Custom, Excise & Service Tax Tribunal
Shri Ved Berry, Ex Vice President vs Cce, New Delhi on 17 November, 2014
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL West Block No. 2, R.K. Puram, New Delhi 110 066. Principal Bench, New Delhi COURT NO. III DATE OF HEARING : 17/11/2014. DATE OF DECISION : 17/11/2014. Excise Stay Application Nos. 50734-50739 and 52425 of 2014 in Appeal Nos. 50576-50581 and 51933 of 201f [Arising out of the Order-in-Original No. 33-CE/CB/CCE/ADJ/2013 dated 14/10/2013 passed by The Commissioner, Central Excise, New Delhi.] For Approval and signature : Honble Mrs. Archana Wadhwa, Member (Judicial) Honble Shri Rakesh Kumar, Member (Technical) 1. Whether Press Reporters may be allowed to see : the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? 2. Whether it would be released under Rule 27 of : the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? 3. Whether their Lordships wish to see the fair : copy of the order? 4. Whether order is to be circulated to the : Department Authorities? Shri Rajesh Kumar Agarwal, Proprietor ] M/s Golden Tobacco Limited ] Shri Sanjay Dalmia, Non-Executive Chairman] Shri Ved Berry, Ex Vice President ] Appellants Shri J.P. Khetan, Ex Managing Director ] Shri Anuran Dalmia, Non-Executive V.C. ] M/s Purni Tobacco Pvt. Limited ] Versus CCE, New Delhi Respondent
Appearance Shri K.K. Anand, Advocate and Ms. Sujata Shirloker Mehta, Advocates for the appellants.
Shri Ranjan Khanna, Authorized Representative (DR) for the Respondent.
CORAM : Honble Mrs. Archana Wadhwa, Member (Judicial) Honble Shri Rakesh Kumar, Member (Technical) Final Order No. 54845-54851/2014 Dated : 17/11/2014 Per. Rakesh Kumar :-
The facts leading to filing of these appeals and stay applications are, in brief, as under.
1.1 M/s Purni Tobacco Pvt. Ltd., Sinnar, Nasik, Maharashtra (hereinafter referred to as PTPL), engaged in manufacture of cigarettes chargeable to Central Excise duty under sub-heading 2403.11 of the Central Excise Tariff, are a franchisee of M/s GTC Industries, Bombay (hereinafter referred to as GTC). The officers of the Directorate General of Central Excise Intelligence initiated inquiries in respect of PTPL and GTC in course of which their business premises and the premises of other persons were searched and a number of documents were resumed. The allegations of the Department are that
(a) PTPL is a dummy/front company of GTC and it is the GTC who was the real manufacturer ; and
(b) during the period from 01/06/91 to 31/3/95, cigarettes involving Central Excise duty of Rs. 46,51,87,192/- manufactured in the premises of PTPL without any accountal were clandestinely cleared without payment of duty.
1.1.1 In this regard it has been alleged that while on paper PTPL was only a franchisee of GTC engaged in manufacture of cigarettes using the brand name of GTC and PTPL selling the entire production of cigarette to GTC, PTPL was actually being controlled fully by GTC in as much as
(a) majority shares of PTPL were held by four companies controlled by GTC; namely M/s Little Rook Trade and Investment Ltd., M/s Hindustan Commercial Company, M/s Harvetex Engineering and Processing Co. Ltd. and M/s Kyoto Company Commercial Ltd. ;
(b) GTC were closely controlling all the activities and operations of PTPL like arrangement for machines and finance, purchase of raw tobacco and other raw materials, manufacture and clearance of accounted and unaccounted cigarettes from PTPL, appointment of wholesale buyers, transportation and sales to wholesales buyers, collection of sale proceeds of unaccount cigarettes from wholesale buyers etc. ; and
(c) GTC were arranging unaccounted supply of principal raw material cut tobacco to PTPL without any payment, from their group company M/s Deccan Tobacco Processors Ltd. (hereinafter referred to as DTPL) and also unaccounted supplies of cigarette tissue paper, CKT paper and filter rods were arranged by GTC and these unaccounted raw materials were used by PTPL for unaccounted manufacture of cigarettes which were cleared without payment of duty.
