Customs, Excise and Gold Tribunal - Mumbai
Gtc Industries Limited, J.P. Khetan, ... vs Commissioner Of Central Excise ... on 14 December, 2001
Equivalent citations: 2002(80)ECC180, 2002(145)ELT423(TRI-MUMBAI)
JUDGMENT Jyoti Balasundaram, Member (J)
1. For reasons recorded below we waive pre-deposit of duty confirmed against M/s. GTC Industries Ltd., and penalties imposed against them as well as on the Chairman, Directors and Officers of the above company and proceed to hear and decide the appeals themselves with the consent of both sides.
2. The brief facts of the case are that M/s. GTC Industries Ltd., a public limited company engaged in the manufacture of cigarettes on its own account in its units at Mumbai and Baroda, entered into franchise agreement with other companies including M/s. Tamil Nadu Tobacco Company Limited (TTCL) for manufacture of cigarettes out of raw tobacco supplied by them. During the period in dispute, i.e., November, 1990 to March, 1995 the movement of cut tobacco and cigarettes was placed under strict excise control and until October, 1993 the fact is that the suppliers of the cut tobacco were under the physical control system. From October, 1993 till March, 1995 the physical control system was discontinued and thereafter cut tobacco moved under the procedures specified by Chapter X of the Central Excise Rules, 1944. A show cause notice dated 23/11/1995 was issued by the Commissioner of Central Excise, New Delhi alleging inter alia that M/s. TTCL is a dummy company set up and controlled by M/s. GTC Industries Ltd to evade payment of duty and that the franchise agreement is merely is facade for illegal operation and that GTC Industries Limited was the real manufacturer of the cigarettes. Notice alleged clandestine clearance of cigarettes without payment of duty and without accounting for the same in Central Excise statutory records without issue of gate passes/invoices and without correctly reflecting receipt and consumption of raw materials out of which cigarettes were manufactured. The extended period of limitation was applied in the notice which also proposed confiscation as well as penal action against both the companies as well as its senior officers.
3. The appellants sought copies of relied upon documents and after protracted correspondence some documents were supplied. Personal hearings took place on different dates and thereafter the Commissioner of Central Excise adjudicated the notice, upholding the charges in the show cause notice and confirming the duty demand of Rs. 69,90,66,580/- against M/s. TTCL/GTC and imposing penalties inter alia of Rs. 60 crores on TTCL/GTC. Penalty of Rs. 60 lakhs each on Shri Sanjay Dalmia, Chairman, Shri Anurag Dalmia, Vice Chairman, Shri J.P. Khetan, Executive Director and Shri S.K. Mukherjee, the then Managing Director of GTC Industries Ltd., and penalty of Rs. 1 lakh on Shri S.V. Makhija, General Manager of GTC Industries Ltd., Rs. 25,000/- on Shri T.K. Krishnamurthy, General Manager (Tech) of GTC Industries Ltd. Hence these appeals.
4. We have heard Shri S. Mukherjee, learned counsel for the appellants and Shri B.B. Sarkar, learned DR for the Revenue.
5. The order is challenged principally on the ground of contravention of principles of natural justice. This challenge is well founded. We find that immediately on receipt of the show cause notice, M/s. GTC Industries Limited wrote to the department on 01/01/1996 requesting for a complete copy of the show cause notice. The letter dated 01/01/1996 is reproduced below:
"Reg: Show Cause Notices Nos. V(24)6-GTC(TTCL) Adj. -- 95 dated 23.11.95 "This has reference to your above mentioned Show Cause Notice issued to M/s. Tamilnadu Tabacco Company Ltd., Salem.
"You have required us to show cause within 30 days from receipt of the Notices as to why duties and penalties should not be levied on us for alleged evasion of Central Excise Duty by third parties. Without prejudice to all other submissions/contentions which we may raise we deny any liability on the said account. It is submitted that the Notice is bad for misjoinder of parties, without jurisdiction and otherwise illegal.
"Before calling upon us to file a reply on show cause, however, we request you to first supply us a complete copy of the notice with all annexure/relied upon documents before we can proceed further in the matter.'
