Custom, Excise & Service Tax Tribunal
Sunder S International vs Commissioner Central Goods And Service ... on 15 October, 2024
1
E/85189/2023 with E/CO/85332/2023
CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL
MUMBAI
REGIONAL BENCH, COURT NO. 2
E/CROSS/85332/2023
IN
EXCISE APPEAL No.85189 OF 2023
(Arising out of order-in-Original No.05/SK/Bhiwandi/Sunder/2022-23 dated
30.11.2022 passed by the Commissioner of GST & Central Excise, Bhiwandi,
12th Floor, Lotus Info Centre, Station Road, Parel (East), Mumbai-4000012)
SUNDER INTERNATIONAL
104, 1st Floor, Prabudhan Building,
74/76,Bora Bazar Street, Fort,
Appellant
Mumbai-400 012
Vs.
COMMISSIONER OF CGST & CENTRAL
EXCISE, Bhiwandi Commissionerate,
12th Floor, Lotus Info Centre, Respondent
Station Road, Parel (East), Mumbai-400 012 Appearance:
Present for the Appellant:Shri M.L.Grover, Advocate & Shri Amit Jain, Advocaste Present for the Respondent: Shri A.K.Jha, AR CORAM:
HON'BLE MR. C J MATHEW, MEMBER ( TECHNICAL ) HON'BLE MR. AJAY SHARMA, MEMBER ( JUDICIAL ) FINAL ORDER NO.86220/2024 Date of Hearing: 23.04.2024 Date of Decision: 15.10.2024 PER;AJAY SHARMA By way of instant appeal, the appellant herein has impugned the Adjudication in Order-in-Original dated 30.11.2022 passed by the Commissioner, CGST & C.Ex.
Bhiwandi Commissioner whereby the demand of Central Excise duty amounting to Rs. 9,93,80,686/- alongwith interest and equal penalties under Central Excise Act and Rules respectively have been confirmed.
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E/85189/2023 with E/CO/85332/2023
2. The issue involved in the appeal are as under:
(i) whether in the facts and circumstances of case the department is justified in issuing the show cause notice much belatedly on 28.9.2020 after invoking the extended period despite starting the investigation in the month of May, 2016 itself?
(ii) whether any suppression can be attributed in the facts and circumstances of the case?
(iii) whether,in facts and circumstances of the case, the department has discharged the burden of establishing beyond reasonable doubt the clandestine manufacture and removal of alleged assembled T.V. sets from the warehouse/godown at Bhiwandi?
3. The facts leading to the filing of the instant Appeal are stated in brief as follows. The appellant, a partnership firm, is engaged in the business of importing parts of TV sets, which, after import, are stored in their godown at Bhiwandi and from there sold as such. Apart from this, they are also engaged in importing, buying/selling complete TV sets in the domestic market. They had a factory located at Bicholim, Goa where they used to manufacture LED/ TV sets of different specifications and sizes by assembling the parts/components imported by them and were clearing the assembled TV sets on payment of central excise duty and were availing Cenvat credit of the CVD paid on the said imports. According to the appellant, the manufacturing operations in the Goa factory were stopped w.e.f. September, 3 E/85189/2023 with E/CO/85332/2023 2015 and thereafter the appellant was engaged only in trading activity from their godown premises at Bhiwandi.
4. Information was received by the then 'DCGEI' (now 'DGGI'), Mumbai Zonal Unit from the Directorate of Revenue Intelligence (DRI), Mumbai Zonal Unit that the appellant had imported flat panel TV sets of Sony & Samsung Brand after splitting them into Panels & Kits, while mis-declaring the value as well as their description as 'parts of TV sets'. By such mis- declaration they allegedly availed 100% customs duty exemption on panels, which constitute 75-80% of the cost of TV sets, undervalued the TV sets and consequently evaded customs duties and by importing as 'parts of TV sets', the CVD applicable on MRP was also being evaded. Accordingly a search was carried out by DGGI in the office and godown of the appellant in the month of May, 2016. It is pertinent to mention that similar search was conducted by DRI also in the month of February, 2016 and goods & documents/ records were seized by them at that point of time under Panchnama. Left over documents, whatever available, were seized by the department herein on 20.5.2016. Statements of various persons including the partner of the firm Mr. Moti Bhatia were also recorded by them. On the conclusion of investigation, a Show Cause Notice dated 28.9.2020 was issued to the appellant, after invoking extended period demanding central excise duty amounting to Rs.9,93.80,686/- alongwith interest and penalties under various provisions alleging that during the period August, 2015 to July, 2016 the appellant assembled 'parts of TV sets' to make 'TV sets' 4 E/85189/2023 with E/CO/85332/2023 at their Bhiwandi godown and such activity amounted to manufacture for which the appellant are liable to pay Central Excise duty but neither they took the registration under Central Excise nor discharged duty liability nor filed the Central Excise Returns and thereby suppressed the material facts.
