Customs, Excise and Gold Tribunal - Delhi
Rochees Watches Ltd. And Ors. vs Cce on 6 May, 2005
Equivalent citations: 2006(197)ELT218(TRI-DEL)
ORDER P.S. Bajaj, Member (J)
1. The above captioned appeals have been directed against the common order-in-Original vide which different amounts of duties with penalties had been confirmed against the appellants by the adjudicating authority.
2. Proceedings against all the appellants were initiated on the strength of a common show cause notice dated 21.5.2003 under which the duty demand based on the shortage of inputs/finished goods and clandestine removal of the same was raised and penalties were also proposed to be imposed on them. The adjudicating authority had confirmed the duty demand and imposed penalties as detailed in the impugned order against all the appellants.
3. In this appeal, Company M/s. Rochees Watches Ltd (in short 'RWL') is the appellants. The learned counsel has contended that there is no tangible evidence on the record to substantiate the charge of clandestine removal of the goods during the period in dispute by this company and as such the impugned order confirming the duty with penalties deserves to be set aside. On the other hand, the learned SDR has reiterated the correctness of the impugned order and stated that thee is ample evidence on the record to prove the clandestine removal of the goods by the appellant company, M/s. RWL.
4. We find from the record that the appellant imported 255970 mechanical watch movements and availed modvat credit of Rs. 24,35,647/- in respect thereof. These movements were imported by them for manufacture of quartz watches. But such movements could not be used in the manufacture of these watches and this fact had not been disputed by Shri Ishar Das Moolrajani, the Managing Director of the company. The plea of the appellant company that in fact that those were not mechanical watch movements, but quartz watch movements which were imported through Bill of Entry and the same were utilized in the manufacture of the quartz watches, in our view, had been rightly rejected by the adjudicating authority. In all the Bill of Entry, the description of the movements recorded was watch movement mechanical. But the appellant company with a view to create the evidence of having imported quartz watch movements erased the word mechanical by applying white fluid in those Bill of Entry. They also to camouflage the illegal act, entered those movements as quartz movements in the record i.e. Form IV register and RG 23A Part-I register. Shri Isher Das Mull Raj, Managing Director of the company, when confronted with the documents could not offer any plausible explanation. The mechanical watch movements were never used by them admittedly and as such no modvat credit could legally be claimed by them in respect thereof. Therefore, the duty demand of Rs. 24,35,647/- in respect of these watch movements on which the appellant company claimed modvat credit illgally had been rightly demanded and confirmed against them.
5. The shortage of 96017 pieces of watch cases and 7548 pieces of quartz movements on physical stock verification taken by the officers in the factory premises of the appellants company allegedly was detected as detailed in the show cause notice involving duty of Rs. 36,87,053/- and Rs. 64,410/- respectively. But this shortage had been duly explained by the appellant company. According to the company, it had stock of very old watch cases/quartz movements which were not useable/saleable and as such those were, re-melted, resulting in the shortage of the watch cases and this explanation could not be out rightly rejected by the adjudicating authority, for want of any evidence to prove the clandestine clearance of the same by the company in the market to various buyers. In the absence of any tangible evidence regarding removal and sale of short found watch cases and quartz movement, the duty in respect thereof could not be confirmed on the company by drawing assumptions and presumptions in the regard. There is no tangible evidence to establish that these goods were cleared by the company in the market. No oral or documentary evidence in this regard had been collected. Therefore, the duty demand of Rs. 36,87,053/- and Rs. 61,450/- against the company in respect of these goods, is set aside.
6. We also find that the duty demand of Rs. 69,79,797/- has been raised against the company on account of clandestine removal of 247007 watch cases. This demand, in fact, had been based on the strength of rough entries in a pad and some loose papers found in the factory at the time of visit by the officers. But allowed to cross-examine them. Therefore, these two duty demands are also set aside.
7. In this appeal M/s. Rachi Ram and Sons (in short M/s. RSS) is the appellant. The duty demand has been raised against this firm for having wrongly availed modvat credit on the imported mechanical watch movements and removed the quartz watches in a clandestine manner. We find that duty of Rs. 5,12,343/- and Rs. 6,79,563/- had been confirmed against the appellant firm on account of fraudulent availment of modvat credit on the mechanical watch movements not physically received by them and duty of Rs. 6,75,109/- has been confirmed against them on account of clandestine removal of the wrist watches without payment of duty during the period in question. The contention raised by the learned Counsel that the demand for wrong availment of credit amounts, had been wrongly confirmed without any tangible evidence to substantiate the allegations, in our view, is not liable to be accepted. We find that the firm had shown the use of mechanical watch movements in the manufacture of digital electronic watches whereas in such watches, these movements could not be used at all as for the manufacture of digital electronics watches, digital modules are required. This fact had been also not disputed by Shri Isher Das Moolrajani, partner of the very author of the entries in the documents had not been identified. Mere unsatisfactory explanation regarding the entries in these documents by the M.D. and authorized signatory of the company, did not warrant an inference that these goods were manufactured and removed clandestinely, especially when there is not tangible evidence to prove the correctness of these entries and actual removal of goods to various buyers by the company in the market. Even the names of buyers had not been identified to whom the goods were cleared. Therefore, the duty demand of the above referred amount in respect of these goods, is set aside, in the light of the above referred facts and ratio of the law laid down in the case of Sukh Ram and Sons v. UOI, 1978 (2) ELT 525; and Collector of Central Excise v. Decent Dyeing Co. 1990 (45) ELT 201 (SC), that it is for the Department to prove the removal of the goods without payment of duty by the manufacturer.
