Customs, Excise and Gold Tribunal - Delhi
M/S. Triveni Rubbers vs Cce, Kanpur on 5 February, 2001
Equivalent citations: 2001(75)ECC180, 2001(131)ELT240(TRI-DEL)
ORDER
V.K. Agrawal:
1. In these two appeals-one filed by M/s. Triveni Rubbers and the and the other filed by the Revenue - arising out of a common Order No.21 Collr/MP/95 dated 28.4.95 passed by the Collector, Central Excise, the issue involved is whether the Assessee was manufacturing Rubber Beltings with less than 25% Rubber Compound, whether benefit of notification No.175/86 was available to the Assessee who was not maintaining statutory records of production and clearance and was indulged in large scale clandestine clearance and whether the Adjudicating Authority while confirming the duty had correctly determined the aggregate value.
2.1 Briefly stated the facts are that the Central Excise Officers searched the factory premises of Triveni Rubbers and M/s. Winner Rubbers P. Ltd., on 23.1.91 on the basis of intelligence that these two units were manufacturing Rubber Beltings of vulcanised rubber having rubber compound more than 25%, falling under Sub-heading 4010.90 of the Schedule to the Central Excise Tariff Act; that on the basis of seized documents and statements recorded, a show cause notice dated 6.11.91 was issued to M/s. Triveni Rubbers for demanding central excise duty amounting to Rs.75,62,092,-30 paise in respect of rubber beltings cleared during the period from 6.11.1986 to 1990-91 alleging that the rubber beltings manufactured by them contained more than 25% rubber compound; that Shri R.K. Agrawal, Proprietor, had deposed in his statement dated 24.1.91, that rubber beltings manufactured in his unit were of the same quality as those being manufactured by M/s. Winner Rubbers and the test result of sample of goods seized from Winner Rubbers revealed that the percentage of rubber compound was 64.8% and 57.9% by weight; that many of the delivery challans bore the same serial numbers and delivery challans were received from the consignees after delivery of the goods and these were torn.
2.2 The Collector, under the impugned Order, confirmed the demand of central excise duty amounting to Rs.26,54,781-71 p. only and imposed a penalty of Rs.10 lakhs, adopting the calculation given by the Appellants in their reply to the show cause notice regarding figures of rubber belting and taking the value of clearances of finished rubber beltings as shown in diaries into consideration. The Commissioner gave his findings to the effect that the appellants manufactured both the types of rubber belting and bifurcated the total clearances based on calculations given by the Appellants. The Commissioner, however, disallowed them the benefit of Notification No. 175/86 prior to 24.8.90 when SSI registration certificate was issued to them holding that the exact date of application for SSI registration was not produced and they were not eligible to avail SSI exemption on the basis of certificate in the name of M/s. Vikrant Udyog Ltd. who was manufacturing goods earlier in the same premises. The Commissioner did not also accept their plea that the challans issued in 1990-91 were for returned goods as it was not mentioned on the challans that these were used for returned goods.
