Custom, Excise & Service Tax Tribunal
M/S. Udaipur Pipes Pvt. Ltd vs C.C.E. Jaipur-I on 4 March, 2015
IN THE CUSTOMS, EXCISE AND SERVICE TAX
APPELLATE TRIBUNAL, NEW DELHI
PRINCIPAL BENCH, COURT NO. III
Excise Appeal No. E/2151 & 2152/2006 -Ex[DB]
[Arising out of Order-In-Appeal No. 179(HKS)/CE/JPR-II/2006 dated: 28.02.2006 passed by Commissioner of Central Excise Jaipur]
For approval and signature:
Hon'ble Mr. Rakesh Kumar, Member (Technical)
Hon'ble Mr. S.K. Mohanty, Member (Judicial)
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. Udaipur Pipes Pvt. Ltd. ...Appellant
Manish Kala, Director
Vs.
C.C.E. Jaipur-I Respondent
Appearance:
Mr. Bipin Garg, Advocate for the Appellants Mr. Ranjan Khanna, DR for the Respondent CORAM:
Hon'ble Mr. Rakesh Kumar, Member (Technical) Hon'ble Mr. S.K. Mohanty, Member (Judicial) Date of Hearing/decision.04.03.2015 FINAL ORDER NO. 50713-50714 /2015-Ex(Br) Per Rakesh Kumar (for the Bench):
The facts leading to filing of these appeals are, in brief, as under:
1.1 M/s Udaipur Pipes (P) Ltd. E/46 Road No. 3, Mewar Industrial Area, Udaipur, Rajasthan (hereinafter referred to as the appellant company) are engaged in manufacture of asbestos cement pressure pipes (ACC Pipes) Asbetos Cement Couplers (AC Couplers), chargeable to central excise duty under heading 6804 of the Central Excise Tariff. Shri Manish Kala is the Director of the appellant company. The tariff rate of duty during the period of dispute, that is, from period 01.04.2000 to 24.02.2000 was 16%. The appellant were availing of the exemption under notification no. 6/2000-CE dated 01.03.2000, 3/2001-CE dated 01.03.2001, 6/2002-CE dated 01.03.2002 which prescribed nil rate of duty for the goods of chapter 68 in which not less than 25% by weight of fly ash or phosphogypsum or both have been used, subject to the condition specified in this notification. The condition specified for this exemption is that the manufacturer maintains proper account in the form as prescribed by the Jurisdictional Commissioner of Central Excise regarding receipt and use of fly ash/phosphogypsum in the manufacture of the goods falling under chapter 68 of the tariff and also file a monthly return in the format as prescribed by the Commissioner with the Jurisdictional Deputy / Assistant Commissioner. There is no dispute that the appellant were maintaining the record regarding receipt and consumption of the fly ash as prescribed by the Commissioner and receipt of each consignment of fly ash was being intimated to the Jurisdictional Central Excise Officer in D-3 form sent upto the year 2002.
1.2 On 07.10.2004 the factory of the appellant company was visited by the Central Excise Officers and they conducted inquiry to ascertain whether the appellant are using at least 25% fly ash in the ACC pipes and couplers being manufactured by them. In this regard, the officers resumed the accounts regarding receipt and use of the fly ash being maintained by the appellant. At the time of the officers visit to the factory, one Shri Laxman Meghwal, Mixture Master, was present and his statement was recorded under section 14 of the Central Excise Act, 1944, wherein he stated that fly ash was not being used for the last one year and that sometimes fly ash in the ratio of 2 to 3 Kg. per 100 Kg. of cement had been used and that if more than 2 to 3 Kg. of fly ash per 100 kg of cement is used, the pipes will break. He also stated that the fly ash was being received but was being used not for the manufacture of the ACC pipes/ couplers but was being used for earth filling of an adjoining plot.
