Customs, Excise and Gold Tribunal - Tamil Nadu
Shree Ganesh Steel Re-Rolling Mills ... vs Cce on 12 August, 1999
Equivalent citations: 2000(90)ECR742(TRI.-CHENNAI)
ORDER V.K. Ashtana, Member (T)
1. In these two appeals against Order-in-Original No. 1/98 dated 19.1.1998 disallowing Modvat credit of Rs. 50,28,813/-and duty of Rs. 12,35,889/- + Rs. 6,45,300/- and penalty of Rs. 7.5 lakhs is confirmed on appellant company. Penalty of Rs. 50,000/- on Shri Ashok Saraf, its. Managing Director was also imposed. The period involved is April, 1994 to September, 1994 and show cause notice was issued on 12.4.1996.
2. Heard Shri G.L. Rawal, Ld. Advocate assisted by Shri S. Murugappan, Ld. Advocate for appellants and Shri S. Sankaravadivelu, Ld. DR & Shri S. Kannan, Ld. DR.
3. Briefly, the issues involved are:
3.1. Alleged Modvat credit taken without receipt (or by wrongly describing) goods as 'Ribbed Bars'.
3.2. Duty on 849.846 MTs of MS Squares found short; and 3.3. 692.620 MTs of Re-melting scrap cleared without duty payment in March 1994.
4. Ld. Advocate submits that these allegations are a sequel to visit of Central Excise Officers to appellants factory on 8.9.1994 and recording of statements of appellants' 6 job workers as follows:
1) Bhagavandoss Metals Statement from its Managing Director Mr. Murilal Sonthalia on 8.9.1994 & 10.11.1994.
2) Kanisk Steel Industries Statement from its Director Mr. K.S. Ganesh on 15.9.1994, 1.10.1994 & 14.11.1994.
3) United Metal Industries Limited Statement by its Managing Partner Mr. R.G. Goel on 1.10.1994 & 16.11.1994.
4) Garg Steels & Alloys Pvt. Ltd.
Statement by its Managing Director Mr. Ujwal Garg on 3.10.1994 & 10.11.1994
5) Goyal Ispat Pvt. Ltd.
Statement by its Managing Director Mr. D. Goel on 3.10.1994 & 8.11.1994.
6) National Engineering & Co.
Statement from its General Manager Mr. J.B. Gupta on 2.10.1994 & 10.11.1994.
(i) Statements from the M.D. taken on 30.9.1994 & 18.1.1995.
(ii) Statement of M.D. given on 13.9.1994 retracted on 1.10.1994.
(iii) Statement from Mr. A. Chellappa (C. Gunasekar) the transporters taken on 7.11.1994.
5. Ld. Advocate further submits that during original adjudication proceedings, the following were cross examined:
Mr. Muralilal Santhalia of M/s. Bhagawandoss Metals, Mr. K.S. Ganesh of M/s. Kanisk Steels, Mr. R.S.C. Goel of M/s. United Metal Industries, Mr. Ujwal Garg of M/s. Garg Steels & Alloys Pvt. Ltd., Mr. E.D. Goyal of M/s. Goyal Ispat and Mr. J.P. Gupta of M/s. National Engineering Co. In addition to above C. Gunasekar, the Transporter, G. Srinivasan, Superintendent of Central Excise, Mr. Lawrence & B. Swaminathan both Inspectors of Central Excise.
6. Ld. Advocate submits that appellants are manufacturers of CTD Bars (re-rolled products), MS Rounds/Angles, M.S. Channels and MS Square Semis. Waste & Scrap arises in this process. These were mainly sold to PSU/State Govt. units like, Tamil Nadu Steels Ltd. & Vishakhapatnam Steel Plant (of M/s. SAIL) or to consumers indicated by them.
7. They use the following raw-materials on which Modvat credit is availed:
(i) MS Ingots
(ii) MS Billets
(iii) MS Ribbed Bars (for conversion to CTD Bars) and
(iv) Rerollable waste & scrap.
8. In view of shortage of production capacity, appellants sent some of these raw materials to job workers under Rule 57F(l)(ii) for conversion, more particularly into MS Ribbed Bars. These, on receipt, are converted into CTD Bars, after availing Modvat credit on Ribbed Bars.
