Custom, Excise & Service Tax Tribunal
Ab Polymer vs Kolkata-Iii on 14 June, 2018
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE
TRIBUNAL, KOLKATA
EASTERN ZONAL BENCH: KOLKATA
Excise Appeal Nos. 70035, 70135 to 70138, 70178, 72095/2013 &
76682/2014
(Arising out of the Order-in-Original No.11/Commr./CE/Kol-III/2012-13
dated- 07/12/2012 passed by the Commissioner of Central Excise, Kolkata-III)
M/s. A.B. Polymer
M/s.Lakhotia Metalizers
Sri Rajeev Goenka
Sri Sanjoy Lakhotia
Sri Jitendra Yadav
Sri Avinash Bubna
Sri Sharad Jhunjhunwala
Sri Chinmoy Kumar
Applicant (s)/Appellant (s)
Vs.
Commr. of Central Excise, Kolkata-III
Respondent (s)
Appearance:
Shri B.N. Chattopadhyay, Consultant for 2,4 & 5 NONE for 1,3,6,7 & 8 for the Appellant (s) Sri K. Choudhari, Supdt. (A.R.) for the Respondent (s) CORAM:
Hon'ble Shri P.K.Choudhary, Member (Judicial) Hon'ble Shri Bijay Kumar, Member (Technical) Date of Hearing : 14/06/2018 Date of Pronouncement :23/07/2018 ORDER NO. : FO/76450-76457/18 Excise Appeal Nos. 70035, 70135 to 70138, 70178, 72095/2013 & 76682/2014 Per Shri Bijay Kumar These appeals are directed against the Order-in-Original No. 11/Commr./CE/Kol-III/2012-13 dated- 07/12/2012 passed by the Commissioner of Central Excise, Kolkata-III wherein Central Excise duty demanded to the extent of Rs.1,16,92,418/- alongwith equal penalty under the provisions of Central Excise Act, 1994 (in short "Act") i.e. under Section 11A2 and Section 11AC of the Act read with Rule 25 of Central Excise Rules, 2002 (in short referred as "Rules"). In addition to above, the interest at the applicable rate has also been held to be imposed at the applicable rate under Section 11AB of the Act. The adjudication order also imposed penalty under Section 26 (1) of Rules on the various co-noticees.
2. Facts of the case are that acting on the information, a search was conducted by the officers of Central Excise Anti Evasion Unit in the factory premises of M/s. Lakhotia Metalizers (Appellant in appeal No. 70135/2013). During the course of searches, private and statutory records and documents were recovered. The departmental officer also seized a CPU (Central Processing Unit) of computer from the factory of the appellant- M/s. Lakhotia Metalizers from which 565 pages of print outs were taken (page No. 1 to 565) in presence of the representatives of the appellant. The print outs were taken after 03 months of the seizure of CPU. Thereafter, on the basis of the investigation conducted on the basis of statement recorded and the computer print out including other corroborative documents, the show cause notices were issued to the appellants which culminated into above adjudication order, which is challenged before us. Period involved in this show cause notice is from 2 Excise Appeal Nos. 70035, 70135 to 70138, 70178, 72095/2013 & 76682/2014 1/11/2008 to 13/01/2010. Ld. Advocate appearing on behalf of appellant has stated that the allegation made in the show cause notices are mainly on following grounds:
(i)Unaccounted raw material.
(ii) Clandestine removal of finished goods.
(iii) The statement recorded under Section 14 of the Act and Contravention of Central Excise Rules.
Also, that the seized documents mentioned at para 2.2 of the show cause notices are not eligible and in some cases are only plain piece of papers; that the documents appeared to have been not written by their employee; that no evidence was produced by the Department to prove the clandestine removal except the said document; that the allegation is that the appellant has not procured various raw material i.e. Metalizer Films, Printed Films etc. The receipt of these material has not been recorded in their books of account; that show cause notices alleged that during the investigation, statements.
