Customs, Excise and Gold Tribunal - Tamil Nadu
Beaver Engineering Corporation, ... vs Commissioner Of Central Excise, ... on 12 October, 2001
Equivalent citations: 2002(79)ECC631, 2002(148)ELT1102(TRI-CHENNAI)
JUDGMENT
S.L. Peeran
1. All these appeals arise from a common Order-in-Original No. 41/2000 dated 29.12.2000 passed by the Commissioner of Central Excise, Hyderabad by which he has confirmed the order in para 75 as follows:-
(i) I demand an amount of Rs. 2,11,12,227 from BEC being the duty payable on the finished goods i.e., button bits, hammers, parts of hammer assemblies and M.S. Scrap total valued at Rs. 17,36,99,374 manufactured and cleared (included on those parts of drilling) rigs found in excess at M/s. Beaver Rock Drills, Secunderabad) without payment of duty during Oct' 1995 to June, 1997 as discussed supra in contravention of the provisions of Rule 991) of the Central Excise Rules, 1944, under Sub-section (2) of Section 11A of Central Excise Act, 1944 read with Sub-section (1) of Section 11A of CE Act, 1944. however, an amount of Rs. 5 lakhs paid by BEC shall be adjusted toward the duty payable as determined above;
(ii) I also demand an amount of Rs. 7,72,693 differential duty payable in respect of clearances made during the period from July 97 to November 97 by BEC under Sub-section (2) of Section 11A Central Excise Act, 1944 read with Sub-section (1) of Section 11A of Central Excise Act, 1944 since BEC is not eligible to avail SSI benefits for the year 1997-98 as proposed in the show cause notice issued under C.No. V/84/15/206/97, dt. 5-1-98 (OR No. 25/98-Hyd-III/Adjn.);
(iii) I also demand an amount of Rs. 31,38,596/-, being the differential duty payable in respect of show-cause notices OR No. 142/98, dated 30.10.98 (Rs. 6,51,003), OR No. 32/99, dated 19.2.99 (Rs. 4,66,017), OR No. 128/99, dated 13.7.99 (Rs. 70,671), OR No. 153/99 dated 2.11.99 (Rs. 9,92,191) & OR No. 48/2000 dated 22.3.2000 (Rs 9,58,714) during the period April 98 to February 2000 under Sub-section (2) of Section 11A of Central Excise Act, 1944 read with Sub-section (1) of Section 11A of Central Excise Act, 1944, since BEC is not eligible to avail the SSI benefits for the year 1998-99 & 1999-2000.
(iv) Under Section 11AC of Central Excise Act, 1944, I impose a mandatory penalty of Rs. 1,12,95,833/- (Rs. 73,84,544/- for the period 10/96 to 6/97 + Rs. 7,72,693/- for the period 7/97 to 11/97 + Rs. 31,38,596/- for the period 4/98 to 2/2000) on Beaver Engineering Corporation.
(v) I demand interest @ 24% on the duty determined under Sub-section (2) of Section 11A of Central Excise Act, 1944 in terms of provisions of Section 11AB of Central Excise Act, 1944 read with Notification No. 40/2000-CE(NT) dt. 12-5-2000;
(vi) I impose a penalty of Rs. 1,50,00,000/- (Rupees One Crore and fifty lakhs) on BEC under the provisions of Rules 173 Q of Central Excise Rules, 1944 for the contravention cited supra;
(vii) I impose a penalty of Rs. 40,00,000/- (Rupees Forty lakhs) on Shri M. Madhusudhan Reddy, Managing Partner of BEC under Rule 209A of CE Rules, 1944 for having associated himself in the contravention of statutory Central Excise Provisions as cited supra;
(viii) I impose a penalty of Rs. 1,00,000/- (Rupees One lakh) on Shri E.V. Subba Reddy, clerk of BEC under Rule 209A of CE Rules 1944 for having associated himself in the contravention of statutory Central Excise provisions as cited supra;
(ix) I impose a penalty of Rs. 10,00,000/- (Rupees Ten lakhs) on Shri G.Ram Murthy, Manager, BEC under Rule 209A of Central Excise Rules, 1944 for having associated himself with contravention of statutory Central Excise provision as cited supra;
(x) I confiscate 68 Nos. of various parts of drilling rigs valued at Rs. 1,57,696 seized at the business premises of M/s. Beaver Rock Drills, Secunderabad as discussed at para 66 supra, under the provisions of Rule 173Q of Central Excise Rules, 1944. However, M/s. Beaver Rock Drills, Secunderabad can redeem the same on payment of a fine of Rs. 6,000/- (Rupees Six Thousand only).
(xi) I confiscate 26 nos. of button bits and hammers assemblies valued at Rs. 2,44,600 seized at the factory premises of BEC as discussed at para 67 supra, under the provisions of Rule 173Q. However, BEC can redeem the same on payment of a fine of Rs. 10,000/- (Rupees Ten Thousand only).
(xii) I confiscate 8 nos. of button bits valued at Rs. 24,000/- seized at M/s. Precision Metal Treaters as discussed at para 68 supra, under the provisions of Rules 173Q of Central Excise Rules, 1944. However, BEC can redeem the same on payment of a fine of Rs. 1,000/- (Rupees One thousand only).
The allegation made against the appellants have been brought out in the brief facts of the case by the Commissioner in para 1 to 12 which is reproduced below:-
BRIEF FACTS OF THE CASE:
M/s Beaver Engineering Corporation, Kushaiguda, Hyderabad (hereinafter referred to as "BEC/assessees") are the manufacturers of parts of drilling rigs, such as tungsten carbide button bits (hereinafter referred to as "Bits/Button Bits") falling under Chapter Sub Heading No. 8207, attracting duty @ 15% and down-the-hole hammer assemblies (hereinafter referred to as 'hammers") and parts thereof, falling under chapter sub-heading No. 8430.00 and 8431.00 respectively, attracting duty @ 13% of Central Excise Tariff Act, 1985 and are availing exemption under Notification No. 1/93 dated 28.2.93 as amended by Notification No. 7/97 dated 1.3.97, No. 16/97 dated 1.4.97 and No. 8/98-CE dt. 2.6.98.
2. On gathering intelligence that BEC are indulging in clandestine manufacture and clearances of excisable goods, the officers of Central Excise, Anti-Evasion wing conducted raids simultaneously on 27.6.1997 at the following premises:
(a) Factory premises
(i) M/s. Beaver Engineering Corporation, Kushaiguda, Hyd. (BEC, in short)
(ii) M/s. Chaitanya Industries, Kushaiguda, Hyd. (CI, in short)
(iii) M/s. Dinesh Engineering Works, Kushaiguda, Hyd. (EW, in short)
(iv) M/s. Vijaya Engineers, Kushaiguda, Hyd. (VE, in short)
(b) Job Workers
(v) M/s. Precision Metal Treaters, Kushaiguda, Hyd. (PMT, in short)
(vi) M/s. Rama Tulasi Heat Treaters/Ramam Tulasi Metal Treaters, Kushaiguda, Hyd.
(vii) M/s. B.S. Metallurgicals (Bharat Heat Treaters) Balanagar, Hyd.
