Custom, Excise & Service Tax Tribunal
M/S. Riba Textiles Ltd vs Commissioner Of Central Excise on 27 October, 2015
IN THE CUSTOMS, EXCISE AND SERVICE TAX
APPELLATE TRIBUNAL, NEW DELHI
PRINCIPAL BENCH, COURT NO. II
Excise Appeal No. 2564-2565 & 3287-3288 of 2006
[Arising out of Order-in-Original No. 172 /Commr(AH)/ /2005 dated 31.10.2005 passed by the Commissioner of Central Excise (Adjn), Mumbai ].
For approval and signature:
Hon'ble Shri Ashok Jindal, Member (Judicial)
Hon'ble Shri B. Ravichandran, Member (Technical)
1
Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
2
Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
3
Whether Their Lordships wish to see the fair copy of the Order?
4
Whether Order is to be circulated to the Departmental authorities?
M/s. Riba Textiles Ltd. Appellants
Shri Ravinder Garg
Vs.
Commissioner of Central Excise Respondent
& ST, Rohtak Appearance:
Shri Bipin Garg, Advocate for the Appellants
Shri Ranjan Khanna, DR for the Respondent
CORAM:
Hon'ble Shri Ashok Jindal, Member (Judicial)
Hon'ble Mr. B Ravichandran, Member (Technical)
Date of Hearing : 15.09.2015
Date of decision : 27.10.2015
FINAL ORDER NO. 53262-53265 /2015-EX(DB)
Per Ashok Jindal:
The appellant M/s. Riba Textiles Ltd. ( hereinafter referred to as RTL) is in appeal against the impugned orders demanding duty along with interest and imposing penalty and Shri Ravinder Garg, Managing Director of RTL is in appeal against the impugned orders imposing penalty on him.
2. As the issue is common, therefore, all the appeals are disposed off by a common order.
3.. The brief facts of the case are that M/s. RTL is a 100% EOU and was engaged in manufacturing of terry towels. M/s. Aryama Polyester Ltd. (in short APL) and M/s. Sarla Polyester Ltd. (SPL) are the manufacturer of polyester texturised yarn (PTY) and Polyester filament yarn (PFY). Both are 100% EOU.
3. An intelligence was received that some 100% EOU were diverting the imported POY and PTY drawn out of POY without payment of duty by fabricating records to show that goods were transferred under AR 3A against CT 3 form from one 100% EOU to another. The information also indicated that the units purportedly receiving the yarn were engaged in the manufacture of 100% cotton goods and use only cotton yarn for manufacture of goods but were falsely showing consumption of PTY/PFY. In these set of facts, the factory premises of M/s. RTL, APL and STL were searched. Certain documents were recovered and the statements of various persons were recorded. On the basis of these documents and statements, show cause notices were issued to M/s. RTL, M/s. APL and M/s. STL to recover Central Excise duty on diverted PTY/PFY jointly and severely along with interest and imposition of penalty and penalties on other co-noticees. It was also alleged that it was a well-planned conspiracy to defraud revenue by M/s. RTL, M/s. APL and M/s. STL. As M/s. RTL would get CT 3 certificates issued for procurement of PTY/PFY, the CT 3 would be used by SPL and APL to clear PTY/PFY under AR 3A, the yarn would not be brought to M/s. RTL but would instead diverted to the local market at Bhiwandi , RTL would further rearrange re-warehousing certificate on AR-3As which was produced to Central Excise authorities in-charge of M/s. APL, M/s. SPL as evidence of receipt of goods in the factory of M/s. RTL. It was also alleged in the show cause notice that M/s. RTL did not require and did not use PTY/PFY in the manufacture of terry towel which was wholly manufactured out of cotton yarn and it was also alleged that they were not authorized to procure PTY/PFY. The show cause notices were adjudicated and duty was demanded from M/s. RTL along with interest and penalties were imposed on M/s. RTL, Shri Ravindra Garg and other co-noticees namely M/s. APL, M/s. SPL, Shri K K Jhunjhunwala, Managing Director of M/s. SPL, Shri Sushil Deora, Marketing Incharge of M/s. SPL, Shri Arun S Gupta, Shri Rajkumar J Somani of M/s. APL, Shri Shyam Bihani, Ex-Chairman of M/s. APL, Shri Usman Noble and Shri V M Patel, Directors of M/s. APL. Aggrieved from the said orders, M/s. RTL and Shri Ravindra Garg, MD of M/s. RTL are in appeals before us.
