Custom, Excise & Service Tax Tribunal
M/S K.C. Soni & Sons Steels (P) Ltd vs C.C.E., Chandigarh-I on 13 January, 2017
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL SCO 147-148, SECTOR 17-C, CHANDIGARH 160 017 COURT NO. II APPEAL NOs. E/54837 & 54843/2014 [Arising out of Order-in-Appeal No. CHD-EXCUS-000-APP-178-179-14-15 dated 10.06.2014 passed by the Commissioner of Central Excise (Appeals), Chandigarh-I.] Date of hearing: 16.09.2016 Date of decision:___________ For approval and signature: Honble Mr. Devender Singh, Member (Technical) =======================================================
1. M/s K.C. Soni & Sons Steels (P) Ltd., :
Appellant(s) VS C.C.E., Chandigarh-I :
Respondent(s)
2. Sh. Rakesh Soni, Director of M/s K.C. Soni & Sons Steels (P) Ltd.
:
Appellant(s) VS C.C.E., Chandigarh-I :
Respondent(s) ====================================================== Appearance:
Sh. Rakesh Soni, Director for the Appellant(s) Sh. Satya Pal, A.R. for the Respondent(s) CORAM:
Honble Mr. Devender Singh, Member (Technical) FINAL ORDER NO. 60047-60048/2016 Per : Devender Singh M/s K.C. Soni and Sons Steels (P) Limited, Behind PSEB Grid, Vill. Kumbh, Amloh Road, Mandi Gobindgarh are engaged in the manufacture of Alloy Steel Ingots, Non-Alloy Steel Ingots & Runners & Risers.
2. The facts of the case are that pursuant to a specific intelligence, the factory premises of the Noticee was initially visited by the Central Excise Range staff of the Central Excise Division, Mandi Gobindgarh on 23.09.2011. At the time of visit, Sh. Rakesh Soni, Director of the Noticee was present in the factory premises. Sh. Rakesh Soni directed Sh. Rakesh Verma, the authorized person to produce the Central Excise Statutory records.
3. The officers observed from the Form IV (Raw material and components) register maintained by the Noticee that the assessee had depicted a recorded balance of 2813.903 MT of Scrap, 10.472 MT of Silicon and 197.109 MT of sponge iron. The RG-1 (Daily Stock Account) register depicted a recorded balance of 105.122 MT of M S Ingots, 21.748 MT of Runners and risers, 14.290 MT of Alloy Steel Ingots and 168.128 MT of Steel Casting. The last invoice bearing S. No. 635 dated 23.09.2011 was found to have been issued by the Noticee. Besides the above records, there was also a computerized statement showing the scrap lying in the factory premises. This statement was found to be lying on the table of Sh. Rakesh Soni, Director. This statement depicted the scrap position of the unit as 1400MT as on 23.09.2011 as against the recorded balance of 2813.903 MT of scrap in the Form IV register. On being asked about this stock statement, Sh. Rakesh Soni explained that this statement depicted the factual position of the stock of scrap lying in the factory premises whereas excess balance had been shown in the record books due to financial constraints and for obtaining bank limits on the higher side. Perusal of the stock statement found on the table of Sh. Rakesh Soni, and on eye estimation, there appeared variation in the stocks of raw material. Sh. Rakesh Soni volunteered to get the physical verification of the stocks done to ascertain the exact position.
4. The physical verification of the finished goods was found tallied with the recorded balance. However, the physical verification of the inputs i.e. scrap was conducted by loading the scrap in the trucks for which Sh. Rakesh Soni, Director arranged five tippers. Out of these five tippers, three tippers were having capacity of around 25 MT which were permanently hired by the Noticee. In addition to these, he arranged two more tippers. The scrap was loaded on the tippers with the help of overhead crane and magnet installed in the factory premises. The weighment slips in respect of each and every tipper which was weighed were prepared. On the basis of these weighment slips, a detailed chart was prepared on the spot showing the tabulation of the weighment slips. As a result of verification of the scrap, a quantity of 1410.200 MT was physically verified against a recorded balance of 2813.903 MT. Central Excise authorities thus found a shortage of 1403.703 MT of scrap in the factory premises.
