Customs, Excise and Gold Tribunal - Bangalore
Commissioner Of C. Ex. vs Bremel Rubber Industries (P) Ltd. on 23 August, 2005
Equivalent citations: 2006(194)ELT240(TRI-BANG)
ORDER S.L. Peeran, Member (J)
1. Both these Revenue appeals are against OIO No. 2/2000 dated 13-1-2000 by which the Commissioner (Appeals) has dropped the demands raised against the assessee on the ground of clandestine removal of goods. The allegation made by the Revenue was that the assessee had manufactured tread rubber by procuring raw materials in the name of other units M/s. Dhana Rubber Industries, M/s. Everest Rubber Industries, M/s. Fortune Rubber Industries, M/s. Best Polymers and M/s. Crest Polymex and that they cleared the goods clandestinely without payment of duty. The Commissioner after thorough examination of all the evidence on record and in the light of several judgments of the Tribunal concluded as follows :
Coming to the other part of the allegation (viz., that the goods claimed to have been manufactured and cleared in the name of the said five units were actually manufactured and cleared by M/s. Bremels Rubbers only) M/s. Bremels Rubbers and its Managing Director had emphatically denied the same. On perusal of the connected documents, I find that the above allegation against M/s. Bremels Rubbers was primarily on the ground that (a) the proprietors of most of the five units in question were its employees/ex-employees; (b) Shri N. Vishwanath its employee had assisted the said five units in procuring the raw materials (c) its vehicles were used for transporting the said raw materials (d) the said five units were its group of companies because of a letter dated 2-4-87 written by Shri B.R. Shetty to Shri P.K. Joseph taking personal responsibility up to a limit of Rs. 5 lakhs on credit of supplies made to M/s. Bremels Rubbers and other ancillary units (e) As per the statements of some of the proprietors of the said units and the owner of the industrial shed. The apt question that arises here is whether the above grounds are sufficient to hold that the goods in question were actually manufactured and cleared clandestinely by M/s. Bremels Rubbers. There is nothing on record to show that the raw materials purchased in the name of the said five units found their way to the factory premises of M/s. Bremels Rubber and the same were utilised by M/s. Bremels Rubbers in the clandestine manufacture and removal of tread rubber. There was also no seizure of any quantum of tread rubber from the premises of M/s. Bremels Rubbers nor was there any allegation of excess stock of raw materials or finished goods at any point of time during the disputed period. Further, there is also no evidence to prove that M/s. Bremels had paid the cost of the impugned raw materials or realised the sale proceeds of the tread rubber. I also find that the officers of the Anti-Evasion Directorate visited the factory premises of M/s. Bremels Rubbers on 10-3-89 and conducted thorough search and drawn Mahazar to that effect. On verification of the physical stock of the finished goods the officers found them tallying with the balance in stock recorded in RG 1/Production Register and also with reference to Gate Passes, Production slips and other records and an endorsement to this effect was made in the RG 1 Register. Similarly the officers conducted mod-vat check with original gate passes received and RG 23A Part I and Part II Registers for the year 1989 and found to be correct. It may also seen that the allegation of non-production/short production of tread rubber was made against the said five units on the basis of non-availability of required machinery, non-consumption/lesser consumption of power etc., In the circumstances, I am of the view that in the interest of justice, the same yardstick should be used to prove the allegation of excess production of tread rubber by M/s. Bremels Rubbers equivalent to the quantity stated to have been manufactured by the said five units. As per the show cause notice M/s. Bremels Rubber were alleged to have clandestinely manufactured and cleared 6,24,000 kgs. of tread rubber in the name of the said 5 units in addition to the quantity of tread rubber manufactured and cleared in their own name. I observe that no exercise had been carried out to ascertain whether M/s. Bremels Rubber had enough sources of electrical power, Infrastructure facility, manpower etc. for the manufacture of such huge quantity of tread rubber. On the other hand, the proprietors of few units viz., S/Shri A. Geogre and A.N. Muthappa who had contended in their respective statements that they were not owning any rubber factory but had signed some blank papers as directed by Shri B.R. Shetty of M/s. Bremels Rubbers had not let in any evidence to substantiate their contentions. The other grounds such as lending of the vehicles for transportation of raw materials, assisting in procuring raw materials the proprietors were the employees of M/s. Bremels