5. Learned Commissioner adjudicated the aforesaid show cause notice and vide impugned order dated 30.11.2022, while classifying the goods in issue under CETH-85287211, confirmed the demand of Central Excise duty amounting to Rs. 9,93,80,686/- alongwith interest and equal penalty under Central Excise Act and Rules respectively on the firm as well on the partner on the firm.
6. Learned counsel for the appellant submits that earlier also on 15.7.2016, a show cause notice was issued to the appellant by DRI alleging that the goods imported by them merit consideration as complete LED TV sets and not parts or components of TV sets and in order to avoid any litigation, the appellant approached the Settlement Commission and it was settled vide order dated 11.7.2017 of the Settlement Commission. According to learned counsel once the imported components/parts of TV sets were assessed as complete TV sets in SKD [Semi knocked down] form and customs duty was paid thereon, question of manufacture of any TV sets does not arise. Learned counsel also submits that they imported the complete TV sets and kept it in their warehouse/godown at Bhiwandi and neither did they assemble the TV sets in their warehouse nor cleared them clandestinely as manufactured goods. According to 5 E/85189/2023 with E/CO/85332/2023 learned counsel the goods were sold as such, in the form in which those were imported and that the allegation are based on assumptions/presumptions only without any evidence to support. The only evidence, which has been relied upon in the SCN, is that in the godown of the appellant at Bhiwandi, the officials found some wooden tables adjoining each other, which were covered with plastic for smooth and soft surface alongwith certain electrical points at regular intervals on the walls facing the tables. Few complete TV sets and certain dismantled TV parts including empty cartons in the flat form were also allegedly found by them at the time of search. According to learned counsel although the presence of TV sets and parts were properly explained to the officials but they did not listen. Learned counsel further submits that the purported statements of Shri Subhash Gamre and Shri Bikash Chhetri, employees of appellant during the course of investigation, which were recorded u/s. 108 of the Customs Act, 1962, were relied upon in the impugned order but their respective cross-examinations recorded before the learned Commissioner were totally discarded by him while adjudicating the show cause notice. For the sake of argument only, learned counsel submits that if the demand of central excise duty is upheld then the appellant would become entitle to cenvat credit of CVD, SAD and cess paid on the imported inputs and also the accumulated cenvat credit pertaining to their Goa factory. Learned counsel also challenged the duty calculation which, according to him, is on higher side as it was done by adopting the price list of Sony & Samsung brand TV sets which is contrary to the provisions of Section 4A of 6 E/85189/2023 with E/CO/85332/2023 Central Excise Act, 1944 and the Central Excise (Determination of Retail Sale Price of Excisable Goods) Rules, 2008. Learned counsel also challenged the show cause notice on the ground of time bar as, according to him, the extended period cannot be invoked in the facts of the case and the show cause notice was issued much belatedly after initiation of investigation and therefore the same is not sustainable.
7. Per contra learned Authorised Representative appearing on behalf of Revenue reiterated the findings recorded in the impugned order and prayed for the dismissal of the appeal. He also brought to our notice that the department has filed cross- objection in the matter. According to learned Authorised Representative during the searches conducted at the Bhiwandi godown, evidences were found which establish that the assembling of LED TV was being done there and the required facilities for the assembly of LED TV were available in the said premises. He also stressed upon the statements of the employees of appellant recorded u/s. 108 and submitted that those were rightly relied upon by the adjudicating authority. According to learned Authorised Representative the availability of the TV sets, panels, its spare parts and the availability of the required facility for the assembly of the LED TV at the godown premises of the appellant coupled with the statement of the employees u/s. 108 ibid clearly establish that the appellant was carrying out manufacturing activities at its Bhiwandi godown premises. Learned Authorised Representative also relied upon the purported statement of Mr. Moti Bhatia, partner of the 7 E/85189/2023 with E/CO/85332/2023 appellant to the DRI officials in which he allegedly admitted that the consignments imported by him was LED TV panels and parts of TV in SKD conditions which used to be assembled as TV sets at his factory for sale and for the said purpose he employed two technicians at his warehouse for assembling the TV sets out of the imported consignments.
8. We have heard learned counsel for the appellant and learned Authorised Representative for the Revenue and perused the case records including the cross-objection and written submissions/case laws placed on record by the respective sides. In the instant appeal everything revolves around the issue whether the appellant is carrying out manufacturing/ assembling activities at their Bhiwandi godown. If the answer is in affirmative only then the other issues like excise registration, mention of retail sale price, valuation etc. are required to be considered. The show cause notice in issue alleges that the appellant has assembled 'parts of TV sets' to make 'TV sets' at their Bhiwandi gown, which amounts to manufacturing and hence liable for central excise duty at the applicable rates. It further alleges that although the appellant is into manufacturing activity but it has neither taken the central excise registration nor discharged the central excise duty liability nor filed the statutory central excise returns. Rather they suppressed the material facts from the authorities concerned. Whereas it is the case of the appellant that they imported complete TV sets and kept it in their godown at Bhiwandi for doing their trading activity. Neither they assembled any TV sets in their Bhiwandi 8 E/85189/2023 with E/CO/85332/2023 godown nor manufactured or cleared them from their Bhiwandi godown.
