Customs, Excise and Gold Tribunal - Delhi
Garlon Polyfab Industries Ltd. vs Commissioner Of C. Ex. on 3 November, 2005
ORDER K.C. Mamgain, Member (T)
1. Appeals No. E/1792-94/2002 are filed by M/s. Garlon Polyfab Industries Limited and Shri Vishal Garg and Shri Vivek Garg who are Managing Director and Executive Director of this Firm respectively. Appeal No. E/683/2003 is filed by the Revenue. Since all these appeals have been filed against the same impugned order of the Commissioner, these are being taken up together.
2. The facts in brief are that M/s. Garlon Polyfab Industries Limited is the manufacturer of Polyester Textured Yarn. Based on information that they are indulging in suppression of production, the Central Excise Officers visited their factory as well as their office premises on 29.10.98 and recovered certain records and documents, which were taken in possession for investigation. From one of the file, month-wise production reports and consumable stock reports for the period June, 1996 to March, 1998 (except for the month of Feb., '97. March '97 and Nov. '97) were recovered. It was found that these reports were prepared in computer generated printed Proforma and bore the signatures of the persons preparing these reports. On scrutiny of the reports it was noticed that during the course of production of textured yarn, out of POY, some excess quantity of yarn is recovered which is shown in these records as gain quantity. This gain in quantity is due to use of yarn oil during the manufacturing process. The gain in quantity of yarn is almost equal to the quantity of yarn oil used during the production. Statements of Shri Vishal Garg, Managing Director and other concerned persons were recorded during the investigation. Based on the investigation, a show cause notice was issued to the appellants demanding duty of Rs. 28,45,512.86 and for imposition of penalty. The case was adjudicated by the Commissioner under the impugned order wherein he confirmed the demand of Rs. 7,56,948/- and dropped the balance demand. He also imposed penalty of Rs. 7,56,948/- on M/s. Garlon Polyfab Industries Ltd. under Section 11 AC of the Central Excise Act and penalty of Rs. One lakh each on Shri Vishal Garg and Shri Vivek Garg under Rule 209-A of the Central Excise Rules, 1944.
3. It was contended before us on behalf of the appellant M/s. Garlon Polyfab Industries Ltd. that the Commissioner has given clear finding in Para-49 and Para-50 of his order that quantity of raw-material consumption remained the same between 1993-1994 to 1998-1999 seems to be weak and unsustainable and accepted the yield factor of 103.92% for the 14 months period. In the instant show cause notice duty stands demandable only on the excess production quantity as detected in the production reports, that too, after giving due allowance for wastage recorded in the said production reports. It was pleaded that the demand can only be for the period for which the production reports have been recovered. They however, contested that the Commissioner has wrongly calculated the amount of duty as he has not taken into account the opening balance and closing balance of POY but has taken the entire quantity of the receipt including the opening balance for working out the quantity of raw material received and demanded duty. It was pleaded that either the quantity of textured yarn produced should be taken for working out the duty or if receipt of the raw-material is taken for working out of duty, then 103.92% of the opening balance plus receipt of raw-material minus closing balance should be taken as the quantity for working out duty.
4. On behalf of Shri Vishal Garg and Shri Vivek Garg, it was pleaded that the Commissioner has given the findings for imposition of penalty in Para-56.6 of his order where it was held that from the discussion, it is emerged that Shri Vishal Garg and Shri Vivek Garg were definitely in the know of affairs of M/s. Garlon Polyfab Industries Ltd. It can be inferred that said production, reports which represented a more accurate picture of the actual production of M/s. Garlon Polylab Industries Ltd. were prepared at their behest. It was pleaded that from these findings of the Commissioner, penalty cannot be imposed on them.