(viii) Factory and registered premises of M/s. Manjeera Machine Builders (P) Ltd., Patancheru, Hyd.
(c) Dealers of Beaver Engineering Corporation
(ix) M/s. Beaver Rock Drills, YMCA Complex, Secunderabad
(x) M/s. Beaver Engineering Corporation, Bangalore Branch, Bangalore
(xi) M/s. Beaver Engineering Corporation, Indore Branch, Indore
(d) Residence of the personnel connected with BEC
(xii) Sri G. Ram Murthy, Manager, Beaver Engineering Corporation
(xiii) Sri M. Madhusudhan Reddy, Managing Partner of BEC and recovered certain statutory/official records as well as private records.
3. Apart from the above, the following business premises were also searched and recovered certain incriminating documents on 27.6.97.
(i) M/s. Steel Centre, Fatehnagar, Hyd.
(ii) M/s. Steel & Stores India Agency, Fatehnagar, Hyd.
(iii) M/s. Drillco Metal Carbides Ltd., Hyd.
(iv) M/s. Raipur Carbides Ltd., Hyd.
(v) Residence of Sri N. Ranga Rao, Area Sales Manager, M/s. Drillco Metal Carbides Ltd.
4. The officers have also verified physical stocks with the entries in the statutory records and noticed the following discrepancies:
(i) button bits and hammer assemblies valued at Rs. 2,44,600/- found in excess at M/s. BEC.
(ii) parts valued at Rs. 1,57,696/- found in excess at M/s. Beaver Rock Drills, Sec'bad.
(iii) 8 Nos. of 'BEAVER' make Button its valued at Rs. 24,000/- found at M/s. PMT received without any valid document from BEC, for job work without any documents.
In view of the said discrepancies and on reasonable belief, that the goods are liable for confiscation, the officers have seized the said goods at the respective places mentioned at (i) to (iii) above.
5. On the basis of further intelligence, the officers searched the residence of Sri E.V. Subba Reddy, Clerk of BEC on 29.6.97 and recovered certain private records.
6. BEC, DEW, VE and CI are all manufacturers of button bits and hammers, CI was also manufacturing truck mounted drilling rigs. BEC, DEW & CI have obtained Central Excise registration and VE remained within the exemption limits. The value of clearances of button bits and hammer assemblies and parts thereof from BEC, CE & VE for 1995-96 & 1996-97 is as under:
Value of clearances Name of the Unit 1995-96 1996-97 (Rs. in lakhs) (Rs. in lakhs)
1. BEC 73.60 98.46
2. DEW 55.58 69.67
3. CI 21.13 13.15
4. VE 27.09 15.98
7. To manufacture T.C. buttons, alloy & Steel of EN 19 grade and tungsten carbide buttons are the main raw material. Alloy Steel of EN 36C grade and Rolled Steel rounds and tubes are the main raw material to manufacture hammer assemblies. Manufacturing process of TC buttons involve the operation of turning, forging, cutting, drilling, milling, heat treatment, button grinding and button fixing. BEC has the capacity to carry out all the operations except forging and heat-treatment, for which they are getting job-work done at M/s. Manjeera Machine Builders (P) Ltd., M/s. Maruthi Forgings, M/s. Precision Metal Treaters, M/s. Rama Tulasi Metal Treaters, M/s. Bharat Thermal Engineering and M/s. B.S. Metallurgicals/Bharat Heat Treaters and certain other job-workers. On return of the material from job-workers, the material is further processed at BEC. In respect of hammer assemblies, the process of forging is done at job-worker's premises and subsequently the operations such as drilling, milling, threading and surface grinding etc. are done at the factory and heat treatment works are done at job workers premises. The Button bits & Hammer Assemblies so manufactured were cleared through their Agents/Sales outlets.
8. The significant evidence noticed in the private records is as under:
(A) Documents recovered from the factory of BEC
(i) Document No. 24 Oct. 95 to Sept. 96 Particulars of sales of bits and hammers of value of Rs. 10.61 crores.
(ii) Document No. 25, 26 and 27 as on 30.9.96 Stock of raw material
unused and in process of
value of Rs. 1.53 crores
(Rs. 79.42 lakhs + 73.63
lakhs)
(iii) Document No. 28(1 to 7 as on 30.9.96 Amounting outstanding
pages) from the customers
including their
dealers-Rs. 2,29,88,340
(iv) Document No. 29 Oct. 95 to Sept.96 Details of amounts
received by Sri
Madhusudhana Reddy
amounting to Rs. 1.17 Crores
(v) Document No. 30 as on 30.9.96 Amounts due to suppliers
of alloy steel and T.C. buttons
Rs. 2,61,40,101 written by
Sri Ram Murthy
as on 28.12.96 Amounts due to suppliers of
Alloy steel and T.C. buttons
Rs. 1,43,76,214 written by
Sri Madhu Sudhana Reddy.
(B) Records recovered from the residence of Sri E.V. Subba Reddy, Clerk of BEC.
(vi) Box File No. 1 Feb. 97 to March 97 Day-wise sheets-written
by Sri Ram Murthy-
containing the particulars
of sales of bits, hammers
and parts.
(vii) Box file No. 3 April and June 97 Amounts received from
customers and payments
made to job workers, raw
material suppliers etc.
with endorsements of Sri
madhusudhan Reddy.
(viii) Note Book 3 & 4 October 96 to June 97 Party-wise ledger and day
book respectively prepared
by Sri Subba Reddy on
the basis of daily sheets.
(c) Records recovered from the residence of Sri G. Ram Murthy, Manager of BEC.
(ix) Note Book No. 1 & 6 96-97 Details of purchases of
alloy Steel.
(x) Note Book NO. 4 Oct. 95 to Apr. Details of
purchases of .C. Buttons
and alloy steel and
payments made
therefor.
(xi) File No. 7 11.3.96 Delivery challan No. 64, dt.
(Page No. 25) 11.3.96 of M/s. Steel &
Stores (India) Agency
Hyd. issued to BEC for
9.59 MT (unaccounted)
(D) Records recovered from the residence of Sri N. Rama Rao, Area Sales Manager, M/s. Drillco Metal Carbides Ltd.
(xii) Note Book No. 1, 3 & 4 95-93 and 96-97 Details of supplies of
T.C. buttons to BEC and Sri
Madhusudhana Reddy of
value Rs. 64,04,252 and
payment of Rs. 39,75,371
received therefor from BEC.
9. Scrutiny of the private records recovered from the factory premises of BEC and from the residence of Sri E.V. Subba Reddy and Sri G. Ram Murthy when compared with the statutory record, revealed that:
i) Rs. 16,14,60,133/- value of finished goods were cleared during October 95 to June '97 (Rs. 10,61,82,701/- during the period October, '95 to September '96 and Rs. 5,52,77,432/- during October, 96 to June 1997). Whereas as per statutory records of BEC the value of clearances of finished goods were Rs. 1,60,07,524/- during 10/95 to 6/97.) Verification of Private records, further revealed that:
(i) Rs. 2.13 crores worth of T.C. buttons was procured during 1995/96, 1996-97, 1997-98 (Rs. 1.12 crores from M/s. Indicarb Ltd., Rs. 0.37 crores from M/s. Rapicut Carbides Ltd. and Rs. 0.64 crores from M/s. Drillco Metal Carbides Ltd.)