1.3 Inquiry was made with Sh. Girish Panth, Sales Executive, present at that time and he also broadly corroborated the statement of Sh. Laxman Meghwal. Thereafter, inquiry was made with Sh. Manish Kala, Director of the appellant company, and his statement was recorded under section 14 of the Central Excise Act, 1944 wherein, he stated that they were clearing ACC pipes manufactured by them at nil rate of duty under notification no. 6/02-CE but on being asked as to whether in the manufacture of ACC pipes and couplers, the fly ash in the required ratio, as prescribed in the notification was being used, he stated that they had manipulated the records of consumption of fly ash and had used the fly ash received in lavelling of the premises at F-20/21 Road No. 3A MIA, Udaipur, and that in order to avail the excise exemption and sales tax exemption, they had only shown the use of the fly ash. On being shown the statements of Sh. Laxman Meghwal and Sh Girish Panth recorded on 07.10.2004 to him, he stated that the facts and details mentioned therein are true and correct. He, further stated that that the actual use of the fly ash were only 3% to 7%. From the records, it was found that the appellant were procuring fly ash from Kota Thermal Power Plant through three parties - M/s Kumawat Industries, M/s Shubham Fly Ash Products and M/s Nirmala Fly Ash Industries, Kota, as it is these three parties who had the necessary license to lift fly ash from Kota Thermal Power Station. The fly ash so procured was shown to have been transported to the appellants factory premises through M/s Kaka Roadline whose proprietor is Sh. Darpan Jain. Statements of Shri Darpan Jain were recorded on 07.03.2005 and 24.05.2005 wherein he stated that only those parties who had obtained the permission from Kota Thermal Power Plant to lift the fly ash, were allowed to lift the fly ash from there under the gate passes issued by the KTPS, that consignments of fly ash was being lifted by M/s Kumawat Industries, M/s Shubham Fly Ash Products and M/s Nirmala Fly Ash Industries, Kota, that the fly ash lifted against the gate passes issued to the above three parties were being unloaded at their premises and thereafter he used to prepare GRs showing transportation of the fly ash to the appellant company, on insistence of Sh. Manish Kala, Director of the appellant company, but the fly ash covered under those GRs was not actually being transported.
1.4. Inquiry was also made with Sh. Chandmal Kumawat of M/s Kumawat Industries and Sh. Kailash Sharma of M/s Shubham Fly Ash Products and M/s Nirmala Fly Ash Industries, Kota and both these persons in their statements denied having supplied any fly ash to the appellant company.
1.5 It is in view of the above investigation that a Show Cause Notice dated 4.4.2005 was issued to the appellant company for denying the benefit of notification no. 6/2000-CE, 3/2001-CE and 6/2002-CE and demanding the differential duty of Rs. 7,41,941/- in respect of clearances of Asbestos Cement pipes and couplers during period from 01.04.2000 t0 26.09.2000 along with interest thereon under section 11AB and also for imposition of penalty on the appellant under section 11AC. Beside this, the SCN also proposed confiscation of 40M of ACC pipes which has been seized in the appellants factory on the ground that the same has been mis-declared, as being manufactured by using more than 25% fly ash. Beside this, the SCN also sought recovery duty of Rs. 22,030/- in respect of shortage of finished gods found at the time of visit.
1.6 The SCN was adjudicated by the Joint Commissioner vide order-in-original dated 07.10.2005 by which the duty demand of Rs. 4,07,075/- out of total duty demand of Rs. 7,41,941/- and also the duty demand of Rs. 22,030/- in respect of shortage goods of the finished products were confirmed along with interest and total penalty of Rs. 4,03,005/- was imposed on the appellant company under section 11AC. Beside this penalty of Rs. 10,000 was imposed on Sh. Manish Kala under Rule 26 of the Central Excise Rules, 2002, while confirming the above mentioned duty demand, the adjudicating authority also gave the benefit of SSI exemption and dropped the demand of Rs. 3,41,166/-. 40M of ACC pipes placed under seizure were ordered to be confiscated with option to be redeemed on payment of redemption fine in lieu of confiscation of Rs. 1000.
