Customs, Excise and Gold Tribunal - Delhi
Jalmadhu Corporation vs Commissioner Of Central Excise on 8 June, 1999
Equivalent citations: 1999ECR921(TRI.-DELHI), 1999(114)ELT883(TRI-DEL)
ORDER A.C.C. Unni, Member (J)
1. The two appeals filed by the appellants against the order of the Commissioner of Central Excise dated 12-1-1996 were heard together and are being disposed of by this common order. We have heard Shri V.S. Nankani, ld. Advocate for the appellants and Shri P.K. Jain, SDR for the Commissioner.
2. The appellant M/s. Jalmadhu Corporation is a proprietary concern on whom duty demand of Rs. 27,97,284 and a penalty of Rs. 2 lakhs was imposed by the impugned order. A penalty of Rs. 10,000/- was also imposed on the Managing Director, Shri Kishore G. Motwani, the other appellant. The appellant concern is engaged in the manufacture of Asbestos Cement Pressure Pipes and Couplings. They claimed the benefit under Notification No. 175/86 and they were registered as SSI unit with the Directorate of Industries, Rajasthan. Notification No. 60/91-C.E., dated 25-7-1991 gave exemption to the goods manufactured by the appellants if it contained fly ash not less than 25% by weight. The benefit of this notification was available to the appellants when they filed their CL on 1-4-1992. The appellants did not claim the benefit in the said CL. Subsequently, the appellants filed further CL w.e.f. 15-12-1992 claiming the benefit of Notification No. 60/91 as amended by Notification No. 26/92, dated 1-3-1992. This CL was also approved by the proper officer under Rule 173B. Notification No. 60/91 was however rescinded on 28-2-1993 by Notification No. 76/93. However, by another notification dated 28-2-1993 namely Notification No. 38/93-CE goods falling under Chapter 68 (other than Heading 68.04) were exempt from the whole of the duty of excise on the condition that the same contained not less than 30% fly ash by weight (minus water content). Accordingly the appellants filed a further CL dated 28-2-1993 claiming the benefit of Notification No. 175/86 which was also approved. On 12-3-1993, the Notification No. 38/93 was amended to the extent the benefit in respect of the said goods was available under Notification No. 60/93. Accordingly the appellants filed a further CL effective from 12-3-1993 claiming the benefit of Notification No. 38/93 as amended by Notification No. 79/93 which was also approved by the Assistant Collector.
3. Subsequently on a visit to the factory of the appellants by Central Excise Officers on 3-8-1993 certain documents were resumed after recording a panchnama and after further investigation a SCN was issued to the appellants on 20-1-1994 asking to show cause why duty amounting to Rs. 27,97,284/-short-levied and short paid should not be demanded under the proviso to Section 11(1) and Rs. 20 lakhs deposited by them should not be adjudged against the duty demand and why a certain quantity of AC pressure pipes seized should not be confiscated and why a penalty should not be imposed apart from confiscating the land, building, plant, machinery etc. The matter was adjudicated by the Commissioner resulting in the impugned order.