4. Learned Counsel appearing on behalf of the appellants submits that relied upon documents /non relied upon documents were not supplied to the appellants. Therefore, the appellants could not reply properly in the absence of the above documents. The appellants were not able to defend their cases before the adjudicating authority in proper manner and hence they did not appear for hearing, therefore the impugned orders are in violation of principles of natural justice and pleaded that on this sole ground, the impugned orders are required to be set aside. He further submits that the appellants were manufacturers of 100% cotton terry towels and procuring PTY/ PFY for manufacturing of borders of terry towels as per the purchase orders. They were availing benefit of notification No. 1/95 CE dated 4.1.1995. Therefore, for procuring PTY / PFY without payment of duty after procuring CT-3 certificate from Range office, the goods namely PTY/PFY were purchased from M/s. APL and M/s. SPL which are 100% EOU under the cover of AR 3A. After receiving the goods in their factory, intimation along with AR 3 A were given to the Circle office who after verifying the receipt of goods on AR 3A as proof of the receipt of goods in warehousing under bond and thereafter, the same were entered in raw material register under the signature of Circle officer. The appellants have maintained all required records and filed RT 11 returns regularly. The appellants had submitted all the documents relating to the supply of PTY/PFY from M/s. APL and M/s, SPL. He further submits that the appellants had filed a detailed chart showing the export of 4,05,353.3 Kg. Towels with border and 25,821.070 Kg. towels without border. The required quantity of PTY/PFY received by the appellants during the period August, 1995 to April, 1996 and during the period 1.11.1995 to 31.5.1998 , the appellants has (exported total quantity of approx. 725 MT of towels out of which 405 MT exported with border which contains PTY /PFY and the remaining quantity was without border in which no PTY/PFY was used. A search was conducted in this case in the premises of the suppliers on 17.7.1998 and 23.7.1998. Thereafter, in follow up action, the appellants factory was visited on 11.9.1998. Records were resumed from the factory of the appellants but no discrepancy was found therein. At the time of visit of the factory of the appellants, 300 Kgs PFY was lying in the factory whereas the case of the Revenue is that appellant had never received used PTY /PFY to manufacture the cotton terry towel. Moreover, the case of the Revenue is that PTY /PFY is not even the raw material for the appellants to manufacture their final product. The case of the Revenue is based on oral submissions of various people i.e. supplier and the transporter, but no corroborative evidence to prove non-receipt of goods have been produced. He further submits that the show cause notices were handed over to their employee Shri Sushil Verma and got the acknowledgement showing that he has also received the RUDs but only few documents were supplied. Immediately, on receipt of show cause notices, the appellants wrote letter to the department for providing copies of the remaining documents. But, no such documents were provided to the appellants and for the first time these documents were provided to the appellants on the direction of this Tribunal in the Court itself and copy of some of the documents are not still provided till date. If all the documents were provided to the appellants in that case, the appellants would like to cross examine all the witnesses whose statements have been relied upon for issuance of show cause notices. He further submits that appellants have been able to prove the usage of PTY/PFY on the basis of market survey that terry towel is having border of PTY/PFY which is also known as 100% cotton towel. The appellant has also collected sample towel of PTY/PFY border with a label 100% cotton. Therefore, the fact of use of PTY/PFY to manufacture 100% cotton towel stand proved and Revenue has not come with any evidence, if the goods in question (i.e. PTY/PFY ) which have been diverted and not received by the appellants, then from where the appellants have procured the PTY /PFY to manufacture the export goods. In these circumstances, he prayed that impugned order is to be set aside and appeals be allowed. In support of their contention, he relied on the decision of Arya Fibres Pvt. Ltd. vs. CCE, Ahmadabad II reported as [2014 (311) ELT 529 (Tri-Ahmd)]. He also relied on the following case laws :-
