly indicates that lots were themselves missing and it is not a case of partial shortage of lots and this was accepted by Shri Hiralal J. Parekh in his statement, dt.08.06.2001, specifically indicating that they might have been sold to unknown buyers on cash basis without accounting for the same in statutory records. He would rely upon the decision of the Tribunal in the case of M/s Auora Foam Pvt.Ltd. 2011 (271) ELT 104 (Tri-Del) for the proposition that even no objection was taken during stock taking, the same cannot be objected to at the appellate stage. As regards the illicit removal charge on the appellant for demand of Rs.15,78,888/-, it is his submission that the said demand is raised on the folding report which was found hidden in lump of fabric in the folding department. It is his submission that it is on record that these reports were prepared by the folding contractors of the firm and was admitted in his statement dt.08.06.2001. He would also submit that incriminating documents were recovered from the adjacent folding house premises owned by Shri Hiralal J. Parekh, Director of the main appellant. It is his further submission that one Shri Devichand M. Munot has admitted that MMF without any Central Excise invoices is an indicator that main appellant as engaged in clandestine removal of its goods. It is his submission that Shri Hiralal J. Parekh, in his various statements, had admitted to this fact. It is also his submission that these arguments would apply to the third demand of Rs.80,663/-. As regards the plea of the appellant that they are operating under compounded levy scheme during the date of search, it is his submission that it is undisputed that an application dt.18.05.2001 was made by the appellant to operate under compounded levy scheme to the Commissioner of Central Excise, Ahmedabad. It is his submission that CCE vide an order dt.12.10.2001 has rejected the application for compounded levy on various grounds against which an appeal filed before Hon'ble High Court, but withdrawn by the appellant. It is his submission that as per Rule 96ZZA(ii) of Central Excise Rules, 1944, a manufacturer makes his application to pay the provisional duty as per compounded levy scheme, however, of application is dismissed, then duty will have to be paid on ad-valerom basis and such duty is to be adjusted with the duty already paid provisionally, are the provisions which will apply in this case. It is his submission that the appellant s claim as to the duty was paid under compounded levy in the month of June 2001, is also incorrect as the invoices submitted by the appellant vide letter dt.17.08.2006 before the adjudicating authority also are incorrect as they had themselves during the month of May and June, paid the duty under ad valerom basis. It is his submission that the worksheet prepared on the basis of folding book indicate that the folding of the fabric was done in the month of May 2001, hence the duty liability would arise as during the relevant period, the appellant was not operating under compounded levy scheme. It is his submission that the plea of the appellant that the goods were actually removed under the cover of invoice, is also incorrect as it can be seen that majority of the invoices have been issued subsequent to the date of search i.e. 07.06.2001 and this shows that it is an after-thought on the part of the assessee to show lot numbers in the invoices issued subsequent to the date of search to claim the benefit of illicit clearances.
12. I have considered the submissions made at length by both sides and perused the records. The written submissions filed by both sides during the hearing and post hearing are taken on record and considered by me while arriving at conclusion.
13. The main issue in these cases is whether the main appellant had engaged himself in clandestine removal of the goods during the material period which is as per the show cause notice Annexure B during the period May and June 2001 based upon the folding book recovered.
14. At the outset, I would like to record that entire case can be disposed of based on the factual matrix as below:-
(i) As regards the demand of duty on illicit removal of 26,534 L.Mtrs, wherein an amount of Rs.80,663/- has been confirmed, I find that the purchasers of the materials M/s DCM Fabrics have clearly recorded a statement which clearly indicate that they have received this quantity of fabrics from the appellant without any duty paying documents or under cover of any invoice. It is seen that the said statement of the buyer is not retracted by him, hence in my considered view, appellant has not made out any case for setting aside the demand of Rs.,80,663/-.
(ii) As regards the demand of illicit removal of 5,19,371 and 1,05,993 L.Mtrs found as shortage during stock taking on 07.06.2001, appellant has case in his favour for more than one reason.
Firstly, as noticed from the records that this demand is raised on the basis of folding record in formchits No.14/16/17 pages of the folding book seized under Panchnama and shortages, at the factory premises of the appellant. Though, various statements are recorded indicating therein that the goods were cleared illicitly, on deeper perusal of the records, I find that the said lot numbers which were recorded in the worksheet prepared were properly answered by the appellant when they filed reply to the show cause notice. I find that in one of the lot numbers i.e. 39 mentioned in the worksheet and considered as illicitly removed, was, in fact, removed by the appellant under invoice dt.07.05.2001, 08.05.2001, under ARE4s on payment of duty. The worksheets prepared by the appellant gives clear details as to the invoice number and the amount of duty liability discharged against the lot numbers which were alleged to have been removed clandestinely. I also find that there are various entries in the worksheet attached to the show cause notice which are either overlapping or appearing twice in the said worksheet.