(ii) Rs. 2.95 crores worth of Steel was procured (Rs. 2.11 crores during October, 95 to April 96 as per note book recovered from the residence of Sri Ram Murthy and Rs. 0.84 crores during February, March, April and June 1997 as per the box files recovered from the residence of Sri E.V. Subba Reddy)
10. During the course of investigation, the statements of the following persons were recorded.
(a) Statement dated 28.6.97, 30.9.97 & 7.10.97 of Sri M. Madhusudhan Reddy, Managing Partner of BEC.
(b) Statement dated 28.6.97 and 14.7.97 of Sri G. Ram Murthy, Manager, BEC
(c) Statement dated 29.6.97 of Sri E.V. Subba Reddy, Clerk and authorised signatory of BEC.
(d) Statements dated 10.7.97 & 14.7.97 of Sri Labh Chand Singhvi, Proprietor of M/s. Steel & Stores (India) Agency, Fathenagar, Hyderabad.
(e) Statement dated 10.7.97 of Sri Subodh Gupta, Branch Incharge of M/s. Steel Centre, Fatehnagar, Hyderabad.
(f) Statements dated 9.7.97 and 14.8.97 of Sri Manoj Kanodia, Branch Incharge of M/s. Kanodiya Udyog, Hyderabad and authorised person of M/s. R.V. Steel Corporation, Bombay.
(g) Statement dated 3.8.97 of Sri Vijay Kumar Nopany and dated 21.11.97 of Sri Ashok Khemka, Partners of M/s. Eastern Steel Corporation, Calcutta.
(h) Statement dated 19.7.97 of Sri Rakesh Brij Mohan Agarwal, Authorised persp1 on of M/s. Giridharilal Agarwal, Bombay.
(i) Statement dated 27.6.97 of Sri N. Ranga Rao, Area Sales Manager of M/s Drillco Metal Carbides Ltd., Hyderabad.
(j) Statements dated 30.6.97 & 7.7.97 of Sri S. Raghvendra, Sr. Sales Manager of M/s. Rapicut Carbides Ltd., Hyderabad.
(k) Statements dated 4.7.97, 7.7.97 and 31.7.97 of Sri K.S. Narayana Swamy, Assistant Manager of M/s. Indicarb Ltd., Secunderabad.
(l) Statement dt. 11.8.97 of Sri K. Sreeramulu, Partner of M/s. Precision Metal Treaters, Kushaiguda, Hyderabad.
(m) Statement dated 7.8.97 of Sri. G.V. Satyanarayana, Managing Partner, M/s. Ram Tulasi Metal Treaters, Kushaiguda, Hyderabad.
(n) Statement dt. 6.8.97 of Sri N. Ranga Rao, Managing Partner, M/s. Bharat Thermal Engineering, Kushaiguda, Hyderabad.
(o) Statement dt. 27.6.97 and 5.8.97 of Sri A. Bhagirath, Proprietor of M/s. B.S. Metallurgicals, Balanagar and M/s. Bharat Heat Treaters and Analysts, Fathenagar, Hyderabad.
(p) Statement dt. 11.8.97 of Sri K. Purnachadra Rao, Authorised signatory of M/s. Manjeera Machine Builders (P) Ltd., Patancheru.
(q) Statement dt. 20.8.97 of Sri Madar Saheb, Managing Partner of M/s. Maruthi Forgings, Jeedimetla.
(r) Statement dt. 11.8.97 of Sri M. Chandran, Commission Agent at Tiruchengode.
(s) Statement dt. 16.8.97 of Sri A. Mohan Reddy, Company Representative of BEC at M/s. Beaver Rock Drills & Equipments, Bhilwara.
(t) Statement dt. 22.8.97 of Sri Raghuvardhan Reddy, Assistant Manager, M/s. Beaver Rock Drills, Secunderabad.
(u) Statements dated 30.6.97 & 13.8.97 of Sri K. Sriram Prakash Branch Manager, BEC Bangalore Branch, Bangalore.
(v) Statement dated 2.9.97 of Sri Suresh Singhvi, Manager of M/s. Beaver Engineering Corporation, Indore.
(w) Statement dated 29.6.97 of Sri N. Maniraju, Accountant of BEC.
(x) Statement dated 29.6.97 of Amrutha Rao, Accountant & authorised signatory of DEW.
(y) Statement dated 28.11.97 of Sri K. Krishna Reddy, Managing Partner of DEW.
(z) Statement dated 5.7.97 of Sri Y. Bhaskar Reddy, Accounts Assistant & authorised signatory of CI.
11. As detailed above, BEC during the period from October, 1995 to June 1997 have indulged in large-scale procurement of raw material, processing of materials including job-work operations, suppression of production of finished goods, clandestine removal of goods without cover of Central Excise Invoice and non-accountal of above said undertakings in their statutory records with an intention to evade Central Excise duty thereof, proviso to Sub-section (I) of Section 11A of Central Excise Act, 1944 appears to be invokable for demanding duty for the extended period.j
12. In view of the foregoing, a show-cause notice in OR.No. 49/97-Hyd.III/Adjn. dated 17.12.97 was issued to BEC requiring them to show-cause as to why:
(a) an amount of Rs. 2,11,12,227/- (Rupees Two crores eleven lakhs twelve thousand two hundred and twenty seven only) being the Central Excise duty payable on the finished goods i.e. Button Bits, Hammers, parts of Hammer Assemblies and M.S. Scrap, totally valued at RS. 17,36,99,374/- manufactured and cleared during the period October, 1995 to June, 1997 (including on those parts of drilling rigs found excess at M/s. Beaver Rock Drills, Secunderabad) should not be paid by them under Rule 9(2) of Central Excise Rules 1944 read with the proviso to Sub-section (1) of Section 11A of the Central Excise Act, 1944.
(b) the amount of Rs. 5,00,000/- (Rupees five lakhs only) paid by BEC should not be adjusted towards the part of duty payable vide (a) above.
(c) mandatory penalty equivalent to the duty amount mentioned at (a) above should not be imposed on them in terms of Section 11AC of the Central Excise Act, 1944.
(d) interest @ 20% per annum on the duty amount mentioned above should not be paid by them as envisaged in Section 11AB of the Central Excise Act, 1944 read with Notification No. 34/96-CE(NT) dated 9.10.1996.
(e) the 26 Nos. of button bits and hammer assemblies valued at Rs. 2,44,600/- seized at the factory premises of BEC, under panchanama dated 8.7.97 and the 8 Nos. of button bits, valued at Rs. 24,000/- seized at M/s. Precision Metal Treaters, Kushaiguda (job worker) should not be confiscated under Rule 173Q of Central Excise Rules, 1944.
(f) land, Building, Plant and machinery of BEC which are sued in the connection with manufacture and clandestine clearances of the excisable goods afore mentioned should not be confiscated to the Government of India under Rule 173Q(2) of the Central Excise Rules, 1944.
