Custom, Excise & Service Tax Tribunal
Santosh Mandiecha Director vs Commissioner Of Central Excise And ... on 15 July, 2022
1 E/984,985,986/2012
CUSTOMS, EXCISE & SERVICE TAX APPELLATE
TRIBUNAL, MUMBAI
REGIONAL BENCH
Excise Appeal No. 984 of 2012
(Arising out of Order-in-Original No. 03/CEX/2012 dated 29/03/2012 passed
by the Commissioner of Central Excise & Customs, Nasik)
M/s. Reliance Electronics Appellant
Plot No. D-1/2, M.I.D.C., Ambad,
Nashik-422 010
Vs.
Commissioner of Central Excise & ST, Nashik Respondent
Kendriya Rajaswa Bhawan, Gadkari Chowk, Nasik 422 002.
WITH Excise Appeal No. 985 of 2012 (Arising out of Order-in-Original No. 03/CEX/2012 dated 29/03/2012 passed by the Commissioner of Central Excise & Customs, Nasik) Shri Santhosh Mandiecha Appellant Director, Reliance Electronics Plot No. D-1/2, M.I.D.C., Ambad, Nashik-422 010 Vs. Commissioner of Central Excise & ST, Nashik Respondent Kendriya Rajaswa Bhawan, Gadkari Chowk, Nasik 422 002.
AND Excise Appeal No. 986 of 2012 (Arising out of Order-in-Original No. 03/CEX/2012 dated 29/03/2012 passed by the Commissioner of Central Excise & Customs, Nasik) Shri Sushil D. Chavan, Appellant Partner, Sivitek India Director, Reliance Electronics Plot No. D-1/2, M.I.D.C., Ambad, Nashik-422 010 Vs. Commissioner of Central Excise & ST, Nashik Respondent Kendriya Rajaswa Bhawan, Gadkari Chowk, Nasik 422 002.
Appearance:
None for the Appellant Shri N N Prabhudesai, Superintendent, Authorised Representative, for the Respondent
2 E/984,985,986/2012 CORAM:
HON'BLE MR. SANJIV SRIVASTAVA, MEMBER (TECHNICAL) HON'BLE MR. AJAY SHARMA, MEMBER (JUDICIAL) Date of Hearing: 15/07/2022 Date of Decision: 15/07/2022 FINAL ORDER NO. A/85654-85656/2022 PER: SANJIV SRIVASTAVA These appeals are directed against order in original No.03/CEX/2012 dated 20.03.2012 of the Commissioner Central Excise Nasik. By the impugned order Commissioner has held as follows:
"ORDER
1. I confirm the demand of Rs.63,34,651/- (Rs.61,72,878/- B.E.D. + Rs.1,23,458/- Edu. Cess + Rs.38,315/- S & H Edu. Cess) (Rupees Sixty Three Lakhs Thirty Four Thousand Six Hundred & Fifty One Only) out of the total demand of Rs.68,11,996/- proposed in the notice, on account of denial of SSI exemption by clubbing the clearances for the material period in terms of Section 11A(2) of the Central Excise Act, 1944. The amount, so determined, shall be recovered.
2. In addition, the interest shall be charged at the appropriate rate in terms of Section 11AB ibid on the amount determined above.
3. I impose an equal penalty of Rs.63,34,651/- (Rupees Sixty Three Lakhs Thirty Four Thousand Six Hundred & Fifty One Only) in terms of Section 11AC ibid read with Rule 25(1)(d) of CER, 2002 for contravention of various provisions of Central Excise Rules, 2002 / Central Excise Act, 1944, stated hereinabove.
However, the penalty may be reduced to the extent of 25% of the amount of penalty imposed in terms of first proviso to Section 11AC ibid, subject to the payment of duty and applicable interest within 30 days from the date of communication of the order, if the 25% penalty amount is also paid within 30 days.
3 E/984,985,986/2012
4. I impose a penalty of Rs.5,00,000/- (Rupees Five Lakhs Only) each on Shri Santosh Mandlecha, Director - M/s. REPL, and Shri Sushil Devram Chavan, Partner - M/s. Sivitek, under Rule 26 of the Central Excise Rules, 2002.
5. There shall be no penalty on M/S. REPL and M/s. Sivitek under Rule 26 of the CER,2002, for the reasons recorded hereinabove (sub-para 5.15.4. refer)."
2.1 Along with the appeals appellant had filed the stay application which were disposed of by this tribunal vide order No S/236 to 238/13/EB/C-II dated 14.01.2013 directing the appellants to deposit an amount of 25% of the duty confirmed, within six weeks. On deposit of this amount the pre-deposit of the remaining duty, interest and penalty was waived.
2.2 Against this stay order, Appellant filed the modification request vide Miscellaneous Application No: E/Modfn/94336/13- Mum dated 29.04.2013. By the order No M/1058/13/EB/C II this application was disposed of rejecting the modification request and applicant was granted time of another six weeks to deposit the balance amount as directed by the order dated 14.01.2013, and report compliance on 02.07.2013.
2.3 By the order No A/737-739/213/EB/C-II dated 19.08.2013, the appeals were dismissed for non compliance with the earlier two orders of tribunal and Section 35 F of the Central Excise Act, 1944.
2.4 Against the order dated 19.08.2013, appellants filed application for restoration of appeal vide application No E/ROA- 97786, 97787 & 97789/2013. This application was disposed of by Order No M/2261-2263/13/EB/C-II dated 04.11.2013, restoring the appeals, after noting the compliance with the directions given by the tribunal in order dated 14.01.2013.
3.1 These appeals were listed for final hearing on 16.12.2021. The bench adjourned the matters to 20.01.2022, stating as follows:
"Adjourned to 20.01.2022 at the request of learned advocate"
3.2 On 20.01.2022, the matter were again adjourned after taking note of the written request made by the counsel for appellants to 10.03.2022.