6. On 18/03/1996 they were advised to contact the DGAE, Chennai for photocopies/carrying out inspection of documents. This letter reads as under:
"Subject: Show Cause Notice No. V(24)6- GTC(TTCL)/Adj./95 dt. 23.11.95 Ref: Your letter No. -
" I am directed to refer to your letter No. -- dt. 1.1.96 requesting supply of annexure/relied upon documents in respect of the Show Cause Notice mentioned above.
"You may contact the Deputy Director General, Anti-Evasion, Central Excise, Madras Zonal Unit, 107, Haman Road, 3rd Floor, T. Nagar, Madras - 600007 and obtain photocopies/carryout inspection of relevant records within 15 days of receipt of this letter. Your reply to the Show Cause Notice should be filed within 30 days thereafter."
7. The appellants requested for supply of copies at the earliest since they had an office in Delhi also and since it was not possible for them to carry out inspection of records at Chennai. Vide letter dated 10th July, 1996 the department supplied some of the documents annexed to the show cause notice, namely :
(1) Annexure-C containing list of statements recorded and relied upon;
(2) Annexure-B containing list of mazhars drawn and relied upon;
(3) Relied upon documents in Annexure D-1; and (4) Annexure-E to the show cause notice.
8. It is pertinent to note all those documents referred to in these statements and mazhars were not supplied. The appellants were of the view that it was not possible for them to prepare their defence only on the basis of inspection of all documents at Annexure 'F' and 'G' which were made available for inspection, as they required complete detailed information particularly when the documents in Annexure 'F' and 'G' were of other companies. Accordingly they requested the department vide letter date 9th October, 1996 for supply of photocopies of documents listed in Annexure D-2 as well as copies of some of the documents that had been supplied to them as listed in the annexure to the letter. In response the department once again offered inspection in view of the voluminous nature of the documents.
9. By letter dated 1st November, 1996 the appellants requested the department to identify essential documents which according to the appellants pertain to M/s. TTCL and they also submitted a letter dated 10th December, 1996 repeating the request for photocopies. In response there to the appellants were informed by letter dated 24/11/1996 that inspection and subsequent photocopies could be obtained from the records available with the Revenue. However, in the proceedings held on 24/12/1996 the adjudicating authority accepted the contentions of the appellants that they were unable to prepare the reply to the show cause notice in view of the absence of copies of relevant documents. The Commissioner therefore directed that photocopies of the relevant documents should be undertaken by the Director General of Anti Evasion as well as by the zonal unit and the same would be collected by the appellants. Copy of the proceedings dated 24/12/1996 is reproduced below:
"The following were present:
"1. Director General of Anti Evasion GTC
(i) Shri N.K. Bajpai, Advocate Shri S.K. Mongia
(ii) Shri K.K. Verma, Supdt. Vice President "Shri Mongia referred to their letter dated 10.12.1996, wherein they had stated that it is the responsibility of the Department to supply them copies of relied upon documents. Since copies have not been provided yet, they are not able to take any action to prepare replies to the show cause notice, etc. Shri Bajpai, referred to this officer letter dated 14/19th November 1996 and stated that according to the directions contained in that letter Directorate General Anti Evasion was to make all arrangements for making copies of relied upon documents and GTC was to send their representatives for obtaining the copies. Even though time was fixed for obtaining the copies from 26th November to 20th December, 1996, GTC representatives had not visited Anti Evasion officer at all. They are only taking objection to every arrangement. This is being done to obstruct proceedings.
"Shri Mongia referred to their letter dated 10.12.1996, wherein they had stated that it is the responsibility of the Department to supply them copies of relied upon documents. Since copies have not been provided yet, they are not able to take any action to prepare replies to the show cause notice, etc. Shri Bajpai, referred to this office letter dated 14/19th November 1996 and stated that according to the directions contained in that letter Directorate General Anti Evasion was to make all arrangements for making copies of relied upon documents and GTC was to send their representatives for obtaining the copies. Ever though time was fixed for obtaining the copies from 26th November to 20th December, 1996, GTC representatives had not visited Anti Evasion office at all. They are only taking objection to every arrangement. This is being done to obstruct proceedings.