5. The statement of Sh. Rakesh Soni, Director of the Noticee was recorded on 24.09.2011 wherein he inter alia stated that:-
i) Unit is presently engaged in the manufacture of MS Ingots only and the rolling mill had been lying closed since the last almost three months. The furnace has a capacity of 8MT.
ii) On being asked about this stock statement found on his table, he explained that this statement depicted the factual position of the stock of scrap lying in the factory premises whereas the recorded balance in the books had been shown on the higher side due to financial constraints and for obtaining bank limits on the higher side;
iii) He also agreed that the stock statement lying on his table was the exact detail of the stock of scrap lying in the factory premises; however, he volunteered for getting the physical verification of the stocks conducted for ascertaining the exact position;
iv) The entire exercise was conducted in his presence in the factory premises, on the basis of the weighment slips a detailed chart was prepared on the spot depicting the tabulation of the weighment slips; he signed this chart which was prepared on the computer installed in the office premises of their factory as token of its correctness. He was fully satisfied with the manner of physical verification and there was no other stock of scrap lying in the factory premises which had not been weighed. As a consequence of the verification of the scrap, a quantity of 1410.200 MT was physically verified against a recorded balance of 2813.903 MT, meaning thereby that a shortage of 1403.703 MT of scrap was detected.
v) On being asked about the reasons for this shortage, he explained to the visiting officers that the unit was under severe financial crunch and in order to gain financial stability by increasing the bank limits, the inflated position of the stocks had been shown in the books of accounts only. Actually, there were a lot of paper transactions without actual receipt of raw material/scrap; that he prepared the details of the invoices in respect of which no material was received by him and only the invoices/bills had been received. With the help of these invoices he had shown the availability of a greater quantity of scrap; he admitted that the CENVAT credit has incorrectly been taken by him as the same had been taken without the actual receipt of scrap/raw material in the unit. But they indulged in paper transactions due to financial crunch only; the list of invoices where only paper transactions were carried out by him was signed by him in token of its correctness;
vi) That in order to prove the authenticity of the transactions the payments were made through cheque and subsequently cash was taken from the respective parties the details of which he had prepared; this cash was utilized by them for procuring the non duty paid scrap which was used for the manufacture of the finished products;
6. Thereafter Sh. Rakesh Soni, Director of the Noticee voluntarily debited the amount of Rs. 30,82,540/- lying in their RG 23-A part II account vide Entry No. 517 dated 24.09.2011.
7. The Director of the Noticee submitted a letter dated 27.09.2011 to the Commissioner, Central Excise Commissionerate, Chandigarh I, retracting therein his statement dated 24.09.2011. The Director of the Noticee took the plea in his retraction letter dated 27.09.2011 that the reasons for shortage stated by him in his statement dated 24.09.2011 were not correct in as much as the exact reasons for shortage were not due to the fact that the material had not been received in their factory but the reasons for shortage was that they had been showing less burning loss during the previous years from 2008-09 to 23.09.2011.
8. The Noticee has electronically filed the ER1 and ER 6 return for the month of September, 2011. These returns revealed that they have shown the consumption of raw material of 2604.861 MT (M S Scrap 2392.368 MT + Sponge Iron 192.719 MT + Silicon Magnese 19.774 MT) and the finished goods manufactured out of the said raw material were shown as 1141.099 MT (M S Ingot 1129.088 + Runner & Riser 12.011 MT). Thus burning loss of 1463.849 MT has been reflected in the month of September, 2011 which comes to 56.20% of the total raw material consumed. Revenue has alleged that such large burning loss is an attempt to justify the shortage of M S Scrap of 1403.703 MT detected in their factory premises on 24.09.2011.
9. Based on the above evidences, the Department issued a Show Cause Notice to the appellants, which was adjudicated resulting in confirmation of demand of Rs. 35,51,734/- along with interest and imposition of penalty of equivalent amount on appellant No. 1 and penalty of Rs. 5,000/- on Director. In appeal, the ld. Commissioner (Appeals) upheld the order of Adjudicating Authority. Aggrieved by the same, the appellants are before this Tribunal.
10. Sh. Rakesh Soni, Director for the appellants appearing on behalf of the company submitted that they were new in the business and the statement had been retracted by him on 27.09.2011. He claimed that the weighment chart was fabricated and there was no stock statement but just balance. There was no panchnama drawn in this case and it was inconceivable that 96 trucks could be loaded in 8 hours. He contended that the weight indicated in the physical verification table was identical and the pattern therein does not indicate actual weight. He also argued that no demand can be raised on burning loss and the burning loss can go upto 11%, which has been confirmed through an RTI enquiry from the department and hence, there can be no penalty.
