Custom, Excise & Service Tax Tribunal
Kunj Alloys Pvt. Ltd. vs Coms,C.Ex,Cus &Amp; S.Tax - Bbsr-I on 19 July, 2018
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL,
EAST REGIONAL BENCH : KOLKATA
Ex.Appeal Nos.627,628/06
(Arising out of Order-in-Original No.CCE/BBSR I/04/2006
dt.28.07.2006 passed by Commissioner (Appeals) of Central Excise,
Customs & S.Tax, BBSR I)
M/s Kunj Alloys Pvt. Ltd.
Shree Vineet Mohan Gupta
Applicant (s)/Appellant (s)
Vs.
CCEx., Cus. & S.Tax, BBSR I
Respondent (s)
Appearance:
Shri K.K.Achariya, Adv. for the Appellant (s) Shri D. Halder, Asstt. Commr. (A.R.) for the Revenue CORAM:
HON'BLE SHRI P. K. CHOUDHARY, JUDICIAL MEMBER HON'BLE SHRI BIJAY KUMAR, TECHNICAL MEMBER Date of Hearing : 19.07.2018 Date of Decision : 20.09.2018 Final Order No.FO/76667-76668/2018 Per Shri P. K. Choudhary :
The present appeals are filed by Appellants against Order-in- Original No.CCE/BBSR I/04/2006 dt.28.07.2006 passed by Commissioner (Appeals) of Central Excise, Customs & S.Tax, BBSR I.
2. Briefly stated the facts of the case are that the appellant is a manufacturer of aluminium wire rod & aluminium alloy wire rod, which are used for drawing of aluminium /aluminium alloy wires for further manufacture of conductor (those are used for overhead transmission of electricity). The main buyers for the conductors are various State Electricity Boards/Power Grid Corporations through open tender. 2
Ex.Appeal Nos. 627,628/06 Purity of raw aluminium ingots used for making wire rods is 99.7% or above. The appellant manufactures wire rods only on its own account or as a job-worker of the Group Companies, i.e. (i) Gupta Cables Pvt. Ltd. (GCPL), (ii) Tirupati Conductors Pvt. Ltd. (TCPL), (iii) Bharat Electrical & Accessories Pvt. Ltd. (BEAPL) and Hitech Powercon Pvt. Ltd. (Hi-tech). The Commissioner vide Order-in-Original No.CCE/BBSR I/04/2006 dt.28.07.2006 issued on 16.08.2006 had confirmed the demand of Rs.69,47,128/- along with interest and imposed equal amount of penalty under Section 11AC of the Central Excise Act, 1944 read with Rule 25 of the Central Excise Rules, 2002. He also imposed penalty of Rs.35,00,000/- on Shri Vineet Mohan Gupta, Director of M/s Kunj Alloys Pvt. Ltd. Being aggrieved with the said Order, the appellants have filed the present appeals before the Tribunal.
3.1 The ld.Advocate appearing on behalf of the appellant, submits that on the basis of intelligence report that Gupta Cables Pvt. Ltd. (GCPL) was engaged in availing irregular modvat credit in terms of Notification No.214/86-CE dated 25.03.1986. Search by DGCEI was conducted in all the Group Companies including the Appellant Company on 25.09.2003. Several records/documents were seized and the below mentioned table shows the documents, of which, clandestine removal of 493.404 MT of aluminium/alloy wire rods were alleged to have been removed clandestinely without payment of Central Excise duty :
3
Ex.Appeal Nos. 627,628/06 Document Description Contents Page Marked of Document reference in paper book 17/FAC/KUNJ/03 Gate Pass Book Gate Passes for 109 to 2015 outgoing Materials of different parties 16/FAC/KUNJ/03 Delivery Challan Delivery Challans 208 to 253 Book issued by the Appellant for Wire Rods dispatched to its Group companies.
07/FAC/KUNJ/03 Record of Wire Finished goods 257 to 274
Rods outgoing (page 257
dispatched, to 264)
11/FAC/KUNJ/03 Material Gate Register 279 to 324
Outward containing entries of
Register all materials going
outward.
36/FAC/KUNJ/03 Computer print- Party- wise 325 to 335
out of party- dispatch of
wise dispatches finished goods
from January 2003
to September 2003
& summary thereof
in last page.
05/FAC/KUNJ/03 Daily Prodn. Hand written 340 to 406
Report account of day-to-
Register day production and
dispatches.
06/FAC/KUNJ/03 Stock Indicating date wise 409 to 420
Register dispatches of
Alloy Rod.
