Custom, Excise & Service Tax Tribunal
Cce, Raipur vs M/S Eureka Iron & Energy (P) Ltd on 22 December, 2009
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
NEW DELHI
COURT NO. II
Excise Appeal No. 2781 of 2007-SM
(Arising out of Order-in-Appeal No. 112/RPR-I/2007 dated 9.5.2007 passed by the Commissioner (Appeals), Customs & Central Excise, Raipur)
CCE, Raipur Appellant
Vs.
M/s Eureka Iron & Energy (P) Ltd. Respondent
Date of Hearing: 22.12.2009 Appearance :
Appeared for Appellant - Shri R.K. Verma, SDR
Appeared for Respondent - Shri K. Kurmy, Advocate
CORAM: HONBLE MR. D.N. PANDA, JUDICIAL MEMBER
Order No.dated.
Per D.N. Panda:
Revenue has come in appeal against following three consequences arsing out of the order appealed passed on 9.5.07 by the ld. Commissioner (Appeals) praying for setting aside the same:
(i) Reduction of redemption fine to Rs.20,000/- in respect of confiscated M.S. ingots of 36,590 MT of value of Rs.4,75,670/-.
(ii) Setting aside of confiscation of 116.487 MT of M.S. ingots value of Rs.18,02,636/- liable to redemption fine and in lieu of imposition of redemption fine penalty of Rs.20,000/- was imposed.
(iii) Granting of concession in levy of penalty calling for confining of the same to 25% under Section 11AC of Central Excise Act, 1944 (hereinafter referred to as the Act)
2. Ld. DR Shri Verma arguing on behalf of Department submits that the whole proceeding came out of interception made to a truck on 3.3.06 and found to have carried M.S. ingots of 36,590 MT on that day. When the department could not find any answer from the Respondent for such goods there was confiscation of 36,590 MT of MS ingots with option granted to redeem the same on payment of redemption fine. Subsequently, when on 4.3.06 the department made investigation into the factory premises of the Respondent, they found excess stock of 116,487 MT of MS ingots which is also subject matter of dispute in the present Appeal. Such an excess being found that was made liable for confiscation with imposition of redemption fine. There was nothing found by the investigating officers to prove reasons of excess by the Assessee while statement recorded from the person concerned resulted with admission of excess. Relying on the statement recorded from the Director of the Respondent Company, the Investigating team made out a case. Therefore when this admission was on record, ld. Commissioner should not have set aside the confiscation. So also, he should not have set aside the redemption fine to impose penalty in lieu of redemption fine for no such power vested on him.
3. So far as the concession granted on the penalty aspect is concerned, Shri Verma submits that when Section 11AC of Central Excise Act, 1944 (herein referred to the Act) is read in toto concession shall be available subject to compliance to the mandate of that Section. The first proviso grants concession if penalty is also paid within the stipulated period while discharging duty demand and interest. The Respondent not having demonstrated its case in the manner required by law to be brought to rigour of Section 11AC of the Act, granting of any concession shall be abuse of the process of law. Therefore, he submits that there is no necessity to grant any concession in respect of penalty on the clandestine removal cases, but to uphold the same as held in Adjudication.
4. The Respondent is not in Appeal today. But ld. Counsel Shri Kurmy appearing on behalf of the Respondent opposes entire submissions of the Revenue on following counts :-
(i) There was a case of finding of a truck carrying 36,590 MT of MS ingots on 3.3.06. But that case is totally different from the case of excess stock of 116.487 MT found on 4.3.06. He brings out from para 6.1 of the Order-in-Original that the officers visited the factory on 4.3.06. It is the practice of the Appellant that at the end of the day, total production is recorded in the statutory record. Such an averment was made before the ld. Appellate Authority, which he has recorded in para 4.1 of the order. This being a very reasonable and tenable plea was appreciated by him and granted relief to the Respondent in accordance with law. He has well acted within his jurisdiction as an Appellate Authority while evaluating evidence and reappraising the same by his coterminous power.