11. He relied upon the following case laws:-
1. CCE Vs. V.M. Rolling Mills 2009 (236) E.L.T. 433 (Del.)
2. Sober Plastics Pvt. Ltd. Vs. CCE, Jaipur 2002 (139) E.L.T. 562 (Tri. Del)
3. Premium Glass Industries Vs. CCE, Jamshedpur 2000 (123) E.L.T. 703 (Tribunal)
4. CCE, Patna Vs. Universal Polythene Industries 2001(130) E.L.T. 228 (Tri. Kolkatta)
5. GeeKay Wires Pvt. Ltd. Vs. CCE, Hyderabad 2006(200) E.L.T. 86 (Tri. Bang.)
6. Micro Forges Pvt. Ltd Vs. CCE, Rajkot 2004 (169) E.L.T. 251 (Tri. Mumbai)
7. Ram Steel Rolling & Forging Mills Vs. CCE, Mumbai-II 2006 (204) E.L.T. 87 (Tri. Mumbai)
8. Galaxy Textiles Vs. CCE, Vapi Appeal No. E/139-140 and 348/2010, Order No. A/922-924/2010-WZB/AHD.
12. The Ld. A.R. submitted that the statements had been recorded under Section 14 of the Central Excise Act and were admissible evidence as has been held by the Supreme Court in the case of Kalvert Foods India Pvt. Ltd. vs. Commissioner of C. Ex., Mumbai 2011 (270) E.L.T. 643 (S.C.) and Chowbey Sugandhit Tambaku Co. Vs. Commr. of C. Ex., Patna 2001 (131) E.L.T. 222 (Tri. Kolkata). He further stated that it was certainly possible to load the trucks with magnetic tippers and added that the weighment had been correctly done in the presence of the appellants, who had actively participated and agreed with the weighment in Para 1.4 of the show cause notice.
13. Heard the parties and perused the records.
14. I find that during the visit to the factory the officers found the computerized statement of stock of raw material, which had been prepared by the Director of the appellants and was on his table, which the Director admitted to be the correct statement. A physical verification was done of the inputs in the presence of the Director and weighment slips for each tipper truck used in the weighment were prepared. On the basis of these weighment slips, officers prepared a detailed chart of physical verification. The entire exercise was done in the presence of the Director and with his active assistance. The Director signed the chart in token of its correctness and he was fully satisfied with the manner of physical verification. The physical verification established a shortage of 1403.703 MT of scrap. The Director never challenged the manner of verification at that time. The assertion that 96 trucks could not be loaded in 8 hours is not acceptable for the reason that adequate number of tippers seem to have been deployed and the Director was satisfied with the manner of weighment and stock-taking. In his statement dt. 24.09.2011, the Director attributed the shortage to the fact that the unit was under severe financial crunch and there were lot of paper transactions without actual receipt of raw material.
15. In his arguments, the appellants have contended that the statement was not voluntary and was taken under pressure. The appellants have referred to the retraction made by him on 27.09.2011. From the said retraction, it is seen that the retraction has been filed before the Commissioner of Central Excise, Chandigarh. Further, the appellants have not alleged that there was any kind of coercion or force or pressure or duress while recording the statement. Without giving any reason, they simply said that the statement was not voluntary. I find that in the absence of any allegation or evidence of force or coercion, or pressure or duress, the retraction carries no weight and is an afterthought particularly since they are admitting that they were actively associated with the officers in the entire verification exercise. I also find that the retraction has not been addressed to the investigation officer who recorded the statement. The Tribunal, in its judgment K.P. Abdul Majeed Vs. CC, Customs 2014 (299) ELT 108 (Tri.- Bang.) has held that the retraction has to be necessarily addressed to the officer to whom the statement was given. The letter to the Commissioner has to be treated only as a representation or complaint and is not a valid retraction. The statement dt. 24.09.2011 recorded under Section 14 of the Central Excise Act, 1944 is therefore an admissible evidence. Besides, the appellant No. 1 deposited the amount of Rs. 31,59,171/- through the Cenvat Credit account and Rs. 3,91,068/- through PLA. In these circumstances, the Honble Supreme Court judgment relied upon by the Ld. AR in the case of CCE Vs. Kalvert Foods India Pvt. Ltd. 2011 (270) ELT 643 (S.C.) is pertinent. In the said judgment, the Apex Court held as below:-