9. Ld. Advocate further submits that the allegations at 3.1 above are consisting of sub-allegations as follows:
(a) Removal of 2055.845 MTs of Finished goods.
(i) 1099.480 MTs. consisting of 417.150 MTs. of CTD Bars and 682.330 MTs. of Angles & Channels directly despatched without receipt in the appellants factory.
(ii) only 400.930 MTs consisting of 69.160 MTs of CTD Bars & 331.775 MTs of Angles & Channels received into the Appellants factory.
(iii) 50.285 MTs of Angles sent to M/s. Steel Mould by M/s. United Metal Industries.
(iv) 505.145 MTs of Finished Goods consisting 289.950 MTs of CTD Bars and 215.195 MTs of MS Angles supplied during 2nd week of October by the job workers, though invoices made earlier.
(b) 1003.120 MTs of finished goods retained by the job workers.
Total Quantity : 3058.965 MTs.
10. Ld. Advocate submits that with respect to the charge of wrong availment of modvat credit as to what was received was not ribbed bars but CTD bars as also that remaining goods were retained by the job workers, the duty on both CTD & ribbed bars is on ad valorem basis and the two products carry different rates. Admittedly, the job workers have paid duty on ribbed bars and not on CTD Bars. Since these job workers have not been charged for wrong payment of duty by the show cause notice in either of these proceedings or separate proceedings, therefore, it is clear that department had no evidence to charge that these job workers had made CTD Bars instead of ribbed bars. If they had produced CTD bars, then differential duty between duty paid on ribbed bars and the higher duty due on CTD bars should have been demanded and penalty imposed on them for misdeclaration. The department is silent on this aspect.
11. Ld. Advocate further submits that even on 8.9.1994 when Central Excise Officers were present in the appellants factory for investigations, 4 or 5 trucks were received containing materials sent after conversion by these job workers. Therefore, had these materials been other than the ribbed bars as described in Central Excise documents, the Officers would have immediately seized the same. However, there is no such discrepancy on record found on that day with respect to the materials physically available in the appellants factory on trucks which had come from the job workers. He submits that this is a clear proof of the fact that what was received was ribbed bars and not CTD bars.
12. He further submits that the major portion of the CTD bars from their unit out of ribbed bars received from the job workers, was sold to M/s. Tamil Nadu Steels which is a Government unit. Tamil Nadu Steels take modvat credit on invoices issued by the appellants. This pre-supposes two inconsistencies in the department's case as follows:
(a) Since the recipient unit was a Govt. Unit, there was no logical reason as to why it should agree to receive the CTD bars from the job workers directly as alleged by the department and yet take credit on invoices issued by the appellant company for the same quantity.
(b) If M/s. Tamil Nadu Steels had actually received CTD bars from the job workers, then invoices issued by the appellants would be bogus and since Tamil Nadu Steels have taken modvat credit on the basis of these invoices, therefore the modvat credit taken by them was also illegal. However, the department has not issued any notice to Tamil Nadu Steels, alleging such irregularity.
13. Ld. Advocate submits that the department has alleged that since the truck numbers in invoices issued by the job workers for ribbed bars consigned to the appellants as well as in the invoices issued by the appellants to M/s. Tamil Nadu Steels etc. are same, therefore, the goods were directly delivered from job workers to M/s. Tamil Nadu Steels and invoices issued by appellants were bogus. Ld. Advocate submits that this fact has a very simple explanation to the contrary. In order to save time and costs relating to procurement of Vehicles, it had been so arranged by the appellants that after the vehicles which brought in ribbed bars into the appellants premises was empty, same vehicle was used for loading CTD bars which were then despatched to Tamil Nadu Steels. This arrangement worked to the advantage of both the transport operators as well as appellants in as much as that appellants did not have to look for other vehicles, and the transport operators did not have to run lorries empty till they got some other consignment.
14. Ld. Advocate further submits that whereas the department's case is merely based on oral evidence, more particularly, the statements of these job workers noted above, the appellants defence is basically on the strength of documentary evidence i.e. the following:
(a) permission taken for despatch of raw materials under Rule 57F(l)(ii).
(b) the receipt of ribbed bars under regular Central Excise Invoices issued by the job workers on payment of duty.
(c) the accountal thereof in their RG 23A-Part-I and credit thereof in their RG 23A Part-II accounts and
(d) clearance thereof as recorded in their RG 1 Register as well as Central Excise Invoices for CTD bars.