The ld.Advocate for the appellants also submits that during the period from 01.01.2003 to 11.08.2003, 147 entries of dispatches have been recorded. Out of the said 147 entries, 95 entries of dispatches tallied with entries in 7 different types of records maintained at various stages. The ld.Advocate submits that the remaining 52 entries/consignments did not tally with any other records and the same are related to job-work and the appellant being a job-worker was entitled to the benefit of Notification No.214/86-CE dated 25.03.1986 (supra) and no Excise duty was payable on such work. 4
Ex.Appeal Nos. 627,628/06 Such activity not being manufacturing in nature, so far as the Appellant is concerned, strict procedure of Excise Law was not applicable while delivery of the goods to the owner thereof. In certain cases, the job worked goods were also sent to intermittent manufacturer at the instance of owner-manufacturer. The ld.Advocate strongly contended that all the documents are available with the appellant to prove that the activity was job-work and those records/documents were ignored by the Adjudicating Authority. Besides the above, there is no evidence whatsoever on record to corroborate the allegation of clandestine removal. Even there is no allegation of any discrepancy in stock of finished goods or raw materials on the date of search. It is his submission that they are disputing any of the said 52 entries of removals shown in seized record No.07/FAC/KUNJ/03 totalling 493.404 MT of aluminium/alloy wire rods. It is his submission that the seized records were not properly examined and the job works done for three concerns in question were held to be manufacture and removal of excisable goods. 3.2 The ld.Counsel submitted that allegation of clandestine removal cannot be unilaterally based on a set of registers containing entries of 'Out Going' materials only, without any corroboration whatsoever. He also argued that though in the course of search, the DGCEI Officials had seized the registers/records of inward receipt of inputs, they did not rely upon those and returned those to the appellant. Therefore, in the course of cross examination of the DGCEI Officials during personal hearing of the case on 31.12.2005, the Appellant produced the 5 Ex.Appeal Nos. 627,628/06 following seized records/documents, evidencing inward receipt of inputs, got those identified by the seizing Officials and the Ld. Commissioner, having appreciated the relevance and evidentiary value thereof, admitted those on records in the course of personal hearing. :-
Document Description Contents Page
marked of reference
Document in
paper book
10/FAC/KUNJ/03 Inward Date-wise details of all 444 to 472
receipts inward receipts
register
13/FAC/KUNJ/03 Ingot receipt Date-wise details of 476 to 486
register receipt of Ingot with
name of suppliers [in
continuation to receipts of
Ingots shown in (pates
268-274) seized record
No. 07/FC/KUNJ03]
21/FAC/KUNJ/03 Purchase Invoices of Ingots 488 to 508
Invoices purchased by the
Appellant from NALCO
22/FAC/KUNJ/03 Cenvat file Duty paying documents 510 to 545
2003-04 against which the
Appellant availed input
credit.
24/FAC/KUNJ/03 Cenvat file Duty paying documents 547 to 577
2002-03 against which the
Appellant availed input
credit.
35/FAC/KUNJ/03 Stock register Month-wise stock account 580 to 595
of Aluminium of Aluminium Ingot from
Ingots 2002- Jan. To Sept. 2003
03 & 2003-04
39/FAC/KUNJ/03 Job Work Job work Challans against 597 to 648
Challan file which Appellant received
Aluminium Ingots from
principal manufacturer for
conversion to Wire Rod.
3.3 In the course of personal hearing on 31.12.2005, the appellant also cross examined Sri Abhiram Das, who admittedly was looking 6 Ex.Appeal Nos. 627,628/06 after Central Excise related works of the Appellant. In the course of cross-examination, Abhiram Das stated " I joined Kunj Alloys on 1.4.2003......" Prior to joining Kunj Alloys, I never dealt with Central Excise matters. Whatever I learnt about Central Excsie procedures & formalities I learnt those in Kunj Alloy only'........" I was following the said procedures from August 2003, but prior to that there were procedural discrepancies in maintaining paper works". Indeed the aforesaid statement of Sri Abhiram Das is corroborated from the fact on record that though the search was conducted in the appellant's factory on 25.09.2003, no discrepancy in record keeping was observed during the period from August to 25.09.2003. 3.4 Further, the ld.Counsel made the Bench to through a reconciliation statement as under (page 665 to 670 of the paper book), extracting the figures from its statutory records -
OWN MANUFACTURING JOB WORK
a Ingot purchased 224.412 MT a Ingot received 1465.772
MT
b Wire Rod sold 218.476 MT b Wire Rod 1421.785
returned to MT
principal
manufacturer
c Scrap/in-process Nil c Scrap/in-process 16.415 MT
stock stock
d Difference 5.936 MT d Difference 27.572 MT
[a-(b+c)] (2.6%- Loss) [a-(b+c)] (1.90%-
Loss)
TOTAL
a Total input (own purchase+ job work) 1690.184 MT
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Ex.Appeal Nos. 627,628/06
b Total removal as per statutory records 1640.261 MT
c Scrap/in-process stock 16.415 MT
Difference [a-(b+c)] 33.508 MT (2%)
On the basis of the aforesaid reconciliation statement, it is submitted that they did not purchase any Aluminium Ingot on its own account during the period April 2003 to July 2003, the appellant submitted that all the Wire Rods alleged to have been removed by the Appellant clandestinely, were manufactured out of Aluminium Ingots received by it from principal manufacturer for conversion on job work basis under Notification No. 214/86-CE dated 25.03.1996 and therefore those are not liable to Central Excise Duty in the hands of the Appellant. The appellant pointed out that its total procurement of Aluminium Ingots (both on its own account as well as from principal manufacturer for job work) reconciled with the total removals made by it, as recorded in the documents relied upon in the SCN.