1.7 On appeals being filed to Commissioner(Appeals) against this order of the Joint Commissioner, the Commissioner (Appeals) vide order-in-appeal dated 16.03.2006 dismissed the appeals. Against this order of the Commissioner (Appeals) these appeals have been filed.
2. Heard both the sides.
3. Sh. Bipin Garg, Advocate the Ld. Counsel for the appellant, pleaded that the appellant were availing the duty exemption under notification No. 6/2000-CE dated 01.03.2000, 3/2001-CE dated 01.03.2001, 6/2002-CE dated 01.03.2002, on the basis that they are using fly ash to the extent of at least 25% in the manufacture of ACC pipes, that the appellant in this regard fulfilled the condition of the exemption notification inasmuch as they have been maintaining the records regarding receipt and use of the fly ash in the format prescribed by the Commissioner and beside this they also filed a monthly return Annexure-C, regarding the receipt and use of fly ash, along with monthly RT-12 return, that upto 2002 they were also filing the intimation regarding receipt of the consignment of fly ash in D-3 format, that the file containing D-3 intimations given from time to time and also the records being maintained and the returns being files have been resumed by the investigating officers, that in April, 2003 the appellants unit had been visited by the Jurisdictional Central Excise Officers, specifically to check the use of fly ash and nothing adverse was noticed by the inspecting team, that the appellant were procuring the consignments of fly ash from KTPS through three parties, namely, M/s Kumawat Industries, M/s Shubham Fly Ash Products and M/s Nirmala Fly Ash Industries, Kota, and the consignments of fly ash were being transported through M/s Kaka Roadlines, that the Departments case against the appellant alleging that the appellant were not using fly ash to the extent of at least 25% is based only on:
(a) Statement of fly ash suppliers Sh. Chandmal Kumawat of M/s Kumawat Industries and Sh. Kailash Sharma of M/s Shubham Industries and M/s Nirmala Fly Ash Industries wherein they have stated that they have not supplied any fly ash to the appellant company;
(b) Statement of Sh. Darpan Jain of M/s Kaka Roadlines, wherein he has stated that he has issued only bogus GRs showing transportation of fly ash from the premises of M/s Kumawat Industries, M/s Shubham Fly Ash Products and M/s Nirmala Fly Ash Industries, Kota to the appellants premises without actually transporting any fly ash;
(c) The statement of Sh. Laxman Meghwal, Mixture Master and Sh. Girish Panth, Sales executive of the appellant company, wherein they have stated either the fly ash was not being used or more it was being used in the ratio of 2 to 3 Kg. per 100 Kg. of Cement; and;
(d) Statement of Sh. Manish Kala, Director of the appellant company wherein, agreeing with the statments of Sh. Laxman Meghwal and Sh. Girish Panth, he has stated that the fly ash consumption was only 3% to 7% and the rest quantity of the fly ash was being used for lavelling the premises of F-20/21 Road No. 3A MIA, Udaipur.