"Shri Mongia stated that according to the aforesaid order dated 14th/19th November, arrangements for making copies are to be made by the Directorate General of Anti Evasion. GTC was to collect the copies. There should be no requirement for GTC Officer to be present throughout the period of making of copies. It would be wasting the time of GTC representative to be present throughout the copy making. He, therefore, suggested that let the copies be made in the Directorate General of Anti Evasion. Thereafter GTC will dispute representatives to collect the copies.
"Shri Bajpai pointed out that this can create problems as GTC was returning copies supplied to them holding them to be not legible. If GTC's representative is present, he would be able to satisfy himself about the quality of the copy prepared and if any copy is found to be not satisfactory, the document could be copies again and proper copies supplied. Shri Mongia stated that out of the large volume of documents receive by them, they had returned only a small percentage as they were found to be not legible. Therefore, this should not be the ground for insisting that the copy making should commence only in the presence of representatives of GTC. Let copies be made first and they shall collect them in instalments as and when they are ready. If at the time of collecting, any copies are found to be not satisfactory, the same shall be pointed out. Shri Bajpai said that photocopy preparation of documents can be commenced immediately and GTC could collect the first set of documents on Monday, the 30th of December 1996. Shri K.S. Gupta, AD Anti Evasion could be contracted for collecting the copies. Shri Mongia stated that on Monday for 12'O Clock Shri Y.S. Kamal will contact Shri K.S. Gupta and collect the firs set of copies and he shall give a receipt of their service. Shri Mongia also stated that in respect of common documents only one copy of each document need be given and for other documents separate copies may be given. He also stated that in respect of copies of documents which had been returned for the reason that they were not legible, GTC shall visit the Directorate General of Anti Evasion and carry out inspection.
"Based on the above submissions, the following directions are given:
"1. Photocopy of relied upon documents shall be undertaken by Directorate General of Anti Evasion and the first instalment of copies shall be collected by the GTC as aforesaid on 30.12.96 at 12'O clock "2. Same procedure shall be followed in respect of supply of relied upon documents available in the zonal offices of Directorate of General of Anti Evasion also. In respect of Madras Zonal Unit, Shri T.K. Pillai of GTC, Telephone Nos. 6713951 & 6719442 shall contact Deputy Director Anti Evasion Shri Thakur (Telephone No. 2663975) and obtain copies.
"3. The preparation of copies of relied upon documents shall be completed in three weeks time. IF any difficulty persist about some copies being not legible, the same shall be considered in the next hearing and such copies shall be presented at the hearing.
"4. The next hearing is fixed at 3.00 P.M. on 22.01.97."
10. Subsequently the representative of the appellants visited the office of the DGAE, New Delhi for obtaining the photocopies of the documents but the same were not supplied. In the next hearing the department again contended that it was not possible to make photocopies of the documents. The Commissioner, after considering the objections of the department, recorded that the question of supply of documents and the modalities thereof had been considered in great detail in the hearing held on 24/12/1996 particularly in the context of the judgment of the apex Court in the case of Sanghi Textiles Processors Pvt. Ltd. v. CCE 1993 (65) ELT 357 and only thereafter directions were passed with the consent of both sides. The Commissioner specifically recorded that any change in these orders would only introduce unwarranted delay in proceedings and he reconfirmed the directions given on 24/12/1996. The proceedings dated 22/01/1997 are reproduced below:
"The following were present:
"1. Director General of Anti Evasion GTC
(i) Shri N.K. Bajpai, Advocate Shri S.K. Mongia
(ii)( Shri K.K. Verma, Supdt. Vice President "In the last hearing held on 24.12.96, as agreed by both the parties, directions had been issued saying that the photocopying of relied upon documents shall be undertaken by Directorate General of Anti Evasion and the first instalment of copies shall be collected by G T C on 30.12.96 by 12'o clock. Sh S.K. Mongia stated that G T C's representative visited Directorate General of Anti Evasion, New Delhi on 30.12.96, for obtaining photocopies. However, he was informed that photocopies of relied upon documents could not be made and he may contact after few days. He also handed over copy of this letter SKM/GTC/EMPL/TCL/31/223 dated 3.1.97 addressed to the Asstt. Director (Anti Evasion), in this regard. Sh K.S. Gupta stated that it is not possible to make photocopies of this documents. Further directions of 24.12.96 was a review of the earlier directions issued.
