Customs, Excise and Gold Tribunal - Delhi
Vikas Wsp Ltd. And B.D. Aggarwal, M.D. vs Cce on 28 July, 2006
ORDER M.V. Ravindran, Member (J)
1. This appeal is filed by the appellants against order in original dated 10/03/2004 which confirmed the demand and also imposed penalties. Appellant No. '1' is the company while appellant No. '2' is the Managing Director of the company. Since the appeals are arising out of the same order-in-original, they are being disposed off by a common order.
2. The relevant fact that arise for consideration are the officers of anti-evasion, Jaipur on a surprise visit to the factory and godown of the appellant found that the appellant was consuming High Speed Diesel (HSD) in the dryer machine and this diesel was being supplied to the appellant from Unit No. '2' which was procuring duty free High Speed Diesel against CT-3 form in terms of Notification 1/95 CE dated 04/01/1995 applicable to EOU's. The appellant accepted the mistake and reversed the entire amount of the duty on 06/02/2002. The officers subsequently visited the godown of one of the group companies i.e. Vikas Chemi Gums India Private Ltd. (VCGIPL) and found 21,828 bags said to be containing Guar Churi Powder. On belief that these would be nothing but Guar Gum Powder, the officers seized the said bags on an apprehension that these bags would have been manufactured by the appellant (a 100% EOU) and cleared clandestinely. Samples of the powder were drawn and sent to the Government laboratory for testing. The statements of Managing Director were recorded on different dates and on the completion of investigation, the authorities relying upon the test report given by the Joint Director, CRCL, New Delhi issued a show cause notice dated 26/11/2002 to the appellant directing them to show cause as to why duty should not be demanded on the seized bags of Guar Gum Powder as having been removed clandestinely and impose penalties. The appellants resisted the show cause notice on the ground that the analysis of the samples does not indicate that the seized bags contained Guar Gum Powder and requested for retest of the samples, which was done. The adjudicating authority did not consider the appellant's contentions and relying upon the two test reports of the CRCL laboratory concluded that the seized bags contained Guar Gum Powder and were removed clandestinely by appellant company, hence confirmed the demand of Central Excise duty, imposed penalty on the appellants, in addition also confirmed the demand of duty on the HSD which was consumed by the appellant along with separate penalty for this violation. Hence this appeal.
3. The learned advocate appearing for the appellants submits that the appellant is indeed in the manufacture of Guar Gum Powder and the unit is EOU and has four units located in the same district and all the units are registered with the Excise Department separately. It is his contention that they are not contesting the amount of excise duty confirmed against the receipt and consumption of the HSD from another EOU and contesting only the penalty imposed in respect of the violation of the law in consuming HSD received from another EOU. He further submitted that as regards the demand of duty on the Guar Gum Powder seized from godown of VCGIPL, the said bags did not contain Guar Gum Powder as it is very evident from the analysis report given by the CRCL. It is his submission that if the samples do not indicate that they are Guar Gum Powder then the demand of the duty on the appellant, subsequent confiscation and imposition of penalty is untenable. He relies upon the statements and various technical data i.e. ISI specification of Guar Gum Powder to contradict the analytical report of the CRCL.
4. The learned DR, on the other hand submits that the bags which were found at the godown of the group company clearly indicated that the said goods were Guar Gum Powder and since the said group company (VCGIPL) did not manufacture Guar Gum Powder it is indicative that Guar Gum Powder must have been clandestinely removed from the factory of the appellant. It is also his submission that all the four units are situated in the vicinity of each other and this in itself is an indicator that the appellants were involved in clandestine removal of the goods. He relies upon the analytical report given by the CRCL to state that the samples, which were drawn from the bags, were nothing but Guar Gum Powder.
5. Considered the submissions made at length by both sides and perused records.
6. We find that the issue in this case is in a very narrow compass. The authorities seized 21,828 bags of some powder and sent the same for analysis to the CRCL. The first analytical report dated 06/5/02 of the CRCL, on which the revenue relied, reads as under :
It is essentially composed of Guar Gum Powder. It is other than Gaur meal. Gum content 82.6% by mass. Remnant may be collected with in 30 days.
7. The appellant contested the said analytical report and asked for re-test of the sample vide their letter dated 31st December, 2002. The authorities got the samples re-tested by the CRCL and the said report reads as under :
No. 75-Exo/2003 Date : 27.08.2003 From : The Director I/C (Revenue Laboratories) To, The Deputy Commissioner (AE) O/o the Commissioner of Central Excise N.C.R. Building, C - Scheme, Statue Circle Jaipur - I Commissionerate, Jaipur. Sir, Subject: Sample of Guar Gum Churi Powder - request for retesting - reg.
Please refer to your letter C. No. IV (6)7/AE/JPR-I./2002-537 dated 7.3.2003 forwarding therewith a sealed sample for retest.
The remnant sample received from the Chemical Examiner, CRCL, Delhi and the sample forwarded by you have been registered here under SLR/SL-/417 /17A/ 12.5.2003 and analysed with the following results :
Each of the two samples is in the form of off-white coarse powder. They do not conform to the IS 3988-1981 specifications for "Guar Gum" and IS 4193-1967 specifications for "Guar meal" in respect of protein content and viscosity. Each is also not matching in-house specifications of Guar Churi powder in respect of Galactomanan Content declared by assessee (forwarded under the cover of letter C. No. CE-13/Offence/vikas/3/ 2002 dated 8.3.2003 from the Superintendent, Central Excise Range, Sri Ganga Nagar.) In view of the above, it is opined that each sample is a tailor-made product of "Guar". The end use may be ascertained by market enquiry.