15. Ld. Advocate submits that whereas on the one hand the entire documentary evidence is in their favour, on the other hand while the appellants have retracted their own statement effectively, the job workers have deposed both in their statements as well as on cross-examination inconsistently as follows:
(I) Statement of Muralilal Santhalia of Bhagavandoss Metals Two Statements recorded on 8.9.1994 and 10.11.1994 only the second statement was used in the notice. In the second statement 378.925 MTs of CTD Bars reported to be retained. 1st statement is silent on this.
(II) Statement of Ganesh of Kanisk Steel Industries Three statements recorded on 15.9.1994,1.10.1994 & 14.11.1994.
As per 1st statement goods supplied all CTD bars.
As per 2nd Statement Angles 187.595 MTs
Channels 82.045 MTs
CTD Bars 626.850 MTs
As per the 3rd statement, 429.785 MTs of channels supplied and 136.915 MTs of CTD bar supplied balance quantity of 331.700 MTs of CTD Bars retained.
During Cross-examination stated that goods were supplied as per documents.
(III) Statement of J.B. Gupta of National Engg. Co.
Two statements on 3.10.1994 & 10.11.1994 In the statement given on 3.10.1994 no mention about retention of goods made.
(IV) Statement of R.S.C. Goyal of M/s. United Metal Industries.
Two statements were recorded on 1.10.1994 & 16.11.1994 only the 2nd statement was relied upon.
First statement is silent regarding retention of part of the goods.
(V) Statement of Ujwal Garg of M/s. Garg Steels & Alloys.
Two statements were made on 3.10.1994 & 10.11.1994.
In the second statement there is no mention that 289.950 MTs of CTD Bars were supplied in second fortnight of October 1994.
(VI) Statement of G.D. Goel of M/s. Goyal Ispat.
Two statements were recorded on 3.10.1994 & 8.11.1994 The 1st statement is silent regarding late removal of 215.125 MTs of Angles.
He submits that since all documents are in their favour and these oral evidence are inconsistent, therefore clearly the balance of convenience lies in favour of the appellants.
16. Ld. Advocate further submitted that in any case it is hard to see as to how the Revenue has lost any duty. This is because the job workers have paid duty on ribbed bars, credit on which were taken by the appellants. Appellants have paid duty on CTD bars with value addition (higher duty), credit thereof has been taken by the recipient M/s. Tamil Nadu Steels etc. Therefore, the entire transactions have been under the modvat scheme. Even if the allegations that CTD Bars were directly removed to M/s. Tamil Nadu Steels is considered, since duties paid and credit taken at all stages, duly reflecting the value addition, and this duty is on ad valorem basis, therefore where is the loss of Revenue?
17. Learned Advocate further submits that while, on the one hand, the department notes that 1,27,000/- units of electricity has been consumed by the appellants, on the other hand, it does not explain that if the appellants had not manufactured CTD bars, then how they had consumed such huge quantities of electricity, paid salaries to about 250 workers and also debiting extra Central Excise duty amounting to over 300 per MT. These are substantial expenditure which logically flow from the allegations of the Revenue and to which Revenue has no answer.
18. With respect to 1003.12 MTs of alleged finished goods retained by the job workers themselves, Ld. advocate submits that firstly, there is no documentary evidence led by Revenue to substantiate this allegation. Secondly, if what was retained by the job workers was ribbed bars (on payment of duty), then why were M/s. Tamil Nadu Steels not charged for taking credit on the CTD bars as per the appellants invoices when these goods were not received by them? Thirdly, if the goods retained were CTD bars, and the job workers had paid duty only as Ribbed bars, then why they were not charged for evading duty? Since Revenue has no answers to these, therefore the allegations are totally unsubstantiated.
19. With respect to the allegation regarding shortage of M.S. semis squares, Ld. Advocate submits that as can be seen from page 169 of the paper book 400 MTs of the inputs for this was issued as recorded under Form-IV and 333 MTs were manufactured and cleared on payment of duty, the rest being in balance.