1.2 A show cause notice dated 02/3/96 was issued to PTPL, GTC and other noticees including Shri Sanjay Dalmia, Chairman, GTC, Shri Anurag Dalmia, Vice Chairman, GTC and Shri J.P. Khetan, Executive Director, GTC for
(a) recovery of Central Excise duty amounting to Rs. 46,51,87,192/- from GTC and PTPL jointly and severally under proviso to Section 11A (1) of Central Excise Act, 1944 ;
(b) confiscation under Rule 209 (2) of Central Excise Rules, 1944 of the land, building, plant and machinery of PTPL used in the manufacture of the clandestinely cleared cigarettes; and
(c) imposition of penalty under Rule 209/ or 209A of Central Excise Rules, 1944 on Shri Sanjay Dalmia, Shri Anurag Dalmia, Shri J.P. Khetan and other noticees.
1.2.1 Alongwith the show cause notice a list of the relied upon documents was also enclosed, but it appears that while serving show cause notice the relied upon documents were not supplied.
1.3 The matter was adjudicated by the Commissioner, Central Excise (Adjudication), New Delhi in the year 2014 vide order-in-original dated 14/10/13 by which he
(a) confirmed the duty demand of Rs. 46,51,87,192/- under Rule 9 (2) of Central Excise Rules, 1944 readwith proviso to Section 11A (1) of Central Excise Act, 1944 from M/s GTC Industries Ltd. and PTPL, Nasik jointly and severally ;
(b) imposed penalty under Rule 9 (2), 52A, 226 and 209 of Central Excise Rules, 1944, of Rs. 46,51,87,192/-, jointly and severally on GTC Industries Ltd. and PTPL and beside this, imposed a further penalty of Rs. 46 crores under Rule 209A of Central Excise Rules, 1944 on GTC Industries Ltd. ;
(c) ordered confiscation of the land, building, plant and machinery of M/s PTPL under Rule 209 (2) of Central Excise Rules, 1944 with an option to be redeemed on payment of redemption fine of Rs. 32,00,000/- and
(d) imposed penalty of various amounts under Rule 209A of Central Excise Rules, 1944 on Shri Sanjay Dalmia, Shri Anurag Dalmia, Shri J.P. Khetan and others.
1.4 Against the above order of the Commissioner, these appeals have been filed alongwith stay applications.
2. Though the matter today was listed for hearing of the stay applications only, after hearing the matter for some time, the Bench was of the view that since on account of certain serious irregularities in the order, the matter has to be remanded for denovo adjudication, the matter can be heard for final disposal. Accordingly, the requirement of pre-deposit is waived and with the consent of both the sides, the matter was heard for final disposal.
3. Shri K.K. Anand and Ms. Sujata Sherlonker, Advocates, the learned Counsels for the appellant, pleaded that, the impugned order confirmed the duty demand of Rs. 46,51,87,192/- against M/s GTC and M/s PTPL, Nasik, jointly and severally and similarly penalty of same amount has been imposed both on GTC and PTPL on jointly and severally and citing the judgment of the Tribunal in the appellants own case decided vide final order No. 51450-51456/2014 dated 06/03/14 and also earlier judgments of the Tribunal in the case of Shri Arvind Steels Ltd. vs. CCE, Trichy reported in 2007 (216) E.L.T. 332, Rimjhim Ispat Ltd. vs. CCE, Kanpur reported in 2013 (293) E.L.T. 124 (Tri. Del.) and also of Honble Gujarat High Court in the case of Commissioner vs. Mukesh Harlalka & others (order dated 13/4/11 in respect of tax appeals No. 1920/2010, 2022/2010, 2134/2010, 2135/2010 and 2219/2010), wherein it was held that the conformation of duty demand and imposition of penalty cannot be ordered jointly and severally on two or more parties they pleaded on this very ground itself, the impugned order has to be set aside. Beside this, it was also pleaded that all the relied upon documents as well as some of the non-relied documents specifically asked for by the appellants have not been provided and that cross-examination a number of witnesses whose statements have been relied upon have not been allowed. They, therefore, pleaded that the impugned order is not sustainable and that they have no objection if the matter is remanded to the Commissioner for denovo adjudication.
4. Shri Ranjan Khanna, the learned DR, defended the impugned order by reiterating the findings of the Commissioner.
5. We have considered the submissions from both the sides and perused the records.
6. In this case, it is the PTPL, Nasik, who was engaged in manufacture of cigarettes as a franchisee of GTC Industries. The Departments allegation is that PTPL, Nasik was nothing but a dummy entity or a front company floated by GTC for the purpose of duty evasion, that it is GTC who were fully controlling the activities of PTPL and that during the period of dispute, PTPL had received huge quantity of cigarette tobacco and other raw materials through GTC, which were used in manufacture of unaccounted cigarettes, which were cleared clandestinely. These allegations are based on the statements of a number of witnesses and a large number of seized documents. Though alongwith the show cause notice, the list of documents had been enclosed, from the records it appears that when the show cause notices were served on PTPL, GTC and other noticees sometimes in 1996, the relied upon documents were not supplied. There appears to be long correspondence between the appellants and the Department regarding supply of documents which appears to have continued till 2013 and still it is the plea of the appellants that all the relied upon documents and some of the non-relied upon documents asked by them have not been supplied to them. Non-supply of relied upon as well as non-relied upon documents would be violation of principles of natural justice.