4 E/984,985,986/2012 3.3 On 10.03.2022, the bench recorded as follows after taking note of the adjournment request made by the counsel for appellant:
"Learned counsel seeks time in the matter.
2. Considering the request matter is adjourned to 26.04.2022. Since appeal is of 2012, we make it clear that no further adjournment request will be considered in any circumstances."
3.4 On 26.04.2022, counsel again made written request for adjournment. Bench hearing the matter after taking note of the request recorded as follows:
"A request in writing has been made by the learned counsel for the appellants for adjournment. As prayed, list on July 15,2022."
3.5 When the matter was listed on 15.07.2022, counsel for appellant has made request via an unsigned letter dated 14.07.2022 stating as follows:
5 E/984,985,986/2012 4.1 Section 35 C (1) and 35 C (1A) of the Central Excise Act, 1962 provides as under:
Section 35C. Orders of Appellate Tribunal. -
(1) The Appellate Tribunal may, after giving the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit, confirming, modifying or annulling the decision or order appealed against or may refer the case back to the authority which passed such decision or order with such 6 E/984,985,986/2012 directions as the Appellate Tribunal may think fit, for a fresh adjudication or decision, as the case may be, after taking additional evidence, if necessary.
(1A)The Appellate Tribunal may, if sufficient cause is shown, at any stage of hearing of an appeal, grant time, from time to time, to the parties or any of them and adjourn the hearing of the appeal for reasons to be recorded in writing :
Provided that no such adjournment shall be granted more than three times to a party during hearing of the appeal.
5.1 Hon'ble Apex Court has recently in case of Ishwarlal Mali Rathod vs Gopal & Others vide order dated 20.09.2021 [in Special Leave Petition (Civil) Nos.1411714118 OF 2021], condemning the practice of seeking repeated adjournments and courts granting the same mechanically has observed as follows:
"5.5 Today the judiciary and the justice delivery system is facing acute problem of delay which ultimately affects the right of the litigant to access to justice and the speedy trial. Arrears are mounting because of such delay and dilatory tactics and asking repeated adjournments by the advocates and mechanically and in routine manner granted by the courts. It cannot be disputed that due to delay in access to justice and not getting the timely justice it may shaken the trust and confidence of the litigants in the justice delivery system. Many a times, the task of adjournments is used to kill Justice. Repeated adjournments break the back of the litigants. The courts are enjoying upon to perform their duties with the object of strengthening the confidence of common man in the institution entrusted with the administration of the justice. Any effort which weakens the system and shake the faith of the common man in the justice dispensation has to be discouraged. Therefore the courts shall not grant the adjournments in routine manner and mechanically and shall not be a party to cause for delay in dispensing the justice. The courts have to be diligence and take timely action in order to usher in efficient justice dispensation system and maintain faith in rule of law. We are also aware that whenever the trial courts refused to grant 7 E/984,985,986/2012 unnecessary adjournments many a times they are accused of being strict and they may face displeasure of the Bar. However, the judicial officers shall not worry about that if his conscience is clear and the judicial officer has to bear in mind his duties to the litigants who are before the courts and who have come for justice and for whom Courts are meant and all efforts shall be made by the courts to provide timely justice to the litigants. Take an example of the present case. Suit was for eviction. Many a times the suits are filed for eviction on the ground of bonafide requirements of the landlord. If plaintiff who seeks eviction decree on the ground of personal bonafide requirement is not getting the timely justice and he ultimately gets the decree after 10 to 15 years, at times cause for getting the eviction decree on the ground of personal bonafide requirement may be defeated. The resultant effect would be that such a litigant would lose confidence in the justice delivery system and instead of filing civil suit and following the law he may adopt the other mode which has no backing of law and ultimately it affects the rule of law. Therefore, the court shall be very slow in granting adjournments and as observed hereinabove they shall not grant repeated adjournments in routine manner. Time has now come to change the work culture and get out of the adjournment culture so that confidence and trust put by the litigants in the Justice delivery system is not shaken and Rule of Law is maintained.
5.6 In view of the above and for the reasons stated above and considering the fact that in the present case ten times adjournments were given between 2015 to 2019 and twice the orders were passed granting time for cross examination as a last chance and that too at one point of time even a cost was also imposed and even thereafter also when lastly the High Court passed an order with extending the time it was specifically mentioned that no further time shall be extended and/or granted still the petitioner - defendant never availed of the liberty and the grace shown. In fact it can be said that the petitioner - defendant misused the liberty and the grace shown by the court. It is reported that as such now even the main suit has been disposed of. In view of the circumstances, 8 E/984,985,986/2012 the present SLPs deserve to be dismissed and are accordingly dismissed."
5.2 About Rs 63,34,651/- of Central Excise Duty with interest and equivalent amount of penalty is involved in the appeal of the main appellant. Penalties of Rs . 5 lakhs on each of other two appellants are involved. Against the above amounts appellants have got the stay by making the deposit of 25% of the duty amount. Now they seem to be in no urgency and are seeking only adjournments when so ever the matter is listed for hearing. This practice of seeking adjournments mechanically and being allowed by the courts/ tribunals have been condemned by the Hon'ble Apex Court in the decision referred above.