20. With respect to charge of clearance of remelting scrap without payment of duty in March 1994, Ld. Advocate submitted that while it is true that no duty was paid on the removal of these scrap, same was done under the bona fide belief that cutting of tubes by gas does not attract any duty. Furthermore, no modvat was taken on these tubes. Thirdly, the entire raw materials were shown in Form IV Register. Therefore, there was no intention to suppress or conceal anything and hence demand thereon was totally time barred. He further submits that the said scrap was sent to M/s. Jaya Bhavani Steels for job work and therefore even if duty had been paid thereon, M/s. Jai Bhavani Steels would have taken modvat credit and so there was no loss of Revenue. He further submits that para 74 of the order-in-original acknowledges the accoutal in Form IV as claimed above.
21. With respect to the cross examination of the 6 witnesses and the statements recorded, he submits that as noted above these statements vary from time to time. He further submits that appellants own statement dt. 30.9.1994 was retracted by him the very next day vide their Registered post/AD letter dt. 1.10.1994. He submits that in para 43 of the order impugned_,Ld. adjudicating authority has not accepted this retraction on the grounds that there is no proof that such retraction letter was received. To this, Ld. Advocate submits that after appellants signature the words "UP" have always been appended which means that the statement was taken 'Under Pressure'. Further, with respect to cross examination of one Shri Srinivasan, Superintendent, he submits that it reveals that officers visited between 11.30 a.m. and 4 p.m. the appellants unit. He further submits that their request for allowing to examine X.T. 1 diary of the said Superintendent was not allowed by the Ld. original authority. He further submits that this was also elucidated that the statement of Shri Murarilal Sonthaliya of M/s. Bhagvandoss Metals was recorded between 6.00 & 8.00 p.m. on 8.9.1994. However, at this time, 5 trucks had come from the same company to the appellants premises. Since Shri Murarilal statement was being recorded at that time, how he could have sent these ribbed bars? Therefore, the statement recorded is not reliable. He further submitted that before appellants statement dt. 18.1.1995 was recorded, the factory was seized in December 1994 and the Department have written letters to Steel Authority of India and Tamil Nadu Steels Ltd. etc. to put pressure on the appellants and therefore the statement dt. 18.1.1995 was taken under pressure and is not voluntary.
22. Ld. Advocate summed-up in conclusion to the effect that there was no loss to Revenue. Revenue had not explained their electricity consumption; that they were made to deposit Rs. 30 lakhs initially under pressure on 12.12.1994 and the very next day, after depositing the said amounts, the seizure of imported goods was lifted. He submitted that in the case of Arpee Industries v. CCE as in it has been held that documentary evidence supersedes the questionable oral evidence. In this case, this was truly the facts with this case. He further submitted that it has been held that when statements are found to be incorrect that should be disregarded as is held in in the case of Arjunlal Mishra v. UOI He further submits that in the case of Mannidra Chandradey v. CEGAT as in , it was held that burden was on the department to show that the statement was recorded voluntarily. He further submits that while the last investigation was carried on on 16.11.1994, the show cause notice was issued on 12.4.1996 i.e. after a period of 1 year, 5 months and 27 days. In the case of Pioneer Alloys as in such delays have been found to be fatal. He also cites the case of S.D. Ketnex Industries v. CCE as in and Ambalal v. UOI as in . The totality of these submissions, prays Ld. advocate, is that the allegations in the show cause notice have not been proved beyond doubt and therefore the impugned order needs to be set aside.
23. Ld. DRs submit that:
(a) The appellants were manufacturing documents rather than goods as is evident by the statements of the job workers, the statement of the Managing Director Shri Ashok Saraf, documents pertaining to appellants' own weigh bridge, the electricity consumption and the evidence of the transporters.
(b) Some of the job workers were charged with abatement in the show cause notice. They admitted their collusion and have gone in settlement under Kar Vivad Scheme. The statements given by the job workers are consistent.
(c) As far as departmental action against Tamil Nadu Steels Ltd. is concerned that is an independent action and has no relation with this issue as has been held in para-36 onwards of the order-in-original.
(d) as has been recorded in para 38 of the order impugned weighment slips shows the discrepancies of CTD bars.
(e) it is revealed from the records of the cross examination at page 192 of the paper book that the conversion charges received by the job workers were from billets to CTD bars and not ribbed bars.
(f) there is no evidence of posting letter dt. 1.10.1984 which alleged to be the retraction of the statement of Shri Sharaf as can be seen from para 43 of the order-in-original.