4. Shri V.S. Nankani, ld. Advocate submits that the allegation of short payment of duty invoking the extended period of limitation was not sustainable for the reason that the five registers namely, D-l, D-2, D-3, D-5 and D-6 relied on by the Department did not belong to tb-e appellants but were private records maintained by one Noor Mohammad who was the Production Manager at the relevant time. The appellants had not authorised Shri Noor Mohammad to maintain the said registers. He also submits that the registers do not contain any signature or authentication by any responsible person of the company, nor does it contain the signature of Production Manager himself. Shri Noor Mohammad had since left the employment of the appellants and he had not responded to several summonses issued to him by the Department. Reliance placed on the said registers was, therefore, unsustainable and burden of proof of alleged clandestine removal has not been discharged by the Department in the absence of admission by the person who had maintained the said registers as to its authenticity and its content. The said registers could not therefore be made the basis for alleging manufacture and clearance of the goods during the period from 15-12-1993 to 19-7-1994 containing less than 25% fly ash. On the other hand, other registers namely, A-18, A-19 and A-34 seized by the Department correctly showed the consumption of raw materials by production of the goods. He submits that since the entire supply of the goods manufactured by the appellants were to Government Departments and Undertakings and since no complaint whatsoever had been received from the said Departments/Undertakings alleging that fly ash content was less than 25% by weight, the appellants' bona fide was fully established and the Department's case was based on assumptions and presumptions unsupported by any evidence. He also drew attention to the fact that the purchase of raw materials of the appellants factory like cement fibre and fly ash is looked after by their office at Bombay and whenever the raw material is received at the factory the same is verified with regard to the invoices/ bills and thereafter the said invoices/bills were forwarded to the Bombay Office for payment to the supplier and as such bills and invoices relating to purchase were kept at Bombay Office and only 3 bills corresponding to transport receipts of an aggregate quantity 29.140 MT remained at the factory. The Department had relied on the statement given by Shri Amar Singh on 13-9-1994 and 14-9-1994. However the said statements on the receipts of fly ash of 29.140 MT in January, 1993 did not tally with D-5 register showing that at least 32.5 MT of fly ash had been consumed. The said documentary evidence showing higher consumption of fly ash than what was mentioned in the statement of Shri Amar Singh has therefore been accepted as more reliable than the statement of Shri Amar Singh. The Department had alleged (para 9.8 of the SCN) that during the period December, 1992 to July, 1993 the appellants had received only much less quantity of fly ash. The said allegation had no basis and on the contrary D-5 register relied on by the Department showed consumption of 52.5 MT fly ash during the period January, 1993 to July, 1994. Ld. Counsel submits that the impugned order had placed reliance on the private registers namely, D-5 and D-l maintained by Shri Noor Mohammad, the then Production Manager instead of statutory and authenticated records maintained by the appellants, namely, registers A-18 and A-19 which reflected and corroborated the entries in RG 1, Form-IV, and RT 12 returns. Reliance on the said private records was, therefore, not sustainable in law especially when other registers namely, A-18 and A-19 dealt with statutory records like RG 1, Form-IV, RT 12 returns.
4.(i) Ld. Counsel also submits that no adverse inference could be drawn regarding to the percentage of fly ash contained in the goods manufactured by the appellants without getting samples thereof tested by an expert, since the entire question boiled down to the actual percentage of fly ash contained in the AC pipes. The appellants had no knowledge whether any sample from the seized goods had been taken by the Department for getting them tested or whether the Department had relied on any such test report. On the other hand, the appellants requested for the test report at the time of personal hearing on 16-5-1995. He relied on the following case law in respect of his contention that in technical matters the conclusion cannot be arrived at without obtaining test report/technical opinion: (1) K.R. Enterprises [1994 (71) E.L.T. 791], (2) Modem Leather Factory [1989 (43) E.L.T 155], N.K. [1990 (45) E.L.T. 223].
4.(ii) Ld. Counsel drew attention to the fact that the appellants had sought cross examination of Shri P.S. Ray, Shri Noor Mohammad and Shri Khariwal which was not allowed.
4.(iii) Ld. Counsel further submits that the entire basis for the alleged manufacture and clearance of the AC pipes by the appellants contained less than 25% fly ash was the private records resumed by the officers. The said re cords did not belong to the appellants nor had they been proved to be authenticated as correct. He places reliance on the following case law in support of his contention that in such circumstances the allegation of clandestine production/removal cannot be sustained:- [1989 (39) E.L.T 650], [1989 (39) E.L.T. 655], [1995 (76) E.L.T. 410] and [1993 (68) E.L.T. 141].