6.1 Rule 20 of the CESTAT Procedure Rule, 1982 reads as under:
RULE 20. Action on appeal for appellant's default. -- Where on the day fixed for the hearing of the appeal or on any other day to which such hearing may be adjourned, the appellant does not appear when the appeal is called on for hearing, the Tribunal may, in its discretion, either dismiss the appeal for default or hear and decide it on merits :
Provided that where an appeal has been dismissed for default and the appellant appears afterwards and satisfies the Tribunal that there was sufficient cause for his non-appearance when the appeal was called on for hearing, the Tribunal shall make an order setting aside the dismissal and restore the appeal." 6.2 In view of the provisions of Rule 20, the appeal is taken up for consideration ex-parte after hearing Shri N N Prabhudesai, Superintendent, Authorized representative for the revenue. 7.1 In these appeals the appellant in Appeal No E/984/2012-
Mum, is the Company (Appellant 1) against whom the demand is confirmed after clubbing the clearance of the appellant 1 with the M/s. Reliance Equipments Pvt. Ltd. and M/s. Sivitek India are the units created on papers, which is to cover up the clearances units by denying the benefit of SSI Notification. Appellant 1, is engaged in the manufacture of various types of metal detectors, viz. handheld metal detectors, deep search metal detectors etc. Appellant 2 is the Director of the Appellant 1 and Appellant 3 is partner in Sivitek India.
9 E/984,985,986/2012 7.2 Appellants contended before the original authority that all the units are in existence and manufacturing goods, therefore the clearances of units cannot be clubbed with Reliance Electronics hence the demand is not sustainable. However original authority has in his detailed findings recorded as follows concluded after considering all the evidences on record concluded that M/s Sivitek and M/s REPL were only dummy and their clearances need to be clubbed for determining the clearances of Appellant 1.
Findings in respect of M/s. Sivitek for the year 2005-06 & 2006-07:
5.3.1, On a perusal of the case records, I find that Shri Sushil Chavan and Shri Khadag Singh, two partners, formed a partnership firm in the name of M/s. Sivitek India under Indian Partnership Act, 1956 declaring their registered office & works at 10, Pasaydan, Vidya Vinay Society, Lawrence Road, Deolali Camp, Nasik (M.S.). They applied for SSI registration to manufacture Metal Detectors, Security Equipments, Electronic Instruments, Access Control Systems and Turnstiles & Gate Barriers, to District Industries Centre, Nasik on 01.10.2003, declaring their works / factory at above mentioned address and commencement of production w.e.f. 15.09.2003 with capacity of live Managerial Staff and one Supervisory Cadre Staff, and in reciprocation, the Industries Inspector, DIC, Nasik issued/ granted permanent registration bearing No 111612705 as a small scale unit on 01.10.2003 On a careful perusal of the case records, I find that the Central Excise officers had visited the business premises of M/s. Sivitek on 03.10.2008 and had drawn a panchnama on the same date.
Search of the business premises of M/s. Sivitek revealed that the said premises were a residential premises and there was no machinery installed therein, and there was no electricity connection sourced on commercial basis. Also, no records were found in the said premises. The said premises were absolutely a residential premises in the name of Shri Sushil Chavan, who was the active partner of M/s. Sivitek. Shri Sushil Chavan was earlier an employee working as a Site Manager in a Construction Firm owned by Shri Santosh Mandlecha, Proprietor of M/s. RE, and 10 E/984,985,986/2012 Shri Khadag Singh was another partner in M/s. Sivitek. It is clear that the manufacturing activity cannot take place in such a small residential premises located at 10, Pasaydan, Vidya Vinay Society, Lawrence Road, Deolali Camp, Nasik (M.S.). Further, it is a basic concept that to manufacture the finished goods, certain apparatus and equipments are essentially required, which were not found during search of the premises. There was absolutely no set-up found to manufacture the security systems in the residential premises. It gives rise to conclusion that M/s. Sivitek were not engaged in the manufacture of impugned goods.
5.3.2. It is further noticed that the raw materials ordered to be procured by M/s. Sivitek were received at the factory premises of M/s. RE. This fact became evident from the Inward Stamp of M/s. RE put on the face of the purchase invoices of M/s. Sivitek. Scrutiny of Invoice No. 506 dated 23.06.2005 issued by M/s. BLG Electronics Ltd., Gandhinagar, Gujarat in favour of M/s. Sivitek consigning the materials of 300 and 273 Nos. of Printed Circuit Boards of specification RE/DSMD/0605 55B and NA/DSMD/0605 55A, respectively, revealed that the said materials were received by Shri Sonawane, Store Clerk - M/s. RE, vide Inward Entry T.O.C. No. 159/3908 dated 26.06.2005, making it evident that the raw materials purchased by M/s. Sivitek were received in the factory premises of M/s. RE only. Another consignment of 325 Nos. of PCBs was dispatched by M/s. BLG Electronics Ltd., Gandhinagar, vide Invoice No. 507 dated 23.06.2005 to M/s. RE, which was received in the factory premises of M/s. RE by Shri Sonawane, Store Clerk - M/s. RE, as it became evident from Material Inward Entry T.O.C. No.159/3905 dated 26.06.2005. A comparison of the manner & style of putting Inward entry stamp on Invoice Nos.506 & 507 both dated 23.06.2005 issued by M/S. BLG Electronics Ltd., Gandhinagar, Gujarat explicitly revealed that both the consignments were received in the factory premises of M/s. RE in sequential manner. Shri Santosh Mandlecha, Proprietor - M/s. RE, and Shri Sushil Chavan, Partner - M/s. Sivitek, in their respective statements dated 04.09.2010 and 25.08.2010 admitted such facts. In addition to above, certain other materials 11 E/984,985,986/2012 procured under following invoices were also received in the factory premises of M/s. RE in the similar fashion, as it became evident from the material Inward stamp affixed on the said invoices:
Sr. Invoice No & Name of Name of Description of Inward E No Date Consignor Consignee goods & Qnty No & date 1 506/23.06.2005 M/s BLO M/s Sivitek Printed 159/3908 Electronics India, 10, Circuit Board dated Ltd., Pasaydaan, - Qnty- 300 26.06.2005 Vidya & 273 Nos.