9. During search of the godown in issue on 20.5.2016 by the then 'DCGEI' (now 'DGGI'), on the basis of information of DRI, some papers invoice etc. were allegedly taken into possession and few statements were recorded. During search they alleged to have also noticed few empty cartons and some assembling facilities by attaching few tables to the wall in the rear portion of the godown and it has been alleged that those were being used to assemble TV parts in order to make complete TV sets. As per department, the appellant clandestinely cleared the complete TV sets from their Bhiwandi godown without paying central excise duty.
10. So far as the issue of clandestine manufacture or removal is concerned, the Hon'ble High Court of Delhi in the matter of CCE v. Vishnu & Co (P.) Ltd.; 2016 (332) E.L.T. 793 (Delhi) has held that in cases of clandestine manufacture and clearances, certain fundamental criteria have to be established by Revenue which mainly are the following:
"(i) There should be tangible evidence of clandestine manufacture and clearance and not merely inferences or unwarranted assumptions;
(ii) Evidence in support thereof should be of :
(a) raw materials, in excess of that contained as per the statutory records;
(b) instances of actual removal of unaccounted finished goods (not inferential or assumed) from the factory without payment of duty;
(c) discovery of such finished goods outside the factory;
(d) instances of sale of such goods to identified parties;
(e) receipt of sale proceeds, whether by cheque or by 9 E/85189/2023 with E/CO/85332/2023 cash, of such goods by the manufacturers or persons authorized by him;
(f) use of electricity far in excess of what is necessary for manufacture of goods otherwise manufactured and validly cleared on payment of duty;
(g) statements of buyers with some details of illicit manufacture and clearance;
(h) proof of actual transportation of goods, cleared without payment of duty;
(i) links between the documents recovered during the search and activities being carried on in the factory of production; etc."
In nutshell it can be said that the theory of preponderance of probability would be applicable only when there are strong evidences heading to one and only conclusion of clandestine activities. The said theory cannot be adopted in cases of weak evidences of a doubtful nature. The department has to prove the allegation of clandestine removal on the basis of cogent corroborative evidence.
11. To establish the theory of clandestine manufacture and removal, the department has to produce the evidence of import or otherwise acquiring of alleged components/parts of TV sets by the appellant which could have been used by the appellant for assembling and manufacturing complete TV sets. Time and again repeatedly it has been held that in case of clandestine removal of excisable goods, there needs to be positive evidence for establishing evasions. Mere suspicion is not sufficient to prove clandestine removal unless it is supported by sufficient cogent evidence. In cases of clandestine manufacture and removal, burden is on the revenue to prove its case with clinching, reliable and independent corroborative evidences. The department herein has mainly relied upon the statements recorded u/s. 108 10 E/85189/2023 with E/CO/85332/2023 ibid and also some invoices recovered during the course of search of godown premises.
12. Now we have to see the statements of appellant's employees viz. Shri Subhash Gamare and Shri Bikas Chhetri, recorded by DRI u/s. 108, Customs Act, 1962 on 5.2.2016, which have been heavily relied upon in the show cause notice and by the adjudicating authority as well while passing the impugned order. Although during their respective cross- examination before the learned Adjudicating Authority both the persons expressed ignorance about any manufacturing or assembling process in the godown premises in issue, but the same was discarded by the adjudicating authority by terming it as an afterthought and observed that their statements u/s. 108 ibid had been made voluntarily, which, in our view, is against the settled principle. Learned Commissioner while adjudicating has held that the statements recorded before Central Excise or Customs officer are legally valid evidence if it is not retracted. It is clear from the case records that both the above witnesses have retracted their respective statements during cross- examination. This fact is significant factor that affects credibility of statement and the aforesaid statements purported to have been made voluntarily cannot be relied upon in absence of any corroborative evidence. The version during examination before the adjudicating authority, of persons whose statements were recorded by DRI u/s. 108 ibid was contrary to their purported statements and though the adjudicating authority preferred to ignore that contrariness, the conclusion can be none other than 11 E/85189/2023 with E/CO/85332/2023 that they were not made voluntarily. It has been argued on behalf of the appellants that those purported statements were recorded by the officials in DRI office on their official computer and cannot be said to be voluntary. Even if for the sake of arguments we accept the findings of learned Commissioner, still such statements, in the absence of any corroborative evidence cannot be made the sole basis to hold against the appellant. Mr.Subhash Gamare, during the relevant time, was working as loader doing loading/unloading work. His purported statements were recorded in English language. Generally one cannot expect such person (a loader) to know or understand English language. During cross-examination when it has been asked from him what has been written in his statement which he gave to DRI, he replied that he doesn't know as he doesn't understand English language and that nothing was explained to him in Hindi language. The said cross-examination is as under:-
"Q.1: I am showing your statement dated 05/02/2016, it has signature of Subhash Gamare, Is it your signature? Ans. Yes Q.2: What is written in the statement?