4.(iv) As regards five private records maintained by Shri Noor Mohammad, Production Manager at the relevant time, ld. Comtsel drew attention to the fact that the said records were recovered from the premises on 3-8-1993 by breaking a locked cupboard since the key was not available. Reliance was placed on the statement given by current Factory Manager Shri Arun and that of Shri P.S. Ray, an Engineer who occasionally helped the appellants on the technical side. Though Departmental Officers had drawn the samples of the goods seized, the appellants were kept in the dark about the result of test, if any, carried out by the Department. The Commissioner in the impugned order had however indicated that though the Department had sent the samples to the National Test House, Calcutta, no test could be carried out for want of equipment. As regards the use of fly ash in the manufacture of AC cement pipe, IS-1592:1989 clearly recognise the use thereof.
5.(i) Opposing the submissions of the Advocate for the appellants, Shri P.K. Jain, ld. SDR submits that the argument that in the absence of a test report no inference could be drawn as to the fly ash contents in the final product could not be accepted since the Board had itself by Circular No. 6/92 clarified that it is not possible to analyse the product to ascertain whether the finished product contained more than 25% fly ash. It was for this reason that the Board had prescribed certain proformas. The records maintained by the appellants in A-18 and A-19 were required to contain such information. Further, if the appellants could establish that the goods contain not less than 25% fly ash by producing test report, nothing prevented them from doing so. Even then since such report can show only fly ash contend of a particular batch of production, the only reliable method by which the actual contents of fly ash could be determined was through records maintained by the appellants. The private records maintained by the Production Manager and the relevant time clearly showed fly ash content was 10% or even lower.
5.(ii) Further, it had been clearly brought out that Shri Noor Mohammad, Production Manager was being guided by the instruction given by Shri P.S. Ray who was an officer controlling the activity of various companies manufacturing similar goods and belonging to the Directors of M/s. JMC (M/s. Jalmadhu Corporation). On the date of search of the factory by the Officers on 3-8-1992 a personal notebook which was maintained by Shri P.S. Ray and written in hi;s own handwriting had been resumed. There was, therefore enough evidence on record to show that registers (D series) maintained by Shri Noor Mohammad and which had been relied on to show that the actual fly ash contents reflected the correct state of affairs and was part of planned strategy evolved by the appellants.
5.(iii) Drawing attention to the D-series Registers, ld. SDR submits that these Registers are co-relatable with the production slips date-wise and monthwise. The figures also showed the contents of the production. The said Registers however did not deal with the details of the clearances which were being recorded in A-18 and A-19 registers and which were co-relatable with the RG1 register. It was not necessary that the production as shown in the private records should be correspondingly reflected in RG 1 register of the same date and the period as sought to be made out by appellants, since there was clear evidence that the private records were maintained by the Production Manager and it showed the correct quantity of production including fly ash contents. Since Shri P.S. Ray and Shri Kheriwal had admitted that there was variation between those registers and RG 1 register figures, finding of the adjudicating authority of clandestine removal cannot be faulted. As regards reliance on transport documents recovered from the almirah of Shri Kheriwal and the statement given by the transporter of fly ash supplier that the quantity of flay ash was not transported in respect of 23 receipts out of 26 receipts, he submits that there was no explanation forthcoming on this aspect. Since all the receipts indicated the name of M/s. JMC, reliance placed on receipts and transport documents produced at the time of hearing before the adjudicating officer by the appellants could not be accepted since these documents contained no stamp of Commercial Tax Officer as in the case of the three genuine receipts found at the time of search. Further, if the said receipts/ transport documents were genuine and were relatable to the period under dispute the same should have found mention in the inward register which was seized on 1-4-1993. In view of the Apex Court's decision in Indru Ramchand Bharvani [1992 (59) E.L.T. 201 (S.C.)] such documents cannot be considered.
