Madras High Court
The Commissioner Of Central Excise vs M/S.Sva Steel Re-Rolling Mills Ltd on 15 November, 2017
Bench: S.Manikumar, R.Suresh Kumar
IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 15.11.2017 CORAM: THE HONOURABLE MR.JUSTICE S.MANIKUMAR and THE HONOURABLE MR.JUSTICE R.SURESH KUMAR C.M.A.Nos.3330 and 3331 of 2017 The Commissioner of Central Excise, Office of the Commissioner of Central Excise, Coimbatore 641 018. .. Appellant in both C.M.As. versus M/s.SVA Steel Re-Rolling Mills Ltd, M.G.Chettipalayam, Ganeshapuram, Annur, Coimbatore. .. Respondent in C.M.A.No.3330 of 2017 M/s.Srinivasa Steel Rolling Mills Ltd., 250-A, Subramaniapalayam Road, G.N.Mills Post, Coimbatore 641 029. .. Respondent in C.M.A.No.3331 of 2017 Prayer: Civil Miscellaneous Appeals are filed under Section 130(1) of the Customs Act, 1962, against the Common Final Order Nos.1534 and 1535 of 2007 in Appeal No.E/500-501/2003/MAS, dated 27.12.2007 and also the Order-in-Original, dated 06.05.2002 in Order Sl.No.21/2002 (Commr.), passed by the Adjudicating Autority. For Appellant : Mr.A.P.Srinivas JUDGMENT
(Judgement of this Court was made by S.MANIKUMAR, J.) Civil Miscellaneous Appeals are directed against the Common Final Order Nos.1534 and 1535 of 2007 in Appeal No.E/500-501/2003/MAS, dated 27.12.2007, passed by the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), South Zonal Bench, Chennai 600 006.
2. Short facts leading to the appeal are that a show cause notice, dated 20.09.1999, has been issued by the Additional Director General of Anti Evasion, Chennai, to M/s.SVA Steel Re-Rolling Mills Ltd, Coimbatore, respondent in C.M.A.No.3330 of 2017 and M/s.Srinivasa Steel Rolling Mills Ltd., Coimbatore, respondent in C.M.A.No.3331 of 2017, alleging certain offences in the manufacture and clearance of iron and steel products, without accounting and without payment of duty, which resulted in Order-in-Original No.21 of 2002, on the file of the Commissioner of Customs and Central Excise, dropping all further proceedings, initiated in the show cause notice, dated 20.09.1999.
3. Being aggrieved by the same, the Revenue has preferred appeals in E/500 & 501/2003/MAS, before the CESTAT, Chennai. After considering the materials on record and submissions, CESTAT, Chennai, vide order, in Final Order Nos.1534 and 1535 of 2007, dated 27.12.2007, ordered as hereunder:
"2. A long list of purported pieces of evidence proposed to be used in the adjudication of the demand is given. About thirteen are statements recorded from various individuals. However, it is not disclosed how they are involved in any offending transaction adjudicated by the Commissioner. Several events are mentioned in the so called evidences. However, it is unclear as to how they were relevant to establish the allegations. It is not indicated as to who gave the statement, date of statement (or statements) and what exactly were the contents. More importantly it is not stated in the appeal if the statements were retracted in cross examination or otherwise. The persons, firms and the documents referred to are not identified/explained in the appeal. It is also not indicated whether these pieces of evidence were useful and were used. It is not indicated in the appeal how each of the evidences listed was treated by the adjudicating authority.
3. Statement of facts details the conclusions arrived at from the above evidence at the Show Cause Notice stage. It concludes by giving a table which shows receipt of ingots by SVA and SSRM from Bannariamman Alloys Pvt. Ltd. and Sueera Alloys Pvt. Ltd. in 95-96 and 96-97. It is not indicated if the figures in the table are actuals with reference to figures appearing in proven documents. Another table gives the quantities of re-rolled products manufactured and cleared without payment of duty in 95-96 and 96-97 by SVA and SSRM. It is not indicated how these figures are obtained. However, the source or bases of these figures are not furnished. The appellant speaks of Rs.24,31,47,423/- as the amount deposited in the bank accounts of the trading firms (listed in the appeal) as observed from the bank records. In the next sentence value of CTD bars/rods manufactured and cleared without payment of duty worked out was shown as under:-
M/s. SVA M/s. SSRM TOTAL Rs.22,56,68,325/- Rs.262,64,88,747/- 4,12,20,422/-
The next sentence states that the duty alleged to have been evaded was Rs.3,37,90,249/- by SVA and Rs.61,83,063/- by SSRM. The appellant speaks of two Show Cause Notices issued and mentions that replies were furnished by the noticees. There is a reference to cross examination of various persons who had retracted their depositions made during investigation.