Ans.:I do not know Q.3: Did someone explain the statement to you? Ans.: No Q.4: Was Mr.Moti Bhatia was present, during the statement? Ans.:No Q.5: Were you were present during the statement? Ans.:Yes Q.6: What happened during the statement recording? Ans.:I answered the questioned, then signed, however, no one explained it to me in Hindi Q.7: Please see panchnama dated 04/02/2016, with signature of Mr.Gamare, were you present?
Ans.:Yes, I was present, and made my signature, however, no one translated it in Hindi. I do not know what is written in it."
13. Similarly Mr. Bikas Chetri's statements, who at the relevant time was also working as loader, were also recorded in English language and during cross-examination he also replied in the same way that he did not know what was written in his 12 E/85189/2023 with E/CO/85332/2023 statement dated 5.2.2016 as nothing was explained to him by the person recording his statements. During his cross- examination Mr. Chetri in response to a specific query, has replied that he is doing the job of loading/unloading of goods whereas in the alleged voluntary statement recorded by DRI on 5.2.2016 it has been mentioned that he assembled LED TV sets. His cross-examination is also extracted as under:-
"Q.1: In 2015-16, what work were you doing in M/s.Sunder International at Bhiwandi Godown? Ans.: I was doing Loading and Unloading work. Q.2: Were you assembling the TV set?
Ans.: No Q 3: Was any assembly of TV set possible at godown? Ans.: No Q.4: I am showing your statement dated 05/02/2016, it has signature of Bikas Chetri, is it your signature? Ans.: Yes Q.5: Can you mention what is written in the statement? Ans.: No Q.6: Did someone explain the statement to you? Ans.:No Q.7: Was Mr.Moti Bhatia was present, during the statement?
Ans.: No The questions put by Adjudicating authority:
Q.8: asked, Who else were present when you signed the statement and alleged threat was made?
Ans.: Subhash Gamare, Manish Maccheri and few others. Q.9: However, Subhash Gamare did not make any such allegations?
Ans.: I do not know."
14. Admittedly in both the aforesaid cross-examinations before the learned Commissioner, everything was explained to the witnesses in Hindi language and after going through the reply, given by the aforesaid witness in the cross-examination a doubt has been created about the veracity of the purported statements recorded by DRI u/s. 108 ibid in English language. No one can expect them to understand English language. The statement recorded during inquiry/ investigation, by the gazetted Central 13 E/85189/2023 with E/CO/85332/2023 Excise officer or customs officers or DRI, has every chance of having been recorded under coercion or compulsion therefore one has to be very careful and must take all precautions while admitting such statements and should not accept any in which doubt exits about voluntary nature. We all are aware that, on various occasions, such gazetted officers of Central Excise/Customs/DRI etc. resort to certain measures in order to get the confessional statements and it is only in order to neutralize this possibility that, before admitting such a statement in evidence, clause (b) of Section 9D (1) ibid mandates that the evidence of the witness to be recorded before the adjudicating authority in order to evaluate the truth out in such type of statements. It is the first principle that justice need not only be done but must also be seen to be done. As per section 3 of the Indian Evidence Act, 1872, a fact is proved only when the Court believes its existence so probable that a prudent man, under the circumstances of the particular case, act upon the supposition that it exists. It is pertinent to mention here that although on the one hand the learned Commissioner permitted the cross- examination of the aforesaid two persons but when he found that they are retracting their purported statements recorded by DRI, he rejected them by terming it as an afterthought. Nevertheless we in the light of the cross-examinations of both the persons as referred above, cannot believe that the statements were made voluntary. Therefore, no reliance can be placed upon such statements.
