Customs, Excise and Gold Tribunal - Tamil Nadu
Caress Industries vs Commissioner Of Central Excise on 1 April, 1997
Equivalent citations: 1998(99)ELT300(TRI-CHENNAI)
ORDER
V.P. Gulati, Vice President
1. The prayer in the application is for dispensation of the pre-deposit of the duty amount of Rs. 3,14,65,370/- and further duty of Rs. 5,94,012/- as also a penalty of Rs. 15,00,000/- levied on the Managing Partner of the appellant firm.
2. The learned Senior Advocate for the appellants Shri C. Natarajan at the outset pointed out that the firm in question was dissolved during the pendency of the proceedings before the learned lower adjudicating authority and this fact was brought on record during the proceedings. The authority below has taken a view notwithstanding the dissolution, the proceedings could continue. He has pleaded that a written objection was taken by the Registry regarding the maintainability of the appeal in this after the dissolution of the partnership firm, the appeal memorandum has been signed by only one of the partners and not by others. In this connection the learned Senior Advocate has pleaded that under similar circumstances, a Three Member Bench of the Tribunal has held in the case of Mentha and Allied Products, Sambhal v. CCE, Meerut reported in 1988 (33) E.L.T. 606 that the proceedings would continue notwithstanding the dissolution and the appeal memorandum may be signed by one of the partners. In that case, the Tribunal took note of Section 47 of the Partnership Act and has held as under :
8. The most relevant decision for the purpose of the determination of the point before us is that of the Hon'ble Madhya Pradesh High Court in the case of Ghanshyamdas Chhotalal (AIR 1964 MP 161) and the provisions of Section 47 of the Partnership Act. There is no dispute that the liability created against the appellants by the department is for the period during which the partnership was in existence. If the assessment is not made and the tax amount is not determined before the dissolution of the firm, the liability to pay tax does not disappear. It continues to exist and can be quantified by making an assessment and determining the tax amount in winding up proceedings. Under Section 47 of the Partnership Act after the dissolution of a firm the authority of each partner to bind the firm and the other mutual rights and obligations of the partners continue notwithstanding the dissolution so far as may be necessary to wind up the affairs of the firm and to complete transactions begun but unfinished at the time of dissolution. For the purpose of winding up, the partnership is deemed to continue.
9. Admittedly, the department had adjudicated and confirmed the demand of duty and also imposed penalty against the appellants after its dissolution. Appeal is a continuing proceeding and therefore, we find no force in the contention of the learned departmental representative that this appeal filed in the name of the dissolved firm by Shri N.L. Nanda, one of the partners of Mentha Allied Products is not maintainable. The appellant firm after dissolution has not started or initiated any new proceedings. They are contesting the adjudication proceeding against the firm initiated by the department even after the dissolution of the partnership firm. Appeal being a continuing proceeding is maintainable in this manner. We overrule the objection raised by the department on this point.
He has pleaded in the background of this decision, the proceedings before the Tribunal based on the appeal memorandum having been signed by one of the partners are maintainable in law.
3. The learned JDR for the Department, Shri S. Murugandy, has sought for following the ratio of the decision.
4. In view of what has been held by the Tribunal in the decision referred supra, we are of the view that the proceedings based on the memorandum of appeal as filed are maintainable. We also had a look at the dissolution deed. In the dissolution deed as it is, in Para 2 at page 3, the following has been set out:
It is agreed between the parties that party of the Third part A.R. Shanmuhasundaram shall take over all the assets and liabilities of firm as on this day the 15th May, 1994 at book value and shall pay all the loans and outstandings and creditors of the firm all the dues, outstandings and sundry debtors of the firm at his own rights and responsibilities.
It is seen that Shri A.R Shanmuhasundaram, who has signed the appeal memorandum has taken over all the assets and liabilities of the firm as on 15th May, 1994, the day of the dissolution deed and he has also undertaken to pay all the loans and outstandings. This undertaking of Shri Shanmuhasundaram by the deed of dissolution can be taken to be in the nature of an undertaking to all the partners for payment of the outstanding which may be there as on 15th May, 1994 and in respect of which the action is still continuing. The proceed- ings had been initiated by the Central Excise authorities before 15th May, 1994, and, therefore, the liability which had accrued as well as of what transpired before15th May, 1994, can be taken to devolve on Shri A.R. Shanmuhasundaram by virtue of this dissolution deed.