Vinay Society Lawrence Road, Deoli Camp, Nasik 2 556/09.08.2005 Ms do Cross linked 169/4130 Shripad Foam - 125 dated Agency, Nos 09.08.2005 MIDC, Ambad, Nasik 3 90/14.07.2005 M/s Pavan do Potentiometer 164/4019 Industries, - 520 Nos dated Valsad 20.07.2005 4 651/31.08.2005 Ms do Cross Linked 174/4244 Shripad Foam - 175, dated Agency, 300 & 25 09.09.2005 MIDC, Nos.
AMbad, Nasik Though the facts were subsequently circumvented advancing arguments by M/s. RE and M/s. Sivitek that the raw materials, being common in nature and description, were wrongly delivered in the factory premises of M/s. RE, but, subsequently, the impugned raw materials were consigned / given to M/s. Sivitek. Such an after thought is not at all appreciable, as in certain cases, it is visibly seen that the purchase orders placed by M/s. Sivitek to their suppliers contained the instruction of delivering 12 E/984,985,986/2012 the raw materials in the factory premises of M/s. RE. Purchase Order No.SI/015/05 dated 03.08.2005 placed by M/s. Sivitek to M/s. Shripad Engineering Works, MIDC, Ambad, Nasik fairly establishes the fact of delivery of raw materials to M/S. RE.
5.3.3. During the year 2005-06 & 2006-07, M/s. Sivitek had shown that they had directly dispatched the Door Frame Metal Detector & Hand Held Metal Detector to The Chairman, TPC, Northern Command, Udhampur' under their several invoices from their business premises on account of M/s. RE and M/s. REPL, but, the confirmation received vide letter F.No.24919/SP/Complaint/ES-4 dated 12.02.2009 from The Chairman, TPC, Northern Command, Ministry of Defence, Udhampur', to the effect that they had not received any materials from M/s. Sivitek, established the fact of non undertaking of manufacturing operations by M/s. Sivitek. This fact fairly concludes that the consignments shown as dispatched by M/s. RE to The Chairman, TPC, Northern Command, Udhampur' showing them as trading sale (purchased from M/s. Sivitek), were in fact manufactured and sold by M/s. RE themselves, as M/s. Sivitek was not having adequate facility and expertise to manufacture these items in their residential premises.
5.3.4. Maintenance of parallel set of invoices by M/s. Sivitek:- It is further seen that M/s. RE had placed the purchase order No.RE/155A/05 dated 07.07.2005 to M/s. Sivitek for supply of 350 Nos. of Deep Search Metal Detector for an amount of Rs.76,44,000/- including CST @ 4% with direction to make delivery at Northern Command, Udhampur. Accordingly, M/s. Sivitek, vide Invoice No.2 dated 18.08.2005, showed the dispatches of 252 Nos. of Deep Search Metal Detector for an amount of Rs.55,03,680/- including CST @ 4% of Rs.2,11,680/- to "The Chairman, Tender Purchase Committee, Hdqrs., Northern Command, Engineers Branch, C/O 56 APO on account of M/s. RE. M/s. Sivitek, further vide Invoice No.3 dated 18.08.2005, additionally shown the dispatches of 98 Nos. of Deep Search Metal Detector for an amount of Rs 21,40,320/- including CST @ 4% of Rs 82,320/- to 'the Chairman Tender Purchase 13 E/984,985,986/2012 Committee, Hdqrs, Northern Command, Engineers Branch C/o 56 APO" on account of M/s RE.
Another invoice of similar Nos 2 & 3 both dated 16.08.2005 were also brought on records, which reflected the entire contents viz, description of the goods, quantity, value, sales tax paid, purchase order no., name of the consignee / buyer same as that of invoice No 2 & 3 both dated 18.08.2005. Preparation & maintenance of parallel set of invoices abundantly corroborates the fact of manipulation in documents done by M/s Sivitek in association with M/s. RE. This is a proven fact during investigation that no orders were placed to M/s. Sivitek by Northern Command, Ministry of Defence, Udhampur to supply the security systems. The orders were placed by The Chairman, TPC, Northern Command, Udhampur' to M/s. RE for supply of security systems, who, deliberately showed the dispatches on the strength of invoices of M/s. Sivitek, while the goods were manufactured by M/S. RE, as M/s. Sivitek was not having facility in their residential premises to manufacture the impugned items.
In the similar fashion, M/s. Sivitek was shown as issued the Invoice No.8 dated 20.03.2007 and Invoice No.8 but with different date as 17.03.2007 with identical details, dispatching 100 Nos. of Deep Search Metal Detector for an amount of Rs.25,25,000/- including CST @ 4% of Rs.97,115/- to "The Chairman, Tender Purchase Committee, Hdars., Northern Command, Engineers Branch, C/O 56 APO" on account of M/s. RE, who, in turn, was shown as sold 100 Nos. of DSMD for an amount of Rs.40,00,000/- vide their Invoice No. 282 dated 17.03.2007 to "The Chairman, Tender Purchase Committee, Hdqrs., Northern Command, Engineers Branch, Udhampur"
against the Supply Order No. 29419/SP/DSMD/0607/87/ES-4 dated 27.01.2007 issued by the Northern Command, Engineers Branch, Udhampur. It is quite clear that there cannot be two invoices of similar serial number with two different dates. It explicitly demonstrates that M/s. Sivitek in association with M/s. RE were indulged in manipulation of documents to show that the goods were manufactured by M/s. Sivitek, while the facts were absolutely contrary.14
E/984,985,986/2012 5.3.5. It is on the records that M/s. Sivitek had placed the order to M/s. Fine Circuits, Sector-6, 'A' Road, NICE, Satpur, Nasik for supply of Printed Circuit Boards (PCBs), and, in turn, M/s. Fine Circuits had dispatched the materials under six computerized Invoice Nos. FP/B/29 dated 09.08.2006, FP/B/37 dated
18.08.2006, FP/B/45 dated 30.08.2006, FP/B/52 dated 07.09.2006, FP/B/57 dated 14.09.2006 & FP/B/58 dated 14.09.2006. Shri Ashwin Bhole, Proprietor - M/s. Fine Circuits, in his statement dated 07.06.2010, admitted that they had consigned the materials initially on the strength of computerized generated invoices, but, subsequently, on the request of Shri Santosh Mandlecha, authorized person of M/s. Sivitek, they had prepared and issued manually prepared invoices, and the accounts were ultimately finalized by Shri Santosh Mandlecha by making payment of Rs.50,000/- in cash to M/s. Fine Circuits. On remarks mentioned as Kind Attn.: Shri Santosh Mandlecha' on the face of aforesaid computerized invoices, Shri Ashwin Bhole confirmed that though they had shown the supply of goods to M/s. Sivitek, but the dealing / negotiation was done by Shri Santosh Mandlecha. It clearly ratified the fact that Shri Santosh Mandlecha was the person who was handling the financial & business matters of M/s. Sivitek.