1. CCE, & ST vs. Nissan Thermoware P Ltd.
[2011 (266) ELT 45 (Guj)]
2. CCE, Thane II vs. Seven Seas Corporation [2010 (259) ELT 652 (Bom)]
3. Varun Dyes & Chemicals Pvt. Ltd. vs. CCE, Surat II [2007 (218) ELT 420 (Tri-Ahmd)]
4. Kothari Filaments vs. CC (Port) Kol [2009 (233) ELT 289 (SC)]
5. Tribhuvandas Bhimji Zaveri vs. CCE [1997 (92) ELT 467 (SC)]
6. PGO Processors (P) Ld. Vs. CCE [2000 (122) ELT 26 (Raj)]
7. Basudev Garg vs. CC [2013 (294) ELT 353 (Del)]
5. He also relied on the CBEC circular No. 171/5/96-CX dated 2.2.1996 . In the alternative, he submits that as the excise duty is payable by the manufacturer of the goods, therefore, if the allegation of the department is taken to be true in that case, the supplier has diverted the goods i.e. PTY/PFY to in Bhiwandi market as per the statements of the suppliers, in that case, the duty is to be demanded from the supplier only not from the appellant, as held by this Tribunal in the case of VVN Mfg. and Investors Ltd. vs. CCE, Vadodara [2007 (218) ELT 407 (Tri-Ahmd)].
6. On the other hand, learned AR opposed the contentions of the learned Counsel and drew our attention to various submissions recorded during the course of hearing. Particularly to the statements of Shri Ravinder Garg, Shri H P Bharadwaj, Shri Jagbir Singh, Shri Sanjeev Khera, Shri Susheel Verma, Shri KK Jhunjhunwala, Shri Shyam Bihani and various transporters and brokers. He further submitted that the statement of these persons corroborates that conspiracy of the appellant to procure invoices against CT 3 from the supplier of PTY/PFY and thereafter sending them the warehousing certificate to skip the excise duty payable on PTY/PFY by the supplier. He further submit that the export documents of the appellants show that they have exported 100% cotton towel which is clear from the documents produced by the appellants. In that sense, the appellants have no usage of these PTY/PFY. Therefore, PTY/PFY was not the inputs for the appellants. He further submits that border description of 100% cotton towel can be compulsorily interpreted as non-usage of PTY/PFY in case of said towel, for various purposes including border, as per the common trade parlance. He produced certain letters given by M/s. Rangoli Furnishings Pvt. Ltd. Sonepat, Haryana and M/s. Trident Group, Ludhiana Punjab, to say that the specification of colour and material used is normally mentioned in the purchase order of the buyer and at the time of export, the exporter has to mention exact specification of all the material used on the body of the towel and the inputs description, otherwise the shipment can be rejected due to wrong declaration. He further submits that the material usage of, the material is required to be disclosed on the product and 100% cotton terry towel will compulsorily contain 100% cotton yarn. Therefore, he submits that the modus operandi of the supplier of the PTY/PFY to the appellant and the appellant was to divert the goods to various weavers in Bhiwandi under the guise of CT 3 certificate issued by the appellant stands proved. As such goods have been diverted by the appellants therefore, duty is demanded from the appellants. In the circumstances, impugned order is to be upheld.
7. Heard the parties. Considered the submissions.
8. On thorough analyzing the records, ( i.e. impugned order various documents oral argument and written arguments) placed before us, we find that the case of the Revenue proceeded on the premise that supplier namely, SPL and APL were engaged in diversion of imported PFY and PTY drawn out of PFY without payment of duty and fabricated the records to show that goods were transferred under ARE 3A against CT 3 from one EOU to another and the units purportedly receiving PTY were engaged in manufacture of 100 % cotton goods and use only cotton yarn for manufacture of goods but falsely showed consumption of PTY which means that appellants did not require POY / PTY as raw material in manufacture of export goods.
9. These allegations of the Revenue are based on various statements of supplier, transporters and the statement of persons on behalf of the appellants. On the basis of these statements, Revenue has concluded that the suppliers were engaged in diversion of imported goods without payment of duty and appellant also issued CT 3 certificate to the suppliers to procure goods without payment of duty which have been diverted to the open market on the instructions of the appellants by the supplier. Therefore, the appellants are liable to pay duty along with interest and penalties on both the appellants have been imposed.