3. Shri V.C. Bhartiya, learned Advocate, mentioned at the outset that two issues involved in appeals are whether value of Rubber beltings has been correctly arrived at and from that date the benefit of SSI exemption would be available to them. The learned Advocate submitted that the Appellants had taken the factory from M/s. Vikrant Udyog since 17.6.86; that as the aggregate value of clearances of the dutiable rubber belting was less than Rs.15 lakhs, they had available SSI exemption and had not applied for a Central Excise license. The learned Advocate further submitted that Vikrant Udyog was holding permanent SSI registration certificate dated 14.10.79 and on the basis of said registration certificate the appellants are also eligible for SSI exemption; that they had applied for mutation of name in the existing registration certificate on 31.7.87; that permanent SSI certificate was issued to them on 24.8.90; that the word `factory' has been used in para 4 of notification No. 175/86 and not the manufacturer and the Tribunal in the case of Lucky Tractor vs. CCE, 1987 (29) ELT 638 has distinguished both the words `Factory' and `Manufacturer'; that in view of the facts, if any factory has acquired small scale status from the Directorate of Industries, it would always remain SSI undertaking because the fact of small scale depend upon the investment in fixed assets in plant and machinery; that such factory shall always be SSI whosoever is the manufacturer/owner. He relied upon the decision in the case of Raja Valve Industries vs. CCE, Chandigarh, 2000 (37) RLT 134. The learned Advoacte also mentioned that no time limit is prescribed in para 4 of notification No. 175/86; that it was held in Prag Industries P. Ltd. vs. CCE, Chennai, 2000 (115) ELT 115 (T) that SSI exemption is available to the Appellants from the date the policy decision was announced by the competent authority raising ceiling of plant and machinery to Rs. 35 lakhs; that the High Court of Allahabad in the case of Satya Narayan Agarwal vs. Govt. of India, 1978 ELT J476 has held that lower rate is applicable to the SSI unit from the date of notification as there is nothing in the notification indicating that the exemption will be applicable only from the date of satisfaction of the Asstt. Collector; that accordingly there is nothing in para 4 of the notification that exemption will be applicable only from the date of application for registration or grant of certificate of SSI from the Directorate of Industries; that the notification contemplates exemption from the date of its issue i.e. 1.3.86 once the factory assumes SSI status. He also mentioned that the Tribunal in the case of Melwin Powell Vanaspati and Engg.Industries vs. CCE, Calcutta, 1999 (32) RLT 801 and Borg Instrument P. Ltd. vs. CCE, New Delhi, 2000 (115)ELT 693 has held that SSI exemption is available to a new manufacturer of a factory from the date he had applied for registration with the Directorate of Industries and not from the date of granting registration by them.
4. The learned Advocate, further, submitted that no sample was drawn from the appellants' unit. Only the samples taken from the premises of M/s. Winner Rubber were tested and the same result had been applied to the rubber belting manufactured by them; that test report cannot be applied retrospectively as was held by the Appellate Tribunal in the case of Hahneman Laboratory vs. CCE, Calcutta, 1999 (85)ECR 532 and Pratap Steel Rolling Mills Vs. CCE, New Delhi, 1996 (87) ELT 188; that accordingly test report of the sample drawn from the premises of Winner Rubber on 23/24-1-91 cannot be made applicable to the Rubber Belting manufactured by Appellants during 1986-87 to 23.1.91; that Shri Radha Krishnan Agrawal,Proprietor has only stated in his statement dated 24.1.91 that the quality of the rubber belting is approximately same that of Winner Rubber; that the word approximately should not be construed as an affirmative that they were manufacturing rubber belting containing more than 25% rubber compound; that further in his statement dated 26.2.91 he has clearly stated that diaries contained production and clearances of rubber belting less than 25% of rubber compound. Finally, the learned Advocate mentioned that the figure of clearances arrived at by the Commissioner in the impugned Order (internal) page 25 of the impugned Order) are not correct as there are totalling and calculation mistakes; that the Adjudicating Authority at internal page 26 of the impugned Order had accepted the calculation percentage of the rubber compound as given by the Appellants in 149 page; that therefore, the value shown against these entries should also be considered as true and correct aggregate value of both type of rubber belting; that it is well settled law that a document or statement when relied opinion proceedings, it should be relied upon as a whole and not as stray sentences or part documents; that the true and correct aggregate value of clearances during the relevant period are as under:-
Year Less than 25% More than 25% TOTAL
----- ------------ ------------- ------
1986-87 16,04,714-40 11,73,669-40 27,78,383-80
1987-88 31,50,268-40 18,25,056-80 49,75,324-20
1988-89 40,51,511-00, 13,41,185-20 53,92,696-20
1989-90 9,86,971-80 3, 57,314-00 13, 44,285-80
1990-01 ----- ----- ** 3,84,829-45
*based on existing seized 20 challan only.