Sealed remnant sample is being returned separately.
Yours faithfully, Sd/-
(DR. Y.K.S. RATHORKE) DIRECTOR I/C (RL)
8. Relying upon both the above said reports of the CRCL, the revenue has come to the conclusion that the contents of the bags which were seized in the godown of VCGIPL was in fact 'Guar Gum Powder', consequently confirmed the demand, ordered confiscation and imposed penalties.
9. We find that the appellant, right from the beginning, was contending that the analysis of the samples by the CRCL were not correct and proper and the samples are not of Guar Gum Powder. On specific direction from the Bench to produce the detailed analytical report of the CRCL, the revenue produced the same which reads as under :
VALUES OF CHARACTERISTICS WHICH HAD FORMED THE BASIS FOR TEST REPORTS ISSUED FROM CRCL, NEW DELHI Characteristics of Analysis Results on the basis of which Test Report C. No. 136/Chem/ Misc/J/2002/CLJ/ AF/252 dated 06.05.02 was issued Results on the basis of which Test Report C. No. 73/EXO/2003 dated 27.8.03 was issued
1.
Moisture, % by mass 7.00% 7.03%
2. Ash, % by mass 1.4% 1.4%
3. Protein, % by mass 8.75% 15.6%
4. Gum, % by mass 82.6% 75.7%
5. Viscosity Not determined 82.4 Centipoises at 27 degree C
6. galactomanan, % by mass
----
10. As against this, it is the appellant's submission that the samples do not conform to ISI specification for Guar Gum Powder. It is necessary to look into the ISI specification for Guar Gum Powder which reads as under:
SL. No. CHARACTERISTIC REQUIREMENT METHODS OF TEST, REF TO CL No. IN Appendix IS :
7437 - 1974 Type 1 Type 2 (1) (2) (3) (4) (5) (6)
i) Moisture, percent by mass, Max 13.0 13.0
--5
ii) Ash, percent by ass. Max 1.5 1.0
--
6iii) Protein, percent by mass, (on dry basis), Max 9.0 5.0
--
16iv) Residue insoluble in acid, percent by mass, Max 14.0 7.0 A
--
v) Gum, percent by mass, Min 65.0 75.0
--
22vi) Viscosity at 27 degree C. in centipoises, Min 1000 2500 B
--
vii) pH 5.5 to 8 5.5 to 8
--
911. It can be seen from ISI specification as reproduced above, the viscosity and galactomanan contents are the most important aspect for deciding whether the powder is Guar Gum or not. We find from the analytical report, as submitted by the CRCL that the laboratory did not test the viscosity and the galactomanan contents when they analyzed the sample for the first time on 06/05/02. Subsequently, on the request of the appellant, retested the same sample and made observation regarding viscosity and galactomanan contents. It is surprising to know that in spite of the viscosity and galactomanan being the most important test for ascertaining whether the sample is of Guar Gum powder, the CRCL did not conduct these tests on 06/05/02. We also find that the analytical report of the CRCL dated 27/08/03 shows variation from the analytical report of 06/05/02, as regards Moisture, Protein and Gum percentage. It is understandable, that the moisture contents may increase/decrease when the sample is stored, but the same sample cannot show a variation of 'protein' content. It is seen that the 'protein' content has increased almost by 100% when the sample was retested on 27/08/03. It is common knowledge that the 'protein' content of any vegetable products do not increase on storage. Protein contents always remain constant, as these cannot get increased artificially. Further, we find that the viscosity as indicated in the test results dated 27/08/03 by the CRCL shows 82.4 Centipoises at 27 degree C, and the ISI specification clearly indicates 1000 to 2500 Centipoises at 27 degree C. On this ground also the department's contention that the sample is of Guar Gum Powder, miserably fails. Since, the department's whole case is made out on the basis of the analytical reports and as these reports are not authentic, shows variation between two tests and test results do not conform to ISI specification for Guar gum powder, the demands raised against the appellants on the basis that the goods in question are Guar Gum Powder are liable to fail and are set aside. Since, the demand is set aside, the confiscation as well as the penalty imposed on the appellants are also set aside.
12. As regards, the penalty under Section 11AC of Central Excise Act, 1944 imposed on the appellant for the consumption of HSD received from another EOU, we find that the appellant has deposited the entire amount on 06/02/02 before the issuance of show cause notice. We find that once the entire demand is deposited by the appellant before the issuance of show cause notice, penalty under Section 11AC is not imposable on the appellant as has been held by the Hon'ble High Court of judicature at Bombay in the case of Commissioner of Central Excise - I v. Gaurav Mercantiles Ltd. as reported at . Respectfully, following the said judgment and the order of the Larger Bench of Tribunal in the case of Commissioner of Central Excise, Delhi - III v. Machino Montell (I) Ltd. as reported at 2004 (62) R.L.T. 709 (CESTAT - LB), we set aside the penalties imposed on the appellant on this count.
13. In the result, appeal succeeds and is allowed with consequential relief, if any, to the appellant.
(Operative part of the order was pronounced in the open court at the end of hearing on 28/07/06)