Custom, Excise & Service Tax Tribunal
Commissioner Of Central Excise, ... vs M/S Birla Ngk Insulators Pvt. Ltd on 5 January, 2016
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE
TRIBUNAL, KOLKATA
EASTERN ZONAL BENCH: KOLKATA
Appeal No. E/405/2007
(Arising out of Order-in-Original No. 77/COMMISSIONER (ADJUDICATION)/ KOLKATA-IV/2007 dated 30.03.2007 passed by the Commissioner of Central Excise, Kolkata-IV)
FOR APPROVAL AND SIGNATURE
DR. D.M.MISRA, HONBLE (JUDICIAL) MEMBER
HONBLE SHRI H.K.THAKUR, MEMBER (TECHNICAL)
1. Whether Press Reporters may be allowed to see
the Order for publication as per Rule 27 of the CESTAT
(Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the
CESTAT(Procedure) Rules, 1982 for publication in any
Authorative report or not?
3. Whether Their Lordship wishes to see the fair copy
of the Order?
4. Whether Order is to be circulated to the Departmental
Authorities?
Commissioner of Central Excise, Kolkata-IV
Applicant (s)/Appellant (s)
Vs.
M/s Birla NGK Insulators Pvt. Ltd
Respondent (s)
Appearance:
Shri A.K. Biswas, Suptd (AR)for the appellant (s) Shri Ravi Raghavan, Advocate, for the Revenue (s) CORAM:
DR. D.M.MISRA, HONBLE MEMBER (JUDICIAL SHRI H.K.THAKUR, HONBLE Member(TECHNICAL) Date of Hearing/Decision: 05.01.2016 Date of Pronouncement: 05.01.2016 ORDER No. : FO/A/75114/2016 Per Shri H.K.Thakur This appeal has been filed by the Revenue against O-I-O No. 77/COMMISSIONER(ADJUDICATION)/KOLKATA-IV/2007 Dated-30/3/2007 under which Adjudicating authority has dropped demand show cause notice No. 21/CE/R-VI/Rishra/ Adjn/2005 dt 29/3/2005 issued to the Respondent herein.
2. Sh. A.K. Biswas Supdt. (AR) appearing on behalf of the Revenue argued that a demand of Rs. 95,18,877/- was issued to the Respondent, alongwith interest & penalty, on the ground of clandestine removal because shortages in the finished goods were detected by the statutory auditors of the Respondent. It is the case of the Revenue that Respondent can not deny the shortages of stock detected by their own statutory auditors. Learned AR relied upon the following case laws in support of Revenues.
Appeal:
(i) Bharat Plast Vs CCE Valsad [2004 (168) ELT 2004 (Tri-Mumbai)]
ii) Majestic Auto Vs CCE Gaziabad [2004 (172) ELT 0391 (Tri-Del.)]
3. Sh. Ravi Raghavan (Advocate) appearing on behalf of the Respondent argued that stock taking done by their Auditors is based only on random selection of items and was not detected by the Revenue and that Revenues relied upon case laws can not be made applicable to the existing facts. That many aspects were left out of physical verification and net stock position of insulators manufactured by the Respondent was lying in excess at the factory as observed by the Adjudicating authority. It is the case of the Learned Advocate that there cannot be any duty liability on the semi-finished goods demanded in the show cause notice. That a report of their auditors, suggesting shortages on the basis of test check, does not indicate any clandestine removal which is nothing but a case made by Revenue on presumption & assumption. He relied upon the following case laws.
(i) Oudh Sugar Mills Ltd Vs UOI [1978 (2) ELT (J172) (SC)]
(ii) Maruti Udyog Ltd. Vs CCE, Delhi-III [2004 (173) ELT 382 (Tri- Del.)]
(iii) CCE Vs Maruti Udyog Ltd. [2010 (262) ELT 180 ({P&H)]
(iv) CCE Vs Maruti Suzuki India Ltd. [2015 (319) ELT 549 (SC)]
(v) Durga Trading Company Vs CCE, Lucknow [2002 (148) ELT 967 (Tri-Del.)] (Affirmed by Honble Supreme Court reported at Commissioner Vs Durga Trading Company 2003 (157) ELT A315 (SC).
3.1 It was further argued by the Learned Advocate that shortages as indicated by statutory auditors was due to recording of wrong codes under different categories and that actually on re-conciliation, no shortage was found. He made the bench go through Para- 7.5 & 7.6 of the adjudication order dt.- 30/03/2007 where such wrong recording of codes was argued by the Respondent and have been considered by the Adjudicating authority. That main buyers of the insulators manufactured by the Respondent are National Thermal Power Corporation Ltd (NTPC), Power Grid Corporation of India, various State Electricity Boards etc. who being Govt. departments/corporations can not be expected to procure clandestinely removed insulators.