15. So far as the statements of Mr. Moti Bhatia, partner of the appellant firm, which were recorded u/s. 14 of the Central Excise 14 E/85189/2023 with E/CO/85332/2023 Act, 1944 and which have been relied upon by the learned Authorised Representative in support of the case of clandestine manufacture/removal, we find that there is no such admission of clandestine manufacture or removal. Rather in his statements recorded from time to time during investigations, he denied the allegation of assembling any TV set at his godown at Bhiwandi. What he mentioned was that the appellant is engaged in Import and Export of Electronic goods like TVs, monitors and accessories, parts, panels and camera. He also stated that they are engaged in the trading of finished goods as well as parts of the TVs from this Mumbai office and they were also engaged in the manufacture of Crown Brand TVs at their factory located at Bicholim, Goa. When a specific query was made as to why Excise duty is not paid on the said goods inspite of admitting the facts before the DRI officials about the firm's activity of assembly of the parts of TVs at their Bhiwandi godown and clearance of TVs to their customers, he replied that he did not admit that the goods were assembled at their godown, but were actually brought for test the quality control and breakage by his staff for the panels and he also mentioned that the matter before the DRI is already decided and settled before the Settlement Commission vide order dated 11.7.2017 and that he has paid all the dues in accordance with the order of the Settlement Commissioner. In reply to a query, he also stated that they have not manufactured any branded TVs like Sony or Samsung etc.
16. We have our doubts about the case of Revenue that during investigation they availed the services of the technical persons 15 E/85189/2023 with E/CO/85332/2023 from M/s. Samsung India who assembled complete TV sets out of the parts/panels availed in the godown in Bhiwandi. Had it been the case, the brands like Sony/Samsung India would have taken legal steps against the appellant under I.P.R. or Copyright Act and would have also initiated criminal proceedings, but nothing of that sort has come on record anywhere in the proceedings.
17. We take note that the notice has suggested a conspiracy to evade duties in which Mr.Moti Bhatia allegedly colluded with M/s.Sunder International. At different places in the impugned order, M/s.Sunder International has been referred to as firm and at other Mr.Bhatia referred to as director/partner. It would appear that the adjudicating authority, in disposing off the proposition in the notice has failed to account for the distinction that precedes such designation. If the appellant is a company, there cannot be a conspiracy or collusion for an artificial person has no cognitive ability to conspire or collude. We fail to see how Mr.Bhatia would, by himself, have conspired or colluded to evade duties. If M/s.Sunder International is a firm in which Mr.Bhatia is a partner, it surely does not stand to reason that such a combination can conspire or collude and, in any case, with penalty imposed on the firm, there cannot be a separate penalty on a partner and if the firm is liberated from such detriment on fact and law, that should be similarly applicable to any constituent of the firm.
18. In such a situation, the evidences herein produced by revenue are required to be scrutinized very minutely and the 16 E/85189/2023 with E/CO/85332/2023 evidences leading to the allegation of clandestine removal are required to be appreciated with a pinch of salt. During the search at Bhiwandi, the officials found some wooden tables with the wall adjoining each other, covered with plastic and certain electrical points at regular intervals on the walls facing the tables and they arrived at the conclusion that those were placed to assemble the parts in order to make it complete TV sets. They also alleged to have seen some assembled TV sets. In our view mere presence of wooden table or electrical connections by its side or of the TV sets does not lead to an inevitable inference that the appellants were indulging into the assembling/ manufacturing activity.
19. It is the case of the department and also the finding of the learned Commissioner that the case is booked by the department on the basis of the statements as well as on the basis of manufacturing process of the appellant and recovery of certain documents from the godown, which collectively established that the appellant assembled 'parts of TV sets' at their godown at Bhiwandi that amounts to manufacture and liable to Central Excise duty. Since the statements recorded cannot be relied, as already discussed by us in earlier paragraphs, the purported manufacturing process which has also been mentioned in those statements also meet the same fate. We failed to find from record about any manufacturing process being witnessed by the department during search in the godown. Mere finding some table alongwith walls having electricity socket and few TV sets or its parts cannot be considered as corroborative evidence. Learned Authorised Representative 17 E/85189/2023 with E/CO/85332/2023 submits that few invoices were recovered from the godown during search and from those invoices the department identified few customers and sent letters to ascertain the nature of the goods supplied to them by the appellant, but they did not get any response from anyone except two such buyers and that few letters were returned undelivered also. It has been alleged that the appellant did not mention proper addresses on the invoices and simply mentioned the name of the buyers on it therefore they were not able to verify most of the invoices. But as we find, the case records suggested a different story. The appellant alongwith their reply to the show cause notice had submitted the list of buyers alongwith their ledger accounts, copies of tax invoices and Form 'C' issued by the buyers wherein complete details of the buyer, to whom parts/components were sold, have been mentioned. Those were also submitted before the learned Commissioner during adjudication proceedings but it seems they were not looked into. The Appellant had also placed them on record before us for our perusal and we have taken note of few of them. Learned Authorised Representative also submits that those two customer viz. Vibgyor Photos and Komal International, who only responded to the query sent by the department, also supported the case of the department by stating that they have not purchased any TV panels or parts from the appellant. Here the learned Authorised Representative tried to suggest that it means that those two persons must have purchased complete assembled TV sets and not any parts or TV parts from the appellant. We must not forget that when a specific query has been sent to anyone then generally response comes limiting to 18 E/85189/2023 with E/CO/85332/2023 that query only and no other inference can be drawn from it. It is the case of the appellant that apart from TV parts/components they are trading in other goods also and that these two customers/buyers purchased the photographic material or kinder joy toy etc and not any part of TV. We must not forget that those two buyers nowhere mentioned that they purchased TV or its parts from the appellant. Therefore, from that reply no inference can be drawn against the appellant. The department failed to produce any purported buyer of the alleged assembled TV set or any confirmation of purchase of assembled TV or its parts from any of the purported buyer. The inference drawn by the department against the appellant on the basis of the cash receipts are also unfounded. From the allegations and arguments, the department tried to pitch it to the extent that the appellant was dealing only in cash payment in order to avoid the identity of its customers. But the ledger account of the appellant establishes other way round. Most of the payments were received through banking channel and the account numbers of the buyers were also mentioned in the ledger. On the sale invoices issued by the appellant, name and address of the buyer alongwith VAT TIN were clearly mentioned from which the bank details and the whereabouts of the said buyers were ascertainable. What the department did, instead of getting the details from the records provided by the appellants by way of ledger, sale invoice etc. they tried to get them through Google search on internet. Therefore we failed to find any force in the submission of the department that in order to clandestinely 19 E/85189/2023 with E/CO/85332/2023 removing the TV sets incomplete address or incomplete details of the buyers were provided by the appellant.