8. Similarly, duty demand of Rs. 36,587/- and of Rs. 26,066/- on the basis of note pads and loose papers recovered from two dealers of the watches, showing sale of writs watches value at Rs. 9652.50, to a dealer of Jabalpur and of 316 wrist watches to a dealer in Gwalior, could not be legally confirmed, as none of the dealers had disclosed the name of any employee/person of the company who sold these watches to them against cash payment. The entries in their rough record, could not be used against the company, especially when they were not the firm in his statement recorded on 27.12.2001 and 23.2.2003. Therefore, it is quite evident that the appellant firm has wrongly availed the credit on the mechanical watch movements which were never utilized by them in the manufacture of digital electronic watches. Therefore, duty demand, detailed above, has been rightly confirmed against the firm for wrong availment of the credit.
9. However, the clandestine removal of the goods (quartz watches) involving duty of Rs. 6,75,109/- by the appellant firm, does not stand proved from any reliable evidence. This duty has been confirmed only on the basis of torn slips recovered from the premises of the firm. But the slips did not contain the names of buyers to whom watches were sold. The ocular testimony of Shri Vinod Arora,Manager, could not taken as sufficient proof of removal of watches by the firm as entered in the slips without corroboration from any other tangible evidence. No statement of any buyer had been recorded in the regard. Even names of the buyers had not been identified to whom the watches were sold by the firm during the disputed period without payment of duty. Therefore, the duty demand of Rs. 6,75,109/- is set aside.
10. Similarly, demand of Rs. 4,86,110/- by disallowing the CENVAT credit on the mechanical watch movements on the ground of having not received/utilized in the factory for the manufacture of watches, is not sustainable for want of any reliable evident to substantiate the same. No evidence regarding clandestine removal of these goods had been brought on record; simple inability on the pat of the Manager Shri Vinod Arora, to offer explanation about these goods could not be accepted as a conclusive proof of removal of the goods in a clandestine manner, when we find that the firm has placed on record evidence to show the clearance of the watches produced out of these movements, on payment of duty. Therefore, duty demand of Rs. 4,86,110/- is set aside.
11. However, demand of Rs. 14,881/- by denying credit on the imported quartz movements, has been rightly confirmed as these goods were never received by the firm.
12. In this appeal, M/s. Rajasthan Watch Manufacturers (in short "RMW"), is the appellant. The duty demand of Rs. 79,565/-, Rs. 47,876/- Rs. 1,29,454/- has been confirmed against this firm by denying the credit on imported watch movements which were allegedly removed as such. But no tangible evidence has been produced to prove the removal of these goods as such after taking the credit by the firm. No statement of any buyer to whom the goods were sold, had been brought on record. Mere non-manufacture of mechanical watches during the period in dispute by the firm did not lend to an irresistible conclusion that the watch movements were disposed of as such, especially when the firm had offered explanation that the movements were rendered waste. Moreover, in the RG-1 Register, the movements of the goods had been shown, we also find that when credit was taken by the firm of CV duty, it was not working under any exemption, but subsequently, the firm started availing exemption under notification No. 8/2000-CE dated 1.3.2000. They accordingly reversed the credit while removing the goods in question. The ocular statement of Shri Deepak Kumar Paramnani, Salesman and of Raju Ramchan, of the firm M/s. Atma Ram & Sons, regarding clandestine sale of the watches by the appellant firm, could not be accepted for want of corroboration from any documentary evidence. Therefore, duty demands detailed above are set aside.
13. The duty demand of Rs. 15,49,762/- has been confirmed against the appellant, M/s. India Watch Parts Manufactures (in short 'IWPM') for having wrongly availed modvat credit on mechanical and quartz watch movements during the period in question, but removed later on in a clandestine manner as such. This charge, in our view, stands corroborated from the documentary evidence. The stock of mechanical watch movement as on 1.4.1998 was shown NIL by the firm, but their RG-I, Register and RT-12 return revealed that they had not manufactured mechanical watches during the year 1988-99. It has been clearly admitted by Shri Isher Das Moolrajani, that the firm has wrongly availed the modvat credit on the mechanical watch movements. The mechanical watch movements could not be utilized in the manufacture of digital electronic watches as in those watches digital modules were required. The firm has wrongly shown entries in the account of module of digital watches as well as in the account of mechanical watch movement, to show the use of these movements. It also stands proved that they illegally obliterated the description of the movements on the duty paying documents. The watch movements in question on which credit was taken by the appellant firm in fact were never used by them in the manufacture of the watches. Therefore, the argument of the learned counsel that the charge is based on no evidence is totally misconceived and cannot be accepted. The duty demands of Rs. 15,49,762/- is upheld.
14. In view of the discussion made above, the impugned order in appeal No. E/2668/04-B is set aside in toto, whereas in appeal Nos. E/2666/04-B, E/2667/04-B & E/2669/04-B is modified in respect of the duties detailed above. In appeal No. E/2666/4-B, the penalty is reduced to Rs. 2.5 lakhs (rupees two lakhs and fifty thousand only), in appeal no. E/2667/04-B; the penalty is reduced to Rs. 1 lakh (rupees one lakh only); and in appeal no. E/2669/04-B, the penalty is reduced to reduced to Rs. 1.5 lakhs (rupees one lakh and fifty thousand only). However, for want of any evidence to prove the active role of the appellants, Sh. Ishwar Das Moolrajani and Mirchuman Chandani in abetting the evasion of duty/wrong availment of the modvat credit by the other appellants, the penalties imposed on them under Rule 209-A of the Rules, are set aside.
15. The appeal stand disposed of in the above terms with consequential relief, if any, permissible under the law.