Rubbers etc. are not sufficient to hold that M/s. Bremels Rubbers were the actual manufacturers of the disputed quantum of tread rubber, inasmuch as such mutual help among the industries is quite common. Regarding the other evidences relied upon viz., a letter dated 2-4-87 (written by Shri B.R. Shetty to Shri P.K. Joseph taking personal responsibility up to a limit of Rs. 5 lakhs in credit for supplies made to M/s. Bremels and other ancillary units) M/s. Bremels Rubber in their reply dated 11-9-91 to the show cause notice dated 14-5-91/3-6-91 (issued to them on identical issue) had contended that the terms "Bremels and other ancillary units" meant only M/s. Bremels Rubber, M/s. Aditlok Investments (P) Ltd. and M/s. Biyer Rubber (P) Ltd. In my considered view a Managing Director of a Company, standing as a guarantor in his individual capacity to the supplier of raw materials for the supplies made to his group of companies or any other company cannot be a ground to conclude that there was clandestine manufacture and clearance of finished products by a particular units, as alleged in the show cause notice. Even for the sake of argument, if it is held that the said five units were the ancillary units of M/s. Bremels Rubbers the above-mentioned action of Shri B.R Shetty, Managing Director of the latter unit would not automatically mean that the raw materials purchased in the names of the said five units were actually received and utilised by M/s. Bremels Rubber and cleared the finished products clandestinely in the absence of any evidence to that effect. Further, there is no bar/restriction under the Central Excise Act/Rules for a person, who is a Director/Partner of a unit to become a director/partner of another units. Hon'ble Tribunal & High Courts have ruled in a series of cases that just because a person is a director/partner in more than one unit, the said units cannot be held to be related to each other, unless mutuality of interest among the said units is proved.
I find that Hon'ble Tribunal in the case of Icy Cold Commercial Enterprise v. Collector of Central Excise has ruled that clandestine removal is a positive act and burden of proving it is on the department and the same is not proveable merely on conjunctures and presumptions. The same view is held in the cases of Khira Steel Works (P) Ltd. v. Collector of Central Excise and Benava Udyog (P) Ltd. v. Collector of Central Excise . Similarly, in the case of Shamsons (India) Ltd. v. Collector of Central Excise , the Tribunal has allowed the appellant's appeal giving them the benefit of doubt on the ground that the clandestine removal was not sufficiently discharged by the revenue.
In the light of the above judgments and in the absence of any substantive evidence, as discussed in the preceding paras, M/s. Bremels Rubbers cannot be held to have received the raw materials purchased in the names of the said five units and manufactured (out of such raw materials) and cleared tread rubber in the names of said units.
As regards the imposition of penalty I have already held in my findings supra that penalty under the provisions of Rule 209A of the Central Excise Rules, 1944 is imposable on the proprietors of the said units. No penalty under Rule 173Q of the CER, 1944 is imposable on M/s. Bremels Rubber as the allegations made against them in the show cause notice were not proved as explained in detail in the foregoing paras.
As regards the imposition of penalty against Shri B.R. Shetty, I find that he had been contending consistently from the beginning that he had not committed any offence, which renders him to liable for penalty under Rule 209A of the CER, 1944. Further, Shri B.R. Shetty is no more alive, Hon'ble Tribunal in the case has held that penalty cannot be imposed after the death of the accused. In view of this ruling, the question of imposition of penalty on Shri B.R. Shetty does not arise. The same is the case in respect of Late Shri J. Thimme Gowda.
S/Shri M.C. Mariappa and J. Narayana Gowda who were the owners of the impugned industrial shed were alleged to have aided/abetted or concerned in the clandestine manufacture and clearance of tread rubber by M/s. Bremels Rubber which warranted imposition of penalty on them under Rule 209A of the CER, 1944. However, no statement was recorded from them in this regard nor any specific grounds were given in the show cause notice for making such allegation. I find from the records that Shri J. Narayana Gowda was a doctor, working at Maddur and the shed was rented out by his brother Late Shri Thimme Gowda and he played no role in letting out the premises. As far as Shri M.C. Mariappa is concerned, he had let out the premises on rent, whoever approached him as any other owner of the shed would have done and there is no evidence to suggest his involvement in the allegations made against him. Hence, no penalty is imposable on S/Shri M.C. Mariappa and J. Narayana Gowda under Rule 209A of the CER, 1944.