(g) the findings in para 46 of the order-in-original that transporters were made to issue fictitious bills covering the transport from the job workers to the appellants factory has not been effectively met by the appellants.
(h) the additional evidence regarding the electricity consumption experiment should not be given any value because the said experiment was taken unilaterally by the appellants as can be seen (in) para 59 of the order-in-original.
(i) with respect to the MS semis squares, Ld. DRs reiterated the findings in para 72 of the order-in-original.
(j) with respect to the charge of removal of re-melting scrap without payment of duty, they reiterated para 73 onwards of the order impugned.
24.Therefore, Ld. DRs submitted that the extended period would be applicable in this case as clandestine removal has been proved and in this connection, they reiterated para 74 of the order-in-original.
25. Ld. Advocate Shri Rawal rebuts as follows:
(a) there is no evidence that any transporter has said that they have transported CTD bars from job workers to Tamil Nadu Steels in the statement dt. 6.9.1994. There was nothing outstanding as Rs. 6 lakhs was given to the transporter in advance by the appellants which fact is also confirmed in the cross examination.
(b) Rule 571 does not overreach the provisions of Section 11A and since there was no intention to evade duty the larger period was not available.
(c) He again stressed the delay in issue of show cause notice and cites the case of Mansaram v. S.P. Pathak as in 1984 (1) SC and Bhagwandas S. Tolani v. B.C. Aggarwal & Others as in as well as Bhagsons Paint Industries as in .
26. We have carefully considered these submissions and the records of the case and are of the considered view that the department has not been able to show that a preponderance of probability emerges out of the evidences on record towards establishing the allegations. Instead, we are inclined to extend the benefit of doubt and in some cases that of limitation for the reasons given below except on the charge of shortage of semi-squares:
(1) With respect to the allegations of availing modvat credit wrongly on Ribbed Bars received from Job workers (not received as per SCN), we find that the impugned order has not projected a clear-cut picture of what was the modus operandi and why it was employed by the appellants. The department's case is that the job workers manufactured CTD bars and not ribbed bars, cleared them directly to the buyers, or retained ribbed bars with themselves. This is sought to be supported by statements of job workers, the statement of M.D. Shri Saraf and the similar truck numbers on invoices of appellant as those in invoices of job workers. As against this, appellants plead that Shri Saraf retracted his statement the very next day, that depositions of other witnesses were inconsistent and sometimes even contradictory, that all statutory documents supplemented their defence and that therefore the oral evidences should be discarded in favour of documentary evidence. While these rival submissions have their own respective values, we find that what tilts the balance of convenience in favour of the appellants are the following:
(a) During the visit of Central Excise Officers, 4 or 5 trucks had arrived from a job worker with documents showing ribbed bars, yet there is no charge that such substantial quantity of goods were inspected on the spot and found to be not ribbed bars. When a team of experienced Revenue Officers is investigating in the factory, and a number of vehicles enter with the goods under dispute under investigation at that very time, their normal reaction would be to immediately physically check description thereof as it would amount to the discovery of the 'corpus delecti' itself-clean, primary evidence. That there is no charge on these consignments, would normally lead us to conclude that the preponderance of probability was that the goods received were in fact ribbed bars. Hence, no seizure or charge on them. Revenue has not been able to explain this at all before us.
(b) Appellants argue that there is no loss of revenue. The buyers only wanted CTD bars and they were entitled to Modvat Credit thereon as per duty paid. If appellants took credit of duty on ribbed bars, they debited far higher duty per MT on CTD bars in view of value addition. Even if the job workers cleared CTD bars, then also same duty was payable. So where was the scope for duty evasion? There is no convincing reply to this in the orders impugned. Since both Tamilnadu Steels & Vishakhapatnam Steel Plant of SAIL are PSUs, it is not even alleged that there was any flow-back of cash to the appellants. Therefore, we do not get any satisfactory answer to the question: "What was the motive?". If, as Ld. DR has submitted, appellants manufactured documents and not goods, then there is no clear and convincing answer to the question : Why?