20. Another reasoning given by the learned Commissioner while confirming the duty demand, is that the imported parts of the TV sets contain bar codes by which the part of specific TV sets could be identified and assembled together in one TV set with the help of screw driver. According to learned Commissioner there could not be any other reason for the parts being affixed with bar codes of the same TV set which enabled assembly through screw driver to make a complete TV set. We find the said finding of the learned Commissioner far from being reasonable as rightly pointed out by the learned Counsel that if Bar codes are meant only for a particular TV set then it cannot be used in any other TV set. If it is true then in case some part of a particular TV set becomes defective, while in warranty, then the entire TV set would have to be discarded as the spare part of that bar code will not be available. The reason for putting bar codes is that it pertains to a particular model of TV sets and the appellants are trading in complete TV sets as well as its parts and if some TV sets become defective during warranty period or if some customer asked for some spare parts of a particular model then the appellant would require that particular part which would be made easily available with the help of bar code. In our opinion the spare parts with bar codes rather strengthens the case of the appellant that the TV sets were tested in their godown for quality control or breakage of the panels etc. It is the consistent stand of the appellant that the imported goods were 20 E/85189/2023 with E/CO/85332/2023 sold as such, in the form those were imported, without undertaking any activity of assembling the TV sets in its godown. The department has failed to produce any evidence on record to prove the contrary therefore we accept the stand of the appellant that they are not carrying out any manufacturing/assembling activities at their Bhiwandi godown. The allegation against the appellant are required to be established by way of cogent and reliable evidence, which the revenue has miserably failed to establish. A case of clandestine removal cannot be proved merely on the basis of probabilities. Revenue did not produce any clinching corroborative evidence to discharge its obligation to prove clandestine removal. Their case is mainly based upon conjecture and surmises. The department failed to establish that the appellant received spare parts etc. clandestinely or some other corroborative evidence to support clandestine removal of complete TV sets from the godown.
21. Learned Commissioner, while adjudicating the show cause notice dt.28.9.2020, has also relied upon the Order dated 11.07.2017 of the Settlement Commission (WZB) in case of appellant i.e. M/s. Sunder International while arriving at the conclusion that the appellant had brought 'parts of TV sets' at their Biwandi godown, which were assembled to manufacture the complete 'TV set' and cleared them fraudulently without payment of Central Excise duty. Now we will examine whether the Adjudicating Authority is justified in relying upon the Settlement Commission's order while arriving at the aforesaid conclusion. In the said order the Settlement Commission has 21 E/85189/2023 with E/CO/85332/2023 recorded that the appellant (i.e. applicant therein) imported complete LED TV sets though in SKD condition and RSP is required to be declared on the packages as per provisions of Legal Metrology Act and the said goods also specified u/s. 4(1) of Central Excise Act, 1944. Before deliberating further on this issue, it is relevant to have a look at the relevant provision of Customs Act, 1962 which provides for settlement of case before the Settlement Commission. Chapter XIV-A of the said Act deals with 'Settlement of Cases' and the relevant provision therein is Section 127B (1) ibid which is as follows:-
"Sec.127B APPLICATION FOR SETTLEMENT OF CASES.-
(1) Any importer, exporter or any other person (hereinafter referred to as the applicant in this Chapter) may, in respect of a case, relating to him make an application, before adjudication to the Settlement Commission to have the case settled, in such form and in such manner as may be specified by rules, and containing a full and true disclosure of his duty liability which has not been disclosed before the proper officer, the manner in which such liability has been incurred, the additional amount of customs duty accepted to be payable by him and such other particulars as may be specified by rules including the particulars of such dutiable goods in respect of which he admits short levy on account of misclassification, under-valuation or inapplicability of exemption notification or otherwise and such application shall be disposed of in the manner hereinafter provided:
Xxx xxx xxx" 22. Section 127B ibid extends the jurisdiction of the Settlement Commission to cases in "which the assessee admits short levy on account of misclassification, under- valuation or inapplicability of exemption notification or otherwise." The provisions of Chapter-XIVA of the Act were
