Customs, Excise and Gold Tribunal - Delhi
Freezair India (P) Ltd. vs Commissioner Of Central Excise on 18 December, 2002
Equivalent citations: 2003(152)ELT321(TRI-DEL)
ORDER P.G. Chacko, Member (J)
1. These three appeals are against the Order-in-Original No. 23/2000, dated 28-9-2000 passed by the jurisdictional Commissioner of Central Excise confirming against M/s. Freezair India (P) Ltd. a demand of duty of Rs. 45,62,325/- under Rule 9(2} read with the proviso to Sub-section (1) of Section 11A, imposing a penalty of equal amount on them under Section 11AC read with Rule 173Q and imposing personal penalties of Rs. 3 lakhs and Rs. 2 lakhs on Shri Kuldeep Singh Punn and Shri Narender Singh Punn respectively under Rule 209A. Appeal No. E/3572/2000-NB(D) is by M/s. Freezair India (P) Ltd. (in short, M/s. Freezair) against the demand of duty and the penalty of equal amount, and Appeal Nos. E/3573 and 3588/2000-NB(D) respectively by Shri Narender Singh Punn and Shri Kuldeep Singh Punn against the respective penalties imposed on them.
2. Two Misc. applications are also before us. The Application No. 397/2001 was filed by M/s. Freezair seeking to raise an additional ground in their appeal, whereby they wanted to raise a contention that the indoor unit/air cooling unit meant for split air-conditioner was not excisable. It was submitted by the Counsel for the appellants at the time of final hearing that they did not press this application. Accordingly, Misc. Application No. 397/2001 is dismissed.
3. The other application before us is E/Misc/489/2001 which was also filed by M/s, Freezair seeking to introduce certain other additional grounds for their appeal. The claim for abatement of the element of duty from the invoice price of the goods for the purpose of determining the assessable value of the goods was sought to be incorporated in the appeal by way of this application. In this application, M/s. Freezair raised a further ground that, during the year 1997-98, their value of clearance was below Rs. 50 lakhs and therefore, they were entitled to SSI exemption. It was pointed out that the additional grounds sought to be raised in the appeal were based on materials already forming part of the case record and that no new evidence was taken into account. After a perusal of the records of the case and careful examination of the submissions made by both sides, we find that this application has to be accepted. Accordingly, Misc. application No. 489/2001 is allowed.
4. The case was initiated by show-cause notice dated 3-5-2000 issued by the Commissioner in relation to the period 1996-97 to 1998-99 by invoking the extended period of limitation under the proviso to Section 11A(1) of the Central Excise Act. The notice was based on certain investigative results. The officers of Central Excise visited the factory premises of M/s. Freezair at Indira Market Naraina on 22-4-99 and seized raw material valued at over Rs. 7 lakhs, which was lying in the adjacent premises, as no documentary proof of lawful acquisition of the material was produced by them. The officers searched their godown at South Patel Nagar and seized 43 pieces of cooling units 309 pieces of evaporative coils, 99 blowers with body of split air-conditioner and 200 pieces of Remote hand sets for split air-conditioners, as no evidence of legal acquisition of the goods was produced. The officers, later on, visited the premises of some of the dealers of M/s. Freezair and seized cooling units of split air-conditioners. They also searched the residential premises of the Directors of the Company, Shri Kuldeep Singh Punn and Shri Narender Singh Punn at South Patel Nagar and recovered certain documents/papers. The documents/papers recovered from their residential and factory premises and from other sources included original invoices, photocopies of invoices, delivery receipts, slips, and four mini spiral pads (diaries). The diaries (which were recovered from the residences) mentioned the names of some of the customers of M/s. Freezair. The officers also searched the premises of a party who had supplied Remote controls to M/s. Freezair and recovered papers containing the details of manufacture and clearance of remote controls. The Managing Director of that company stated that they had cleared 120 pieces of Remote control, without bills, to M/s. Freezair. Statements were recorded from Shri Kuldeep Singh Punn and Shri Narender Singh Punn (Directors of the appellant company) Shri S.K. Gaur (Accountant of the appellant-company) and representatives of customers of the appellant-company.