Shri Avinash Bubna of M/s. Arvind Industrial and Shri Chinmoy Kumar of AB Polymer, Belghoria, Kolkata; were also recorded;
That Shri Abinash Bahuguna said to have stated that since January, 2009, raw materials like ink, ethyl acetate, hardener, adhesive etc. were supplied to the appellant on the basis of hand written challans and payments against all such receipts were remitted by cash by the appellant; that Shri Chinmoy Kumar supplier of polyethylene sheets have stated that Shri Sanjoy Lakhotia, Managing Director of the appellant used to contact with him over phone for supply of polyethylene sheets since 3 Excise Appeal Nos. 70035, 70135 to 70138, 70178, 72095/2013 & 76682/2014 January, 2009 and most of the payments were made to him in cash. In this regard, the appellants stated that the statements were taken from only two of the suppliers of raw materials and the same could not and should not represent so many suppliers from whom they purchased various raw materials. In addition to that, the Appellant submitted that the statements were taken behind their back and therefore, cannot be relied upon. In this regard they referred to the decision of Hon'ble Apex Court and relied upon the decision of Hon'ble Supreme Court in case of Gyan Chand Vs. Union of India reported in 1985, ECR 223 (S.C.). Also, the appellant relied upon the decision of R. Sunder Vs. Deputy Collector of Customs reported in 1996 (82) ELT 451 wherein it is held that the statement obtained by the Department from one of the suppliers of the petitioners behind the back of the petitioner could not be relied upon being violative of the principle of natural justice. It was submitted by the appellant that this is well settled law that any statement taken behind the back without giving opportunity of rebuttal, the entire proceedings becomes void on account of being in violation of principles of natural justice; that the investigating officer has only relied upon the statement of four customers out of 130 and concluded that they indulge on unaccounted sales; that the statement of four customers cannot be relied upon as conclusive proof without taking the statement of remaining 126 customers. The appellant further stated that in para 3.1 (iii) of the show cause notice, they relied upon the receipt of the material and payment thereof to M/s. S.R. Enterprises/ M/s. Purv Flexipack Pvt. Ltd. but no record of such transaction found in their books of account and therefore contended that they usually made the payment in cash; that M/s. S.R. Enterprises is closed since 2005, which is also affirmed by statement 4 Excise Appeal Nos. 70035, 70135 to 70138, 70178, 72095/2013 & 76682/2014 obtained from Mr. Rajeev Goenka, in-charge of the unit. The appellant also stated that from the scrutiny of the private record marked as 03/LMPL/10, the conclusion was drawn that this is the record of clandestine removal. However, the argument is not correct in view of the fact that many of the description do not have the name of the customers and some entries in the private register do not establish any clandestine removal as settled by the Hon'ble Tribunal. The clandestine removal cannot be based on the private registers on the basis of the ratio laid down in the cases of M/s. Kirtibhai Maganbhai Patel Vs. Commr. of C.E., Nagpur [2003 (159) ELT 1162 (Tri.-Mumbai)] wherein it is held that entries in the register alone would not be sufficient to establish clandestine manufacture and clearance. Also same view was taken by the Tribunal in case of Kumar Ali & Sons Vs. Commr. of C.E., BBSR [2006 (200) ELT 104 (Tri.-Kol.)]. Regarding the various entries in the register, the appellant stated that those are for the order received from the customers and not the supply made to them; that the department proceeded on the basis of said register thinking that these are the record of removal of the goods in clandestine manner. Regarding the print out from page 1 to 565 taken from one of the CPU of the computer, the appellant submits that the computer was resumed by the departmental officer without proper sealing thereof and the printouts were taken after three months of seizure; that the print out is not admissible evidence under Rule 36B of the Act; that the allegations made on the basis of computer print outs had not been corroborated by any other evidences. The appellant also argues that as per the computer print out, the total quantity of 900 MT of different variety of the products were sold to individuals without invoice in addition to 229 MT of manufactured goods sold as per the invoices; that if these 5 Excise Appeal Nos. 70035, 70135 to 70138, 70178, 72095/2013 & 76682/2014 two quantities are taken together, the total quantity came to 1129 tons which is beyond the capacity of all their machines installed in their factory even if runs together 24x7x365. Therefore, the CPU data cannot be taken to be true ; that the integrity of data said to have been taken from unsealed condition and that too in the appellant's back is not acceptable, in view of the fact that the chance of data being tampered could not be ruled out; that the said computer was not in regular use and the statement of the persons who have fade the data in the computer have not been recorded by the department; that no verification was conducted on the premises of the parties whose names were figuring in the challans/private documents/CPU print outs; that the statements were prepared in some of the cases for inflated quantity and entering into many duplicate entry. The clandestine removal cannot be based on the private record/ documents. There was no excess or shortage of goods, in the factory, also no finding was recorded for the purchase of excess raw materials or excess consumption of electricity or excess payment made to the workers; that there is also no finding that there was mismatch in the value of the goods and value of the clearance as shown in the Central Excise record.
3. The appellants have relied upon the following case laws :
(i) Commr. of Central Excise Vs. Universal Polythene Industry- [2001 (130) ELT 228] -
In this case, Hon'ble Tribunal , Kolkata has held that the clandestine removal and clearance is a serious charge against the manufacturer which is required to be discharged by the Revenue by production of sufficient and tangible evidence -Standard of proof in such cases has to be on the basis of absolute proof and not on the basis of 6 Excise Appeal Nos. 70035, 70135 to 70138, 70178, 72095/2013 & 76682/2014 preponderance of probabilities.