(c) Since PSUs were the main buyers, therefore if they colluded with appellants to receive CTD bars directly from job workers and received the invoice on them from appellants separately, then why were they not charged for abetment and penalised under the law? In fact, these consignments allegedly received by Tamil Nadu Steels (for alleged CTD bars) would be without payment of duty (as job workers paid duty only on ribbed bars) and hence would be liable to confiscation. During the visit of officers to factory and thereafter too, deliveries to Tamil Nadu Steels continued. Yet department could neither intercept nor find in premises of Tamil Nadu Steels etc., and seize any offending goods. The total absence of any charge on goods and/or Tamil Nadu Steels is, we find, quite inexplicable, and hence fatal to the establishment of the charge.
(d) Furthermore, if the job workers had retained goods on which they (and the appellants) had paid duties, then the job workers were guilty of retaining duty paid material in their factory. If they had cleared them to other buyers, then department should have led evidence to show to whom they were cleared. The department has not charged the job workers for retention of duty paid goods though they have been penalised under Rule 173Q. Neither have they led any evidence of sale thereof to others (than Tamil Nadu Steels). Thirdly, why should Tamil Nadu Steels, a Government controlled unit, pay the appellants for goods they never received, because the quantum of duty credit taken by them would be much lower than the value of the goods. Therefore, why should they enter into an arrangement which involves financial loss? How were they compensated and by whom? There are no answers on record to these vital issues.
(e) The officers last visited the appellants unit and completed most of the basic investigations on 16.11.1999 (sic) and further detailed investigations were initiated. Yet the SCN was issued on 12.4.1996, after a period of 1 Year, 5 Months and 27 days. Thus despite availability of abundant time, none of these issues have been clarified.
(f) While appellants did manufacture other types of goods in their unit, CTD bars was their major product in terms of comparative volumes and values. Therefore, it was incumbent upon the department to show that even though no CTD bars were manufactured by them (as alleged), yet the quantities of other goods produced, could have involved the consumption of a huge quantity of 1,27,000 units of electricity. Since their case is mainly based on corroborative evidence, the burden of giving a reasonable answer on this aspect was clearly on the department and we find that this has not been discharged.
(g) Furthermore, if the major product is to be held not manufactured, then there should have been convincing answers to the appellants' submission that why should they incur the significant expenditure of Rs. 300/MT conversion charges to job workers as also the huge establishment of hundreds of workers etc. When a case is based mainly on corroborative evidences, then such loose ends are fatal deficiencies.
(2) With respect to the allegations regarding shortage of semis-squares, the order-in-original has held as under:
70.0 As regards the shortage of 849.846 MTs. of SQUARE SEMIS which is an intermediate product arising during the process of manufacture of finished goods in the premises of the noticee, and alleged in the show cause notice, it is pleaded that 400MTs. had been issued for manufacturer of ROUNDS on 1/3, 13/3 and 15.3.1994 but were not suitably deducted in form IV register. It is further pleaded that the remaining 449.486 MTs. [apparently, a mistake for 449.846 MT] was actually available in stock on that day. They have found fault with the manner of Stock taking/verification conducted by the officer on 6.10.1994. They have observed that the said officer had deposed during Cross-examination that verification was done only by visual inspection and estimation, without any scientific means of estimation. They highlight that the officer did not even remember the type of scale used by him.
71.0 Thus, interestingly, the noticee themselves admit omission to account for 400 MTs of SQUARE SEMIS in form IV. Their present plea that it had been issued for production of ROUNDS on 1/3, 13/3 and 15.3.1994, is a belated attempt to cover the shortage, which was not disputed either at the time of stock taking, or at the time of subsequent statement by the Managing Director of the factory. As for the remaining 449.846 MTs., the STOCK TAKING REPORT, 1994, filed by Shri P.N. Swaminathan, Inspector reveals that the balance of SQUARE SEMIS was NIL. The report also contains details of stock in record, floor, etc. of other goods such as MS ANGLE, MS CHANNELS, etc. Even if a lapse could have occurred on the part of stock taking officer, in estimating the goods without a scientific basis and without proper scale, and based on eye estimation, there cannot be an error in estimation of a product whose balance on floor was NIL. There can be a difference in weight in other goods, but NOT in the impugned goods whose balance in stock was NIL. The said stock taking report has been duly countersigned by Shri K.S. Ravikumar, Authorised Signatory of the noticee. Even if the departmental officer could have missed out noticing certain quantum of said goods, the same could have been brought to his notice by the authorised representative, or subsequently by Shri Ashok Saraf, Managing Director of the noticee, Co. or at least later on at the first available opportunity without waiting for issue of the subject show cause notice. Therefore, there cannot be any doubt about the shortage and hence non availability of Square Semis as on the date of Stock Taking viz., 6.10.1994.