3.5 The ld.Advocate further contended that there is nothing on record that the appellant had purchased raw materials. The Appellant Company being a SSI Unit is also a registered dealer under State Sales Tax Law and also under the Central Excise Act, 1944. 3.6 According to him without reconciliation of the seized records, the job-work items were misconstrued to be manufactured without going through the contract between the parties. The Appellant was neither called upon to produce evidence from the owner of the goods nor they 8 Ex.Appeal Nos. 627,628/06 were examined for which entire case was decided against Appellant without any contrary evidence on record. He also invited attention to the Chartered Accountant's Certificate showing that the owner of goods have received their own goods after being processed by the Appellant on job-work basis.
4. The ld. DR appearing on behalf of the Revenue submitted that the proceeding was initiated on the basis of the outcome of the search made on 25.09.2003 who found various incriminating documents were found in the course of search. There was a simultaneous search operation to the premises of the Appellant as well as other three connected units of the same group to which the Appellant belongs. By the efforts of the investigation, the concealed documents were detected. According to the ld.D.R., the Appellants commenced commercial production on 18.01.2003.
5. Heard both sides and perused the appeal records.
6. We observe that within a period of eight months of commencement of commercial production, there was a search conducted in the factory premises of the appellant and its other three group companies. On examination of the documents/records, the investigation team alleged clandestine removal of goods.
7. Almost all the removals (listed in internal page 6 & 7 of the impugned order) were admittedly made to the Group Companies of the Appellant, which were simultaneously searched on 25.09.2003 along with the Appellant company. Receipt of the converted Wire Rods by 9 Ex.Appeal Nos. 627,628/06 the said group companies from the Appellant has never been disputed and in the course of search of the group companies by DGCEI, there was no detection of any excess stock of Wire Rods. On the contrary, the Appellant submitted certificates from independent Chartered Accountant certifying that the group companies (principal manufacturer) have received back commensurate quantities of Wire Rods from the Appellant Company against Ingots supplied by them under job work challans. It is pertinent to note that, while no discrepancy whatsoever was found in the Appellant's group companies, namely Bharat Electrical & Accessories Pvt. Ltd. (BEAPL) and Hi-Tech Powercon (P) Ltd. (Hi-tech) and therefore no Show Cause Notices were issued to them, separate Show Cause Notices were issued to Gupta cables Pvt. Ltd. (GCPL) & Tirupati Conductors Pvt. Ltd. (TCPL).
8. Show Cause Notice dated 25.01.2005 issued to GCPL proposed recovery of Central Excise Duty amounting to Rs.7,66,116/- on the allegation that the 60.5 MT of Conductors physically found short was allegedly removed without payment of duty. The SCN was adjudicated by the Joint Commissioner vide Order-in-Original No. JC/HDQR/BBSR- I/CE/14/2006 dated 30.10.2006 wherein it was held that the physical stock verification done by the DGCEI Officers was erroneous and the allegations in the SCN are not corroborated by any evidence whatsoever. Accordingly, the demand proposed against GCPL was held to be unsustainable in law and the show-cause proceeding was dropped.