5.3.6. Standing as a surety/ guarantor by Shri Santosh Mandlecha for procurement of a loan of Rs 60,00,000/- from Mahavir Nagari Sahakari Bank, Nashik for M/s Sivitek is also a cogent piece of evidence, which provides due corroboration of business association of M/s. RE with M/s. Sivitek, and active role played by Shri Santosh Mandlecha for M/s. Sivitek.
5.3.7. To conclude from above, I find that the goods i.e. security systems shown as manufactured by M/s. Sivitek in their business premises were not in fact manufactured by M/s. Sivitek, and the task of manufacturing was attended & undertaken by M/s. RE, as M/s. RE were having adequate manufacturing facility in their factory premises and vast expertise in this field.
Findings in respect of M/s. REPL during the year 2005-06 to 2009-10:
5.4. (a) Year 2005-06:- Having regard to the facts and circumstances of the case, I find that M/S. REPL was 15 E/984,985,986/2012 incorporated as a company under the Indian Company Act, 1956 during the year 2005-06 declaring their registered office at 5, Vardhaman Housing Society, Near Jain Bhawan, Artillery Centre Road, Nasik, as it appears from the Balance-sheet for the year 2005-06. There was no activity of the unit during the year 2005-
06, and as such there was no transaction during the said year.
(b) Year 2006-07:- During the year 2006-07, M/s. REPL had shown sales income of Rs.16,05,756/- in their Balance-sheet, which constituted the element of trading sales of Rs.15,86,720/- and the remaining amount of Rs.15,343/- and Rs.3,693/- on account of sales tax and packing charges, respectively. A perusal & comparative analysis of purchase bills with their sale bills revealed that M/s. REPL had shown the purchases of Security Systems from M/s. Sivitek & M/s. Hitech Associates, Kolkata and effected the clearances to Superintendent of Police, Nasik, Metro Railway, Kolkata, Jala's Enterprises, Andheri, Mumbai and Northern Command, Ministry of Defence, Udhampur. The purchases shown from M/s. Hitech Associates, Kolkata have not been taken into consideration, as the purchases were on trading basis. Insofar as the purchases from M/s. Sivitek are concerned, I have already dealt with this issue in preceding paragraph (sub- para 5.3.1. to 5.3.7. refer) holding that the impugned goods were not manufactured by M/s. Sivitek and the said work was undertaken by M/s. RE in their factory premises, therefore, considering the sale shown as effected by M/s. Sivitek to M/s. REPL as trading sale is not feasible. Though the payments towards sale of impugned goods were shown as made through cheques by the customers viz. Assistant Security Commissioner, Metro Railway, Kolkata, Jala's Enterprises, Andheri, Mumbai and Northern Command, Ministry of Defence, Udhampur, the same cannot be considered as a trading sale for M/s. REPL, as M/s. RE had themselves manufactured those items and created a front company in the name of M/s. REPL to draw extraneous benefits. Further, the maintenance of parallel set of invoices by M/s. Sivitek shown as issued in favour of M/s. REPL discussed herein below duly corroborates the fact of manipulation in documents, which ratifies the fact that M/s. RE were in fact acting for M/s. Sivitek and M/S. REPL:
16E/984,985,986/2012 Maintenance of parallel set of invoices by M/s. Sivitek:-
Contents encompassed in Invoice No.3 dated 27.09.2006 issued by M/s. Sivitek to The Assistant Security Commissioner, Metro Railway, Kolkata' abundantly shows that the sale of 40 Nos. of Door Frame Metal Detector amounting to Rs.9,36.000/- including CST @4% of Rs.36,000/- was effected to Metro Railway, Kolkata on account of M/s. REPL against purchase Order No. RE/155/06 dated 21.09.2006 and M/s. REPL, in turn, sold the said items to Metro Railway, Kolkata, under their Invoice No. 15 dated 27.09.2006 for at of Rs.10,08,800/-. Another invoice of similar No. 3 but with different date shown as 27.09.2007 was brought on records, which reflected the entire contents viz. description of the goods, quantity, value, sales tax paid, purchase order no., name of consignee/ buyer same as that of Invoice No. 3 with date 27.09.2006.
Similarly, Invoice No.5 dated 10.10.2006 shown as issued by M/s. Sivitek contains the information that M/s. Sivitek had sold 57 Nos. of Hand Held Metal Detector amounting to Rs.76,950/- including VAT @ 12.5% of Rs.8,550/- to M/s. REPL against the purchase Order No. RE/193/06 dated 06.10.2006, and M/s. REPL, in turn, sold the said items to Jalas Enterprises, Andheri (E), Mumbai, under their Invoice No. 16 dated 13.10.2006 for an amount of Rs.1,07,576) - including VAT and transport. Another invoice of similar No. 5 but with different date shown as 10.10.2007 was brought on records, which reflected the entire contents viz. description of the goods,' quantity, value, sales tax paid, purchase order no., name of the consignee/buyer same as that of Invoice No. 5 with date 10.10.2006.