72.0 This is further strengthened by the two statements furnished by noticee to the department. They have furnished a statement dt. 24.9.1994 of Central Excise Stock as on 21.9.1994, wherein MS SQUARE SEMIS is indicated as only 109.550 MTs. Similarly, they had also filed a statement on 18.10.1994 showing the production and clearance of MS SEMIS AND SQUARES manufactured from 1.1.1994 to 7.9.1994. The Closing Balance is shown therein consistently from June, 1994 as 109.550 MTs, while the actual balance has been consistently 959.359. It is clear from these statements that they did not have even till 7.9.1994, more than 109.550 MTs of MS SQUARE SEMIS. No other evidence has been produced to indicate further manufacture of MS SQUARE SEMIS to increase the stock to 449.846 MTs.
We find great logic in these observations, particularly because against this, appellants argue that manner of stock taking was only through estimation. When the stock taking report shows "Nil" balance of this item, then obviously, there is no question of any estimation! We cannot but accept this logical conclusion. Appellants have not challenged this stock taking report with any evidence to the contrary before us. Therefore, we find that duty on this shortage is to be confirmed and appellants are liable for penal action thereon. The order impugned has not bifurcated the duties confirmed, but as per the SCN, it is alleged to be Rs. 12,35,889/-. Therefore, this is liable for confirmation.
(3) With regard to the allegation of removal of remelting scrap of 629.615 MTs, we are of the considered opinion that the demand is time-barred for the reasons discussed below. The appellants have accepted these clearances without duty, but have pleaded that it was due to bona fide belief, as the scrap arose out of cutting of imported duty paid scrap. Mere cutting of scrap does not result in manufacture of scrap, as the imported scrap remains scrap. This bona fide belief was further strengthened as an audit objection on this issue was closed in view of their submissions. We find that as against this, it is not disputed that these removals were duly accounted for in the appellants' records. Therefore, intention to evade duty is a questionable proposition. This intention not being there is further proved by the fact that this transaction was Revenue neutral because entire scrap was sent for conversion to ingots. Therefore, duty paid (if paid) by the appellants would have been available as Modvat credit to the Ingot producers. As noted earlier, the show cause notice has been issued after almost 1 year and six months from detection of offences. We find that department could have issued a notice on this aspect separately within 6 months period, as this charge is not linked in any way with the other charges. Hence, it is our considered opinion that there is no suppression with intent to evade established in this charge and therefore the demand is time-barred.
(4) Ld. DR has submitted that Job Workers have settled the matter of penalties imposed on them under the Kar Vivad Samadhan Scheme, and have hence accepted their involvement. That scheme was a unique scheme designed for a unique purpose and any settlement therein was not purely an adjudication/appellate order on merits. Other considerations like cost-effectiveness of proceeding with the litigation would also have weighed in their minds. Therefore, we are unable to accept this contention that mens rea flows, ipso facto, out of a settlement under KVS scheme.
27. In view of the aforesaid findings, we modify the order impugned as follows:
(1) The demand for duty of Rs. 12,35,889/- (Rupees Twelve Lakhs Thirty Five Thousand Eight Hundred and Eighty Nine only) on shortage of MS Square Semis is confirmed.
(2) The demand of duty of Rs. 50,26,813/- (Rupees Fifty Lakhs Twenty Six Thousand Eight Hundred and Thirteen only) is set aside.
(3) The demand of duty of Rs. 6,45,300/- (Rupees Six Lakhs Forty five Thousand and Three Hundred only) is set aside.
(4) Since the demands on above major issues are set aside, and there is nothing on record to prove direct involvement of Shri Ashok Saraf, Managing Director in shortages established, therefore, penalty of Rs. 50,000/- (Rupees Fifty Thousand only) on him is set aside.
(5) Penalty on appellants is reduced from Rs. 7,50,000/- to Rs. 60,000/-(Rupees Sixty Thousand only) as it is imposable only on shortages produced.
28. Shri Ashok Saraf's appeal is accordingly allowed and appellant company's appeal is partially allowed accordingly with consequential relief as per law.
(Pronounced in open court 12.8.1999).