(g) penalties should not be imposed on them under Rules 9(2), 52A(8) 173Q and 226 of the Central Excise Rules, 1944.
2. The appellants filed their reply denying all the charges. The statements which they had given were all retracted and a very strong plea was taken by them that the whole case has been drawn on the basis of the private registers maintained by Shri Ram Murthy, Manger and these registers having seized from his residence. The appellants in order to prove that they do not have the capacity to produce the extent of goods as alleged in the show cause notice, got their machinery and the production capacity verified through a Government agency namely Andhra Pradesh Productivity Council and also through Sri Venkata Rao, Chartered Engineer. They filed these two documents to prove that they do not have such capacity and such extent of goods to be manufactured for clearance. Therefore, they denied that there was any clandestine activity or clandestine removal of goods. They also took the opportunity to cross-examine several witnesses. However, the two main witnesses who are the employees of the appellants who had given statement and who had maintained the records could not appear for cross-examination due to their ill-health. G. Ram Murthy was suffering from high blood pressure and diabities and had requested for adjournment so that he can appear on the next date to subject to cross-examination. However, the Commissioner of Central Excise refused to grant that opportunity and proceeded to decide the case. The findings recorded by the Commissioner in para 54 to 74 is reproduced below:-
54. The first contention is not acceptable since
(a) the maintenance of private records was done by Shri E.V. Subba Reddy and Shri G. Ram Murthy and was solely within the knowledge of Shri M. Madhusudhana Reddy. They are all responsible employees at BEC.
(b) they are unable to segregate the production/clearances of goods towards other firms at any stage.
(c) at the time of surprise visit made to four units except BEC in none of the other three units there was variation in stocks.
(d) the partners/employees of three units viz., DEW, CI and VE have no role to play in maintenance of the private records.
(e) it is nowhere mentioned that the manufacture and clearance of bits and hammers were from the factories of DEW, CI, and VE except to the extent of some clearances made under Central Excise invoices by those firms to BEC to meet the despatch schedules.
(f) the statements given by various dealers/agents/depot incharges of BEC who have received the finished goods viz. bits and hammers had stated that they had received mostly from BEC without bills and they used to hand over the sale proceeds to Shri Madhusudhan Reddy or Shri G. Ram Murthy of BEC alone and not to other persons belong to DEW, CI & VE.
55. The second contention is not acceptable since the retractions were all belated, not supported by any material. As regards threat and coercion at no point of time has it been mentioned as to which officer had threatened and how coercion was used. It is pertinent to note that different Officers recorded the statements on different dates. When the deponents did not mention the manner of coercion or the time of coercion and the Officers involved it is a futile attempt to contended that there was coercion, after issue of show-cause notice. In this regard since no material evidence was given in support of the cross-submission made at the time of cross-examination of several persons these are clearly an after thought and are not acceptable as evidence.
56. The statements given by Sri M. Madhusudhan Reddy and the job workers are clear admissions only. It was held in the case of Ayodhya Prasad v. Bhawani Sankar AIR 1957 A 41 that:
"the effect of an admission of a fact by a party is to shift the onus. He is required to prove the contrary. Again if a person to whom the admission was made acted on the faith of it and altered his position, it may also operate as on estoppel. The party making admission is at liberty to prove that such admissions were mistaken or were untrue and he is not estoppel or concluded by them unless other person has been induced by them to alter his condition".
57. The investigating officers acted on faith of admissions of Sri M. Madhusudhan Reddy, who is the main person of BEC, that the recovered documents related to transactions made by BEC. BEC has paid the duty of Rs. 5 lakhs vide TR-6 challan dt. 7.7.97. It is worth to mention that a part of the duty was paid on 7.7.97 even after the alleged affidavit dated 30.6.97 retracting the statement dt. 28.6.97 given by Sri Madhusudhan Reddy. At the time of part payment of duty, there is no intimation of alleged affidavit. Therefore, the arguments advanced by the learned Counsel that the statements were retracted by affidavits do not stand to the test of legality.
58. The third contention is not acceptable as it is relevant to note that neither Shri Madhusudhana Reddy nor Shri R. Ram Murthy have submitted any details of purchases of raw material and bits and hammers made locally for trading, such as names of suppliers, quantity purchased and details of payments made to them and sales made to local manufacturers when particularly asked for. Further they are unable to submit the same even during submission of reply to the show cause notice or at the tie of personal hearing conducted. If any trading taken place, certainly it would have been noted in the private records maintained by the assessees. Had it been there, the same could have been identified by Shri Madhusudhan Reddy/Shri G. Ram Murthy/Shri E.V. Subba Reddy. In the initial statements dated 28-6-97, dated 29-6-97 and dt. 28-6-97 of Shri Madhusudhan Reddy, Shri E.V. Subba Reddy and Shri G. Ram Murthy respectively, they never deposed that trading activity was also conducted by BEC or in the personal capacity of Shri Madhusudhana Reddy, Shri G. Ram Murthy. The claim of trading activity was made at subsequent stage of investigation and without submitting any material evidence. It is only an after thought as they could not furnish any proof for the trading activity which is stated to be in Crores of rupees. As such, I do not consider the claim of trading.
59. The fourth contention is not acceptable since the duty demand is not based on the production capacity of the unit. The goods produced by the assessees involve many operations viz. turning, forging, cutting, drilling, milling, heat treatment, button grinding and button fixing. Most of these operations such as miling, turning, drilling, etc. can be done in any small workshop or a lathe machine. On record two operations viz. heat treatment & forging is being done through job workers viz. M/s. Manjeera Machine Builders (P) Ltd., M/s. Maruti Forgings, M/s. Precision Metal Treaters, M/s. Rama Tulasi Metal Treaters, M/s. Bharat Thermal Engineering and M/.s B.S. Metallurgicals/M/s. Bharat Heat Treaters to complete the manufacturing process required for finished goods. The same was also admitted by Sri Madhusudhana Reddy vide his statement dated 7.10.97. As such, consideration/non-consideration of production capacity of BEC alone does not arise. The contention put forth by the assessees is only to side track the issue.
60. It is also observed that BEC has procured T.C. buttons valued of Rs. 2.13 Crores during 95-96, 96-97 and 97-98 and Rs. 2.11 Crores worth of steel during Oct, 95 to April, 96 as per the note book recovered from Shri Ram Murthy and Rs. 0.84 Crores during Feb, 97 to June, 97 as per box file recovered from the residence of Shri E.V. Subba Reddy. If the contention of the that BEC can produce only Rs. 1 to 1.5 Crores of goods per year is correct then what is the necessity to purchase Rs. 2.11 Crores worth of steel during Oct, 95 to April 96 (7 months) and Rs. 0.84 Crores of steel during Feb'97 to June'97 (5 months). The statements further corroborate the basic evidenced collected i.e., documents/ note books/ box files recovered. It can be observed from the box file No. 2 recovered from the residence of Shri E.V. Subba Reddy, during, April 97 to June'97, on several occasions, Shri Madhusudhan Reddy has received amounts and also payments made to job workers, raw materials suppliers. During this period, Shri Madhusudhan Reddy has endorsed his signatures in token of receiving the same whenever he has taken the amounts/issued payments to raw material suppliers.