From the Invoice No.7 dated 16.03.2007 shown as issued by M/s. Sivitek, it is seen that M/s. Sivitek had sold 50 Nos. of Hand Held Metal Detector for an amount of Rs.67,500/- including VAT @ 12.5% of Rs.7,500/- to M/s. REPL, who, in turn, sold the said items to The Chairman, Tender Purchase Committee', Northern Command Hdqrs., Udhampur' for an amount of Rs.1,48,800/- including CST @ 4% under their Invoice No.17 dated 17.03.2007. Another Invoice of different No. 8 of same date shown as 16.03.2007 was brought on records, which reflected the entire contents viz. description of the goods, quantity, value, 17 E/984,985,986/2012 sales tax paid, purchase order no., name of consignee/buyer same as that of Invoice No. 7 with date 16.03.2007.
The aforesaid evidences brought on records are cogent and tangible piece of evidence to consider that M/s Sivitek had manipulated the documents in active connivance with M/s. RE and M/s. REPL to show that the goods were in fact manufactured by M/s. Sivitek for M/s. REPL, while the facts were absolutely contrary.
(c) Year 2007-08 & 2008-09 upto 30.09.2008:- During this period, M/s. REPL changed their mode of business and commenced their manufacturing activity on job work basis. They used to give the raw materials to M/s. RE on the strength of challans under Notification No.214/86-C.E. to manufacture the Security systems and getting the goods completely manufactured from M/s. RE. It is a fact that M/s. RE were manufacturing similar items for themselves on their own account as well as for M/s. REPL on job-work basis, and the raw materials were same for both type of items manufactured. There was no segregation of the inputs purchased by M/s. RE for their own manufacturing and supplied by M/S. REPL for job-work. No evidence relating to maintenance of separate inventory was placed on records to establish that the inputs were segregable. Likewise, the finished goods produced on manufacturing as well as on job-work basis were also not segregable as to which finished goods belonged to whom. In such a case, the benefit of job-work claimed under Notification No.214/86-C.E. is not available to M/s. RE. The Hon'ble Supreme Court in the case of Prestige Engineering (India) Ltd. Vs. CCE, Meerut 1994 (73) ELT 497 (S.C.)] was pleased to hold that 'unit manufacturing same goods on his account as well as on job work - Same raw material supplied by the customer inter-mixed with own material Finished product not segregable as to what is manufactured from customer's material and what from own material - Job work benefit under Notification No.119/75 - CE is not available due to lack of identification of goods on job work (relevant Para 24 refers).
It is also a fact that M/s. REPL had not complied with the condition envisaged at para 2 to Notification No.214/86-CE dated 18 E/984,985,986/2012 25.03.1986. The said condition clearly stipulates that the exemption contained in the notification shall be applicable only to the said goods in respect of which the supplier of the raw materials or semi-finished goods gives an undertaking to the Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise having jurisdiction over the factory of the job-worker that the said goods shall be used in or in relation to the manufacture of the final products in his factory or removed ................! As the condition of giving an undertaking to the Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise was not followed and procedural provisions / conditions of the notification were violated, the benefit of exemption notification cannot be extended. A notification embracing the condition must be followed scrupulously in its literal term to fetch the requisite benefit. If substantial condition is ignored or not followed strictly, the benefit whereof is not available, as held by the Hon'ble Supreme Court in the case of CCE, Trichy Vs. Rukmani Packwell Traders [2004 (165) ELT 481 (S.C.)]. The Hon'ble Apex Court held that the strict construction of a notification is to be done in terms only of their own words. As the condition associated with notification was not complied with, the benefit whereof cannot be allowed to be extended.
The goods were manufactured by M/s. RE in their factory premises on job-work basis for M/s. REPL during the period 01.04.2007 to 30.09.2008. As the entire manufacturing activity including testing & inspection was done by M/s. RE, he is the manufacturer in the eye of law and liability to pay the duty rests upon M/s. RE. During search of the factory premises of M/s. RE on 01/02.10.2008, the raw materials (of M/s. REPL) as well as their records were found lying in the factory premises of M/s. RE. There was absolutely no segregation of inputs procured for manufacturing by M/s. RE and procured on job-work basis as well as there was no segregation in the stock of finished goods. Such fact was duly admitted by Shri Santosh Mandlecha, Proprietor - M/s. RE in his statement dated 02.10.2008. Deposition or confession if found true on examination is a corroborative piece of evidence and that can be relied upon.
19E/984,985,986/2012 Hon'ble Supreme Court in the case of CCE, Madras Vs. Systems & Components Pvt. Ltd. 2004 (165) E.L.T. 136 (S.C.I held that "what is admitted need not be proved". I see here no reason for interference.
Further, certain factors or parameters such as common staff, sharing of the business & office premises, use of electricity in common, procurement of raw materials (of M/s. REPL) in the factory premises of M/s. RE, common administrative arrangement handled by Shri Santosh Mandlecha, Proprietor - M/s. RE, who also served on the Board of Directors in M/S. REPL, Shri M. M. Agnihotri, the CEO of M/s RE was another Director in M/s. REPL, mentioning the same Telephone No. Invoice of M/s. REPL as of M/s. RE, providing technical assistance to M/S. REPL in looking after the complaints received from the customers of M/s. REPL to remove defects using common marketing network, sales strategy. customer base and brand name etc., explicitly suggest that the unit M/s. REPL was not having separate existence though it was created on paper by bifurcating two units as M/S. RE and M/s REPL independently. Separate Pan No. and separate registration with Sales authorities and DIC cannot hold water to effectuate that M/s. REPL was having separate existence in law during the above stated period and thus the SSI exemption during the said period is not admissible. A unit is dummy has to be based on the facts of each case and there cannot be any generalization or rule of universal application. The above discussed facts showing commonality or mutuality in the business of each other among both units M/s. RE and M/s. REPL rendered the existence of M/s. REPL dummy unit during material period. The Hon'ble Supreme Court in the case of CCE, New Delhi Vs. Modi Alkalies & Chemicals Ltd. [2004 (171) ELT 155 (S.C.)] had held companies having common staff for accounting, marketing and supervision and director of latter found to be employees of former constitute the parameters of front companies for manufacturing company. Similar views were expressed by the Hon'ble Tribunal in the case of Umiya Ceramics Vs. CCE, Rajkot 12007 (211) ELT 500 (Tri-Ahmd.). This duly supports the observation taken above.