5. In the above view of the matter, therefore, we hold that the Tribunal can take cognisance of the appeal on merit.
6. With respect to the demand as made, the learned Senior Advocate Shri Natarajan has pleaded that the learned lower authority has accepted the appellants plea for grant of Modvat credit in respect of the LAB (Linear Alkyl Benzene) which is held to have been purchased by them and utilised for the manufacture of Acid Slurry, the item in respect of which duty has been demanded. He has pleaded that they have filed a worksheet in this regard in the paper book and if the Modvat credit which has been allowed is taken into consideration for the purpose of this proceedings, the demand in that event will come to be reduced to Rs. 1,87,85,628/-. He has pleaded that the authorities have during the course of investigation brought out the particulars of the vehicles by which the alleged LAB in question received by them is stated to have been removed. He has pointed out that some of the vehicle numbers which have been mentioned are not those of any vehicles meant for carrying such goods but are those of Scooters, Mopeds, and the like. If the quantum which are attributable to the movement which have been recorded to have been made by these vehicles and the quantum which are shown to have moved by regular goods vehicles, the duty amount in that account he has pleaded would come to Rs. 97,13,729.17. He has pleaded that the LAB which is stated to have been removed to the appellants premises would have only moved in goods vehicles. Once the particulars of these vehicles to the extent of the LAB moved are available, the quantum of duty to be demanded could be only based on the quantum which was carried by these vehicles. Therefore, he has pleaded that the demand against the appellants would be only against that order. He has pleaded that since the duty is now demanded on the assessable value, the amount received by them as consideration of the sale as held in the learned lower authority's order should be taken as cum-duty price. In this connection he has cited the decision of the First Bench of the Tribunal in the case of CCE v. Pawan Tyre Pvt. Ltd. reported in 1997 (19) RLT 66. In this connection he has referred us to Para 2 of the order which is reproduced-below for convenience of reference :
"2. Department has no case that besides price collected, any amount has been collected as excise duty. Therefore, whatever amount was collected must be treated as amount collected on the basis of cum-duty price. That being so, the amount of Rs. 30,389.25 which was the duty calculated on the wholesale price amount should be treated as part of the wholesale price and assessable value and duty calculated accordingly. This is supported by the observations of the Supreme Court in Assistant Collector of Central Excise v. Bata India Limited [1996 (14) RLT 613 (S.C.). It was observed therein that unless it is shown by the manufacturer that the price of the goods includes an amount of excise duty payable by him no question of exclusion of the duty element from the price for determination of value under Section 4(4)(d)(2) will arise. In other words, if duty is payable by the manufacturer that will be eligible for deduction from the price. As has come out in the facts of this case, the price realised by the respondent was cum-duty price and as duty was leviable on the goods and had, in fact, paid pursuant to the impugned order passed by the Additional Collector of Central Excise, the deduction of the duty element claimed for arriving at the assessable value was justified. It will make no difference whether the duty amount has been paid by the assessee at the time of clearance of the goods or it was paid subsequently."
7. He has pleaded, therefore, that based on what he has pleaded above, the maximum amount that would become payable based on the findings against the appellants would, therefore, only be Rs. 54,45,129.88.
8. Referring to the merits of the case, he has pleaded that the demand has been raised against the appellants merely based on third party evidence. He has pleaded that the LAB is manufactured by M/s. Tamilnadu Petro Products Limited (TPL) and the same is sold by them through their sole selling agents M/s. Southern Warehousing Company (SWC). The evidence recorded in the books of M/s. Southern Warehousing Company and also that of their Finance Manager and the transporters of the goods has been cited against them. The learned lower authority has, however, not considered the rebuttal of that evidence by the appellants in the proper perspective. He has pleaded that M/s. TPL and M/s. SWC organised their affairs in the manner to take the maximum benefit of the quantity discount which they have declared to the Central Excise Authorities and for that purpose, they had made entries in their books showing bulk sales to the appellants. He has pleaded that the appellants had only a capacity of 50 Tonnes for storage of the LAB in their unit and has pleaded that on a number of occasions quantity of 150 Tonnes has been shown to have been despatched to the appellant's unit. He has pleaded that this itself would show that something is wrong with the accounts as maintained by M/s. SWC at the behest of M/s. TPL. He has further pleaded that the Central Excise officers had been visiting the appellant's factory from time to time and at no point of time either excess raw material or finished product has been found. He has pointed out that only violation that was detected against the appellants was in regard to the two or three lots in very small quantity. He has pleaded, no adverse inference for such a large quantum of evasion could be drawn from this small quantum in respect of which the liability is accepted. He has further pleaded that evidence of some of the persons who are employees of M/s. SWC has been cited against them to show as if they were indulging in large scale transaction of LAB at the behest of the appellants. He has pleaded that if any thing was done by them, it was at the behest of M/s. SWC. He has, therefore, pleaded that the learned lower authority's order is not proper in as much as the learned lower authority has not taken note of the evidence which has been explained in rebuttal by them. As to the financial position of the appellants, he has pleaded that Shri Shanmuhasundaram was running a small scale unit and has fixed assets of over about 7.75 Lakhs and the fixed assets of another partner Shri Rangaswamy are of the order of about 18 Lakhs. He has therefore pleaded for fixing a nominal amount for pre-deposit.
