Custom, Excise & Service Tax Tribunal
Amar Enterprises vs Alwar on 5 July, 2018
IN THE CUSTOMS, EXCISE AND SERVICE TAX
APPELLATE TRIBUNAL, NEW DELHI
PRINCIPAL BENCH, COURT NO. I
Excise Appeal No. 51695 - 51697 of 2017
[Arising out of the Order-in-Original No. ALW-EXCUS-000-COM-
006-17-18 dated 30.05.2017, passed by Commissioner of Central
Excise, Alwar]
M/s. Amar Enterprises Appellants
Shri Sanwar Mai Goyal
Shri Amar Chand Sharma
Vs.
CGST & CE, Alwar Respondent
Appearance:
Shri Prem Ranjan, Advocate for the Appellants Ms Tamana Aalam, AR for the Respondent CORAM:
Hon'ble Mr. Anil Choudhary, Member (Judicial) Hon'ble Mr. C L Mahar, Member (Technical) Date of Hearing/ Decision: 05.07.2018 FINAL ORDER No. 52626-52628/2018 Per: C L Mahar:
The brief facts of the matter are that the appellants are a 100% EOU engaged in manufacture of copper ingots from various kinds of copper scraps such as mixed copper cable scrap, mixed copper scrap, E/51695-51697/2017 copper scrap, MS scrap, rubber picuks, etc. The appellants, after segregation of the scraps retrieves copper from the same and the copper scrap so obtained is melted and from it copper ingots are manufactured. The department has entertained a doubt that appellants are under-reporting the recovery of copper from copper scrap procured by them and by indulging into lower recovery, they are suppressing the manufacturing and clearance of copper ingots and thereby evading central excise duty. The Central Excise officer have supervised six consignments totally weighing 300.825 MT of copper scrap imported under 5 Bills of Entry. It revealed in the supervision of recovery that the average recovery of copper from mixed copper cable scrap imported under 5 Bill of Entry was 31.8 % of total weight.
2. The investigations by the Revenue revealed that during the period from 10.12.2003 to 12.10.2004, since there was no physical supervision by the officers of the Revenue, during the course of segregation activity of such copper cable scraps, the appellant-
assessee has under reported the recovery of copper to 18.41% only.
After necessary investigations etc, a show cause notice dated 14.12.2006 was issued and same was adjudicated by the learned Commissioner vide his order dated 13.2.2008 wherein a short payment of duty amounting to Rs.1,20,19,706/- was confirmed and equal amount of penalty on the appellant was imposed under Section 2 E/51695-51697/2017 11AC. Personal penalty of Rs.10 lakh was imposed on Shri Sanwar Mai Goyal, partner of the appellant.
3. Against the above mentioned order-in-original, the appellant in his first round of litigation had come before this Tribunal wherein vide Final Order No. 55292 -55294/2016 dated 16.11.2016, the Tribunal has remanded the case for denovo adjudication with the following directions:-
"7. In the totality of the facts and circumstances of the case, we are of the view that in the instant case, no comparative study of like manufacturing units was considered by the department. Similarly, the appellant to support their contention has not brought on record any such studies pertaining to the yield from the consignments of the scrap. A comparative study of like factories on this subject matter is required to be considered for coming to the right decision. Hence, we set aside the impugned order and remand the matter back to the adjudicating authority to have a comparative study from like factories and make estimation accordingly, but by providing a reasonable opportunity of personal hearing to the appellant. Additional evidence may be admitted, if need be during the course of hearing. Learned Counsel for the appellant assured full support to the lower authority. With the aforesaid direction, the appeal is allowed by way of remand. "
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4. In pursuance to the above order of this Tribunal, the matter has been re-adjudicated vide order-in-original dated 31.5.2017 wherein the duty and other penalties have been confirmed in toto.
5. It can be seen that this Tribunal in its order dated 16.11.2016 has specifically asked the Revenue to undertake comparative study of like factories on this subject matter before reaching the right decision.