5.(iv) The SCN in paragraph 12 had referred to evidence of manipulation of gate passes by the appellants. The contention had been raised by the appellants that the department had not produced the original copies of such gate passes. In this connection, ld. SDR drew attention to para 12.5 of the SCN which itself stated that the original copies of the gate passes were never given to the buyer. In place of these photocopies of the gate passes with attestation of Notary were only submitted. It would be obvious from this that original gate passes were available only with the appellants and no plea that they had not been given original copies of gate passes by the Department can therefore be allowed to be taken. The gate passes seized during search clearly proved that the appellants were indulging in manipulation of the same and were telling the buyer that the excise duty had been paid where in fact no such duty had been paid.
5.(v) Ld. SDR also submits that it may be noted that the various statements given by Shri P.S. Ray, Shri Kheriwal and others had not been retracted and only during the cross examination before the adjudicating authority, they had varied their statements. This was purely on legal advice. There was, therefore, no infirmity in accepting and relying on the statement given by the said persons. He relied on the Apex Court's judgment in Surjeet Singh Chhabra [1997 (89) E.L.T 646 (S.C.)]. As regards production of all witnesses for cross examination, he relied on the Apex Court decision in Kanungo & Co. [1983 (13) E.L.T. 1486 (S.C.)].
6. We have considered the submissions of both sides and have perused the evidence on record. The allegation against the appellants is that they had manufactured and removed AC presssure pipes containing less than 25% fly ash by weight in the guise of AC pressure pipes containing fly ash more than 25% by weight by manipulating their records for wrongly availing exemption under Notification No. 38/93 as amended. The Department has relied on the seized records and the statements recorded from the persons connected with the production of excisable goods and the maintenance of records. The first statement made by the appellants relate to private records (D-series) shown in the panchnama. The reliance on the said records is questioned by the appellants on the ground that these records were maintained by a person who has neither admitted to having maintained such registers nor as to the correctness as to its contents. Nor did they contain any signature of the person who had maintained them. The appellants have maintained that even if it had been maintained by the Production Manager at the relevant time, there was nothing to show that he had been authorised to do so by any superior authority. Ld. Counsel had strongly urged that even at the time of recovery of the same from the locked cupboard of the Production Manager, the same had to be broken open since the key thereof was not available. The only nexus between the said documents with the Production Manager (no testimony given on record) is the statement given by another employee present at the time of search that they were maintained by the former Production Manager. The interpretation given to the entries therein were also dependent on the statement of the said employee. The appellants, therefore, have urged that the said documents are inadmissible in evidence and cannot be relied upon. As regards the contents of the registers, the appellants have sought to show that there were wide disparities between the quantity of production shown in the D-5 and D-l registers and the production and clearance shown in the RG1 register. In D-5 register for the period 1-4-1992 to 14-2-1992 (sic), 28,023 numbers recorded to have been cleared unlike according to the RG 1150213 were shown to have been cleared on payment of duty. This meant 10,872 numbers were not recorded in RG 1 register. However during the period January 1993 to March 1993,15713 of pipes were recorded as produced. Therefore, the allegation of the Department that the balance 10,873 manufactured prior to 15-12-1993 were deliberately not recorded as production after January 1993 as containing not less than 25% fly ash by weight, would mean that between January 1993 and March 1993, the appellants had manufactured 4,840 of pipes (15,713 -10,873) whereas D-5 register showed a production of only 124 pipes. As such it would be evident that the entries in D-5 register were wholly incorrect because if the appellants had in fact manufactured only 124 pipes, it would not have been possible to record in RG 1 about 15,713 between January 1993 and March 1993 even by falsely recording the production of 10873 numbers allegedly manufactured prior to 15-12-1993. There were similar discrepancies in D-l register as also. The appellant's Counsel had also drawn attention to the fact that there was duplication of the records in D-3 and-D-6 registers since there was no reason why the same date had to be recorded in the two registers. Having regard to these inherent weaknesses of the entries in the said D-series registers it would be evident, according to the appellants these records are neither reliable nor accurate. No reliance could therefore be placed on these records. Ld. SDR had contended before us that it was not necessary that the production figures shown in the private records need be reflected for the corresponding period in RG 1 register. Therefore the entries contained in those registers could not be brushed aside as not reliable and not accurate in the number shown not tallying with the RG 1 register. Regarding lack of authorisation from his superior for maintenance of D-series registers by the then Production Manager, the ld. SDR had drawn attention to the fact that Shri P.S. Ray had in his statement admitted to having advised Shri Arun Kumar and Shri Noor Mohammad for taking necessary action on lines decided by the management. Further Shri Arun Kumar had also admitted that the registers were being maintained by Shri Noor Mohammad.