introduced for settlement of cases involving mis-classification to facilitate disputes resolution expeditiously without going through hierarchy of appellate provisions provided in the said Act. Settlement of cases is an exception to the normal procedure 22 E/85189/2023 with E/CO/85332/2023 of adjudication of duty liability and other deterrent provisions i.e. levy of penalty and prosecution. The word 'case' has been defined u/s. 127A (b) ibid to mean any proceedings under the Customs Act or any other Act for the levy, assessment and collection of customs duty, pending before an adjudicating authority on the date on which the application u/s. 127B(1) ibid is made. The case which is represented before the Settlement Commission for settlement must be pending adjudication at the time of filing the application for settlement. The Settlement Commission has to see whether there is full and true disclosure of duty liability which has not been disclosed by the applicant therein before the proper officer and the manner in which such liability has been incurred. The adjudication of show cause notice by concerned authorities, in respect of which a settlement application has been made and allowed to be proceeded with, is not only contrary to the statutory scheme but also defeats the very purpose of the settlement provisions. By approaching the Settlement Commission, the allegation contained in the show cause notice cannot be said to be proved against the applicant therein. Our aforesaid view is supported by the decision of this Tribunal in the matter of Indian Oil Corporation Ltd. vs. CCE, Mumbai; 2011 (274)ELT 561 (Tri. Mum.) wherein it has been held that by approaching the Settlement Commission, the allegation has not been proved against the assessee and the same remained unproved. Similarly a Larger Bench of the Tribunal in the matter of Bosch Chassis Systems India Ltd. vs. Commissioner; 2008 (232) ELT 622 (Tri.LB) has held that mere filing of application before Settlement Commission and payment 23 E/85189/2023 with E/CO/85332/2023 of duty does not mean that the assessee has admitted the charge of fraud, wilful mis-statement or suppression of facts etc. with intent to evade payment of duty.
23. A consistent view has been taken by this Tribunal time and again that the proceedings before the Settlement Commission are different from the adjudication proceedings. In proceedings before the Settlement Commission there was no requirement to adjudicate any allegations raised in the show cause notice whereas in adjudicating proceedings the authority concerned has to adjudicate all the issues/allegations raised in the show cause notice. Except in very rare instance, the offer of settlement is accepted and immunity provided. There is, thus, no weighment of evidence of fact or need for appreciation of law subject to full and correct disclosures having been ascertained. Once the issue has been settled by the Settlement Commission on an application filed by an assessee, the adjudicating authority in different proceedings for different show cause notice concerning same assessee cannot base its adjudication on the findings recorded by the Settlement Commission. Therefore, in our view the Adjudicating Authority is not justified in recording the following findings while relying upon the observations made by the Settlement Commission:-
'27 i) I now refer to the Order No. 118/FINAL ORDER/CUS/DRK/2017 dated 11/07/2017 issued by Hon'ble Settlement Commission (WZB) in the case of Noticee, M/s. Sunder International. In the said order, at para 9.4 the Hon'ble Settlement Commission has observed that .....
Xxx xxx xxx
27.iii) In view of above discussion, I observe that it had been comprehensively concluded by the Hon'ble Settlement Commission in their Order that M/s. Sunder 24 E/85189/2023 with E/CO/85332/2023 International had imported the parts of TV sets in disassembled form. Further, the investigation had brought forth the fact that these parts of TV sets with same Bar code, on assembly brings a complete 'TV set' in existence.
27.iv) I observe that the Noticee had referred to a plethora of rulings/case laws in support of their contention that submission before Hon'ble Settlement Commission should not be relied upon in the instant proceedings. However, the Noticee could bring fourth as to how the specific facts of the respective rulings/ case laws were identical to the factual matrix of the instant case.
28 i) In view of the above discussions, I conclude that the Noticee had brought 'parts of TV sets' at their Bhiwandi Godown, which were assembled to manufacture the complete 'TV set', classifiable under CET No. 85287211, cleared these 'TV sets' fraudulently, without payment of Central Excise duty at the appropriate rate, by resorting to the modus operandi discussed above, and has caused huge loss to the exchequer. Therefore the demand of Central Excise duty raised through instant SCN is liable to be confirmed. "
such a finding does not have sanction of law.
24. In view of our discussion in the preceding paragraphs we are satisfied that, as the department has failed to establish any case against the appellant, the duty demand alongwith interest and respective penalties as mentioned in the show cause notice in issue herein cannot survive.
