Customs, Excise and Gold Tribunal - Bangalore
Treadwell Rubbers, Mr. George Kurian ... vs The Commissioner Of Central Excise on 16 January, 2007
Equivalent citations: 2007(118)ECC144, 2007ECR144(TRI.-BANGALORE), 2007(212)ELT551(TRI-BANG)
ORDER T.K. Jayaraman, Member (T)
1. These appeals have been filed against Order-in-Original No: 15/2005 dated 6.5.2005 passed by the Commissioner of Central Excise, Mangalore.
2. The impugned order has been passed consequent to CESTATs Final Order No. 84 to 88/2002 dated 23.1.2002, which remanded the case to the Original Authority with the following findings.
4. We have carefully considered the matter. We find that there is a justification in the arguments advanced on behalf of the appellants that the Adjudicating Authority was not just right in enhancing the quantum of penalty and the party should not be placed in the worst position than they were at the time of passing the original order at the first instance. Accordingly, we are not in agreement with the findings given by the authorities either in enhancing the penalty or in ordering for confiscation of plant and machinery since plant and machinery were not ordered for confiscation in the original order. As regards clubbing of clearances, we are of the view that strict guidelines should be followed as per Board Circular Section 37B. In the view we have taken, we are remanding the matter to the concerned Adjudicating Authority to examine the matter afresh on taking into consideration of the pleas made by the party with reference to the clubbing of clearances and the direction of the Tribunal as well as the guidelines issued under Section 37B while passing the order. Accordingly, he may pass an order on providing an opportunity to the party. Thus, these appeals are allowed by way of remand. The party is at liberty to raise all the connected pleas at the time of re-adjudication proceedings. Thus these appeals are disposed of in the above terms.
3. The Adjudicating Authority has examined the issues after giving a personal hearing to the appellants. M/s. Treadwell Rubber has a proprietor Shri George Kurian. His wife Mrs. Annie George is the Proprietrix of M/s. Excel Tyres. She has given a General Power of Attorney in favour of her husband. The Adjudicating Authority has examined the question of clubbing of the clearances of the above two units in the light of Board Circular 6/92 dated 29.5.92. He has observed that the above mentioned circular does not cover the instant case where one proprietary unit is owned by the wife and the other proprietary unit is owned by her husband and the wife has executed a General Power of Attorney in favour of her husband to look after all the business activities of the units owned by her. The Commissioner has relied on the decision in Quality Steel Industries v. CCE wherein it has been held that clearances from both units are to be clubbed together for the purpose of Notification No. 80/80-Central Excise, as the two units although registered separately would not be independent of each other, if the proprietor of one unit was the wife of the proprietor of another unit and had executed a Power of Attorney in favour of the husband. The above decision has been upheld by Apex Court in 1999 (107) ELT A61 (SC). He has also relied on the decision in the case of CCE v. Paper Packing Industries , wherein it is held that when two wives had executed Power of Attorney in faovur of their husbands and had no role to play in the business of the second firm, the clearances made by the second firm constituted by the two husbands and their wives were also for and on behalf of the first firm and were therefore to be clubbed.
3.1 As regards clandestine production and clearance, the Commissioner has observed the following points.
(i) The purchase and use of raw materials were not properly accounted in the prescribed Form-IV register;
(ii) The purchase of raw materials without proper bills and under fictitious names;
(iii) The production of excisable goods viz., tread rubber, had not been accounted in the RG1;
(iv) The clearance of excisable goods viz., tread rubber, had not been accounted in the RG1;
(v) The excisable goods viz., tread rubber had been removed without gate passes;
(vi) The excisable goods viz., tread rubber had been removed without payment of duty;
(vii) The excisable goods viz., tread rubber, removed had been undervalued; and
(viii) The sale proceeds realized had been accounted in Shri George Kurian's account thereby proving cross-funding/financial flow back/interlacing of funds, between M/s. Excel Tyres and M/s. Treadwell Rubber.
Referring to the Orders-in-Original 8/91 and 40/96 passed by the previous Commissioners and also the Show Cause Notice, he has stated that each of the above infractions are supported by accurate corroborate evidences. With regard to clandestine removal the appellant relied on a large number of case laws, however, the Commissioner in Para 24.8 of the order has distinguished those cases and stated that in the present case there is ample documentary evidence for purchase of carbon black under fictitious names, under-valuation, etc. 3.2 With regard to the quantification of the production, the Commissioner has discussed the formula recovered from Shri George Kurian during investigation, the one based on M/s. Hi-Tech Polymers, Mangalore and the formula based on Rubber Board's letter. Out of the three formulae, the formula given by the Rubber Board gives the least production. As per the Rubber Board formula, for every one kg of carbon black, the tread rubber produced comes to 3.22 kg. He has also observed that the assessee has accepted the figures given by the Rubber Board, therefore, Rubber Board's formula has been adopted for the purpose of quantification and demand of duty.