that Shri Manish Kala has retracted the statement given by him at the time of officers visit to the factory stating that the same was on extempore basis without giving any opportunity or without referring to any record maintained by them and was also under pressure, that Sh. Darpan Jain, Proprietor of M/s Kala Roadlines has also retracted his statement vide letter dated 18.07.2005 addressed to the appellant, that in the statements of Sh. Laxman Meghwal and Girish Panth, it has been stated that the bulk of the fly ash received was being used for land filling at F-20/21 Road No. 3A MIA, Udaipur which shows that the fly ash was being received and this statement contradicts the statements of Sh. Darpan Jain of the transport company and of the fly ash suppliers stating that no fly ash was being supplied, that in view of this only, the appellant had sought cross examination of Sh. Darpan Jain of M/s Kaka Roadlines, Sh. Kailash Sharma of Shubham Fly Ash and Nirmala fly ash industries and Sh. Chandmal Kumawat of M/s Kumawat Industries, that the original adjudicating authority has wrongly disallowed the cross examination which, in the circumstances of the case, was necessary, that the Honble Delhi High Court in the case of Basudev Garg vs Commissioner of Customs reported in 2013 (294) ELT 353 (Del.) while interpreting the provisions of section 138B of the Statements Act, 1962 which in perimeteria with the provisions of Section 9D of the Central Excise Act, 1944 has held that the statements of person recorded by the Gazette officer of a Department cannot be used against an assessee without giving to the assessee the opportunity of cross examining the deponent and in this regard, Honble High Court has relied upon its earlier judgments in the case of J&K Ciggarttes Ltd. vs Collector reported in 2009 (242) ELT 189 (Del.), with also the Apex Courts Judgment in the case of Laxman Exports Ltd vs Collector reorpted in 2000 (122) ELT 641 SC, that when the appellant as per the condition of the notification were maintaining the record of the receipt and use of the fly ash and were also filing monthly return in this regard along with RT-12 return and when during inspection in April 2003 by the preventive team of the Divisional Office for checking the use of fly ash in the manufacture of ACC Pipes, no irregularity had been found, merely on the basis of the statements of the suppliers and transporter of fly ash suppliers and of some certain employees and of the Director, the Department cannot infer that the appellant company was not using the fly ash to the extent 25%, that the Department had also drawn sample of the ACC pipes available at the time of their visit on 07.10.2004 but the SCN and the Adjudication order are totally silent about the outcome of the test of those samples, that the statement dated 07.10.2004 of Sh. Laxman Meghwal that fly ash can be used only to the extent of 2% to 3% in the manufacture of ACC pipes and if higher percentage of fly ash is used the pipes will break is factually incorrect as the ISI specifications for ACC pipes permitted the use of fly ash upto 40% and this is also one more reason as to why the statement of Sh. Laxman Meghwal cannot be relied upon without permitting his cross examination, that the appellant has also requested the investigating officers on the spot at the time of search to verify their claim to verify as to whether the fly ash received was being used for land filling at an adjoining plot but no such verification has been done, and that the appellant have been using the entire quantity of fly ash received by them as per the records for manufacture of ACC pipes, Sh. Garg also cited the judgment of the Tribunal in the case of Mahavir Metal Industries vs CCE Daman reported in 2014 (313) ELT 581 and also in the case of Premium Packaging (P) Ltd. vs CCE reported in 2002 (184) ELT 165 (tri. Del) and in case of Vikram Cement (P) Ltd. vs CCE Kanpur, reported n 2012 (286) ELT 615 wherein it has been held that merely on the basis of the statements of some persons and statement of Director, the duty demand cannot be confirmed against an assessee. He also mentioned that the Tribunals Judgment in the case of Vikram Cement (P) Ltd. (Surpa) has been upheld by the Honble Allahabad High Court vide judgement reported in 2014 (303) ELT 82 (All.), and that in view of this the impugned order is not correct.