7. Having considered these submissions of both sides and the records, we are of the view that the mere fact that the D-series registers do not contain the signature of Shri Noor Mohammad, Production Manager who maintained those records, or the fact that there was no authorisation given by the superior officer for maintaining those registers do not by themselves make them inadmissible since these have been admittedly recovered from the wooden cabinet used by Shri Noor Mohammad. The statement of Shri Arun Kumar, the person who was the Manager of the appellant company and who knew Shri Noor Mohammad had testified the said documents were in the custody of Shri Noor Mohammad. Further the statement of Shri P.S. Ray who had knowledge of the affairs of the group of companies as General Manager (Technical) and who had been visiting the appellant's factory had been passing on instructions to the Production Manager as per instruction dated 21-12-1993. He had in his statement dated 4-3-1993 admitted that as per entries in D-3, D-6, A-ll, D-5 and production reports and D-7 and entries in Form-V register stated that fly ash content of AC pressure pipes was not more than 10% by weight. In the face of these facts, we do not agree with the contention of the appellants that the private registers relied on by the appellants were inadmissible or that their contents were unreliable.
8. As regards the contention of the appellants that the statement of Shri P.S. Ray could not be relied upon since he was not subjected to cross examination, we are in agreement with the ld. SDR that it is not necessary for the adjudicating authority to allow cross examination in all cases. What was sought to be established by the Department on the basis of statement given by Shri P.S. Ray was that on a perusal of the private records maintained by Shri Noor Mohammad whether it was possible to say that the percentage of the fly ash used in the manufacture of AC presure pipes was less than 25%. With his technical expertise in the field/ Shri Ray was dertainly competent to give correct information and when in his statement dated 4-3-1993 which (had not been retracted) admitted to the fact that not more than 10% by weight fly ash was in use, there was in our view, sufficient basis to come to the conclusion that D-series records showed the correct position as to the use of fly ash. We, therefore, find no infirmity either in the admissibility of the private records or the statement given by Shri P.S. Ray. As regards the actual consumption of fly ash we find that the statement of transporter and the supplier clearly showed the said quantity of fly ash was not transported in respect of 23 receipts. This further erodes the credibility of the appellants' case.
9. In the light of the above, we are satisfied that the Department has succeeded in establishing that the appellants have used less percentage of fly ash in the production of their manufactured products and thereby they had wrongly availed of the benefit of Notification No. 38/93. The recovery of Rs. 27,97,284/- is therefore confirmed. We also confirm the appropriation of Rs. 20 lakhs already deposited by the appellants. Since the adjudicating officer has already allowed redemption of Rs. 25,000/- which is not excessive considering the value of the goods confiscated, we find no reason to interfere with the same. Accordingly, we also confirm para 16 (ii) of the impugned order. As regards the penalty of Rs. 2 lakhs on the appellant company, we find that the same is not excessive. No interference is, therefore, called for in para 16 (iii) of the order.
10. However, as regards personal penalty imposed on Shri Kishore G. Motwani, we find that no allegation of abetment under Rule 209A has been established against him. The said penalty on Shri Kishore G. Motwani is, therefore, set aside and Appeal No. E/547/96-NB filed by him is allowed.
11. Appeals are disposed of in the above terms.