We are of the considered opinion that it is established from the record that the aforesaid statements were given by the concerned persons out of their own volition and there is no allegation of threat, force, coercion, duress or pressure being utilized by the officers to extract the statements which corroborated each other. Besides, the managing Director of the Company on his own volition deposited the amount of Rs. 11 Lakhs towards excise duty and therefore in the facts and circumstance of the present case, the aforesaid statement of the counsel for the respondents cannot be accepted. This fact clearly proves the conclusion that the statements of the concerned persons were of their volition and not outcome of any duress. I also find that the plea of burning loss does not sustain because in the month immediately following the investigation, the burning loss shown by the appellants in ER-1 and ER-6 Returns was 56.20% of the total raw material consumed. Such high level of burning loss is clearly not normal and seems to be a deliberate ploy to justify the shortage of scrap detected in the preceding month. The party has relied upon the case law of Ram Steel Rolling & Forging Mills Vs. CCE, Mumbai-II (supra) to claim that the burning loss of 10% is allowable as per the guidelines of Ministry of Steel. They have also referred to the information obtained through the RTI to argue that 8% to 11% is the burning loss. A finding has also been given by the Adjudicating Authority that from the burning loss reflected by the noticee in records w.e.f. Jan., 2009 to Aug., 2011, the average burning loss remained between 5% and 7.08%. In this backdrop, the sudden surge in burning loss can only be explained as a deliberate ploy to adjust the actual shortage in their stock of M.S. scrap, which was detected by the departmental officers on 23.09.2011 and 24.09.2011.
16. The appellant have also argued that no panchnama was drawn on the spot. I find that the weighment exercise was done in the presence of the Director, with his active assistance. The Director has certified the correctness of the weighment exercise and subsequently admitted the shortage of scrap. Therefore, he cant take this plea at this stage. In the case laws of CCE Vs. V.M. Rolling Mills (supra) and Sober Plastics Pvt. Ltd. Vs. CCE, Jaipur (supra), there was no record as to the basis of arriving at the shortages and no stock-taking was done. In the instant case, the weighment exercise was done with the assistance of the Director, who certified the correctness of the entire exercise and also admitted the shortage of scrap. In the case of Premium Glass Industries Vs. CCE, Jamshedpur (supra), the issue was recovery and seizure of the loose sheets in respect of which no panchnama was drawn, which cast doubt on the recovery, which is not the case in the matter at hand.
17. In the case of Galaxy Textiles Vs. CCE, Vapi (supra), the shortages detected at the time of visit were not corroborated by the statement of the partner as also the authorized signatory, hence, the facts of that case are different from the instant case. In the other case law cited by the party namely GeeKay Wires Pvt. Ltd. Vs. CCE, Hydrabad (supra), the demand was confirmed on the basis of stock weighed on eye estimate. In the case of Micro Forges Pvt. Ltd. Vs. CCE, Rajkot (supra), the stock position was arrived at on the basis of an estimation. These cases are not applicable because the stock verification in the instant case was conducted in the presence of the Director and the Director was fully satisfied with the manner of verification.
18. The other case laws relied upon by the appellants relate to the standard of evidence in the case of clandestine removal. In this regard, the following observations of the Ld. Commissioner (Appeals) are well reasoned:-
7 Another contention of the appellant is that the department has not been able to establish the case by corroborative evidence. It is observed that in such cases where the movement of the goods have been made without the invoices and without entry in the books of accounts, the statements of the Director are enough corroborative evidences to prove the clandestine removal. In this context it is observed that the Honble Tribunal in the case of Chowby Sugandhit Tambaku Co. Vs. CCE reported as 2001 (131) E.L.T. 222 (Tri.- Kolkata held as under:-
Clandestine removal Proof Revenue authorities not required to prove by mathematical precision activities of clandestine removal which are in personal knowledge of the manufacturers for which all precautions are taken to avoid detection in future Rules 9(2) and 173(Q) of Central Excise Rules, 1944.
19. In view of the foregoing, I find that there is no infirmity in the order of the Ld. Commissioner (Appeals) and the same is upheld.
20. The appeals filed by the appellants are dismissed.
(Order pronounced in the court on________) Devender Singh Member (Technical) NS 2 E/54837 & 54843/2014- CHD