( ii) Durga Trading Company Vs. Commr. of Central Excise, Lucknow [2002 (148) E.L.T. 967 (Tri.-Del.) "wherein the Tribunal held that reconciliation of sales and purchase bill not achieved- No inference could be drawn legally for clandestine removal and for the goods cleared after manufacture without payment of duty on this ground- Charge has to be based on concrete and tangible evidence and not on inferences involving unwarranted assumptions-No clandestine removal -Erstwhile Rules 9 (2) and 173Q of Central Excise Rules, 1944- In absence of any corroborative evidence like consumption of excess electricity or statements of buyers, it could not also be said that notice company clandestinely removed goods manufactured from stock found short. Charge cannot be based on presumptions and assumptions-There should be tangible evidence of removal of goods alleged to have ben manufactured and cleared without payment of duty. "
4. Regarding the value, the appellant states that the Department has adopted the highest price ignoring the transaction value which is not correct. The expression transaction value means the price charged to the goods by the seller. In a given transaction, Section 4 (1)
(a) of the Act is the price is a sale consideration and the buyers is not related to the assessee and then on each removal, challans had been taken on the transaction value. It is evident from their sales record that they have sold the products at different rates to different customers by calculating the duty demand but the Department has taken into account the highest price for the product without considering the price of each and 7 Excise Appeal Nos. 70035, 70135 to 70138, 70178, 72095/2013 & 76682/2014 every transaction. The appellant also said that even if presumed that they have indulged into the clandestine removal of the goods after the purchase of the raw material from the various suppliers, they should be extended the benefit of CENVAT Credit in view of following decisions :
(i) Mahabir Plastics Vs. CCE, Mumbai-2010 (255) ELT 241
(ii) CCE Vs. Marine Electricals-2006 (205) ELT 261
(iii) Apex Steels (P) Ltd. Vs. CCE-1995 (80) ELT 368
(iv) CCE Vs. Re-rolling Mills-2009 (159) ELT 192.
The appellant has further submitted that they have deposited a sum of Rs.10.00 Lakhs during the investigation. The same cannot be treated as the voluntary payment and the same is not without coercion. The appellant also stated that it has been held by the Hon'ble Tribunal in the number of cases that the payment made towards the investigation cannot be termed as the voluntary if the same has been done without a routine demand under the law.
5. The appellant has also submitted the following statements:
i) Statement, marked 'A', showing entries mentioned more than once
ii) Statement, marked 'B' showing entries do not have any material description and the value. The demand on this count cannot sustain being no basis.
iii) Statement, marked 'C', showing entries do not have any name of the party, therefore, cannot be alleged clearance of any goods.
iv) Statement, marked 'D', showing entries derived from plain paper sheets described as challan.
There are about 196 entries taken from alleged challan book Nos. 1 to 21, calculating assessable value of Rs.4,26,13,733/-. The said so-called challan books are nothing but loose plain sheets without any details of consignee, description of goods, customer's name, address, date, value 8 Excise Appeal Nos. 70035, 70135 to 70138, 70178, 72095/2013 & 76682/2014 etc. The said loose paper sheets cannot be utilized for demanding duty as discussed in foregoing paras.
(v) Statement, marked 'E' showing customer's name LML/LSC, that is, self.
There are about 26 transactions where demand has been raised on the allegation of removal of goods without payment of duty to LML. We state that the said entries taken from private documents are all inputs for captive consumption, used in the manufacture of final goods on which duty was paid at the time of clearance from the factory.
(vi) Statement, marked 'F' showing entries in the excise invoice. As per the Appellant in the show cause notice the duty has been demanded on the entries on which it is alleged clearance of goods without payment of duty but duty on such entries have been paid and reflecting in the statutory books.
(vii) Statement, Marked 'G' shows entries which upon examination were not found to exist at all in any of the so called evidence sheets.
(viii) Statement, Marked 'H' shows entries with huge clerical mistakes than what found in the evidence sheets. Example : A quantity of 900.0 kgs. have been written as 9000 kgs.
(ix) Statement, Marked 'I' shows entries with a material description of item like BOPP, Pet, Toluene etc. which Lakhotia Metalizers Pvt. Ltd. do not manufacture nor do they have the machines, infrastructure etc. to do so. The said items have been falsely and wrongly taken as sales.