20E/984,985,986/2012
(d) Year 2008-09 & 2009-10 (from 01.10.2008 to 31.03.2010):- Traversing forward, I find that M/s. REPL entered into an agreement with Shri Anil Namdeo Gite, Director - M/s. Eclate Electricals Pvt. Ltd., Plot No.D-1/9, MIDC, Ambad, Nasik on 27.08.2008 to obtain the said premises on lease rental basis for the period of 36 months i.e. 01.10.2008 to 31.09.2011 on payment of a compensation license fee of Rs.7,000/- per month for use and occupation and enjoyment of the said license premises for business/ manufacturing activity. The said agreement was duly notarized on 29.08.2008. Subsequently, on making application, the Regional Officer, MIDC, Nasik, vide his letter No.RON/AMB/Case No.425/4194 dated 01.10.2009 granted the permission for sub letting of the premises for the period 01.10.2009 to 30.09.2010 subject to payment of sub- letting charges of Rs. 12,000/-, which was paid by M/s. REPL vide Pay order No. 053855 dated 07.10.2009, as it is seen from the letter Ref. REPL:MIDC:NSK:10:01.09 10 dated 07.10.2009, which was duly acknowledged in the office of MIDC on 08.10.2009. It was also agreed upon that the licensee (M/s. REPL) shall use the said premises for carrying out business / manufacturing activity only and they will pay all rates, taxes, levis, Municipal Taxes, Society maintenance charges etc. as applicable from time to time.
Further, it is seen that M/s. REPL was registered as a small scale unit with the District Industries Centre, Nasik on 29.10.2009, as it appears from the certificate dated 23.11.2009 issued by the District Industries Centre, Nasik.
The aforesaid both documents such as letter No.RON/AMB/Case No.425/4194 dated 01.10.2009 issued by the Regional Officer, MIDC, Nasik granting permission for subletting of the premises for the period 01.10.2009 to 30.09.2010 and registration certificate dated 29.10.2009 issued by the District Industries Centre, Nasik, give rise to conclusion that M/s. REPL started their manufacturing operations separately w.e.f. 29.10.2009 on a new premises at Plot No.D-1/9, MIDC, Ambad, Nasik. To conclude, it can be considered that M/s. REPL came out as a separate manufacturer w.e.f. 29.10.2009, as there was neither common staff nor common business premises nor common 21 E/984,985,986/2012 inventory of the raw materials nor common manufacturing operations. In such a case, it is not feasible to conceive that the unit was not in operation and was dummy of other during the period 29.10.2009 onwards. Therefore, the existence of M/S. REPL cannot be considered as a front company of M/s. RE during the period 29.10.2009 onwards. Accordingly, the demand has to re-worked out, entailed in succeeding paragraph (sub-para 5.13 refers).
5.5 As regards to argument relating to non-supply of relied upon documents, I. find the same was supplied to all of the noticees on 18.10.2010 & 19.10.2010, and dated acknowledgement was obtained from them. It is also ascertained that the copy of the statement dated 02.10.2008 of Shri Santosh Mandlecha, Proprietor - M/s. RE was supplied / delivered alongwith relied upon documents. Hence, there is no violation of principles of natural justice, as contended.
5.6. As regards to recording of the statement dated 02.10.2008 of Shri Santosh Mandlecha, Proprietor - M/s. RE, I find that the deposition was voluntary one and no pressure or force was cast upon to tender such evidence. The deposition was as per prevailing facts; whatever plea is advanced is an after thought.
5.7. As regards to time-bar aspect, I find that M/s. RE, M/s. Sivitek and M/s. REPL were not registered with the department being SSI unit, and therefore, they were not filing the returns; also they were not supposed to do so. The facts relating to getting the goods manufactured on job-work basis for M/s. REPL and running the entire show from the factory premises of M/s. RE were concealed / secreted from the knowledge of the department with an intent to evade the payment of Central Excise duty, and the matter absolutely rested under suppression. Therefore, the extended period of limitation was invocable. The demand is issued on 12.10.2010 covering the period from April 2005. In fact, the exemption limit of dutiable manufactured goods has crossed Rs.1,00,00,000/- w.e.f.18.08.2005. The unit was availing the SSI exemption under Notification No. 8/2003- C.E. dated 01.03.2003. A unit availing SSI exemption has to file the excise return on quarterly basis in terms of Rule 12(1) of the Central Excise Rules, 2002, though they were not required to do 22 E/984,985,986/2012 so. The relevant date to issue a notice is defined in Section 11A(3)(ii) of the Central Excise Act, 1944, according to which, where no periodical return is filed, the last date on which such return is to be filed would be the relevant date'. In this case, the last date of filing the quarterly return for the period July 2005 to Sept 2005, when the exemption limit has crossed, would be 20.10.2005, concluding the fact that the demand is within its time limit computing it by going back for a period of five years from the date 12.10.2010, when the notice was issued. Towards my observation, I draw support from the judicial pronouncement delivered in the case of CCE, Surat-I Vs. Neminath Fabrics Put. Ltd. |2010 (256) FIT 369 (Guj.), wherein the Hon'ble High Court of Gujarat held that the period of 5 years is applicable once suppression established and there is no reasoning effective derived from the aspect of the knowledge of the department. The method of computation of time period of five years to issue a notice is also expounded by the Hon'ble Supreme Court in the case of Mathania Fabrics VS CCE, Jaipur [2008 (22) ELT 480 (S.C.)]. By going with this principle. I hold that we entire demand is within its time limit of extended period of five years, 5.8. Principle relating to argument for allowance of Cenvat credit in case of demand of duty on finished goods holds goods, subject to observance and compliance of the requirement and condition stipulated in Rule 3 & 4 of the Cenvat Credit Rules, 2004. While holding so, I draw support from the case law decided in case of M/s. Beco Chemicals (P) Ltd. v/s CCE, Raipur [2003 (156) E.L.T. 668 (Tri. Del.)].