61. The assessee's contention as stated in their written reply dated 24.3.99 that "Shri G. Ram Murthy" has no connection with the manufacturing of BEC" is not correct for the following reasons.
(a) i) Sri N. Mani Raju in his statement dated 29.6.97 stated that he will attend to maintenance of statutory accounts, despatches, preparation of Central Excise Invoices on the instructions received from Sri Madhusudhan Reddy, G. Ram Murthy, E.V. Subba Reddy. He has also stated that the matters relating to purchase of raw material, production and despatch of finished goods is totally taken care of by Madhusudhan Reddy, Sri G. Ram Murthy and Sri E.V Subba Reddy.
ii) Sri E.V. Subba Reddy, who is stated to be working in BEC since last 10 years has stated that the documents is available and entries in the note books (recovered at Sl.NO. 1 to 4) are written by Sri G. Ram Murthy as per the instructions and directions of their Managing Partner Sri Madhusudhan Reddy.
iii) Sri Amrutha Rao, Acct. & Authorised signatory of DEW stated that Sri G. Ram Murthy, who is Manager BEC looks after the production and clearance at DEW.
iv) Suppliers of raw material namely M/s. L.C. Singhvi, Sri Subhodh Gupta, Manoj Kanodia, etc. have stated that the persons who used to contact for supply of steel is either Sri G. Ram Murthy or Sri Madhusudhan Reddy.
v) Sri G.V. Stayanarayana, Managing Partner, M/s. Rama Tulasi Metal Treaters Kushaiguda in his statement dated 7.8.97 stated that though materials were actually not received, they were asked by Sri G. Ram Murthy to prepare challans/ bills as if they done it. He stated that the person concerned with VE, CI, DEW, BEC is Sri G. Ram Murthy and he was receiving all the payments from Sri G. Ram Murthy only.
vi) As could be seen from the letter dated 27.1.98 filed by Sri V.J. Shankaram, Advocate wherein he has requested for extension of time to submit written replies, he has submitted vakalats for a) BEC, b) M. Madhusudhan Reddy, Managing Partner, c) Sri G. Ram Murthy, Manager, BEC and d) E.V. Subba Reddy, Supervisor, Authorised Signatory. Sri G. Ram Murthy signed the vakalat in the capacity of Manager, M/s. BEC and the same was accepted by the learned advocate.
b) From the above, it is amply clear that Sri G. Ram Murthy is closely associated with the manufacturing activity and day to day transaction of BEC. It is noteworthy to mention that Sri G. Ram Murthy has acknowledged the receipt of SCN (OR No. 48/97, dated 17.12.97) on dated 20.12.97 on letter head of M/s Beaver Engineering Corporation, Hyderabad in the capacity of Manager, M/s. BEC. Hence it is construed that the affidavit dated 16.7.97 (submitted alongwith reply dated on 24.3.99) does not contain facts.
c) The Revenue got strong substantial corroborative evidence to prove that M/s. BEC has procured huge quantity of raw material as the suppliers of raw material (Alloy-steel) have admitted that they have supplied raw materials without issuing any documents such as challans and bills. In fact they have identified the corresponding entries in the incriminating documents recovered relating to the amounts paid and payable to them by BEC.
d) Also Sri Vijay Kumar, Proprietor M/s. Eastern Steel Corporation, and Sri Rakesh Brij Mohan also confirmed the particulars noted in the incriminating documents, against the name of their firm.
e) Huge amount of job work charges (Rs. 25,62,161/-) paid by BEC during 1996-97 as admitted by Sri E.V. Subba Reddy with reference to the records recovered from his residence also supports the involvement of huge quantity of raw material for production and clearance there of without accounting the same in the statutory records.
f) K. Sriram Prakash, Branch Manager, BEC, Bangalore and Sri Suresh Singhvi, Manager, M/s. BEC, India have admitted in their statements that on most of the occasions they receive the material without any documents and sale proceeds in respect of goods sold without bills were handed over to Sri G. Ram Murthy/ E.V. Subba Reddy or any other person authorised by Sri G. Ram Murthy/ M. Madhusudhan Reddy.
Taking all this into account the plea of production capacity by BEC is rejected.
62. The learned Counsel also argued that when the witnesses do not turn-up for cross-examinations, their statements should not be relied upon. The Hon'ble Supreme Court in the case of Mahasingh v. (1976) 1 SCC 644 held that:
"Cross-examination of witnesses may be of no consequence in the face of admission of seizure of article".
63. Relying upon the judgement cited supra, I hold that the statements given by S/ Shri E.V. Subba Reddy and Shri G. Ram Murthy mentioned in the submissions made by the learned Counsel in his letter dt. 24-3-99 and rejoinders are valid statements. As regards Shri E.V. Subba Reddy, who was an employee of BEC has been intimated to attend personal hearing fixed many times to participate in cross-examination but did not do so. As regards Shri G. Ram Murthy who was also an employee of BEC has also been intimated about personal hearings and to participate in cross-examination. He has replied that he was suffering from high B.P. and sugar and requested for postponement of the personal hearings. Since both of them are the employees of BEC, BEC could have produced them.
64. On the question of cross-examination of certain individuals, the department has made its best efforts by informing the personal hearing intimations/issuing summons to the concerned and all efforts to serve summons on the said personas proved futile. Therefore, I hold that the denial of opportunity of cross-examination of certain individuals and employees of BEC has not resulted in miscarriage of justice.
65. The learned Counsel of BEC has cited a catena of decisions of the Hon'ble Supreme Court/ Tribunal in support of their submissions. It is necessary to peruse the case laws cited by the counsel. The case laws submitted have been carefully considered. The ratio of the decisions of those cases cannot be applied to the instant case for the reason that the facts and circumstances of those cases are not the same. As detailed out in the findings this case is based on specific documents recovered during raid and duly corroborated by statements of individuals concerned with the transactions. Therefore, I do not consider it necessary to discuss the individual case laws referred to by BEC separately as the proposals contemplated in the show cause notice are correct. Hence, I reject the arguments of the learned Counsel.
66. 68 nos. of various parts of drilling rigs valued at Rs. 1,57,696 were seized at the business premises of M/s. Beaver Rock Drills, Secunderabad on 27-6-97 (dealer of BEC) since the stock was in excess having without bills. Shri Raghuvardhan Reddy in his statement dt. 22-8-97 stated that they receive the material sometimes without bill from BEC and its sister concerns, as such it was in excess than what was recorded in their stock register. he further confirmed on perusal of the records recovered from the residence of Shri E.V. Subba Reddy clerk of BEC, that the details contained in the note books and computerised statements against the entries 'BRD" are correct. Shri Madhusudhana Reddy, vide his statement dt. 07-10-97 further corroborated the statement given by Shri Raghuvardhan Reddy that the statement is correct. During the cross examination on 2-2-2000 by the Counsel Shri Radhuvardhan Reddy deposed that they are selling hammers and other materials with bills and receiving them on bills. Had it been true, they would have received the material with bill and could have shown and the same would have been entered into the register. The answer given by Shri Raghuvardhan Reddy, during the cross-examination is not acceptable. As such 68 nos. of various parts of drilling rigs seized at the premises of M/s. Beaver Rock Drills., Secunderabad are liable for confiscation.