5. It appeared from the investigative results that M/s. Freezair manufactured and cleared excisable goods without payment of duty of excise amounting to Rs. 45,62,325/- during the years 1996-97, 1997-98 and 1998-1999. It appeared, they wilfully suppressed the manufacture of the goods and made clearance thereof clandestinely, without getting themselves registered with the Central Excise Department, without accounting for the production and clearance in statutory records, without submitting RT 12 returns/classification declarations/price declarations, without following the prescribed procedure and without maintaining statutory records, with intent to evade payment of duty. The Department, therefore, concluded that the amount of duty was recoverable from M/s. Freezair by invoking the extended period of limitation under Section 11A. It was also thought that M/s. Freezair and the two directors were liable to be penalised. Hence the show cause notice. The allegations in the show-cause notice were denied in the reply submitted on behalf of the parties by their Counsel. In adjudication of the dispute, the Commissioner passed the impugned order.
6. Examined the records and heard both the sides. The learned Advocate Shri Harbans Singh, representing M/s. Freezair and Shri Narender Singh Punn, submitted that M/s. Freezair India (P) Ltd. came into existence only on 1-4-98 with M/s. Kuldeep Singh Punn and Narender Singh Punn as directors and that, prior to the said date, the manufacturing activity was being undertaken by Shri Kuldip Singh Punn in the name and style of a proprietory concern. 'The advocate contended that it was only the manufacturer of the goods who was liable to pay duty of excise. M/s. Freezair India (P) Ltd. were not manufacturers of the goods prior to 1-4-98. In this case, the assessment was done on M/s. Freezair even for the period prior to 1-4-98, during which period they were not in existence. The Counsel submitted that assessment could be made only on the manufacturer of the goods, though recovery of the duty assessed could be made from the transferee of the as-sessee-unit. The Counsel cited on the following decisions in this connection :
Makers Development Services Pvt Ltd. v. CCE - 1998 (33) E.L.T. 126, Perfect Cartons, Cochin v. CC, Cochin - 1987 (29) E.L.T. 254.
Relying on the cited case law, the Counsel submitted that the duty of excise demanded from M/s. Freezair for the period prior to 1-4-98 was, in any case, not recoverable from them. Yet another contention raised by the Counsel was that the duty element ought to have been deducted from the invoice price of the goods for the purpose of determining the assessable value of the goods in terms of Section 4(4)(d)(ii) of the Central Excise Act. In this connection, he also relied on the decision of the Larger Bench of the Tribunal in the case of Srichakra Tyres Ltd. v. CCE, Madras [1999 (108) E.L.T. 361 (T) = 1999 (32) RLT 1]. The learned Counsel further submitted that, during the year 1997-98, the value of the goods cleared by M/s. Freezair was below Rs. 50 lakhs and therefore, the benefit of SSI exemption was available to them. This benefit was also not granted by the Commissioner.
7. Referring to the penalty imposed by the Commissioner on Shri Narender Singh Punn, the Counsel submitted that Narender was not in any way concerned with the manufacturing activity prior to 1-4-98 as, during that period, the activity was carried out by the proprietory concern of Shri Kuldeep Singh Punn, with which Shri Narender Singh Punn had nothing to do. The Counsel, further, pointed out that, in the impugned order, there was no finding on penal liability of the appellants.
8. The learned Counsel Shri K.K. Anand, who represented Shri Kuldeep Singh in Appeal No. 3588, adopted the arguments of Shri Harbans Singh.