3.2. Learned Advocate also made the bench go through Para- 9.5 of the order-in-original dt .30/3/2007, to argue that shortages mentioned by their auditors is only 0.29% of their total production & can be ignored in view of the relied upon case laws. It is also his case that no duty is payable on the semi-finished goods and that Para 9.5 of the Order-in-Original itself records excess & shortage of finished goods which is not possible.
4. Heard both sides & perused the case records. The issue involved in the present appeal is whether shortages suggested by the statutory auditors of the Respondent, based on test check, can be made the basis for clandestine removal. Revenue has strongly argued that shortages are detected by the statutory auditors of Respondent and there has to be clandestine removal only. On the other hand Respondent has argued that the shortages were suggested by their auditors, based on a test check, which as per Para- 9.5 of the adjudication order dt. 30/3/2007 included both excess & shortages. It is also observed from Paras-7.5 & 7.6 of the O-I-O dt. 30/3/2007 that excess & shortages of finished goods was explained by the Respondent, during adjudication, to be due to wrong recording of codes. There is no evidence with the Revenue that the re-conciliation done by the Respondent is incorrect. There is force in the argument of the Respondent that finished goods can not be both short & excess and that such a situation can be only due to wrong recording of code numbers. There is also no evidence with the department that goods have been cleared clandestinely which is based only on presumptions & assumption. Secondly no duty can be demanded on semi finished goods. It is also not the case of the Revenue that shortages of finished goods suggested by the auditors was finally accepted by the Respondent in their balance sheet for the relevant financial year. The case laws relied upon by the Revenue are not applicable for more than one reasons. Firstly shortages are not detected by the departmental officers during stock taking. Secondly 100% of the stock verification has not been done by the statutory auditors of the Respondent which was only based on test check. Thirdly, on reconciliation made by the Respondent no shortages were seen & nothing contrary has been brought an record by the Revenue. Fourthly, Respondent has never accepted the shortages which was the fact in the case laws relied upon by the Revenue. Fifthly, the case laws relied upon by the Revenue were not with respect to shortages suggested by the statutory auditors of the assesses.
4.1. There is also a force in the argument of the Respondent that even if the shortages suggested by their auditors is taken to be true, then also the same is required to be ignored as per the case law CCE Vs Maruti Udyog Limited (Supra) as the shortage represents only 0.29% of the total production of the Respondent.
4.2. It is further observed that no evidence whatsoever exists that any excess raw material was procured by the Respondent or was found in the stock of the Respondent during the relevant time. A case of clandestine removal can not be made and held to be established based an presumptions & assumptions. CESTAT Delhi in the case of Durga Trading Company Vs CCE Lucknow (Supra) relied upon by the Respondent, made following observations in Para-9 9. It is well settled that the charge of clandestine manufacture of the dutiable goods and removal thereof without discharging the duty liable by an assessee, cannot be established on assumptions and presumptions. Such a charge has to be based on concrete and tangible evidence. It this context, reference may be made to Oudh Sugar Mills Ltd. V. Union of India 1978 (2) ELT (J 172) (S.C.), wherein the Apex Court has observed that demand of duty cannot be raised on the strength of assumptions and presumptions. There should be sufficient evidence of the removal of the goods alleged to have been manufactured and cleared without payment of duty. The charge of clandestine removal must be based on tangible evidence and not on inferences involving unwarranted assumptions. This very principle of law had been applied by the tribunal in a number of cases and out of those, few are, Amba Cement and Chemicals V. CCE 1996 (82) ELT 347 and Madhu Foods Products V. CCE 1995 (76) ELT. 197. 4.3. The above case decided by CESTAT Delhi was upheld by Apex Court as reported at Commissioner Vs Durga Trading Corporation [2003 (157) ELT A315 (S.C)].
5. In view of the above observations & settled proposition of law, a case of clandestine removal can not be considered to be established based only upon the statutory auditors of the Respondent made on test check basis. Accordingly, appeal filed by the Revenue is rejected and order in original dt. 30/3/2007 passed by the Adjudicating authority is upheld.
(Operative part of the order was pronounced in the open court.)
Sd/- 29/01/16 Sd/- 29/01/16
(D.M.MISRA) (H.K. THAKUR)
JUDICIAL MEMBER TECHNICAL MEMBER
K.B & T.K/-
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Appeal No. E/405/2007