4. In para 10, the following account of the submissions by the Counsel for the notices is given:-
"During personal hearing on 29.4.2002, Shri Raghavan, Advocate, presented himself on behalf of the notices. He argued that the demand in the impugned SCN was not based on any material evidences recovered from the premises of the noticees and was merely based on receipt of CTD bars by some Kerala based dealers from the bill traders. He further stated that they had made prolonged correspondences with the department for providing them with copies of documents, but the Anti-Evasion directorate vide letter dated 28.7.200 had only replied that everything was available and it was for them to come and search the records and find out which was against the principle that a SCN should be self contained. He contested the allegation that the goods received by them under Rule 57 F (4) challans was more than what has been reflected in the 57F (4) challans. He further countered allegations regarding excess weight, abnormal consumption of electricity, statements recorded from the Directors of SVA/SSRM, dispatch particulars under bill traders invoices, receipt of cash through them, transactions through broker, bank transactions. He further cited various case laws in support of his arguments. In view of the above submissions, he pleaded that the SCN was based on mere presumption and assumptions and since the SCN itself was full of contradictions, further proceedings in the case be dropped."
5. The rest of the statement of facts in para 11 explained how the Commissioner had dropped proposals made in the Show Cause Notices. The same is reproduced below:-
"11. After going through the facts of the case, the Commissioner found that the quantification of demand in the show cause notice was neither based on the final product that could be manufactured out of unaccounted raw materials (said to have been received from BAS/SAPL) or based on alleged cash receipts through the cheques of the Bill Traders. He further concluded that when no enquiry had been made with the supplier of ingot, no notice had been issued to suppliers of MS ingots for clandestine removal of such ingots without payment of duty and without following procedure, the possibility of lorries carrying extra weight as suggested in the show cause notice being proved to be impossible through affidavit furnished and the record of cross examination extracted supra, the allegation in the notice that unaccounted ingots were received by SVA and SSRM did not survive. Discussing clandestine removal, the Commissioner observed that none of the trading firms' names that appear in the SCN had been mentioned in the statement of Sri.S.Sridhar which was also retracted within 24 hours. So, the evidence brought on record through the statement was of no help to the Dept. No consignment had been intercepted or seized in transit and no statement had been recorded from the owners and drivers of the lorries and the trip sheet had not been seized.
11.1 None of the persons whose signatures were found in the impugned documents were ever employed by the Noticees and there was nothing to substantiate that the signatures appearing in the correspondences were of the same persons. In the light of the material evidence on record, the Commissioner concluded that Sri Siddique of Cheran Roadways was never involved in transport of alleged unaccounted CTD bars. The Commissioner also observed that without any statement being recorded from Bill Traders, the SCN had sought to allege that those Bill Traders were not independent, but creations of SVA/SSRM. Such proposition was not agreeable.
11.2. With regard to the reason there was no response from the Bill Traders to the summons or to the newspaper advertisement did not infer that the bill traders never existed but were not available for enquiry. He further observed that the investigating officers ought to have verified the bona fides from Commercial Tax Officer (CTO) regarding the transactions and whether these Bill Traders filed returns and whether they had shown disposals for Form XX collected by them. There was no attempt in the SCN to determine quantity of unaccounted CTD bars manufactured through excess electricity consumption. The SCN stated at one side that Sri Jithu and Sri Sharma were planted names by SVA/SSRM and that nobody in that name existed. But in another part it has stated that statements from one Sri Jithendra Jain (known as Jithu) and Sri Chandrasekar Sharma were recorded. He also observed that the affidavit of Shri Kandasamy Associates, Chartered Engineers brought on record by the Noticees could not be controverted as the information furnished by them showed that electricity consumption varied on many factors. He further noticed that Sri G. Rangaraj, Staff in his statement had admitted knowing Jithu and that he had drawn money and handed over the same to him who was helping the Bill Traders in procuring orders and in collection of money. There was confirmation that unless the person who has issued cheques identifies the person to whom cash has to be handed over, the bank will not deliver the cash to third parties. Hence, the case of the department that Sri.K.Selvaraj and Sr.G.Rangaraj handed over the cash relating to cheque issued by Bill Traders to SVA/SSRM was not acceptable. Further, considering the finding that the department could not establish procurement of excess raw material or clandestine manufacture and removal of CTD bars, the logical conclusion was that there could be no cash receipt towards sale of non-existent unaccounted clearances."
6. It is difficult to make out the reasoning followed by the Commissioner in arriving at the decision he made. This part of the statement of facts refers to, apparently, valid points relevant to the decision of the Commissioner which the appellant probably disputes. However, the facts remain unclear to even a reader committed to make sense out of the narration. In four and half pages of the grounds of appeal much space is consumed in explaining how preponderance of probability is cardinal and adequate in establishing charges in quasi judicial proceedings before the departmental officers. The grounds of appeal reproduce an allegation from the show cause notice about unexplained consumption of power and suggests that the Chartered Engineer's Certificate of consumption of power (apparently accepted by the Commissioner) was inadequate explanation as it had not furnished the item-wise particulars of consumption. Apart from this, the only grounds based on which the relief is canvassed are presented in two sentences each in the form of comments on the observations of the adjudicating authority in paragraphs 8.3, 8.4, 8.5, 8.16, & 8.17. These in any case do not build up a case for the revenue or even an intelligible commentary on or sufficient grounds against the impugned order.