"The question of supply of copies of relied upon documents as well as the modalities of supplying the same i.e. whether noticee may inspect and take copies or copies may be supplied by the Directorate General of Anti Evasion was considered in great details in the hearing held on 4.11.96 and 24.12.96 particularly in the context of Hon. Supreme Court's judgment in Sanghi Textiles Private Limited v. Collector of Central Excise. The directions of 24.12.96 were issued after considering all the aspects and on agreement by both the sides. Any change in this order would only introduce uncertainties and delay the proceedings. Therefore, the directions of 24.12.96 as contained in letter of even number dated 26.12.96 may be carried out. The next date of hearing shall be fixed after confirmation is received from the Directorate General of Anti Evasion that photo copies of relied upon documents have been supplied in terms of the directions of 24.12.1996."
11. Pursuant to the above directions the department vide its letter dated 19/06/1997 intimated the appellant that one set of relied upon documents as listed in Annexure D-2 was available in the Chennai office for collection by the appellant. Vide the order dated 22/08/1997 the assignment of the Commissioner (Adjudication) changed and the present show cause notice was assigned to another Commissioner for the purpose of adjudication. A preliminary hearing was scheduled for 22/03/1997. Hearings were adjourned to 30th September, 1997 during the hearing before the adjudicating authority the department again moved an application for review of the directions passed by the predecessor adjudicating authority who had directed supply of photocopies of all relevant documents. Although no photocopies of documents had been supplied to them, the appellants agreed that where the photocopies were supplied they would not ask for inspection of original documents and would only identify few more documents for inspection, if felt necessary. Accordingly the adjudicating authority directed supply of photocopies and adjourned the primary hearing to 30th September, 1997. It was pointed out by the appellants vide their letter dated 26/11/1997 that copies of Annexure D-2 as supplied had contained variations and were also not complete and they enclosed a specific list of remaining documents not received with request for supply of the same.
12. The directions of the previous adjudicating authority were reviewed on 23/02/1998 and directions were given for supply of only representative samples of cash memos, invoices, gate passes, registers and records and the appellants were directed to begun inspection and make copies of whatever documents they required.
13. The request of the appellants and other noticees for keeping the proceedings in abeyance in view of the writ petition filed by M/s. Tirupati Cigarettes Ltd., before the Hon'ble High Court, was rejected and the appellants were directed to complete inspection within three weeks from the end of July, 1998. A personal hearing was held on 25/08/1998. Thereafter on 26/11/1998 the appellants received the communication from the department requiring them to continue the inspection work. The appellants commenced inspection of documents at Madras in accordance with the direction of the department. Vide order dated 21/06/1999 adjudication of the present show cause notices were assigned to Shri T.V. Sairam, Commissioner (Adjudication) who on being satisfied that the difficulties faced by the appellants and the need for identification and supply of essential/relied upon documents particularly in view of the judgment of the Hon'ble Supreme Court in Sanghi Textile Processors Pvt. Ltd. v. CCE, 1993 (65) ELT 357 and directed the DGAE to make out a complete list of essential documents and supply photocopies thereof to the appellants within a period of 45 days. He directed that inspection should be completed by the appellants within one month thereafter. The minutes of the proceedings dated 17/08/1999 are reproduced below:
"M/s. Tamilnadu Tobacco Co. Ltd. and Ors.
"SCN No. V(24)6-GTC (TTCL) Adj/95 dated 23.11.95.
"RECORD OF PERSONAL HEARING HELD ON 17.8.99 at 11.00 hrs. "Out of 19 Noticees called for personal hearing representatives of 17 noticees only appeared before the Adjudicating Authority. Shri R.K. Goel, Advocate represented noticees No. 1, 3 to 9 & 19. Mrs. Rohina Nath, Advocate, represented M/s. GTC. None appeared from Departmental side.