(ii) Since officers had visited the factory at the mid of the day, the Appellant was prevented to record the alleged excess stock of 116.487 MT of MS ingots lying on the factory premises to be recorded at the end of day upon receiving of production report. The reason beyond control of Respondent for recording was appreciated by the ld. Commissioner (Appeals) in para 11 of the order to set aside the confiscation of such excess stock. This is a normal practice followed by industry where manual accounting of inventory is followed. There was no ulterior motive of Respondent to escape duty of such goods. Nothing contrary evidence was found by Revenue to hold against Respondent. He further argues that this alleged excess stock of 116.487 MT of MS ingots was not the real excess stock. That was accounted for in the statutory record and has also suffered duty in the meantime. Revenue has not been prejudiced. Therefore Respondent cannot be suspiciously dealt. Considering all these circumstances, ld. Commissioner (Appeals) held that the confiscation of 116.487 MT was unwarranted were well founded reasons. He also held that calling for payment of redemption fine was undesirable when the confiscation was bound to be set aside. However, he imposed a penalty of Rs.20,000/- and that too for no goods reason for such imposition when any imposition of penalty under Rule 25 is subject to the provisions of Section 11AC of the Act. He brings out that once penalty is imposed under Section 11AC, there cannot be cumulative penalty under Rule 25 of Central Excise Rules, 2002,
(iii) So far as the total imposition of penalty of Rs.3,89,824/- made under Section 11AC of the Act is concerned, his argument is that confining the penalty to 25% of the imposed amount is mandate of the statute. But of course, such concession shall be subject to the compliance to the provisions of Section 11AC. Having materials on record that the mandate of Section 11AC was followed, ld. Commissioner (Appeals) has granted such concession. But ld. DR has not brought out a contrary case to impeach order of ld. Commissioner (Appeals). Therefore the order of the ld. Commissioner (Appeals) on all the three counts is unassailable for the reasons aforesaid.
5. In support of the contentions raised by the ld. Counsel, he relies on the decision of the Tribunal in the case of Subrato Sen Vs. CCE reported in 2007 (213) ELT 665 to submit that non-accountal of goods with no intention to evade duty does not attract penalty nor duty is leviable on the spot under Section 11A of the Act, 1944 when goods were not removed. He also relies on the decision in the case of Sujana Universal Industries Ltd. Vs. CCE reported in 2007 (81) RLT 171 to submit that confiscation and penalty for non-accountal is unwarranted under Rule 25 of Central Excise Rules 2002 when the goods were lying in the factory but not entered in Excise record. So far as the concession of penalty is concerned, he relies on the decision of Honble High Court of Delhi in the case of K.P. Pouches (P) Ltd. Vs. Union of India reported in 2008 (228) ELT 31.
6. After completion of the argument by both sides, when dictation of the order was in progress, ld. DR brings out decision of the Honble High Court of Bombay in the case of Kirloskar Brothers Ltd. Vs. Union of India and Others reported in 1988 (34) ELT 30 to submit that mens reas is irrelevant for imposition of penalty for the goods found unaccounted and goods are liable to confiscation. He relies on the decision of the Tribunal in the case of PNP Castings (P) Ltd. Vs. CCE reported in 2006 (194) ELT 250 to submit that excess stock when found not accounted for in statutory record that proves intention to evade payment of duty under Rule 25 of Central Excise Rules 2002. Also he relies on the decision in the case of CCE Vs. ASP Sealing Products Ltd. reported in 2008 (221) ELT 62 to submit that unaccounted goods found in the factory is liable to confiscation. When the proposition of Revenue is as above, ld. Counsel submits that in case of difference in interpretation of law by different Courts or authority or forums a view favourable to assessee shall prevail following the Apex Courts decision in Apex Courts decision in the case of Pradip J. Mehta Vs. Commissioner of Income Tax reported in (2008) 300 ITR 231 (SC). Also he relies on the decision of Apex Court in the case of Sun Export Corporation Vs. Collector of Customs reported in 1997 (93) ELT 641 (SC) on the same count of interpretational benefit for tax payer.