10. The defense of the appellants is that yarn in question i.e. PTY/PFY is an input for them to manufacture terry towel which have been used in manufacture of export goods which were ultimately exported which is not in dispute. In support of this contention, the case of the appellants is that during the course of investigation 300 Kgs. of PTY was physically found in their factory which took place after exportation of export goods was complete by the appellant and this export goods were containing PTY in borders of terry towels. To prove whether 100% cotton towels contain PTY/PFY or not, the appellant brought certain samples of the 100% cotton towels in question wherein it is shown that 100% cotton towel do contain PTY /PFY in border.
11. The allegation and defense are based on certain evidence. Therefore, we have to analyse the stand taken by both the sides before us to arrive at a correct decision in the matter.
12. The Revenue has relied on the statement of suppliers wherein Managing Director of SPL, Shri K K Jhunjhunwala has admitted in his statement dated 6.11.98 that the goods were delivered to M/s. Sukhsagar Roadlines on the instruction of appellants and goods were delivered at Bhiwandi. He also admits in his statement dated 22.9.99 that if the said yarn were sent to Bhiwadi instead of appellants factory, the supplier would offer Rs.5 -6 in addition to actual price of yarn reflected in the invoice. As they were receiving extra money, therefore, he agreed to divert PTY / PFY to Bhiwandi. The transportation was booked by brokers and freight was on to pay basis at Bhiwandi. He also admits that appellants sold the impugned goods to local vendors at Bhiwandi through brokers. The payments were received by the supplier in cash either from the brokers or were deposited in their bank accounts and they never received payment directly through the appellants. There were some statements of the brokers and transporters. In the case of SPL, we have seen that 8 consignments were issued by SPL in the name of RTL and the name of transporters were shown as M/s. Sukhsagar Roadlines., M/s. Standard Transport Corpn., M/s. Sainath Roadways, M/s. Vagheshwari Roadlines. The statement of transporter namely, M/s. Sukhsagar Roadlines, M/s. Standard Transport corpn. were recorded during the course of investigation. No statement of Vagheshwari Roadlines were recorded. But a statement of Satish Kumar Chowdhary, clerk of Balaji Salasar Roadways, Mumbai was recorded for the transporter namely, M/s. Sainath Roadways, M/s. Vagheshwari Roadlines who states that M/s. Sainath Roadways, and M/s. Sukhsagar Roadlines the goods were transported only up to Bhiwandi and not to Panipat. The statement of Shri Satish Kumar Chowdhary creates doubt when he is neither the transporter nor the employee of the transporting company. We also find that all the statements recorded of the supplier recording the name of the transporters but none of the transporters were made parties to the show cause notices and no proceedings were initiated against the transporters. Therefore, reliance on the statement of the transporters creates doubts. The Revenue has also relied upon the statement of some of the employees of the appellants namely Shri Ravinder Garg, (one of the appellant), Shri H P Bharadwaj, Shri Jagbir Singh, Shri Sanjeev Khera, Shri Sushil Verma, Supervisor, Shri Kartar Singh, Inspector. We have seen statement of these people. Infact in the statement of Shri Ravinder Garg, it is admitted fact that they are using PTY for making border of towel and for stitching the sides. The percentage of yarn was 5-6 % of the total weight of towel. The statement of Shri Sanjeev Khera, Director (Tech) also confirmed that when they have orders for using the PTY in the borders of the towels, the requirement was about 4% and the statement recorded on 11.9.98 also submits that they are using the PTY as raw material but the past one a half years, they have had not used PTY in manufacture of towel. Infact in this case, the impugned yarn was procured by the appellant during the period August, 1995 to April 1996 and the export also took place between the period 01.01.1995 to 31.5.1998. Therefore, the statement of employees of the appellant are exculpatory and support the case of the appellants. Revenue has not adduced any documentary evidence to show that the goods have not been received by the appellants and have been diverted by the appellants.