"A striking point of non-supply of essential/relied upon documents came up before the adjudicating authority. It was also pointed out that as per the Supreme Court Judgment in the case of M/s. Sanghi Textile Processors (P) Ltd. v. Collector of Central Excise (1993 (65) ELT 357 (S.C.) 'The reasonable and pragmatic solution is to require the Collector (i.e. the investigating In-Charge) to have a meeting with petitioners and their Learned Counsel to find out a practical way of identifying essential documents required to be made copies of. It would also, perhaps, be appropriate for the Collector to sift the seized documents and as far as practicable at this stage, to identify the documents essentially necessary for the department so that the non-essential surplusage could be weeded out to the extent possible to reduce the number of documents which are petitioner may make copies of.' "The Adjudicating Authority was also of the opinion that unless a complete list of essential documents as made out by the DGAE is supplied to the Noticees as well as to the Adjudicating Authority, we may not be in a position to focus our attention as to how far the inspection work has progressed. As per the Supreme Court's Judgment such "documents essentially necessary for the department so that non-essential surplusage could be weeded out to the extend possible to reduce the number of documents which the petitioner may make copies of." DGAE will ensure that the judgment of the Hon'ble Supreme Court in Sanghi Textile Processors case is followed in letter and spirit. This exercise should be completed by the DGAE within a month's time and a list of all such essential documents along with photocopies of such documents should be made available to all the noticees within 45 days. From the date of receipt of such photocopies, the assessees will finalise their inspection within one month thereafter. Their final reply should also reach within next 30 days after completion of such inspection.
"As the case has already been delayed, I am sure and confident that all the concerned parties will co-operate and take this job has priority job without any excuses whatsoever so that the proceedings are not further delayed. The completion of respective job by concerned departmental officers or noticees or both, as the case may be, at every stage of above said time frame, will be brought in writing to the notice of Adjudicating Authority."
14. However, in spite of the above directions the DGAE did not supply any list or photocopies of documents and this was brought to the notice of the Commissioner vide appellants' letter dated 14/10/1999. In May, 2000 the appellants once again reiterated their request for supply of photocopies of essential documents drawing the attention of the adjudicating authority to the directions given by the Hon'ble High Court of Allahabad in the case of Kanpur Cigarettes Ltd. v. involving similar issues as in the present case. Personal hearing was held on October 10, 2000 when the adjudicating authority adjourned the same directing the appellants to submit case law on the necessity of supplying of photocopies and on the same day itself the appellant submitted the case law in support of its contentions. Personal hearing was adjourned to January, 2001; written submissions were filed by the appellants in February, 2001 during the hearing before the Commissioner when the adjudicating authority referred to a letter written by the Additional Director of DGAE, South Zonal Unit, Chennai, stating that supply of essential documents had been made of all the documents along with the show cause notice itself and stating that copies of relied upon documents had been given to the appellants in 1997 and that no inspection was being carried out by the appellants. The office of the DGAE also sent a communication to one of the appellants asking for listing out the required documents for the purpose of supply thereof. No further hearings were fixed after February 13, 2001 and the impugned order came to be passed on 30th August, 2001, confirming the duty demand and imposing penalties as set out herein above.
15. The narration above would clearly bring out that the order has been passed without furnishing copies of essential documents relied upon in the show cause notices and that the categorical directions given by the predecessor Commissioner in proceedings held on 24/12/1996 and 27/01/1997. We also note that the directions given by the present adjudicating authority in the proceedings held on 17/08/1999 have not been complied with. The order therefore clearly suffers from vice of violation of principles of natural justice. We therefore set aside the same and remand the case to the jurisdictional Commissioner for fresh decision in accordance with law after supplying the appellants copies of all relevant documents and affording the facility of inspection and copies of other relied upon documents. He shall pass fresh orders after considering their reply and after extending to them a reasonable opportunity of being heard. The appellants are at liberty to raise all pleas in their defence.
16. In the result the appeals are allowed by remand.