3.3 Taking into account the submissions of the appellant that the department had reckoned quantities of carbon black received after the raid while calculating clandestine production. The Adjudicating Authority based on documentary evidence deducted a quantity of 550 kgs of carbon black from the quantity of 2475 kg receipt shown for the year 1989-90 and worked out the quantity to be taken into account at 1925 kg.
3.4 The Adjudicating Authority has given the benefit of cum-duty price in terms of Apex Court decision in the CCE, Delhi v. Maruti Udyog Ltd. and re-quantified the duty demand.
3.5 With regard to the appellant's contention that Rule 209A was introduced only on 14.4.1986 and it cannot be invoked for the period prior to that date. The Commissioner has observed that the issue is not for the period prior to the insertion of Rule 209A but pertains to the period 1984-85 to 1989-90 and there has been an offence on the part of Shri George Kurian during the period from 1986 to 90 and hence, penalty under provisions of Rule 209A is justifiable.
3.6 With the above findings, the Adjudicating Authority confirmed the demand to the tune of Rs. 10,83,725/- for the period from 1984-85 to 1989-90 under erstwhile Rule 9(2) of the Central Excise Rules, 1944 read with proviso to Section 11A(1) off the Central Excise Act, 1944. He held that the quantities of tread rubber seized from the appellants unit are held to be liable for confiscation. However, he held that as the goods were released provisionally, he has ordered appropriation of security amount of Rs. 2,2825/- and Rs. 4,525 in terms of B-11 bond executed by the appellants unit. He imposed the following penalties.
Sl. No. Appellant Penalty Imposed Rule
1. M/s. Excel Tyres & Rubber Products (ETRP) Rs. 1,00,000/-
Rule 173Q of Central Excise Rules, 1944
2. M/s. Treadwell Rubber (TR) Rs. 20,000/-
-do-
3. M/s. Geekay Rubber Agencies Rs. 1,000/-
-do-
4. Mr. George Kurian Rs. 1,00,000/-
Rule 209A of Central Excise Rules, 1944.
5. Shri Jolly Abraham Rs. 5,000/-
-do-
4. Shri Laxmi Narayan, learned advocate appeared for the appellants urged the following points.
(i) The Commissioner has taken Rubber Board's formula. The appellants refute his finding that George Kurian agreed to the formula of Rubber Board for the reason that the said formula applies to synthetic rubber (Cisamer). The appellant never purchased a single consignment of cisamer. Hence, the formula adopted is not acceptable.
(ii) To manufacture rubber several raw materials are required. The principal raw material is carbon black. The department has not conducted any experiment with regard to consumption of carbon black vis-a-vis the formula adopted by the George Kurian. Therefore, the production of tread rubber arrived at by the Adjudicating Authority is not acceptable.
(iii) The following reasons have been given to hold that Treadwell Rubber (TR) is not an independent unit.
a. Same production supervisor looking after the production facilities of TR and ETRP.
b. Common workers for both units.
c. TR not in possession of complete machinery for the manufacture of tread rubber and utilizes the machinery of ETRP for manufacture of the final product.
d. Trusting the brand name EXCEL on the tread rubber without intimating the said fact to the Department.
(iv) The above set of findings cannot by itself lead to an inference that TR is not an independent unit. In the present case, the parties have a separate income tax registrations, sales tax registrations, SSI registrations, etc.
(v) There is no evidence led by the department to show mutuality of interest or of financial flow back and therefore, the clubbing of the clearance of both units cannot be sustained. The following case laws are relied on.
a. Jagivandas & Co., Thane v. CCE, Bombay .
b. CCE, Ahmedabad v. Ambica Scale Manufacturing Works .
c. CCE, Jaipur v. Rockdrill India P. Ltd. .
d. Naresh Shroff Prop. Uni-Offset Printers v. CCE, Madras .
e. Binod Kumar Maheshwari v. CCE, Calcutta-I .
f. Geeta Valves and Engg. P. Ltd. v. CCE, Vadodara g. Ram Tondon v. UOI h. Balachandran v. CCE, Coimbatore .