Apart from the above, appellant also submitted that assuming, although denying that they manufactured and cleared goods clandestinely, the excise duty has been calculated on cum-duty price, that is, the excise duty 9 Excise Appeal Nos. 70035, 70135 to 70138, 70178, 72095/2013 & 76682/2014 has been calculated on the basis of the price, allegedly at which we sold the goods; that it is well settled that the assessable value is to be determined after deducting the excise duty from the price charged, as held in the case of Nirula & Co. (P) Ltd.-2003 (156) ELT 583. Similar view has been taken in the case of Premier Electrodes Ltd. Vs. CCE, Nasik-2007 (211) ELT 621. In the case of CCE Vs. Maruti Udyog Ltd.-2002 (141) ELT 3 wherein the Apex Court has held that "Sale price realized by the assessee to be regarded as the entire price inclusive of excise duty".In determining the value on which excise duty is payable, the element of excise duty sales tax or other taxes which is included in the price, is to be excluded in arriving at the assessable value. The demand of duty calculated on the basis of sale is not sustainable. The Appellant therefore, states and submits that the amount of duty sought to be recovered has wrongly been calculated without following the principle laid down by the Apex Court.
6. In view of above, the appellant finally stated that they summed up that they are not liable to pay any duty as demanded as they have not indulged into any clandestine removal and Department has not proved conclusively clandestine removal as proposed in the show cause notice and held by the adjudicating authority.
7. We also heard the Ld. Consultant at the time of hearing who reiterated the grounds contained in the Appeal memorandum which has been extracted above and also submitted the copies of the register viz. 03/LMPL/10- copies of the sales and purchase register and also 4/LMPL/10 for our perusal. The Ld. Advocate submits that the Department has not provided the cross examination to the various persons whose statements 10 Excise Appeal Nos. 70035, 70135 to 70138, 70178, 72095/2013 & 76682/2014 were recorded under Section 114 of the Central Excise Act. He relied upon the various decisions wherein it is held that the benefit of cross examination by the witness is violation of principles of natural justice. These decisions are as under :
i)Andaman Timber Industries Vs. Commr. of Central Excise Kolkata-II [2015 (324) ELT 641 (S.C.)
ii) Jindal Drugs Pvt. Ltd. Vs. Union of India [2016 (340) ELT 67 (P&H)
iii) Commr. of Central Excise, Delhi Vs. Kuber Tobacco India Ltd. [2016 (338) ELT 113 (Tri.-Del.)
iv) Gontermann Pipers (India) Ltd. Vs. Commr. of Central Excise, Kolkata-VII [Order No. FO/77772-77773/2017 dated-08.11.2017
v) Jha Shipping Agency Vs. Union of India [2011 (264) ELT 321 (Cal.)
vi) Hindustan Mint & Agro Products Pvt. Ltd. Vs. Union of India [2017 (346) ELT 206 (All)
vii) Basudev Carg Vs. Commr. of Customs [2013 (294) ELT 353 (Del.)
8. Ld. D.R. on the other hand, defends the order passed by the Ld. Adjudicating Authority and states that this is a case of clandestine removal and the Department has also obtained statement of the various persons who in a categorical term stated that they have supplied the raw materials to the appellant on the basis of telephonic order and the payments were made in cash; that so was the case for many sales which were made on cash payment. He relied upon the following decisions :
i) Somani Iron & Steels Ltd. Vs. CESTAT [2011 (270) ELT 189 (All.)
ii) Patel Engineering Ltd. Vs. Union of India [2014 (307) ELT 862 (Bom.)
iii) Sudhir Sharma Vs. Commr. of Customs [2015 (319) E.L.T. 450 (Del.) 11 Excise Appeal Nos. 70035, 70135 to 70138, 70178, 72095/2013 & 76682/2014 wherein it is held that in every cases the cross examination is not required and the Ld. D.R. said that non-allowance of the cross objection by the adjudicating authority in its vitiated the proceedings and the corroborative evidence have been obtained and made applicable to the appellant.
9. We have heard the parties and perused the case records. The issue involved in this case is regarding the clandestine removal of goods by the appellant. From the record made available to us by the Ld. Consultant on behalf of appellant, it is seen that most of the entries are made in such a way that it is difficult to arrive at a conclusion about sales and purchase of raw materials and finished goods. We find from the records and registers made available to us that entries are made in a cryptic manner that too after so many alterations. This leads us nowhere to conclude that Appellant has indulged in the clandestine removal. We have also perused the statements recorded by the various persons wherein in some statements, it is stated that there was cash sales also but this in itself would not be sufficient to prove the clandestine removal without the further corroborative evidence. Moreover, the maker of the statements have not been examined, cross examined by the adjudicating Authority/Appellant. In this regard we refer and rely the case of Jindal Drugs Private Ltd. Vs. Union of India [2016 (340) ELT 67(P&H) and Commissioner of Central Excise, Delhi-I Vs. Kuber Tobacco India Ltd. [2016 (338) ELT 113 (Tri.-Delhi)] wherein it is held in a categorical terms that the statement recorded during the investigation is required to be admissible as evidence only when the maker is examined by the Adjudicating Authority as per the procedure prescribed as per Section 9D of the Central Excise Act. Having not done so, the statements recorded from the various person have no evidentiary value.