4. Shri Ranjan Khanna, Ld. DR, pleaded that though the appellant company were maintaining meticulous record of receipt and use of fly ash and were also filing monthly return in this regard, the records and the returns were manipulated records and returns, that this is clear from the findings of the Joint Commissioner in para 67 of the order in original wherein the Joint Commissioner has given a finding that while the registers maintained by the appellant showed working of the factory in two shifts and the consumption of fly ash has been shown on this basis, Shri Manish Kala and Sh. Girish Panth in their statements have stated that the factory was working in one shift only. He also emphasized that the appellant do not have the licence to lift fly ash from KTPS and the license in this regard had only been issued to M/s Kumawat Industries, M/s Shubham Fly Ash Products and M/s Nirmala Fly Ash Industries, Kota. He pleaded that Sh. Chandmal Kumawat, proprietor of M/s Kumawat Industries and Sh. Kailash Sharma of M/s Shubham fly ash and M/s Nirmala fly ash have denied having supplied any fly ash to the appellant company. He pleaded that though the transportation of fly ash from the premises of M/s Kumawat Industries, M/s Shubham Fly Ash Products and M/s Nirmala Fly Ash Industries, Kota to the appellant company is being shown through Kaka Roadlines, Sh. Darpan Jain, Proprietor of M/s Kaka Roadlines in his statement has stated that he has issued only bogus GRs on insistence of Sh. Manish Kala showing transportation of fly ash from the premises of M/s Kumawat Industries, M/s Shubham Fly Ash Products and M/s Nirmala Fly Ash Industries, Kota to the Appellants factory. He emphasized that the statements of Sh. Chandmal Kumawat and Sh. Kailash Sharma have not retracted and Sh. Darpan Jain of M/s Kaka Roadlines retracted his statement only after 7 months and his retraction cannot be treated as credible. Beside this, he pleaded that the appellant have not produced any evidence or proof of payment to the fly ash suppliers which also shows that no fly ash had been supplied. As regards the statement of Sh. Manish Kala, Director of the appellant company, he pleaded that he has not retracted his statement and that since the same is corroborated by the statement of Sh. Laxman Meghwal and Sh. Girish Panth, cross examination of the transporters and suppliers of fly ash suppliers was not necessary and on account of not permitting the cross examination of these persons, the proceedings have not been vitiated. He also pleaded that as pointed out in para 5 of the SCN, the records regarding receipt and use of fly ash were not being properly and fully inasmuch as the entries in some of the columns which related to total quantity of finished products, total quantity of fly ash and percentage of fly ash in the finished products respectively were kept blank. He, therefore, pleaded that there is no infirmity in the impugned order.
5. Sh. Bipin Garg in rejoinder pleaded that the contention of the Department that the records regarding receipt and use of the fly ash were not being properly maintained is not correct. As some of the extracts of the register placed on record do show that that percentage of fly ash in the final product was being mentioned.
6. We have considered the submissions from both the sides and perused the records. The only point of dispute in this case is as to whether the appellant for availing the exemption under notification no. 6/2000-CE, 3/2001-CE and 6/2002-CE were using fly ash to the extent of 25% or more in the manufacture of ACC pipes/ couplers. There is no dispute that the appellant in this regard were maintaining the records as prescribed in the exemption notification and were also filing a monthly return along with ER-1 returns. However, on this point the dispute is that these records were not been properly maintained as according to the Department some of the important columns regarding total quantity of finished products, total quantity of fly ash used and percentage of the fly ash in the finished products were being left blank. The appellants counsel however, disputes this allegation of the Department and according to him as per the documents available with him, these columns were not being left blank. It is also his contention that even if the column no. 10to 13 are left blank, it is not material as column no. 7 clearly shows the quantity of fly ash utilized.
7. However, the case of the Department against the assessee is based mainly on:-
(a) Statement dated 7.10.2004 of Sh. Laxman Meghwal, mixture master and statement of Sh. Girish Panth, Sales Executive of the appellant company wherein they have stated that fly ash was being used only to the extent of 2 to 3% and most of the time no fly ash was being used and the fly ash received was being used for lavelling the premises at F-20/21, MIA, Udaipur;
(b) Statement of Sh. Manish Kala, Director of the Appellant company wherein he has stated that the above mentioned statements of Sh. Laxman Meghwal and Sh. Girish Panth.
(c) The statement of Sh. Chandmal Kumawat, proprietor of M/s Kumawat Industries and statement of Sh. Kailash Sharma, Manager of M/s Shubham and M/s Nirmala wherein they have stated that they had not supplied any fly ash received by them from KTPPS to the appellant company and;
(d) Statement of Shri Darpan Jain, proprietor of M/s Kaka Roadlines wherein he has stated that he had issued only bogus GRs on the request of Shri Manish Kala, Director of the appellant company showing transportation of the fly ash from the premises of M/s Kumawat Industries, Kota, M/s Shubham Fly Ash Products, Kota and M/s Nirmala Fly Ash Industries, Kota, to the appellant premises without actually transporting any fly ash.