25. Learned counsel also contested the invocation of extended period on the ground that the facts were within the knowledge of the department in the year 2016 itself but still the show cause notice was issued to them much belatedly on 28.9.2020. According to learned counsel, the said submission was made before the Adjudicating Authority also but the same was not addressed in the impugned order. It is no doubt true that when the facts were within the knowledge of the department then the department cannot take the plea of suppression or mis- declaration etc. only to invoke extended period for issuing the show cause notice after 4-5 years. What we have gathered from 25 E/85189/2023 with E/CO/85332/2023 the show cause notice herein that the facts about alleged mis- declaration or suppression etc. were within the knowledge of the department in the year 2016 itself when DRI started investigation in the said year by recording statements etc and informed the department herein. It has been specifically recorded in the show cause notice in paragraph 12 (i) as under:-
"12. i) M/s. Sunder's International have suppressed their production of excisable goods and cleared the said goods mis-declaring the same as part of TV instead of TV with an intent to evade Central Excise Duty thereon. Further they have suppressed the correct description of the said goods manufactured by them and also suppressed the correct value of the said goods and not disclosed the said facts to the department. They have not obtained Central Excise Registration for the said place of manufacture located at Bhiwandi. The assessee has admitted the said facts regarding the manufacturing activity carried out at the said premises and clearance of the manufactured goods from the said premises, during the investigation by DRI, thereby they have evaded payment of Central Excise Duty amounting to Rs. 9,93,80,686/-.emphasis supplied]
26. In view of above, there is no dispute that the fact about alleged mis-declaration was within the knowledge of the department in the year 2016 itself when DRI initiated investigation and show cause notice therein was also issued to the appellant by DRI on 15.7.2016. As per case records, the basis of the instant show cause notice is the information received from DRI in the year 2016 itself but still the instant show cause notice came to be issued much belatedly in the year, 2020 after invoking the extended period which, according to us, is not invokable, particularly in view of the law laid down by the Hon'ble Supreme Court in the matter of Nizam Sugar Factory vs. Collector of Central Excise, A.P.; 2006(197) ELT 465 (SC) in which the Hon'ble Supreme Court has specially laid down that : 26
E/85189/2023 with E/CO/85332/2023
9. Allegation of suppression of facts against the appellant cannot be sustained. When the first SCN issued all the relevant facts were within the knowledge of the authorities. Later on, while issuing the second and third show cause notices the same/similar facts could not be taken as suppression of facts on the part of the assessee as these facts were already in the knowledge of the authorities. We agree with the view taken in the aforesaid judgments and respectfully following the same, hold that there was no suppression of facts on the part of the assessee/appellant."
27. The Principal Bench of the Tribunal also in the matter of Karamjeet Singh & Co.Ltd. vs. CGST, Customs & Excise-(2024) 21 Centax 69 (Tri.-Del.) while setting aside the show cause notice therein, held as under:
"11. ------ Based on the audit's observations, the Commissioner issued the SCN dated 8.4.2011 covering the period 16.8.2002 to 31.12.2008 invoking extended period of limitation. It is a well settled legal position that once the issue is within the knowledge of the department, it cannot allege that the assessee suppressed any facts with intent. Therefore, the SCN dated 8.4.2011 covering the period 16.8.2002 to 31.12.2008 is completely time barred and cannot be sustained." [emphasis supplied] Accordingly, in view of the law laid down by the Hon'ble Supreme Court and the decision of this Tribunal as above, the show cause notice itself is time barred and is not sustainable and if the same is not sustainable then there is no question of any duty, interest or penalties on the firm or its Partner/Director named in the said notice.
28. In view of the discussions made hereinabove, we can summarize that mere recovery of certain parts or TV sets or cartons in the instant case is not sufficient to prove clandestine manufacture/assembling or removal. Clinching evidence is required to be produced by the department to substantiate the allegations levelled against the appellants beyond any reasonable doubt which, in the facts of the present case, the 27 E/85189/2023 with E/CO/85332/2023 department has failed to prove. Neither any evidence of manufacturing of finished goods i.e. TV sets nor its onward transportation or its buyers have been produced on record by the department. Statements, if any, can only provide the missing links to corroborate facts and they cannot, of themselves, establish facts or the whole claim of alleged events.
As the duty demand itself has been set aside, there is no question of any interest, and/or penalties etc. On the ground of limitation also the show cause notice cannot sustain.
29. Accordingly, the show cause notice is not sustainable and the adjudication order impugned herein is therefore set aside.
The appeal is allowed with consequential relief and cross objection is also disposed of.
(pronounced in the court on 15.10.2024)
(C.J.MATHEW) (AJAY SHARMA)
MEMBER (TECHNICAL) MEMBER (JUDICIAL)
mk