9. The learned DR referred elaborately to the various statements of the appellants and others given under Section 14 of the Central Excise Act, and claimed that the Department's case was virtually conceded by the appellants. He submitted that, in the factory premises of M/s. Freezair, another company, namely, M/s. IPUNN Temp. Control (P) Ltd. was feigning to be working, which had no capital goods or workers for any manufacturing activity but was issuing invoices showing clearance of excisable goods. The goods shown to have been cleared under such invoices had, in fact, been manufactured by M/s. Freezair. The learned DR submitted that this was a colourable device by M/s. Freezair to evade payment of duty. He relied on the Supreme Court's decision in the case of Calcutta Chromotype Ltd. v. CCE, Calcutta - [1998 (99) E.L.T. 202 (S.C.)]. Regarding the claim for abatement of duty, the learned DR submitted that such abatement had already been given by the Commissioner.
10. We have examined the submissions. After a perusal of the statements of Shri Kuldeep Singh Punn, Shri Narender Singh Punn, Shri S.K. Gaur, and the representatives of the suppliers and customers of M/s. Freezair, we find that the department has a well-knit case against M/s. Freezair India (Pvt.) Ltd. in so far as the demand of duty is concerned. The appellants could not successfully rebut the Department's case that they manufactured and cleared air-conditioners and parts thereof without payment of duty and without observing any of the requirements under the Central Excise Act/Rules during the period 1996-97 to 1998-99. The appellants have no case that the goods were not excisable. They also do not say that they had taken Central Excise registration, maintained statutory records, filed classification declarations/price declarations, cleared the goods on payment of duty, filed RT 12 returns and the like. Suppression of facts, alleged by the Department, has not been seriously contested. The Revenue's case for recovery of duty of excise on the goods cleared during the aforesaid period is based on certain documents resumed by officers of Central Excise from the possession of the appellants and certain other documents supplied by the informer. These documents are four mini spiral pads/diaries, original invoices, photocopies of invoices, copies of delivery receipts/slips. The mini spiral pads recovered from the residences of Shri Kuldeep Singh and Narender Singh revealed that M/s. Freezair had manufactured and clandestinely cleared goods valued at Rs. 82,88,075.40 from 1-7-96 to 28-12-96 without payment of duty or observing other Central Excise formalities. The other documents revealed that they had clandestinely manufactured and cleared goods valued at Rs. 32,17,200/- and Rs. 18,99,100/- in 1997-98 and 1998-99 respectively without payment of duty or observing other Central Excise formalities. Shri Kuldeep Singh Punn admitted these facts in his statements dated 22-4-1999, 6-5-99, 13-7-99 and 17-4-2000. In these appeals, they have claimed that they were pressurized to give those statements. It is hard to accept this claim inasmuch as, the statements given by Shri Kuldeep Singh Punn at different points of time were, by and large, consistent on factual aspects and he never chose to retract any of the statements. Shri Narender Singh Punn also admitted the clandestine removal of goods from their Patel Nagar godown. When confronted with the aforesaid documents, neither of the two brothers was able to rebut the Department's case. Shri S.K. Gaur, Chartered Accountant of the appellants, stated that the invoices had been prepared by him under instructions of Shri Kuldeep Singh Punn; that the production of goods recorded by him in RG.I was of such quantities of the goods as were required to be entered in the register, by Shri Kuldeep Singh Punn, and that the slips issued by their customers used to be directly submitted by them to the Directors. The implicating statements of Shri S.K. Gaur have not been contradicted by the appellants. Gaur was not cross-examined by any of the appellants. The customers, in their statements given under Section 14 of the Central Excise Act, admitted that the goods were received without bills and without payment of duty from M/s-Freezaip. None of these witnesses has been cross-examined in this case, nor even sought to be cross-examined. Thus the evidence adduced by the Department has, by and large, gone unrebutted. All the documents viz. the original invoices, the photo-copies of invoices, the spiral pads/diaries and the delivery receipts were admitted to be genuine by the Directors and their Chartered Accountant. Therefore, the finding of the Commissioner that M/s. Freezair evaded duty on air-conditioners and parts thereof during the period of dispute has to be sustained, and we do so. In this context, it is pertinent to note that there has been no serious challenge to the demand of duty on the ground of limitation.