67. 26 nos. of button bits and hammer assemblies valued at Rs. 2,44,600 detained at the factory premises of BEC on 27-6-97 and subsequently seized under panchanama dt. 8-7-97 since the goods were stored in the factory premises for clearance. At the time of drawing panchanama, Shri N.M. Raju, who maintains Central Excise records and Shri M. Madhusudhana Reddy have been asked the reasons for excess stock of 26 nos. of button bits for which they have not given any satisfactory reply. As such, the goods were detained and later on seized. The counsel has submitted in the written submission at the time of personal hearing held on 7-4-2000, that the goods ere in process or were the raw material in stock. Here the question is 26 Nos. of button bits and hammers were manufactured and not entered in the RG 1 stock. The goods in process or the raw material stock does not relate to 26 Nos. of finished goods of button bits and hammers. They are liable to be entered in RG 1 register immediately on completion of the job. As such, 26 Nos. of button bits and hammers assemblies are liable for confiscation.
68. 8 Nos. of button bits valued at Rs. 24,000 were seized at M/s. Precision Metal Treaters. These button bits were sent by BEC without issuing any job work challans. At the time of drawing panchanama, Shri K. Sreeramulu, Partner of M/s. Precision Metal Treaters could not produce any job work challans in respect of nos. of bits of "BEAVER" make. Shri K. Sreeramulu, in his statement at. 11-8-97 stated that they undertake job work of heat treatment to BEC and CI among others and further stated that they had received 8 nos. of "BEAVER" make button bits for job work from BEC without any documents. Shri M. Madhusudhana Reddy, in his statement dt. 7-10-97 agreed that the contents of the statement of Shri K. Sreeramulu is correct. In this regard Counsel has not given satisfactory reply. As such, 8 nos. of button bits are liable for confiscation.
69. I find on the basis of findings given above that the grounds contained in the show-cause notice regarding clandestine manufacture and clearance of bits and hammers during Oct, 95 to June, 97 suffers no infirmity particularly because the modus operandi adopted by BEC is established by the documents/records recovered from the factory premises of BEd, residential premises of Shri E.V. Subba Reddy, and Shri G. Ram Murthy, employees of BEC, confirmative deposition given by the personnel of BEC and accepting the details available in the said private records. The duty demand on clandestine removal as proposed in the SCN is liable to be confirmed. I have taken BEC's own data and clear details shown in the documents/registers how much worth of bits and hammers were actually removed as a basis to demand the duty. After taking into consideration the unaccounted clearances effected as shown in the private records during financial year 1995-98. BEC has crossed Rs. 3 Crores turnover during the preceeding financial year and thereby they are not eligible for SSI benefits.
70. In view of the foregoing, I conclude that the circumstances appearing in evidence on records, private beyond doubt that the clandestine manufacture and clandestine removal without payment of duty. Therefore, the larger period has rightly been invoked vide the proviso to Sub-section (1) of Section 11A of the Act. Evasion of duty on unaccounted bits and hammers in already established. Therefore, the duty demand is sustainable in law. Penal action against BEC is rightly proposed under Rules, 173Q of the Central Excise Rules, 1944. It has also been proposed for mandatory penalty under Section 11AC. There is mensrea on the part of BEC, as I discussed supra, to evade payment of duty. Hence, imposing mandatory penalty is also justified. Section 11AB and Section 11AC of Central Excise Act, 1944 were brought into effect from 28.6.96. The period covered in the show-cause notice is from October, 95 to June, 97. Section 11AB and Section 11AC can be collected/imposed in this case from October, 1996 to June 1997. Therefore, I am of the view that interest under Section 11AB and mandatory penalty under Section 11AC can be collected/imposed in this case from October 1996 to June 1997. During the said period Rs. 73,84,544/- differential duty was demanded. Further, the assessees are also liable for mandatory penalty of Rs. 7,72,693/- for the period 7/97 to November, 97 and of Rs.31,38,596/- for the period 4/98 to 2/2000. I rely on the following case laws in support. Lakshmi Packaging (P) Ltd. v. CCE, Coimbatore-1998 (98) ELT 91(T). Maruti Udyog Ltd., v. CCE, New Delhi 1998 (101) ELT 685 (T) and Marchandy Prasad Radhakrishna Prasad (P) Ltd., v. CCE, Calcutta-II 1998 (102) ELT 705 (T). It has also been proposed for confiscation of land, building, Plant & Machinery used in connection with the manufacture of the impugned goods under Rule 173Q of Central Excise Rules, 1944. However, I do not contemplate the confiscation of the same as the relevant provisions under Rule 173Q of Central Excise Rules, 1944 are not existing at present.
71. In so far as the penalty on Shri M. Madhusudhan Reddy, Managing Partner, BEC, Shri E.V. Subba Reddy, Clerk of BEC and Shri G. Ram Murthy, Manager of BEC is concerned, I note that the entire spectrum of operations of procurement of raw material clandestinely and sales of finished goods clandestinely without payment of duty was done and within the knowledge of Shri M. Madhusudhan Reddy, Managing Partner of BEC. Shri E.V. Subba Reddy, clerk BEC and Shri G. Ram Murthy, Manager of BEC have also had the knowledge of clandestine procurement of material and clearances of the same without payment of duty and assisted Shri M. Madhusudhan Reddy by maintaining the records/ registers at their residences. As such, they are also liable to be penalised under Rule 209 A of Central Excise Rules, 1944.
72. The clandestine removal done by BEC during 1995-98 is proved beyond bout. The unaccounted production is also to be taken into account to arrive at aggregate value of clearances while allowing SSI benefits for the next year. A show-cause notice under C.No. V/84/15/206/97, dt. 05-01-98 (OR No. 25/98-Hyd-III/Adjn.) for Rs. 7,72,693 covering the period July'97 to November, 97 alleging that BEC has crossed Rs. 3 Crores turnover in the preceeding financial year. Since BEC has crossed Rs. 3 Crores of turnover after taking into consideration unaccounted clearances as per the private records recovered, during 1996-97, BEC is not eligible for SSI benefits for the year 1997-98 and accordingly, the assessees are liable to pay full rate of duty. As such differential duty of Rs. 7,72,693/- demand as cited supra is in order. They are also liable to pay the interest under Section 11AB and penalty under Section 11AC, of Central Excise Act, 1944 as they have suppressed the Production and Clearances for the earlier period and wrongly availed the SSI exemption.
73. The modus operandi adopted by the party is evident from the findings above. All through they tried to palm off their clandestine production and clearances to the other three companies with whom they otherwise have close connections. however, it is clear from the evidences unearthed that this is only a facard and a ploy to cover the clandestine production & clearance of BEC itself. This modus operandi necessarily continued as they had to maintain the facard and avail the SSI exemption. The subsequent 5 SCNs dated 30.10.98, 19.2.99, 13.7.99, 2.11.99 & 22.3.2000 pertain to the period from April 98 to February, 2000 is on this basis.