It was also expected as per the above order that the finding of comparative study will be provided to the appellant before undertaking the re-adjudication of the matter. It is seen from the impugned order-in-original that no such comparative study as ordered by this Tribunal has been undertaken before re-adjudication of the matter. The adjudicating authority has held that they are not in a position to find any like units or factories working in their jurisdiction where the comparative study can be made. It has also been mentioned in the impugned order that after 13 years, there is no data available, therefore, no comparative duty can be carried out at this stage. It has also been mentioned that -
19.2 "........Any comparative study of Industries has to be done in relevance to time period involved. After 13 years there is no data available, therefore, no comparative study can be carried out at this stage. An apple can be compared with an apple and orange can be compared with orange but an apple cannot be compared with orange.
4E/51695-51697/2017 Besides, in this case, personal hearing was held on 18.5.2017 but as on date the assessee has also not submitted any comparative data /documents or additional evidence in support of their defence in the matter. Therefore, I proceed to decide the case on the basis of documents / facts available on record. "
6. The learned advocate appearing on behalf of the appellant has stated that the adjudicating authority has failed to implement the instructions issued by this Tribunal in their order dated 16.11.2016 stating that the department has not undertaken any comparative study of like industries for ascertaining the standard percentage of copper metal recovered from various kinds of copper scraps. It has also been argued that principles of natural justice has not been followed by the adjudicating authority as no copy of any such study was provided to them before undertaking the adjuration in this matter. The learned Advocate has assailed the order-in-original saying that it is based on mere surmises and conjectures without any substantial evidence indicating excess manufactured and clandestine clearance of copper ingots. It has further been contended that the Central Excise Officers supervised the activities of segregation of copper, MS scrap, rubber picuks, dust and other metals (viz. lead aluminous etc. for the recovery of copper scrap, from mixed copper cable scrap / mixed copper scrap / copper scrap in respect of 16 consignments weighing 300.825 MT imported vide 5 Bills of entries from 10.9.2004 to 5 E/51695-51697/2017 8.11.2004. The Central Excise officers also examined the raw material issue slips and plant segregation challan which revealed that average copper recovery from mixed copper cable scrap was 31.8% for the said 5 Bills of Entry.
7. We have heard the learned DR who has reiterated the findings given in the order-in-original.
8. We have heard the rival contentions. We are of the view that the while asking for the comparative study, this Tribunal had expected that the Commissioner would not confine himself to his own jurisdiction, he could have done the exercise of taking the relevant data of copper recovery from various kind of copper scraps from other units which are under the jurisdiction of other Commissionerate. So far as his observation as mentioned in preceding para 5 is concerned, it is to mention that recovery of copper from various kinds of scrap will always remain the same even after lapse of 13 years. Only adoption of some latest recovery technology may make some small variation in the recovery percentage of metal from the scrap. The above observation of the Commissioner basically indicates that he has not put any serious efforts in making judicious decision into the allegations made under the impugned show cause notice. He has rather adopted a comfortable posture by simply 6 E/51695-51697/2017 confirming the duty demanded under the impugned show cause notice.
9. For establishing the clandestine manufacture and clearance, the department has not made any sincere efforts to establish that appellant-assessee have manufactured and clandestinely cleared the copper ingots over and above what was declared by them in their statutory records. The law is fully settled that in every case of alleged clandestine manufacture and clearance, the onus is on the revenue to prove what it alleges with positive and concrete evidences. We find that average recovery of copper from five consignments of copper scrap cannot form concrete evidence to demand duty over and above the declared quantities of clearances of copper ingots. The department should have gathered some more precise evidences to prove unrecorded manufacture of copper ingots and sale of same. We find that they have not even made any efforts in this direction. We note that since a huge quantity of copper ingots cannot manufactured and sold without leaving some traces of evidences but no efforts have been made to prove the same.