13. The defense of the appellant is that they have physically received PFY/PTY to manufacture their export goods. This fact has been proved by the appellant as some physical stock in their factory was found at the time of search. Further, the Revenue itself admits that in some of the consignments, the appellants have used PFY/ PTY in manufacture of export goods. The appellants has also produced certain samples of towels containing border of PTY/PFY along with label of 100% cotton towel. We further find that in this case, the Revenue has not come with evidence that PFY/PTY used by the appellants or found in their premises at the time of investigation were procured by the appellants from some other source except goods procured under CT 3 issued by the appellants. As Revenue failed to prove the source of procurement of PTY/PFY found during investigation and admittedly used in export consignments therefore, the evidence produced by the appellants that PTY/PFY is raw material for the appellants to manufacture the export goods is having weightage over the fact that PTY/PFY is not the raw material/ inputs for the appellants to manufacture their export goods. The Revenue has decided the case against the appellants on wrong premise that PFY/PTY is not the raw material to manufacture of export goods by the appellants. We find that evidence produced and a defense taken by the appellant is having evidentiary value over the evidence relied by the Revenue which are oral statements only. Relying on the decision of this Tribunal; in the case of M/s. Davinder Sandhu Impex Ltd. vs. CCE Ludhiana [Final Order No. 52894-52895/2015 dated 14.9.2015 wherein the case was booked against the assessee on the basis of the statement of the managing director without bringing any corroborative evidence, in that case, this Tribunal held as under:
11. In this case also, we find that the case has been made out only on the basis of the statement of Shri Baldev Singh, Managing Director of the appellant and no other evidence in the form of to manufacture of such huge quantity, the consumption of electricity, additional packing material, payment for purchase of additional packing material, payment received for clandestine removal goods, how the goods were transported has been brought on record by the Adjudicating Authority or the inspecting team, therefore, relying on the above said decision cited hereinabove, we hold that charge of clandestine removal is not sustainable in the absence of any corroborative evidence to the statement of Shri Baldev Singh, Managing Director.
14. In this case also, the Revenue have relied on the assumptions that the PTY/PFY is not an input for the appellant to manufacture their final product which is found incorrect.
15. Therefore, in the absence of any corroborative evidence produced by the Revenue, the case of the Revenue is not sustainable.
16. In these circumstances, as appellants have been able to prove that PFY/PTY is the raw material and they have procured these raw materials on the strength of CT 3 issued by appellant for procurement of the same, therefore, the duty cannot be demanded from the appellants.
17. Revenue has also proceeded their case on the premise that the supplier of PTY /PFY are engaged in the activity of diverting PTY/PFY without payment of duty. It may be the case of the Revenue that manufacturer-suppliers are indulged in that activity or may be supplier are engaged in the activity of diverting the goods but no demand of duty has been confirmed by the Revenue against those supplier as duty is payable by the manufacturer of the goods. Therefore, in that circumstances also, duty cannot be demanded from the appellant as held by this Tribunal in the case of VVN Mfg. and Investors Ltd. (supra). The responsibility of consignor was discussed in the case of Skyron Overseas [2010 (252) ELT 293 (Tri-Ahmd)] by the Tribunal. The Tribunal held that once the consignor receives duplicate copy endorsed his statutory obligation is over unless it is proved that the consignor himself diverted goods or was responsible for diversion. We notice in the present case, the revenues case is that the consignor is involved in diversion of the non-duty paid goods. In the present case, there is an allegation of diversion of goods en-route. The consignors role and liability can be inferred in other similar cases Sunstar Impex (P) Ltd. [2009 (244) ELT 605 (Tri-Ahmd)] and Arya Fibres Pvt. Ltd. [2014 (311) ELT 529 (Tri-Ahmd)]. As such, if the consignor who is 100% EOU were actively involved in the diversion, the duty liability may be fastened on them.
18. The other issues raised by the learned Counsel of the appellant during the course of argument that they were not supplied relied upon documents is not required to be examined at this stage as the appellant has already succeeded on merits.
19. In view of the above discussions, we hold that the impugned orders qua confirming duty demand along with interest imposing penalty on the appellant i.e. RTL is not sustainable consequently, the impugned orders qua imposing penalty on both the appellants also deserves no merits. Hence, are set aside.
20. In result following the order is passed:-
Duty demand along with interest confirmed against the appellant i.e. M/s. RTL is set aside on appellant namely RTL and penalties imposed on both the appellants before us are set aside.
21. Appeals are disposed of in the above terms.
(Pronounced in the open court on 27.10.2015)
( Ashok Jindal) Member(Judicial)
( B Ravichandran )
Member(Technical)
ss
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