9. The learned JDR for the Department, Shri Murugandy has pleaded that the learned lower authority has relied upon the evidence of the third parties viz., the Finance Manager of M/s. SWC, the records maintained by M/s. SWC and the statement of Mr. Rabik, the Manager of the Transport Company but also on Shanmuhasundaram's own statement. He has pleaded that the learned lower authority has taken note of the large financial transaction between the appellants and the 3 employees of M/s. SWC to whom Cheques/Drafts of large amounts running into lakhs have been given by the appellants. He has pleaded that the appellants tried to evade payment of duty on purchase of LAB without accounting for the same in their records and had indulged in large scale evasion of the duty. As to the availability of Modvat credit and cum-duty price, he has pleaded he leaves it to the Bench as to the benefit to be given in this regard. He has no instructions regarding the financial position of the appellants.
10. We have considered the pleas made by both the sides. We observe that Shri A.R Shanmuhasundaram has admitted in his statement to having indulged in the production and sale of unaccounted quantity of LAB. The evidence of the Accountant of M/s. SWC, Shri Radhakrishnan brings out the modalities of the transactions between the appellants and M/s. SWC. Further, the larger scale financial transactions between the appellants and the 3 employees of M/s. SWC has also been taken note of by the Collector. There is no specific rebuttal in regard to this finding of the learned lower authority as to the quantum. Further, it is seen that the learned Collector has taken note of the fact that detailed records had been maintained by M/s. SWC right from 1987 to 1994 as to the transactions in regard to the supply of LAB to the appellants and his finding that these records could not have been fabricated just for the convenience of these proceedings suddenly, prima facie is acceptable. Further, the evidence of movement of the vehicles and the Manager of the Transport Company's statement clearly prima facie point to the large scale evasion of duty in respect of Acid Slurry manufactured out of unaccounted quantities of LAB. Therefore, we prima facie hold that the learned lower authority's order is based on acceptable evidence. The appellants have pointed out that some of the movement of the LAB was shown to have been made by vehicles which were not goods carriers but were only scooters, mopeds or other such vehicle carriers. There could be a point in favour of the appellants on this account. But that will have to be considered at the time of final hearing. As to the benefit of Modvat credit, the learned lower authority has allowed the Modvat credit to be given to the appellants and this will become available to them subject to the verification of the duty paid nature of the LAB. In the present case, since the manufacture of the LAB has been shown to have been made from the ac- counted for stocks which were sent from M/s. TPL to M/s. SWC, prima facie for the present proceedings we can accept the appellants plea that the demand would come down by reason of the Modvat credit which has been ordered to be given. This Modvat credit we make it clear will ultimately become available subject to the verification of the duty paid nature of the goods. Further, the amount recovered by the appellants by way of sales of the Acid Slurry in view of the case law cited by the appellants, prima facie can be taken to be cum-duty amounts. The demand, therefore, for that reason will also get reduced. As to the financial position of the appellants, we observe that apart from the affidavits filed by Shri A.R. Shanmuhasundaram, there is nothing on record to go by. The learned JDR has also no instruction with regard to the financial position. We, therefore, in the facts and circumstances of this case have to take note of the fact that the appellants prima facie had indulged in large scale unaccounted transactions and, therefore, the position as has been placed before us cannot be taken to be reflective of the correct position. In view of the matter, we hold taking note of the various abatements which might become available to the appellants and taking note of the various statements, amount that would become due from the appellant's if worst is held against them as per the submissions made by the Ld. Senior Advocate, that the ends of justice will be served if the appellants company is called upon to pre-deposit a sum of Rs. 45,00,000/- (Rupees Forty Five Lakhs) towards duty and Shri Shanmuhasundaram, Rs. 5,00,000/ (Rupees Five Lakhs) towards penalty and subject to that the pre-deposit of the balance amount of duty payable and penalty by the company and the balance of the penalty levied on Shri Shanmuhasundaram is dispensed with and the recovery of the same stayed pending appeal. Ordered accordingly. The pre-deposit should be made on or before 27th June, 1997 and the compliance report on 30th June, 1997.