12 Excise Appeal Nos. 70035, 70135 to 70138, 70178, 72095/2013 & 76682/2014
10. The computer print outs and the names appeared in the registers maintained by the Department has not been shown to Shri Sanjoy Lakhotia, M.D. of the appellant and statement has not obtained his comments on each and every narration as to whether and how the sales has been made and how the payment has been received . This is obviously not done and the statements which has been taken is of general in nature. Some of the purchasers of the finished products are well known manufacturers for which no conclusive inference can be drawn namely J.K. Masala, Priya Cream Crunch Biscuits, Chandmali Vikharam etc. Had their statement been taken on the sale being made to them, there have been full proof of the case of the Department. This cross verification of sales has not been done by the investigating agency. The maker of these records would have asked to participate in the investigation and their statement could have been recorded for each and every entry maintained in the ledger or even the computer print out. The investigation has not been done to this effect. Also no efforts were made by the investigating agency to contact the Directorate of Industries to find out as to how much is the installed capacity of the appellant and to what extent they could manufacture the goods especially in view of the fact that the appellant in reply has in a clear term stated that their installed capacity could not be more than 300 MT even if it is presumed that the factory of the appellant runs 24x7x365. Although two of the suppliers have stated that they use to supply the various raw materials on cash payment on the basis of instruction of Shri Sanjoy Lakhotia; MD, of the appellant company but for the remaining supplier of the raw material, which is stated to be more than 130, has neither been examined nor their statements were recorded to coroborate the quantity of raw material supplied. The statements of the 13 Excise Appeal Nos. 70035, 70135 to 70138, 70178, 72095/2013 & 76682/2014 two suppliers who has stated they used to supply the goods on cash payment have not been subjected to examination in Chief cross examination, so these statements loose their evidentiary value.
11. Regarding acceptance of computer printouts as the evidence only after passing the test of examination and cross examination of the person responsible for feeding such data. Before acceptance of computer printouts the rigours of Section 36B of CEA, 1944 has to be fulfilled but the same has not been followed in their case. The appellant has stated in a clear and categorical term that the computer from which the CPU has been taken out had not been put to use for several months. Also, the seizure of CPU without following the due process of sealing the same and re-opening the same in presence of Appellant is representative casts serious doubt about the integrity of data contained therein to be taken as evidence during the proceeding. Similarly, for the manufacture of so much of the finished goods, there would be a requirement of the various raw material proportionately and that from the perusal of the record it is seen that the department has not obtained evidence of such consumption of the raw material also. Further the consumption of electricity , required for the manufacture of such huge quantity of excisable goods has also not been verified by the Department. Considering the totality of the circumstances, we are of the view that the adjudicating authority has not considered the arguments advanced by the Appellant and confirmed the demand in a routine manner. Therefore, the same is not sustainable. The D.R. has relied upon the ratio laid down in the case of Somani Iron and Steel Ltd. Vs. CESTAT [2011 (270) ELT-189 (All)] regarding private record found in the factory showing the suppression of production, it is for the Appellant to prove that they are wrong and did not belong to them. In this case the 14 Excise Appeal Nos. 70035, 70135 to 70138, 70178, 72095/2013 & 76682/2014 appellant are not disputing the existence of private record but says that the entries made there is regarding the order obtained but against which no supply has been made for the quantity which is as per statutory record. The Revenue has not conducted investigation regarding the supply made to the person whose name is found to b entered in the Register if it is for clearance of finished goods clandestinely. Similarly, regarding the denial of cross examination, he refers to the decision in case of Patel Engineering and Sudhir Sharma's case described supra. We have examined the case law however find these to be not applicable in the facts and circumstances of the case at hand. Accordingly, we set aside the impugned order and allow the appeals.
(Pronounced in the Court on 23/07/2018 )
Sd/- Sd/-23/7/18
(P.K.Choudhary) (Bijay Kumar)
MEMBER(JUDICIAL) MEMBER(TECHNICAL)
k.b/-
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