7. Heard both sides for long time and perused the record.
8. So far as the confiscation of 36,590 MT of MS ingots is concerned, there is no dispute by the Respondent as to confiscation. But Revenue is aggrieved on the reduction of the redemption fine. When para-9 from the Appellate order is read that shows that the penalty under Section 11AC shall be confined to 25% of the duty determined. Ld. Commissioner (Appeals) has overlooked the entire issue when there was a penalty of Rs.3,89,824/- imposed on the Respondent by order of Adjudication on different counts. It appears that penalty of Rs.3,89,824/- related to the entire allegation made in the show cause notice. The allegations were that there was attempt to remove 36,590 MT of MS ingots on 3.3.06 and there was denial of Cenvat credit of Rs.3,06,074/-. This denial having been compensated by Assessee on 27.3.06 through TR-6 challan No. 03 dated 27.3.09 (para-10 of appeal order) that called for appropriate test before imposing penalty.
9. 36,590 MT of MS ingots was found without being supported by any document when the goods were carried by a lorry. Therefore decision of the ld. Commissioner (Appeals) on confiscation of such goods remained unimpeachable for no contrary evidence led by Respondent. But so far as the redemption fine on this confiscation is concerned, he has not given any reasoning for reduction of the redemption fine. Reason being heart beat of justice that should by exhibited by a speaking order.
10. So far as the excess of the stock 116,487 MT of M.S ingots is concerned, this stock was noticed on 4.3.06 by the investigation team. While ld. Adjudicating Authority in para 6.1 of the order brings out that the Director, Shri Kanhaiya Charan Patel had admitted shortage of sponge iron and pig iron. There is nothing recorded by him as to the excess stock of 116,487 MT was not recorded in the books of account. He has not recorded anything about the reason why such excess stock had arisen. Explanation of the Assessee did not weigh his consideration. Ld. Adjudicating Authority abruptly came to the conclusion for confiscation of the same. Therefore on such account, ld. Appellate Authority considering the averment of the Respondent in para 4.1 of his order that goods produced during a day is recorded at the end of each day and visit by investigating officer having been made during mid day prevented the Assessee to record, convinced the Appellate Authority to reverse the confiscation order of the ld. Adjudicating Authority relating to 116,487 MT of M.S. ingots. The Panchnama dated 4.3.06 if any has not been brought to record at the time of investigation by the Adjudication order. But there is an admission by the Director as to the excess stock found, which became the only basis for the purpose of confiscation in the Adjudication process. Ld. Adjudicating Authority has not made out the case any where in the order to find out whether this excess has really arisen out of any intention to evade the duty liability on such goods. Therefore, intention to evade the duty liability not being surfaced that was the basis for the Appellate Authority to grant concession in respect of the redemption fine setting aside confiscation. The redemption fine imposed by order of Adjudication was Rs. 1.00 lakh for 153.077 MT of MS ingots and also for the goods found in the truck. Ld. Appellate Authority without examining each and every allegation specifically came to the conclusion that so far as the confiscation of 116.487 MT of MS ingots is concerned, penalty of Rs.20,000/- shall be imposable to serve the purpose of law under Rule 25 of the Central Excise Rules 2002.
11. The confiscation of 116.487 MT of M.S ingots was based on Rule 25 of the Central Excise Rule 2002. Confiscation if held to be proper under law, consequence thereof shall follow. Ld. Counsels plea being that the alleged excess stock of 116.487 MT confiscated having been found place in the books of account, and that has already fetched Revenue by applicable excise duty, needs scrutiny. However, at the moment of visit by officers that was observed to be excess in absence of any cogent evidence and explanation for which that attracted Rule 25(1) (b) of Central Excise Rules 2002 and such goods were although held to be liable to confiscation in Adjudication such confiscation was not considered appropriate by the ld. Commissioner (Appeals) on the basis of pleadings of the Respondent. He simply assigned a reason that these excess stocks having been available in the factory premises, the Respondent should only be penalised by an amount of Rs.20,000/- instead of redemption fine. However, such decision does not get sanction of law without proper examination. Therefore whether redemption fine can be waived needs examination.