7. Another plea of the appellant is that the Departments allegation of duty evasion is based on the statements of 116 persons out of which they requested for cross-examination of 60 witnesses, but still the cross-examination of only a few witnesses has been allowed and the cross-examination of a number of witnesses was not allowed. In this regard it is seen that while the Adjudicating Authority had permitted cross-examination of a number of witnesses and the witnesses had been summoned, but a number of them were either found to be non-traceable or if they were traceable, they failed to appear. In our view, the question as to whether the statements of such witnesses can be relied upon by the Department by invoking the provisions of Section 9D (1) of Central Excise Act, 1944, has to be decided in the light of the judgment of Honble Delhi High Court in the case of JK Cigarettes Ltd. vs. CCE reported in 2009 (242) E.L.T. 189 (Del.), wherein Honble High Court has held that in para 32 of the judgment that while the provisions of Section 9D of the Central Excise Act, 1944 are not unconstitutional or ultravires, while invoking this Section
(i) the concerned authority has to form an opinion on the basis of material on record that a particular ground as stipulated in the said Section exists and is established ;
(ii) such an opinion has to be supported with reasons;
(iii) before arriving at this opinion, the adjudicating authority should give opportunity to the affected party to make submissions on the available material on the basis of which the authority intends to arrive at the said opinion; and
(iv) it is always open to the affected party to challenge the invocation of the provisions of Section 9D of the Central Excise Act in a particular case by filing statutory appeal, which provides for judicial review.
7.1 In view of this judgment of Honble Delhi High Court, the Adjudicating Authority while relying upon, for proving the allegation of duty evasion against an assessee, the statements of the persons whose cross examination has to be permitted, but the same could not take place as they are either not traceable or not coming for cross examination or are dead or are incapable of giving evidence or an kept out of the way by the adverse party or whose presence cannot be determined without an amount of delay of expense which under the circumstances of the case, the court considers unreasonable, has to give, after hearing the Assessee, a specific finding as to whether the circumstances enumerated in Section 9D (1) for relying upon the statement of a person without cross examination exist or not. In the impugned order there is no discussion on this point. Section 9 D (2) readwith clause (a) of Section 9D (1) can be invoked only in terms of directions of Honble Delhi High Court in terms of its observations in para 32 of its judgment in case of JK Cigarette Ltd. vs. CCE (supra). In cases of witnesses not covered by clause (a) of Section 9D (1), where their cross examination has been requested by the appellants, the statements of the witnesses can be relied upon only after permitting their cross examination and as per the provisions of clause (b) of Section 9D (1).
7.2 As regards supply of relied upon and non-relied upon documents, which had been seized from the appellants premises or from other persons the same have to be supplied and if any relied upon document is not supplied, it cannot be taken into account for proving the allegation against the appellants.
8. It is also seen that duty demand of Rs. 46,51,87,192/- has been confirmed against PTPL and GTC Industries Ltd. jointly or severally and similarly penalty of equal amount has also been imposed on them under Rule 9 (2), 52A, 226 and 209 of the Central Excise Rules on GTC Industries Ltd. and PTPL jointly and severally. In our view, which is based on the judgment of the Tribunal in the case of Shri Arvind Steel Ltd. vs. CCE, Trichy (supra), Rimjhim Ispat Ltd. vs. CCE, Kanpur (supra) and also the judgment of Honble Gujarat High Court in the case of Commissioner vs. Mahesh Harlalka (order dated 13/4/11) the duty demand cannot be confirmed against two or more persons jointly and severally and similarly penalty cannot be imposed on two or more jointly or severally. Moreover in this case the manufacturer of the cigarette is PTPL as a franchisee of the GTC. When the allegation of the Department is that PTPL is a dummy company or front company floated by GTC Ltd. which was being fully controlled by GTC and accordingly it is the GTC which has to be treated as the actual manufacturer, a specific finding in this regard has to be made and once such a finding is given, the demand would have to be confirmed against M/s GTC not against PTPL. If, however, there is no evidence to prove that PTPL is a front company or a dummy company floated by M/s GTC Ltd. but still there is sufficient evidence to prove the allegation of duty evasion against PTPL, the demand would have to be confirmed against PTPL and not GTC Industries Ltd. The matter has not been adjudicated in this manner and, therefore, for this reason the impugned order has to be set aside and the matter has to be remanded for denovo adjudication.