8. It is seen that there is contradiction between the statements of Sh. Laxman Meghwal and Sh. Girish Panth on one hand wherein they have stated that while fly ash was being received but the same was being used only to the extent of 2 to 3% and the balance quantity of fly ash was being used for land filling/ levelling of an adjoining plot and the statement of Sh. Darpan Jain of M/s Kaka Roadlines and statement of Sh. Chandmal Kumawat and Sh. Kailash Sharma of the fly ash suppliers wherein he had stated that no fly ash had been supplied to the appellant company. If M/s Kumawat Industries, M/s Shubham Fly Ash Products and M/s Nirmala Fly Ash Industries, Kota, had not supplied any fly ash to the appellant company, and M/s Kaka Roadlines have not transported any fly ash to the appellant company, the appellant company would not be having any fly ash which they could have used for levelling the plot at the F-20/21 Road No. 3A MIA, Udaipur. It is also seen that in April, 2003, the appellant premises had been visited by the Jurisdictional Central Excise Officers for checking the use of fly ash and at that time no irregularity had been found. In view of these circumstances, we are of the view that the appellants request for cross examination of Shri Darpan Jain of M/s Kaka Roadlines, Sh. Chandmal Kumawat of M/s Kumawat Industris the fly ash supplier and Sh Kailash Sharma of Shubham Fly Ash Products and M/s Nirmala Fly Ash Industries is genuine. Beside this for the same reason, the request for cross examination of Sh. Laxman Meghwal and Sh. Girish Panth is also genuine. It is seen that the Honble Delhi High Court in the case of Basudev Garg Vs CCE while interpreting the provisions of section 138B of Customs Act 1962, which are in perimeteria with the provisions of section 9D of Central Excise Act, 1944 has held that statement given by a person cannot be used against an assessee without giving the assessee an opportunity of cross examining the deponent. It is also seen that in terms of section 9D(2) of Central Excise Act, 1944, the provision of sub section(I) shall, so far as may be, apply in relation to any proceeding under this act other than proceeding before the court as they apply in relation to proceedings before the court. Under section 9D(1) in course of prosecution proceedings, for offences under the Central Excise Act, 1944, the statement of a person can be used against an assessee only when the person who has made the statement is examined as a witness in that case before the court and the court is of the opinion that having regard to the circumstances of the case, the statement should be admitted in evidence in the interest of justice. The only circumstances in which the statement of a witness can be accepted as relevant for proving the charge against him without cross examination are those enumerated in clause (a) of section 9D(1), that is, when the person who made the statement is dead or cannot be found, or is incapable of acting evidence, or is kept out of the way by the adverse party, or whose presence cannot be obtained without an amount of delay, or absences which under the circumstances of the case, the court considers unreasonable. In terms of sub section (2) of section 9D, the provisions of sub-section (1) have to be applied, as far as possible for adjudication proceedings also. Therefore, when the Departments case against an assessee is mainly based on statements given by some persons and those statements are not corroborated by some other independent evidence, and contradict each other, for using those statements, against the assessee for proving the charge of duty evasion against their, their cross examination would be necessary.
9. In view of this we are of the view that the rejection for the appellants request for cross examination was not correct and this has vitiated the proceedings. Therefore, the impugned order is set aside and the matter is remanded to the Original adjudicating authority for de novo adjudication after permitting the cross examination of the witnesses whose statements are sought to relied upon by the Department against the appellant company. The appeals stands disposed of as above.
(Dictated and pronounced in open court) (Rakesh Kumar) Member (Technical) (S.K. Mohanty) Member(Judicial) Neha Page | 1