5.9. Coming to the contention of adoption of cum-duty price to compute the duty liability, I find that this principle is not having implication everywhere in a generalized manner. Unless it is shown by the manufacturer that price of the goods includes excise duty payable by him, no question of exclusion of duty element from price arises for determination of value under Section 4 of the Central Excise Act, 1944; one cannot go by general implication that wholesale price would always mean cum-duty price, particularly when the assessee had cleared the goods claiming exemption under an exemption notification, as held by the Hon'ble Apex Court in the case of Amrit Agro 23 E/984,985,986/2012 Industries Ltd. Vs. CCE, Ghaziabad [2007 (210) ELT 183 (S.C.)]. Similar view was expressed by the Appellate Tribunal in the case laws, cited herein below:
i. 2011 (263) E.L.T. 545 (Tri.-Del.) - EON Polymers Put. Ltd.
v/s CCE ii. 2011 (263) E.L.T. 241 (Tri.-Del.) - Dhillon Kool Drinks and Beverages Ltd. v/s CCE, Jalandhar 5.10. As regards to argument that the notice is pre-judging the issue and hence illegal, as it appears from the language used in the notice which shows the prejudice approach of the department, I find that that the notice has merely leveled the charge and nowhere it is written in a conclusive manner that the duty is liable and to be paid. Moreover, the argument doesn't have legal base, as the case was heard in person and the ample opportunities were afforded to all of the Noticees to defend the allegation and to justify and clarify their stand. This is a paradigm in extending the principle of natural justice.
5.11. It was also argued that the notice is bad in law, as the same was not issued to all the manufacturers concerned. It is a fact that the notice is issued to all the persons viz. M/s. RE, M/s.
REPL and M/s. Sivitek, as can be seen from the show cause notice dated 12.10.2010, and hence the argument is of no avail."
7.3 Original authority in his order has observed that during investigation, the premises of Sivitek India was visited by the excise officers and it was found to be residential premises of the partner and there was no machinery installed therein and there was no electricity connection sourced on commercial basis and no record of production was found in the premises. The raw material ordered to be procured by Sivitek India were received at the factory premises of Reliance Electronics and the same is evident from the inward register of Appellant 1, which was affixed on the purchase invoices of Sivitek India. Similar is the situation in respect of finished goods. As per the records, Northern Command, Ministry of Defence, Udhampur has also clarified that the order for procurement of goods was placed on Appellant 1 whereas these goods have been shown to be 24 E/984,985,986/2012 manufactured by Sivitek India. (Para 5.3.3 of the impugned order) 7.4 Commissioner has further observed that Appellant 1 and the two dummy units were having parallel set of invoices showing clearance of goods. (Para 5.3.4 and 5.4 (b) of the impugned order) 7.5 Above facts clearly determined by the Commissioner for holding that the clearances of the three units needed to be clubbed for determining their eligibility under SSI exemption notification are uncontroverted. In fact these findings are based on the records recovered from the premises of the Appellant 1 during the search operation on 01/02.10.2008 and subsequent enquiries conducted during the investigation. After considering all the submissions made Commissioner has computed the demand of duty para 5.13 of the impugned order in the manner as indicated below:
Sr Year/ Value of Clearances (Rs) Value Rate of Central No Period excluding duty Excise M/s. RE M/s REPL M/s. Aggregate exemption including duty Sivitek value of (Rs) Edu. (Rs) Clearances.
Cess and SHE (%) 1 2005- 9349582 0 15284187 24633769 14633769 16.32 2388231 06 2 2006- 9117238 1211140 4000000 14328378 4328378 16.48 713317 07 3 2007- 15637296 4118828 0 19756124 4756124 16.48 & 736673 08 14.42 4 2008- 15396456 10774771 0 21014492 8014492 14.42, 1218855 09 10.30 & 8.24 5 2009- 20440465 10058648 0 30499113 15499113 8.24 & 1277575 10 (upto Oct 10.30 2009) Total 6334651 7.6 We do not find any reason for differing with the findings recorded by the Commissioner on the basis of the records 25 E/984,985,986/2012 recovered from the premises of Appellant 1, during the search operation. Section 36 A of the Central Excise Act, 1944 provides as follows:
"Section 36A. Presumption as to documents in certain cases. -
Where any document is produced by any person or has been seized from the custody or control of any person, in either case, under this Act or under any other law and such document is tendered by the prosecution in evidence against him or against him and any other person who is tried jointly with him, the Court shall, -
(a) unless the contrary is proved by such person, presume -
(i) the truth of the contents of such document;
7.7 In view of the above discussion and taking note of Rule 20 of CESTAT (Procedure) Rules, 1982 we are deciding these appeals ex-parte on merits.
8.0 In view of the above decisions of the Hon'ble Apex Court and also taking note of the Rule 20 of CESTAT (Procedure) Rules, 1982, we dismiss these appeals after considering the appeals exparte.
(Pronounced in the open court) (Sanjiv Srivastava) Member (Technical) (Ajay Sharma) Member (Judicial) tvu