74. The contention of the party that the SCNs are on the basis of clubbing of the production of the other companies is not correct since the basis is the SCN No. 49/97 dated 17.12.97 which alleges clandestine production and removal and the findings of which clearly reveals the strategy adopted by BEC as elaborated herein before. The annexure only show the computation of the differential duty involved since SSI exemption will not be available to BEC and not for clubbing of the companies involved. No further evidence/submissions have been given by BEC to controvert this save and except challenging the basis of the subsequent SCNs. The findings pertaining to SCN No. 49/97 therefore applies mutatis mutandis to the subsequent SCNs also and deserve to be confirmed.
3. Arguing for the appellants Shri V.J. Sankaram and Shri J. Sankarraman, Ld. Advocate point out that there was a clear violation of principles of natural justice in not giving an opportunity to cross-examine the main witnesses namely G. Rammurthy and E.V. Subba Reddy. Ld. Counsel points out that the Commission has clearly erred in holding that the appellants should have produced them. They contend it was practically impossible to produce them when they were suffering from illness and completely bed ridden. Commissioner's view that G. Rammurthy's prayer for postponement cannot be accepted is clear violative of principles of natural justice. They pointed out that the binding that the cross-examination is not required in view of admission of seizure of article is not correct as there was no seizure of articles in the matter which connects to the quantum of goods said to have been removed for confirmation of duty. Therefore, there is a clear mis-application judgment of the Supreme Court cited in para 62 of the order extracted supra. Ld. Counsel points out to para 65 wherein the Commissioner has stated that he doe snot consider it necessary to discuss the individual case law referred to by them. He submits that the case law of the Apex Court and the Tribunal are clearly binding on the Commissioner and not to follow the same amounts to judicial indiscipline. The fundamental law has been laid down in these judgments pertaining to the manner in which the evidence is required to be adduced and analysed. When there is a clear violation of principles of natural justice, the citations referred to by them had a clear applicability and the Commissioner cannot hold that he is not going to discuss the individual case law. Pointing out to other portions of the evidence, Ld. Counsel submits that there is no corroboration of any sort with regard to the quantum of production as they did not have the production capacity to manufacture to the extent indicated. He submits that private records and registers were maintained by the two persons and what they had written there was required to be put to test and in the absence of they being tested and the persons explaining the entries made, the said evidence is not sustainable in law. In this regard, he relies on the following judgments:-
1 1999 (31) RLT 324 (TRIBUNAL) RAJ SANDEEP CO. GIAN SING v. CCE & C, CHANDIGARH CLANDESTINE REMOVAL - Rule 9(2) of C.Excise Rules, 1944 - Evidence material like entries in note book of driver and octroi receipts, relied upon by Department gives rise to suspicion and is not sufficient to establish clandestine removal - benefit of doubt extended - appeal allowed.
2. 2000 (40) RLT 1077 (CEGAT) CCE, CHANDIGARH v. DASHMESH CASTING (P) LTD.
CLANDESTINE REMOVAL - Rule 9(2) of C. Excise Rules, 1944 - Evidence - allegation based on octroi records showing movement of respondent's truck - no other evidence brought on record - allegation not established - appeal rejected.
3. 1999 (84) ECR 245 (TRIBUNAL) KRISHNA BOTTLERS (VIJAYAWADA) PVT. LTD. v. CCE, GUNTUR DEMAND - CLANDESTINE REMOVAL - Evidence - Burden of Proof - Burden to prove clandestine removal on Revenue - show cause notice based on assumptions and presumptions, and not on any evidence, is not maintainable. The so-called unsigned information referred to as "letter" has no evidentiary value. In this view of the matter, there is also no case for its remand to the jurisdictional authority for de novo consideration - ratio of Supreme Court, High Court and various Tribunal judgements. Impugned order set aside.
4. 2001 (94) ECR 584 (TRIBUNAL) MTK GURUSAMY & ANR v. CCE, MADURAI DEMAND -- CLANDESTINE REMOVAL - EVIDENCE - Seizure of private register maintained by a private part time employee - Demand cannot be confirmed on basis of such an unauthenticated document without corroborative evidence, such as seizure of clandestinely removed goods or invoice or purchase of raw materials etc. - ratio of Supreme Court judgment in the case of Triveni Rubber & Plastics v. CCE (1994 (54) ECR 40 (SC), and of several Tribunal decisions cited. Impugned order set aside.
5. 2000 (120) ELT 148 (TRIBUNAL) SUVARNA POLYMERS PVT. LTD. v. CCE, HYDERABAD.
DEMAND- Shortage - Clandestine removal - Evidence - Only piece of evidence relied upon by the Revenue is the inflated figure pertaining to allegation of manufacture and clandestine removals for raising higher financial limit from the bank - Demands raised solely on the basis of the statement furnished by the assessee to the banks not sustainable - Rules 9(2) of Central Excise Rules, 1944.
6. 2000 (93) ECR 59 (TRIBUNAL) IGNI FLUID BOILER (I) LTD v. CCE, MADRAS EXEMPTION - DEMAND - Limitation (extended) - Penalty - Clubbing of clearances of appellant and M/s. FEPL on the ground that FFPL is a hired labour and denial of exemption on the ground that premises and machinery being common, the same had been leased out by the appellants to FFPL. The contract executed between the appellants and M/s. FFPL was proper. The agreement and the purchase order clearly shows that the relationship between the appellant and M/s. FFPL is on principal to principal basis and not that of hired labour. Both the units had obtained separate Registration Certificates by showing bifurcation of the premises and also about clearances made in respect of manufacture done independently and filed RT 12 Returns indicating the same address. The fact that both the units were manufacturing form the same premises by utilising the same machinery and the fact of separate clearances being effected was also made known to the department. However, even if the Commissioner had treated M/s FFPL as the hired labour, a separate show cause notice should have been served upon M/s FFPL for demand of duty in respect of clearances made by them. Thus everything about the circumstances of operations of the two units were fully in the knowledge of the department. Therefore, the question of CE Rule 9(2) alleging clandestine removal and invoking proviso to Section 11A(1) of CEA alleging suppression does not arise in the matter. Impugned order set aside.
7. 2001 (130) ELT 271 (TRI-KOLKATA) SHARMA CHEMICALS v. COMMISSIONER OF C.EXCISE, CALCUTTA-II CLANDESTINE AND REMOVAL - Evidence - Note book of entries of production and removal of products recovered from a person whose name not appearing in list of workers in statutory records cannot be relied upon to support the charge - No other corroborative evidence - Charge not proved - Rules 9(2) and 173Q of Central Excise Rules, 1944.
Clandestine manufacture and removal - Evidence - Charge of clandestine removal - Cannot be sustained on presumption that persons entrusted with such a job are not usually shown as employee - Rules 9(2) and 173Q of CER, 1944.
Clandestine manufacture and removal - Burden of proof - Revenue is required to proved beyond doubt factum of clandestine manufacture - Rules 9(2) and 173Q of Central Excise Rules, 1944.
Natural Justice - Cross-examination - Entire case of clandestine removal depending on a person from whom note book of entries of production and removal of products recovered - Revenue claiming him to the employee of assessee and assessee denying the same - Denial of request of assessee of cross-examine him violated principles of natural justice - Rules 9(2) and 173Q of CER, 1944.