12. So far as the penalty of Rs.3,89,824/- is concerned, this penalty arose by a combined reading of operative part of order in original para 6.7 (i) and 6.7. (ii) at page 8 thereof. The first charge of escapement of goods of 36,590 MT of M.S in the truck resulted with duty evasion of Rs.77,629/- (Rs.76,107/- + Rs.1,522/-) and Cenvat credit of Rs.3,06,074/- disallowed gave rise to aggregate penalty of Rs.3,89,824/-. It may be stated that penalty cannot be imposed mechanically and leviability of penalty for each violation calls for its own decision. If at all penalty shall be levied on each count, that has not been examined by both the Authorities below. The ld. Appellate Authority below according to his will and pleasure granted concession in penalty under Section 11AC of the Act against such levy of Rs.3,89,824/- reducing that to 25%. Statute law and also the law laid down by Honble High Court of Delhi in the case of K.P. Pouches (P) Ltd. (supra) prescribe that an assessee should get an option to discharge its liability determined under Section 11A of the Act within the prescribed time for concession of penalty. In para-27 of the judgment, Honble High Court has laid down the law and the same is reproduced as under for appreciation:
To obviate any similar situation from arising in future, we are of the opinion that in its adjudication order the adjudicating authority under the Act should explicitly state the options available to the Assessee under Section 11AC of the Act. Once the choices are made known to the Assessee and it still does not take advantage of the first proviso to Section 11AC of the Act, it will be entirely at its own peril. Therefore it would be beneficial, both from the point of view of the Revenue as well as the Assessee, if the options available to the Assessee are mentioned in the adjudication order itself.
13. There is no dispute at all that an assessee who submits its facts and circumstances to the scope of 11AC of the Act he shall get appropriate concession in respect of penalty under that Section. But this aspect has not been thread bare examined by both the authorities below and this being a matter of record that calls for examination.
14. Ld. Counsel relied on the decision of Sujana Universal (supra) holding that goods lying in factory without entry in record is not liable to confiscation is a decision of Division Bench. But Revenues reliance on the decision of PNP Castings (supra) is a decision to the contrary. The intention of non-accountal aspect needs scrutiny in the present case on the basis of pleadings of the Appellant as to inspection done during mid day, while there was an admission by the Director that there was excess stock as recorded in para 6.1 of the order in original. While decision relied upon by Revenue cannot be brushed aside, the decision relied upon by the assessee weighs consideration heavily being a decision of Division Bench. Therefore without appropriate fact finding no conclusion can be drawn. Similarly, the decision relied upon by assessee in the case of Subrato Sen (supra) is also a decision of Division Bench and that deserves to be considered on the basis of the facts and circumstances of the case. While saying so, the benefit of interpretation of law in case of controversy shall be held in favour of the assessee also cannot be overlooked. Apex Court in the case of Pradip J. Mehta and Sun Exports provided guidelines in respect of interpretational benefit.
15. Having said as above it has become necessary to send the matter back to the ld. Adjudicating Authority to examine various aspects discussed in 8 to 14 aforesaid and make fact finding as well as come to proper conclusion on each allegation in show cause notice by reasoned and speaking order. The order is expected to depict the matter in controversy, relevant facts, pleadings and evidence of both sides and law applicable in respect of his decision.
16. In the result, orders of both the Authorities are set aside on all the three counts and issues that comes out from para-12 of the first Appellate order for redetermination in re-adjudication affording fair opportunity of hearing.
(Dictated & pronounced in open Court) (D.N. PANDA) JUDICIAL MEMBER RM