10. If there were excess sale of copper ingots other than what is provided in the statutory records of the appellant-assessee then some investigations should have been done to prove it but we find the department has not even bothered to undertake any investigations on 7 E/51695-51697/2017 this side to prove that the assessee has manufactured and cleared certain quantities of copper ingots which are not recorded in the bookds of accounts. In this regard, we take note of this Tribunal's order in the case of Mittal Pigment Pvt. Ltd. vs. CCE, Jaipur [2018 (360) ELT 157 (Tri-Del)] . The relevant paras are extracted hereinbelow:
6. Revenue has made out its case of suppressed production of clandestine clearances of goods without payment of duty solely on the basis of approximation production considering average yield of the product viz. zinc oxide out of the raw material issued, which has been in the nature of different varieties like zinc dross, zinc ingots, etc. and which are of different purities. During the hearing, Ld. Advocate for the appellants further referred to literature - "Zinc - The Science and Technology of the Metal, Its Alloys and Compounds authored by CH Methewson, Professor, Yale University, prepared with cooperation of the American Zinc Institute;
and the Scrap Specifications Circular issued by Institute of Scrap Recycling Industries, Inc. saying that the conclusions mentioned in the show cause notice and in the order-in- original confirming the suppressed production and duty is not correct, considering the varieties of zinc scrap like "Saves, Scabs, Scribe" and so on used by the appellant.
6.1 Further the department has not gone beyond the approximation of yield which they have shown as 70 to 84% in col. 3 of Annexure-A attached to the show cause notice and average yield overall had been shown as 77.60% which has 8 E/51695-51697/2017 been made the basis for issuance of the show cause notice (SCN) as well as for confirming the duty of Central Excise by the impugned order dated 19-5-2009. The department confirmed the duty demand along with interest for the period of five years alleging suppression of clandestine removal of the final product and also imposed penalty mainly based on the production approximation and on the statement of Director of the unit, Shri Agarwal, who is one of the appellants in this case.
6.2 The department has not gone beyond the approximation and the statement of Shri Agarwal. Any prudent person would not so conclude on extra production by approximation and by a mere statement of the Director of the company. Unless there are further corroborations in the form of documentary evidences, which could be like despatch details for the production, receipt details of the said material, transactions of the sale money, transportation details of such goods, details of additional consumption of electricity for such suppressed production a prudent individual would not agree with the present conclusions of the Revenue. There is nothing on record from the Revenue side to come to a reasonable conclusion to say that there has been preponderance of probability of such suppressed production on the part of the appellant. The evidences in the form of approximation and averaging production as 77.6% and one statement of Shri Agarwal, Director of the appellant company cannot be called a prudent conclusion of the production estimate.
6.3 Consequently, we are of the considered view that the department has not discharged its burden of conclusively 9 E/51695-51697/2017 proving the case of suppressed production and clandestine clearance by the appellants. In this regard we seek support from Hon'ble Allahabad High Court's decision in the case of Continental Cement Company v. Union of India - 2014 (309) E.L.T. 411 (All.) and Supreme Court's decision in the case of Oudh Sugar Mills Ltd. v. Union of India - 1978 (2) E.L.T. (J172) (S.C.) and CESTAT's in the case of Punalur Paper Mills Ltd. v. CCE - Vide Final Order Nos. 996-997/2008, dated 26-8-2008 [2009 (244) E.L.T. 204 (Tribunal)]. The Hon'ble High Court in the case of Continental Cement Company (supra) has inter alia observed as under :
13. .......to prove the allegation of clandestine sale, further corroborative evidence is also required. For this purpose no investigation was conducted by the Department.......
14. .......
15. ........When there is no extra consumption of electricity, purchase of raw materials and transportation payment, then manufacturing of extra goods is not possible..."
7. Considering above discussions and the case laws cited above, we conclude that the Revenue has failed to reasonably prove suppressed production and clandestine clearance on the part of the appellants. Consequently, the impugned order in respect of confirmation of duty for alleged suppressed production, and imposition of fine and penalty on the appellant No. 1 and imposition of personal penalty of Rs. 40 lakhs on Shri Agarwal who is appellant No. 2 are hereby set aside. The appellants will get the relief accordingly."
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11. Thus we hold that charges of clandestine manufacture and clearance is not established on the basis of available evidences.
12. In the light of above, we hold that there is no merit in demand of duty and same is not sustainable and accordingly the order in original is set aside.
13. Since the demand itself is not sustainable on merit and therefore, question of imposition of penalties under Section 11AC of the Act on the firm and under Rule 26 of Central Excise Rules on the partners does not arise and thus, same are also set aside.
14. The appeals are allowed in above manner.
(operative part of the order pronounced in the open Court) ( Anil Choudhary ) ( C L Mahar ) Member (Judicial) Member (Technical) ss 11