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Ex.Appeal Nos. 627,628/06
9. The Show Cause Notice dated 20.08.2004 issued by DGCEI to TCPL on the basis of search conducted on 25.09.2003 proposed to recover from them Rs.66,99,793/- with interest and penalty under Section 11AC alleging clandestine removal of different varieties of Conductors on the basis of private records such as Diaries / Documents, which shows date-wise production and dispatch of excisable materials recovered from residential premises of certain workers. The said Show Cause Notice, however, did not allege any deviation with regard to job work done by TCPL for GCPL. Adjudicating the said SCN vide order-in-original No. CCE/BBSR-I/3/2006 dated 27.07.2006, the Commissioner found that the proposed demand is wholly based on assumptions, presumptions and unsubstantiated. It is pertinent to note that while dropping the said Show Cause proceeding, the same Commissioner observed that:-
(i) 'Conductors' are not trading goods available in the market;
(ii) Those are sold to State Electricity Boards/ Power Grids only, who buy conductors through open tender and being Government bodies would never accept clandestinely removed non-duty paid goods;
(iii) The input (Aluminium Ingot) suitable for manufacturing Conductors is procured only form reputed manufactures like NALCO & BALCO;
(iv) Conductor grade Aluminium Ingot is not available in the open marked;11
Ex.Appeal Nos. 627,628/06
(v) All the recodes of purchase of input was verifiable from the aforesaid reputed manufactures of Aluminium Ingots, but the DGCEI did not do so;
(vi) Had the products of TCPL been clandestinely used by GCPL for manufacture of Conductors, the DGCEI Officers who simultaneously searched GCPL factory on the same date i.e. 25.09.2003 they would have found some evidence to that effect and/or excess stock of Conductors. But nothing of that sort was detected by DGCEI Officers;
(vii) It is difficult to conceive of removal of 80 truckloads of Aluminium Conductors which are neither saleable in the open market nor would be accepted by Electricity Boards without duty paying documents;
(viii) It would be hypothetical to assume clandestine sale of Conductors, after being substantially value added, for eventual recovery of Aluminium Metal;
(ix) The allegations in the SCN are wholly uncorroborated.
10. The findings of the Ld. Commissioner in the TCPL's case is wholly applicable to the Appellant's case and therefore the same Commissioner could not have taken a different view to confirm the demand against the Appellant in the impugned order.
11. We find that there is nothing on record to suggest that the Appellant clandestinely sold the value added Aluminium / Alloy Wire Rod manufactured from out of Aluminium Ingots o 99.7% purity to any other outside party. There is no allegation of the presence of any other 12 Ex.Appeal Nos. 627,628/06 Conductor manufacturer in the vicinity, to whom the Appellant could possibly sell such a huge quantities of Wire Rods without payment of duty. The SCN does not place on record any evidence of unaccounted procurement of Aluminium Ingots / other inputs by the Appellant and the source from which the Appellant could procure such unaccounted for Ingots/inputs for use in the clandestine manufacture of Wire Rods. There is no reference of any buyer who might have purchased the allegedly clandestinely removed Wire Rods by the Appellant. There is nothing on record to show unaccounted for receipt of sale proceeds by the Appellant from any source and there is nothing on record to corroborate clandestine manufacture of such huge quantity (493.404 MT) of Aluminium Wire Rods by the Appellant.
12. The impugned order finds that the aforesaid quantity of Aluminium Rods were actually not job work goods, but are in reality goods those have been manufactured and removed clandestinely by the Appellant (internal page 38 of the impugned order). While finding so the Ld. Commissioner deliberately ignored the Appellant's submission in paragraph 2.8 (bage 655 of the paper book) of its written submission dated 31.12.2005, wherein the Appellant stated that during December 2002 to March 2003 the Appellant purchased on its own account 77.293 MT of Ingot/ Scrap and sold 74.244 MT of Wire Rod on payment of duty. Thus taking into account the burning loss and generation of dross approximately at 2% , the Appellant had only 1.5 MT of carried over stock of Ingot/ Scrap as on 01.04.2003. It is also a matter of record that the Appellant did not purchase any Ingot / Scrap 13 Ex.Appeal Nos. 627,628/06 on its own account between April to July 2003. With only 1.5 MT of carried over stock of its own purchases of Aluminium / Scrap as on 01.04.2003, the Appellant could not have manufactured 493.404 MT of Wire Rods alleged to have been removed without payment of duty, particularly in the absence of any evidence whatsoever of record to even remotely indicate that the Appellant purchased Aluminium Ingot / Scrap from any Source other than those duly reflect4d in its statutory / private records. Therefore, the finding of the Ld. Commissioner that the allegedly clandestinely removed 493.404 MT of Wire Rods were not the job-worked goods, is manifestly without any substance.
13. In view of the above discussions the impugned order is set aside and the appeals filed by the appellants are allowed.
(Pronounced in the open Court on 20.09.2018) Sd/ Sd/ (BIJAY KUMAR) (P. K. CHOWDHARY) MEMBER (TECHNICAL) MEMBER (JUDICIAL) mm