(vi) It is well settled that a proprietary concern is no different from its proprietor and therefore, penalty cannot be levied on TR as well as on George Kurian. The following case laws are relied on.
a. Crescent Tool Engg. v. CCE b. Goyal Tin Works v. CCE .
c. V.K. Thampi v. Collector d. UMV Commercial Corporation v. CCE
(vii) Rule 209A was introduced only on 14.4.86, therefore, the said Rule cannot be invoked for period prior to 14.4.1986. The following case laws are relied on.
a. Brij Mohan v. CIT b. S.L. Kirloskar v. UOI c. Abhinav Dyeing and Finishing Mills v. CCE maintained in 1996 (88) ELT A125 (SC).
d. Elgi Equipment Ltd. v. CCE 1999 (30) RLT 331 (T).
e. CCE v. Markandeya Prasad Ramakrishna Prasad 1998 (25) RLT 919 (T) f. Universal Electronics v. CCE g. Maruthi Udyog Ltd. v. CCE 1998 (25) RLT 246 (T)
(viii) The appellant worked under physical control and therefore, extended period under Section 11A is not available.
(ix) The Adjudicating Authority has stated that the case of Geetha Valves and Engg. (P) Ltd. v. CCE . Is not applicable. This is not correct. The appellant has taken the contention that the clubbing of clearances and denying SSI exemption on the ground that the workers are common to both the units, which are interrelated family units, is dealt with in Geetha Valves case (supra). The ratio of the decision in that case is clearly applicable to the present case.
6. The learned JCDR reiterated the impugned Order-in-Original.
7. We have gone through the record of case carefully. This is for the third time that this case is coming up before the Tribunal. We find that the Adjudicating Authority has rightly decided the issues in accordance with the remand order dated 23.1.2002 of the Tribunal. After examining the Board's guidelines and several case laws, he has come to the conclusion that the clearances of M/s. Treadwell Rubbers and M/s. Excel Tyres & Rubber Products should be clubbed. Shri George Kurian is the proprietor of one unit and Smt. Annie George is the proprietrix of another unit. They are husband and wife. Smt. Annie George has also given General Power of Attorney to Shri George Kurian. For all intense and purposes, the whole show was being run by George Kurian. The Adjudicating Authority has also referred to the enormous evidence collected by the investigations to establish clandestine production and removal. There was no proper accountal of purchase and use of raw materials. The raw materials were purchased without proper bills under fictitious names. There was also no proper account of the statutory RG-1 registers to record the production of excisable goods. Further the excisable goods had been removed without proper documents and without payment of duty. There was further under-valuation. In view of all these things, the Adjudicating Authority has established clandestine production and clearance. He has also stated that the sale proceeds realized had been accounted in Shri Georgre Kurian account, thereby proving financial flow back between M/s. Excel Tyres and M/s. Treadwell Rubber. The ratio of the CEGAT's decision in the Quality Steel Industries case (supra) is clearly applicable. The above decision has also been upheld by the Apex Court. Hence, the finding that the clearances of both the units have to be clubbed is proper. We do not want to interfere with the same.
7.1 As regard the quantity of tread rubber manufactured based on Rubber Board's letter, we find that the appellants have contended before the Tribunal that the Rubber Board formula relates to synthetic rubber (Cisamer) and therefore, the same cannot be applied. We do not agree. In fact the formula recovered from Shri George Kurian during investigation gives 3.684 kgs of tread rubber for one kg of carbon black, whereas, the Adjudicating Authority has taken a lesser value according to Rubber Board, which is 3.22 kg. in these circumstances, the objection of the appellant before the Tribunal is not sustainable. Moreover, this point has not been argued before the Adjudicating Authority.
7.2 The appellants have contended that the penalties have been imposed both on the new and the proprietor, which is not permissible in the light of many case laws. We agree with this contention and set aside the penalty of Rs. 1,00,000/- under Rule 209A in respect of Shri George Kurian.
7.3 The Adjudicating Authority has also taken into account the decision of the Apex Court in the Maruti Udyog's case (supra) and given the benefit of cum duty price to the appellants. Thus, the demand of duty has been reduced to Rs. 10,83,725/-.
7.4 On the whole, the Order-in-Original is legal and proper. We modify the order only to the extent of setting aside penalty on Shri George Kurian, otherwise the impugned order is upheld. Summing up, the appeals of M/s. Treadwell Rubber and M/s. Excel Tyres are dismissed. The appeal of Shri George Kurian is allowed.
(Pronounced in open Court on 16.01.2007)