11. A contentious issue raised in this case is whether M/s. Freezair were liable to pay duty for the period prior to 1-4-98. Admittedly, the company is successor-in-interest to the proprietory concern of Shri Kuldeep Singh Punn. The company inherited all the rights and liabilities of the proprietory concern, a fact conceded by the appellants. The liabilities inherited by the company from the proprietory concern included the liability to be assessed and to pay the duty of excise. In so far as the goods manufactured and cleared by Kuldeep Singh Punn prior to 1-4-98 are concerned, M/s. Freezair stood in the shoes of the manufacturer and were, therefore, liable to be assessed to duty. It follows that the company had the liability to pay duty on such goods. None of the decisions cited by the learned Counsel appears to support a contrary view.
12. A claim for abatement of duty element from invoiced price in determining the assessable value of the goods has also been raised in this case as already noted. This claim is based on certain documents now available on record. These documents were, apparently, not made available to the Commissioner. We are of the view that this claim has to be considered by the adjudicating authority in terms of Section 4(4)(d)(ii) of the Central Excise Act and the decision of the Tribunal's Larger Bench in Shri Chakra Tyres (supra). That authority will also examine the claim of SSI exemption based on aggregate value of clearances of goods. The Commissioner shall give the appellants a reasonable opportunity of being heard on these limited aspects and re-quantify the demand of duty after carefully examining the above claim.
13. Having found that the appellants, with intent to evade payment of duty, suppressed their manufacturing activity and clearance of excisable goods and also contravened Central Excise Rules as alleged in the show-cause notice, we have also to uphold the demand of interest under Section 11AB. However, such demand cannot be raised on the duty payable for the period prior to 28-9-96, Section 11AB having come into force only on 28-9-96.
14. The Commissioner has imposed a penalty of Rs. 45,62,3257- on M/s. Freezair under Section 11AC read with Rule 173Q. Section 11AC and Rule 173Q are independent provisions standing on different footings. One cannot be read with the other. The learned Commissioner has not given any break-up of the penalty between the two provisions. Therefore, we are unable to sustain the penalty. The Commissioner will be at liberty to decide afresh on the question whether separate penalties under Section 11 AC and Rule 173Q were liable to be imposed on M/s. Freezair and, if so, to what extent. But, while doing so, the adjudicating authority shall bear in mind that Section 11AC was not in the statute book prior to 28-9-96.
15. Personal penalties have been imposed on the Directors of the company under Rule 209A. For imposing a penalty under this provision of law, there should be a finding that the person sought to be penalised under this provision had acquired possession of, or was in any way concerned in transporting, removing, depositing, keeping, concealing, selling or purchasing or in any other manner dealt with any excisable goods which, he knew or believed, were liable to confiscation under the Central Excise Act or Rules. In this case, however, the Commissioner has not confiscated any excisable goods nor has he found that the Punn brothers were in possession of any excisable goods or had dealt with such goods in any manner with the knowledge/belief that the goods were liable to confiscation. That being so, we are unable to sustain the penalties imposed on the Punn brothers. These penalties are set aside. In the result, Appeal Nos. 3573 and 3588/2000 are allowed.
16. Appeal No. 3572/2000 is disposed of in the following terms:
(a) M/s. Freezair are held liable to pay duty of excise on the goods cleared by them without payment of duty during 1996-97 to 1998-99;
(b) The learned Commissioner shall re-quantify the duty in the manner already spelt out in this order;
(c) The penalty of Rs. 45,62,325/- is set aside. The Commissioner shall take fresh decision on penal liability under Section 11-AC and under Rule 173-Q in the manner already spelt out;
(d) The order for recovery of appropriate amount of interest under Section 11-AB is upheld. The adjudicating authority shall, however, have to clarify the appropriate amount in terms of this order;
(e) The amounts of Rs. 5 lakhs and Rs. 28,374/- already deposited by M/s. Freezair shall be appropriated towards the duty to be re-quantified and demanded by the Commissioner;
(f) The appellants shall be given a reasonable opportunity of being heard on the remanded issues.