9. In view of the above discussion, the impugned order is set aside and the matter is remanded to the Adjudicating Authority for denovo adjudication, strictly in terms of our directions and observations in this order.
10. However, before parting with this matter, we cannot help expressing our anguish at the manner in which this matter involving duty of Rs. 46,51,87,192/- has been handled. The show cause notice in this matter has been issued on 02/3/96 when there was no provision for charging interest on duty. Such a provision was introduced on 28th September 1996 by inserting Section 11AB and was applicable in the cases where short payment or non-payment of duty had occurred on account of fraud, wilful mis-statement, suppression of fact or contravention of the provision of Central Excise Act, 1944 or the Rules made thereunder with intent to evade the payment of duty. While in this case, the provisions of Section 11AB could not be invoked as the period for which the duty has been demanded is prior to 28th September, 1996, there was another provision Section 11AA introduced w.e.f. 26/5/95 which provided for charging of interest on duty demand confirmed under Section 11A (2) when the assessee failed to pay the duty demand confirmed within a period of three months from the date of adjudication order. This provision was applicable even in respect of the show cause notices issued prior to 26/5/95 and which had been adjudicated on or after 26/5/95. In view of this legal position, it was in the interests of the Department to adjudicate this matter involving duty of Rs. 46,51,87,192/- as early as possible. However, it is seen that Department has taken about 19 years in supplying the relied upon documents and still the appellants grievance is that some of the relied upon documents asked by them has not been supplied. Even after 19 years when the matter was adjudicated, the adjudication has been done in a most careless manner. When the legal position as to whether duty demand against two or more persons can be confirmed jointly or severally and penalty on them can be imposed on jointly and severally is well settled, it is surprising as to how a senior Commissioner has confirmed this demand jointly and severally against PTPL and GTC Industries and not only this has also imposed penalty of some amount both on GTC Industries Ltd. and PTPL on jointly and severally which does not make any sense at all. Similarly, there is absolutely no explanation for the Department not being able to supply the relied upon documents and non-relied upon documents asked for by the appellant in 19 years, which has given one more ground to the appellant to seek denovo adjudication and further delay the adjudication and start of interest liability under Section 11AA. It is because of the careless manner in which the adjudication of this matter has been done even for after 19 years from the issue of show cause notice, we are compelled to remand this matter for denovo adjudication. The only person to be benefited from this delay in completion of adjudication proceedings would be the appellants who face serious allegation of duty evasion and while they are immune from the interest liability under Section 11AB in case of confirmation of duty demand, the interest liability under Section 11AA would start only after expiry of 3 months from the date of adjudication order and to the extent the adjudication proceedings get delayed, the appellant company saves its interest liability under Section 11AA.
10.1 Similar observations have been made by the Tribunal in its order reported in 2012 (28) S.T.R. 327 (Tri. Del.) in respect of another case against Golden Tobacco Ltd. involving duty of Rs. 49,63,87,299/- which had been handled in a similar careless manner. Beside this, there is another matter against M/s Golden Tobacco Ltd. involving duty of Rs. 30,85,63,693/- for the period prior to September 1996 and dealt with in the Tribunals order reported in 2012 (282) E.L.T. 385 (Tri. Del.) which has also been handled in the same manner. There is also another matter disposed of vide final order no. 51450-51456 dated 06/3/14 against Golden Tobacco Ltd, where the duty involved is Rs. 29,53,36,551/- which had also been handled in a similar manner, where the matter was adjudicated after a long delay of 18 years without supply of all the relied upon documents and the duty demands had been confirmed jointly and severally compelling the Tribunal to remand the matter for denovo adjudication.
10.2 We hope that this time, the Commissioner would ensure that denovo proceedings are completed strictly in terms of the Tribunals directions. Since, this is a very old matter, the denovo proceedings must be completed within a period of six months from the date of this order.
11. The Registry is also directed to endorse a copy of this order to the Chairman, Central Board of Excise and Customs for his information.
12. The appeals as well as the stay applications stand disposed of, as above.
(Operative part of the order pronounced in the open court.) (Archana Wadhwa) Member (Judicial) (Rakesh Kumar) Member (Technical) PK ??
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