There was also a proposal for imposition of penalty M/s. Aditlok Investments (P) Ltd., Bangalore under Rule 209A of the CER, 1944. But there is no mention in the show cause notice and the annexure thereto about the nature of contravention or violation which render them liable for imposition of penalty. However, on perusal of the records I find that some proprietors of the said five units had claimed that they taken certain machinery on lease from M/s. Aditlok Investments for the manufacture of tread rubber. M/s. Aditlok in their reply dated 8-1-91 to the show cause notice had contended that leasing of such machinery to the said units on principal to principal basis would not constitute any violation of the provisions of Central Excise Rules. Even though mixing mill extruder, conveyor etc., which were required for the manufacture of tread rubber were found installed, when the officers visited the said units, M/s. Aditlok had not produced any evidence to substantiate their contention that they were in possession of so many numbers of machinery to lease out to the said units. Hence, M/s. Aditlok Investments are liable for penalty under Rule 209A ibid.
Shri P.K. Joseph, N.L. Dagade, S.K. Hedge and M/s. M.A.T Acharya Agencies and M/s. S.V. Rangaswamy & Co. Ltd., who were dealers in raw materials and finished goods and hirers of generators sets were also called upon to show cause as to why penalty under Rule 209A should not be imposed on them. On perusal of the records I find that they had dealt with M/s. Bremels and other five units only in their capacity as dealers/hirers and such dealings were in no way different from their dealings with their other customers in the normal course of their business. There is also nothing on record to show that the dealing between them were beyond that of the dealer and customer. Hence, imposition of penalty under Rule 209A on the said persons is not called for.
As regards the proposal for imposition of penalty on Shri N. Vishwanath, I find that no statement had been recorded from Shri N. Vishwanath nor was there any specific mention in the show cause notice about the nature of contravention or violation by him. Shri N. Vishwanath in his reply dated 9-10-91 to the show cause notice had contended inter alia that he had assisted some of the units in Peenya in procuring raw materials and their transportation using his acquaintance with some of the dealers in order to keep good neighbourly relationship. I find that there is nothing on record to show the involvement of Shri N. Vishwanath in the clandestine manufacture and clearance of excisable goods by any of the units. Hence, the question of imposition of penalty on Shri N. Vishwanath does not arise.
Taking into consideration the above detailed discussion I pass the following orders :-
ORDER
(i) I impose a penalty of Rs. 50,000 (Rs. Fifty thousand only) each on Shri Shankar Bhagwan and Smt. Reeta Sen Gupta and Rs. 50,000/- (Rs. Fifty thousand only) each on S/Shri Bhaskar Sen Gupta, T.T. Varghese, A. George, N. Ramesh and A.N. Muthappa under Rule 209A of the Central Excise Rules, 1944.
(ii) I also impose a penalty of Rs. 30,000 (Rs. Thirty thousand only) on M/s. Aditlok Investments (P) Ltd., Bangalore under Rule 209A of the Central Excise Rules, 1944.
The proceedings initiated against the other noticees are hereby dropped.
2. As can be seen, the Commissioner has imposed penalties against several persons under Rule 209A but has dropped the demands of duty which is now under challenge.
3. We have heard learned SDR and counsel and gone through the entire records of the case. The Commissioner after detailed examination examined the allegation of the department that the said five units were not functional and the tread rubber was actually manufactured by the Respondent out of the raw materials procured in the names of the said five units and cleared clandestinely in the above units name. After due examination he found that there was no dispute on record that all the above five units had obtained Central Excise License for manufacture of tread rubber; registered with the Department of Industries and Commerce as SSI and also with Sales Tax Department. The raw materials were procured and final products were cleared under documents in the name of respective units and that they had been filing the classification lists, price lists and other excise documents regularly with the department. All the five units were proprietary concerns, although some of them were employees of the respondent. He has also taken all the evidence of the power drawn from KEB generated by generators and found that there was no receipt of raw materials by the respondent from the said units and the respondent had not manufactured and cleared the goods clandestinely. The department had not produced any evidence to show that the raw materials purchased in the name of the said five units found their way to the respondents factory unutilized and cleared after clandestine manufacture of the goods. There is no evidence of excess consumption of electric power. As the Commissioner has rightly noted, the Revenue did not do the exercise to ascertain whether respondents had enough sources of electrical power, infrastructure facility and manpower for the manufacture of such huge quantity of tread rubber. The entire reading of the order clearly shows that the Commissoner has examined the evidence in great detail and has found that the department has not established the case of clandestine removal. The Revenue has not filed all papers other than what was before the Commissioner and there is no evidence to show that the respondent had received the inputs from the five units and clandestinely manufactured and removed the same without payment of duty. The Order of the Commissioner is just, proper and legal. There is no infirmity in the same. Hence the impugned order is confirmed by dismissing the appeals.
(Pronounced and dictated in open Court)