5. Opposing the appeal filed by Revenue it was pleaded that the Revenue has not contested the findings of the Commissioner in Para-49 of his order, which are based on facts. Since these findings have not been contested, therefore, there is no merit in the Revenue's appeal and the same deserved dismissal. It was also pleaded that demand cannot be confirmed on assumption or presumption. Demand can be confirmed only for that period for which definite evidence was available in the form of production reports. Reliance was also placed on the decision, in the case of Newtech Polymers Ltd. v. C.C.E., Jaipur II, and Truwoods Pvt. Ltd. v. C.C.E., Visakhapatnam,
6. It was contended on behalf of the Revenue that the findings of the Commissioner in Para-47 of his order that the yield works out to 103.92% during the 14 months period for which the monthly production, reports are available is very much valid. This is based on actual figures and the same has been discussed in Para-20 of the Commissioner's order under heading brief facts of the case. It was also pleaded that the Commissioner should have confirmed the demand for the entire period of the show cause notice as the machinery remained the same, the raw material remained the same and the efficiency of the manufacture of the yarn remained the same. Therefore, the order of the Commissioner restricting the demand only for 14 months cannot be held as a correct order. Appellants M/s. Garlon Polyfab Industries Ltd. had suppressed the production not only for the 14 months but also for the earlier period of show cause notice as the yield shown in their Balance Sheet is less than 100% during 1994-1995 onwards, although, earlier yield was more than 100% when texturised yarn was not chargeable to duty. The demand for the entire period of the show cause notice requires to be confirmed. It was also pleaded that the penalties imposed on Shri Vishal Garg and Shri Vivek Garg are based on valid evidence that they were concerned in getting the goods wrongly entered in the RG-I Register and getting the excess production of goods cleared without payment of duty. Our attention was also drawn to Para-56.2 and para-56.3 of the impugned order where the Commissioner has giving finding that the handwriting Expert confirmed that Shri Vivek Garg has signed those production reports, which are the basis for demanding duty for 14 months. Although, Shri Vishal Garg had repeatedly asserted that these are not his signatures and he has no substantial knowledge about the work of M/s. Garlon Polyfab Industries Ltd. yet the handwriting Expert has confirmed that Shri Vivek Garg has signed production reports on the basis of which the demand has been raised. Our attention was also drawn to the statement of Shri Vishal Garg, where he has accepted that he was looking after the procurement of raw-material for manufacture of texturised yarn and their sale in the market. Therefore, the Commissioner has correctly come to the conclusion that both these person were concerned with the removal of unaccounted woods, which were liable for confiscation. Therefore, the penalties were correctly imposed on them under Rule 209A of the Central Excise Rules, 1944.
7. We have considered the submissions made by both the sides. We find that on behalf of M/s. Garlon Polyfab Industries Ltd., it is contested before us that for the period of 14 months, the Commissioner has wrongly calculated the duty on taking the yield as 103.92%. However, attention of the learned Advocate was drawn to Paras-1, 9, 20 and 21 under heading 'brief facts of case' and para-47 under heading 'discussion and findings' of the order of Commissioner where he has taken the gain percentage as 4.84% and waste percentage as 0.92 and finally came to the average percentage of yield to 103.92% (4.84 gain percentage minus 0.92 waste percentage) for the period 14 months which is based on the proper evidences. We also find that the other point of contest is the quantity, which has been taken by the Commissioner for working out the differential duty. We agree with the appellants that for working out the duty, the Commissioner should take the opening balance plus the quantity received during the period minus the closing balance and this will give the quantity of POY issued for the production of texturised yarn where either opening or closing balances is not available for a particular month or period, then the quantity of POY actually issued for production for texturised yarn should be taken, 103.92% of this quantity will be the quantity of texturised actually produced. Thus, the actual quantity of textured yarn produced and the quantity recorded in the RG-I Register for that period will give the excess production. This should be taken for working out the differential duty. Since the actual figures are not available before us, therefore, we remand back the case to the Commissioner for working out the differential duty to be demanded. The penalty imposed on M/s. Garlon Polyfab Industries Limited may accordingly be modified by the Commissioner.
8. We find that there are sufficient evidences against Shri Vishal Garg and Shri Vivek Garg, therefore, they are liable for penalty. Since we are remanding back the case to the Commissioner for working out the duty liability afresh for the period for which production reports are available, the penalties on these persons may also be suitably modified by him.
9. As regards the appeal filed by the Revenue, we find that Commissioner has given the factual position in Para-49 of his order. This factual position has not be contested in the appeal. In view of the factual finding given by the Commissioner, the yield of 103.92% cannot be extended for the other period for which the evidence of suppression of production has not been produced. The Commissioner has given a clear finding that the wastage was more when the appellants were using inferior quality of POY. P-3 and P-5 are the lower grade material and P2B is the lowest grade of material, whereas, the Department has taken P-2B quality is the first grade material. This position has not been controverted. We also find that the respondents have relied on the decision in the case of Nutech Polymers Ltd. v. Commissioner of Central Excise, Jaipur-II, and Truzuoods Pvt. Ltd. v. Commissioner of Central Excise, Visakhapatnam, where it was held that duty cannot be demanded merely on the basis assumptions and presumptions without any directed material of evidence brought on record. In the present case, the Department could bring only production slips for the 14 months for comparison with the production recorded in the RG-I Register. No evidence has been brought on record that the production for the earlier period was also wrongly recorded in RG-I Register. The period, which is covered by production reports, for the same period entries in other diaries cannot be taken as additional production. Therefore, we do not find any substance in the Revenue's appeal.
10. We accordingly reject the appeal of the Revenue.
11. In view of the above discussion, we uphold the order of the Commissioner except the amount of duty and penalty. We remand the case to Commissioner only for re-working out the liability of duty on M/s. Garlon Polyfab Industries Limited mentioned in Para-50 of the impugned order and re-quantify the penalties imposed on M/s. Garlon Polyfab Industries Limited and on Shri Vishal Garg and Shri Vivek Garg as discussed in Paras-8 and 9 above, after affording an opportunity of personal hearing.
12. All the Four appeals are disposed of as indicated above.