Clandestine manufactured and removal - Evidence - Entries in a private note book of record of production at most raise a doubt but do not prove the charge in absence of other corroborative evidences like installed capacity of factory, raw materials utilisation, labour employed, power consumed, goods actually manufactured and packed etc., Rules 9(2) and 173Q of CER, 1944.
Clandestine manufacture and removal - Evidence - Distance between 'may be true' and 'must be true' is long and whole of it must be covered by legal and unimpeachable.
8. 2001 (131) ELT 662 (TRI-DEL) HARYANA ROADWAYS ENGINEERING CORPORATION LTD v. CCE, NEW DELHI VALUATION (CENTRAL EXCISE) - Demand - Original consideration received by assessee for sale of the goods had to be taken as cum-duty price and abatement of differential duty from sale realisation allowable - Erstwhile Section 4(4)(d)(ii) of Central Excise Act, 1944.
9. 2000 (136) RLT 274 (CEGAT) EAST INDIA COTTON CO. LTD v. CCE, NEW DELHI Small scale exemption - Notification No. 175/86-CE dt. 1-3-86 - Clubbing of clearances - Show cause notice - Natural Justice - non-issue of show cause notice to all the units whose clearances are to be clubbed together for the purposes of exemption notification, is violative of principles of natural justice - Impugned order set aside - appeal allowed.
10. 1999 (114) ELT 561 (TRIBUNAL) BALBIR STEEL (P) LTD. v. CCE, KANPUR CLANDESTINE REMOVAL - CROSS-EXAMINATION - NATURAL JUSTICE -Statement relied on - Summons - Statement of transporter relied on to prove charge of clandestine removal - Summons issued to transporter but transporter not produced for cross-examination - Duty of Revenue not to end merely by issuing summons to the persons on whose statements it relied - Further duty of Revenue to produce them, otherwise the statements given by those person not to be relied upon for the purpose of adjudication - Sections 14 and 33 Central Excise Act, 1944.
4. Ld. Counsel points out that the findings given by the Commissioner is bald and without due analysis of the entire evidence even culled out by the Revenue. Even to proceed to confirm the entire evidence on record in terms of investigation is required to be analysed in the context of replied given by them. Merely to hold that there is clandestine removal and confirming the charge is violative of principles of natural justice. He points out that all other units whose clearances have been taken into consideration for confirming duties were not put to notice and as such, the proceedings are totally vitiated as held by this bench in DON Fire Works Factory and Ors. v. CCE Madurai reported in 1999 (31) RLT 104. Ld. counsel submits that this aspect of the matter has not been referred to in the order at all. He submits that for the purpose of proving clandestine removal, the Revenue is required to prove (a) the extent of raw material purchased; (b) electricity consumed, (c) funds utilised, (d) number of employees employed & (e) the final product having been sold in the market to the person concerned. He points out that in the absence of all these evidences, the charge of clandestine manufacture and removal solely based on the private registers is not sustainable in the light of the judgment cited supra. Therefore, he submits that as the Revenue has not discharged their burden of proving the clandestine manufacture and removal and that the Commissioner has solely proceeded on the assumptions and presumptions, the impugned order is required to be set aside by granting waiver of pre deposit at this stage itself.
5. Ld. DR submits that the case is built up on detailed investigation and on seizure of enormous private registers. Merely because two of the witnesses were not present for cross-examination that will not tilt the case in the appellant's favour; for the reason that appellants were given fully opportunity to cross-examine all the witnesses. They also utilised the opportunity to cross examine large number of witnesses. The main witnesses namely G. Rammurthy and E.V. Subba Reddy were served with several notices to present themselves. They did not appear and appellants did not take any step to bring them as they were their employees. In the circumstances, the Commissioner has no choice but to proceed with the orders. The Commissioner has given detailed findings and relied on their own statements and several other material evidences culled out in the investigation and have rightly confirmed the demand. He submits that all these evidences are required to be analysed at the final stage and at this stage the appellants should be put to terms with regard to the stay applications. He submits that there is no violation of principles of natural justice. He submits that he will try to get a report from the Commissioner in all aspects of the matter including the case laws so that he will be in a better position to place the Revenue's point of view at the final stage of hearing.
6. On a careful consideration of the submission and on perusal of the entire material on record, we are of the considered opinion that there is indeed violation of principles of natural justice for the reason that the most vital and important witnesses and from whom the private registers were seized were not cross-examined. The Commissioner in para 33 of his order has noted the reason for the absence but has blamed the appellants for not producing them. The Revenue is relying on the witnesses' statements and the documents seized from them. Therefore, the initial burden is on the Revenue and the Revenue is required to discharge the same by proving the charges made out in the show cause notice. In case if the witnesses do not turn up for one reason or the other, then their main statement cannot be taken into consideration. On exclusion of these statement, the evidences is required to be analysed. For the purpose of proving clandestine manufacture and removal, the best evidence is with regard to the use of electricity consumption and the production capacity of the Company. In this regard, two vital piece of evidences have been relied by the appellants and that is the report of the State body like Andhra Pradesh Productivity Council and the Report from the Chartered Engineer Shri Venkata Rao. The Commissioner does not want to discuss their evidences which clinches the issue one way or the other. When such rebuttal evidences with regard to the production capacity has been produced, the Commissioner ought to have taken these pieces of evidences into consideration. Failure to record or analyse these pieces of evidences certainly has resulted in violation of principles of natural justice. In that view of the matter, the prayer for waiver and stay of recovery made in the stay applications is required to be accepted. Hence, the stay applications are allowed.
7. We notice that the procedure of Tribunal is that at the time of hearing the stay application if it has been pointed out that there is a clear violation of principles of natural justice, then the Tribunal at stay stage itself takes up the matter for final hearing. Therefore, keeping with the Tribunal's practice, we take up the appeals for final disposal.
8. It was argued by the counsels that Revenue has not established the charge of clandestine manufacture and removal and that there is a clear violation in as much as that the Commissioner has proceeded beyond the terms of the show cause notice. It has also been argued that without making the other units on whose clearances the demands have been raised parties to the proceedings, the proceedings are null and void. We are, therefore, of the considered opinion that all the pleas of the appellants including the plea to cross-examine the two vital witnesses namely E.V. Subba Reddy and G. Rammurthy are required to be reconsidered by the Commissioner. The Commissioner should compel the witnesses to appear and face the cross-examination. The law has given powers to the Commissioner to summon them by all means as no witness can stay away from the quasi judicial forum. The Ld. Commissioner should take all proper steps to get the witnesses so that appellants can cross-examine them. Only thereafter, the Commissioner shall hear the appellants in great details on all aspects of the matter and with an open mind record the findings in the light of the judgments which have been already noted supra. The fundamental principle for confirming the demands on clandestine removal should be borne in mind and the evidences should be clear, clinching, cogent and acceptable in law. The Commissioner after duly following the principles of natural justice and after hearing the appellants, shall pass a detailed, considered speaking order in terms of law. Thus these appeals are allowed by way of remand for de novo consideration.
(Pronounced & dictated in open Court)