7. We find that the statement of facts are shabbily drafted containing mostly allegations levelled in the show cause notice described as evidence without explaining how the same were dealt with in the adjudication order. No valid or cogent grounds worth the name are advanced in the appeal to assail the order sought to be vacated. The appeal is not accompanied by a paper book with copies of documents such as statements and other evidences relied upon in the adjudication proceedings. The appeal memorandum does not set out proper grounds but only offers shallow comments on a couple of observations contained in the impugned order. We reject the appeal on these grounds."
3. Being aggrieved by the common order made in Final Order Nos.1534 and 1535 of 2007, dated 27.12.2007, instant Civil Miscellaneous Appeals have been filed, on the following substantial questions of law, "(1) Whether the order of the adjudicating Authority/2nd respondent, is per se illegal and the findings recorded therein qua the appellant are perverse and unsustainable?
(2) Whether the 2nd respondent is correct in passing an order rejecting the appeal filed by the Revenue on the ground that "they could not comprehend the substance in appeal, the statement of facts are shabbily drafted and the appeal is not accompanied by paper book"?
(3) Whether the Adjudicating Authority and the 2nd respondent are correct in holding that the show cause notice and the subsequent appeal are liable to be dismissed for non-joinder of parties?
(4) Whether the Adjudicating authority and the 2nd respondent had erred in holding that M/s.Srinivasa Steel Rolling Mills Ltd., and M/s.SVA Steel Re-Rolling Mill had not removed the goods clandestinely from their factory premises?"
4. Supporting the substantial questions of law, Mr.A.P.Srinivas, learned counsel for the appellant made submissions, on the grounds, "(i) The Tribunal ought to have elaborately elucidated the evidence, materials furnished in the show cause notice and their value, before passing the impugned orders.
(ii) The Tribunal ought to have taken note of the fact that appreciation or rejection of any piece of evidence squarely falls within the ambit of appreciation of evidence and ought not to have passed the impugned orders, either without evidence or direct nexus, between the conclusion and the primary fact, upon which, the conclusion is based and thus, the finding is perverse, as was held in Rakesh Kumar Aggarwal v. CEGAT, New Delhi, reported in 2002 (143) E.L.T. 497 (Del).
(iii) The Tribunal ought to have taken note of the fact that if an appropriate authority had misdirected itself by not applying the correct legal tests, the conclusion arrived at thereof, is irrational or perverse as was held in Terai Overseas Limited v. Commissioner of Customs, reported in 2001 (134) E.L.T. (Cal).
(iv) The Tribunal ought not to have overlooked the cardinal principle that it is the Tribunal, which is the last fact finding authority and ought not have come to the present conclusion, based on the material placed before it and thus, perverse as was held in K.Ravindranathan Nair v. Commissioner of Income Tax, Ernakulam reported in 2001 (127) ELT 11 (S.C.)."
Heard the learned counsel for the appellant and perused the materials available on record.
5. The Commissioner of Central Excise, Coimbatore, adjudicating authority, has extensively considered the evidence and submissions and ultimately, found that there is no ground to proceed against the assessees and thus, dropped all further proceedings, initiated in the show cause notice No.62 of 1999, dated 20.09.1999, issued by the Additional Director General of Anti Evasion, Chennai. CESTAT, Chennai, has considered the history of the case and after analyzing the evidence/statements, held that the appeal memorandum only reflects the comments and observations made in the adjudicating order. That apart, the CESTAT, Chennai, has held that there no sufficient grounds to interfere with the Order-in-Original.
6. Though Mr.A.P.Srinivas, learned counsel for the appellant placed reliance on the above judgments and submitted that the Tribunal did not assign valid reasons or indicated application of mind, but misdirected itself, by not applying the correct legal test and therefore, the findings are irrational or perverse, going through the entire material on record, we are of the view that both the Order-in-Original No.21/2002, dated 06.05.2002 and Final Order Nos.1534 and 1535 of 2007 in Appeal No.E/500-501/2003/MAS, dated 27.12.2007, do not attract rationality or perversity.
7. The burden to prove clandestine manufacture and removal is on the revenue. Direct evidence of clandestine removal would rarely be available and the standard of proof has to be necessarily based on preponderance of probabilities. Conjunctures and surmises cannot be the basis of proof, when clandestine removal is alleged and for establishing the said charge, there should be positive evidence. Therefore, when the department alleges clandestine production and removal of goods, without due proper accounting in the records and without payment of duty, the burden of establishing the allegation lies heavily on the department. In the case on hand, the department has not discharged the burden.
8. Concurrent findings of fact rendered by both the quasi-judicial authorities, do not call for any interference. No substantial questions of law, are involved. In view of the above, both the Civil Miscellaneous Appeals are dismissed. No costs.
(S.M.K., J.) (R.S.K., J.) 15.11.2017 Index: Yes Internet: Yes To The Customs, Excise & Service Tax Appellate Tribunal, No.26, Shastri Bhavan Annexe Building, Haddows Road, Chennai 600 006.
S.MANIKUMAR, J.
AND R.SURESH KUMAR, J.
skm C.M.A.Nos.3330 and 3331 of 2017 15.11.2017