Secondly, I do find that there is no denial of the fact that the main appellant had filed an application on 18.05.2001 to operate under compounded levy scheme with CCE Ahmedabad. The said application on the date of visit was not rejected by the authorities and after visit of the authorities in the factory premises of the appellant, appellant having not received any rejection letter, continued to clear the goods manufactured by them under the compounded levy scheme. It is noticed from the records that the appellant had prepared invoices during the period, clearly indicating therein that they are operating under compounded levy scheme as per the provisions. It cannot be held against the appellant that he having filed an application for paying duty on the ascertained annual production capacity, as per the notification issued under Section 3A of Central Excise Act, 1944 and rules made thereunder, that he had removed the goods clandestinely during the period. The entire worksheet of the Revenue indicate that the productions were done in the month of May, barring few entries, they were done from 11.05.2001 which would fall under the application filed by the appellant on 18.05.2001 indicating to operate under compounded levy scheme. There is no dispute that the main appellant had discharged the Central Excise duty liability after 18.05.2001 under compounded levy scheme and paid the duty liability through PLA. In my considered view, the charge of illicit removal cannot be confirmed against the appellant on this factual matrix, which indicate that the appellant to his subsequent application made on 18.05.2001 has paid the duty under the compounded levy scheme.
Fourthly, I find that both the lower authorities have conveniently dis-regarded this main plea of the appellant before them and have confirmed the demands raised without addressed to the fact that duty liability has been discharged by the appellant after 18.05.2001 under compounded levy scheme. Though the ld.Departmental Representative submits that the said application was rejected by the authorities on 12.10.2001, I find that before rejection of said application, the fact that the appellant was discharging the duty liability on such goods, is not denied. Even if we consider that the Commissioner has rejected the application filed by the appellant to operate under compounded levy scheme, it would not indicate that the clearance of 5,19,371 and 1,05,993 L.Mtrs were illicitly removed in as much as the rejection of the application made by the appellant, at the most, would require re-consideration of value and discharge of duty liability under different headings and it cannot be held that there was clandestine removal of the goods by the appellant. On perusal of records, I find that there is no such allegation in the show cause notice. My this view is fortified by the order of this Bench in the case of Suzler Processors Ltd (supra) wherein it was held as:
4.?The question required to be decided in the present appeal is as to whether the non-maintenance of record by the appellant during the intervening period of filing the application and rejection of the same by the Commissioner, which resulted in shortages of grey fabrics and final product would call for confirmation of duty of Rs. 3,00,020/-. As per the appellant during the said period, they discharged their duty liability under compounded levy scheme, which does not take into consideration each and every clearances and duty is required to be paid on the lump sum basis. There is nothing on record to show that the goods found short were not included in the goods cleared under compounded levy scheme, on which the duty already stand discharged on monthly basis. It is also noticed that the appellants prayers for working under the compounded levy scheme was rejected only in October, 2001. As such in August, 2001, when their factory was visited by the officers, they were working under the compounded levy scheme and were discharging their duty liability accordingly. It is not the Revenue s case that such shortages were not part and parcel of the clearances effected under compounded levy scheme on which duty already stand paid by the appellants. As such, by extending the benefit of doubt to the appellant, we find no justification in separate confirmation of demand of Rs. 3,00,020/-. Accordingly, we set aside the impugned order and allow the appeal filed by the assessee.
15. In view of this, I hold that the demand of duty raised on the appellant on the charge of clandestine removal of 5,19,371 & 1,05,993 L.Mtrs is unsustainable and liable to be set aside and I do so.
16. Now, I take up the issue of imposition of interest and penalties on the appellant. I have already held that the demand of Rs.80,663/- needs to be upheld against the appellant, interest liability on such amount also arise on the appellant, which needs to be discharged.
17. As regards the penalties to be imposed on the main appellant on the amount of Rs.80,663/-, since I have come to conclusion that the appellant is liable to discharge this duty liability, equivalent amount of penalty on the same needs to be imposed on the main appellant and I do so.
18. As regards the penalties imposed on the individuals, I find that though they are considered as instrumental for imposition of penalty under the provisions of Rule 26 of Central Excise Rules, 2002, since I have set aside the major demand, a token penalty of Rs.10,000/- (Rupees Ten Thousands only) each on Shri Hiralal J. Parekh and Shri Devichand M. Munot is imposed.
19. The rest of the impugned order is set aside barring the findings as recorded hereinabove.
20. As I have disposed of all the appeals of the appellants on merit, the Revenue s appeal also stand disposed of.
21. All the appeals are disposed of as indicated hereinabove.
(Pronounced in Court on 18.7.2014)
(M.V. Ravindran)
Member (Judicial)
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