5. The learned Advocate continued to submit that the Commissioner has added presumpted figure in all financial years on the ground of totalling mistakes towards the dutiable rubber belting; that there is no totalling mistake individual pagewise throughout; that the Adjudicating Authority has failed to pin point the page number or pagewise total in the consolidated chart; that fir financial year 1990-91 only 20 challans were resumed by the Department reflecting removal of rubber belting valued at Rs.3,84,829-45; that ins absence of any evidence of clandestine removal, only relying upon the statement of Muneem, calculating prorata removal is not accepted in law;that it has been held by the Tribunal in the case of K. Harnath Gupta vs. CCE, 1994 (71)ELT 981 that clandestine removal is positive act and duty is not demandable on average basis; that the Supreme Court also in the case of Oudh Sugar Mills, 1978 (2) ELT J 172 has held that figure should be arrived at on the basis of positive evidence and should not be based upon inference involving unwarranted assumption; that therefore, the value arrived at by the Adjudicating Authority in regard to missing challan amounting to Rs.31,28,915/- should be reduced from the aggregate value for the financial year 1990-91.
6. Countering the arguments, Shri S.P. Rao, learned D.R., submitted that M/s. Triveni Rubber did not obtain licence thus giving the impression that they were manufacturing exempted goods. that day to day production and clearance had been recorded in the seized diaries in a coded manner which was indicative of the fact that they had kept the records in a secret manner for their private purpose; that they were using chits and challans repeatedly; that during search officers recovered number of torn challans of the Assessee from the dustbin in Winner Rubbers; that Shri Daya Shankar Gupta, Munim,had admitted in his statement that he used to tear the delivery challans and that diaries did not contain all the entries of despatch and clearance and the actual clearance figure was more than what was reflected in the diaries. He, further, emphasised that benefit of SSI exemption under Notification No. 175/86-CE should not be given to the assessee as they were not clearing the goods legally and were indulging in evasion of Central Excise duty; that in any case the benefit of Notification cannot be extended to them on the basis of a certificate of Registration as SSI obtained by someoneelse; they have to obtain certificate independently in their name; that as the SSI status had been granted to them only on 24.8.90, the benefit of notification could be given only from that date. Reliance was placed on the decision in the case of Kutch Cement (P) Ltd. vs. CCE, Rajkot, 1996 (82) ELT 280 (T)wherein it was held that as SSI certificate was granted without any retrospective effect in absence of any stipulation to this effect in the certificate, the concession under Notification No.175/86-CE would be available only from the date of issue of SSI certificate. He also mentioned that similar views were expressed by the Tribunal in the case of Magnavision Electronics Ltd. vs. CCE, Bangalore, 1997 (91)ELTD 185 (T). Finally, the learned D.R. Submitted that the Commissioner had accepted the calculations submitted by the Assessee observing that the investigating officers had not calculated the entries given in the diaries on the basis of formula adopted by them in the Show Notice; that when there was a dispute of such a nature which went to the root of the demand of duty, the principle of natural justice demanded that the investigating officers should have been confronted with the calculation submitted by the Assessee and to invite their reaction accepting it unilaterally; that further the Department had interpreted their entries in column 3 in length whereas the assessee had indicated weight of fabric in Column 3; that cloth is never traded on weight basis nor the finished material goes by weight; that this proves that the calculation given them was ab initio wrong.
7. In reply, the learned Advocate referred to Annexure V to the show cause notice issued to the Appellants by the Department and mentioned that the formula adopted by the Department therein has also been adopted by them in 149 pages submitted by them to the Department and as such the same cannot be disputed by the Department.
8. We have considered the submissions of both the sides. The Appellants have themselves admitted in their reply dated 24.1.95 to the show cause notice that adopting the formula worked out by the Department they had prepared a consolidation sheet showing diaryswise value of the rubber belting containing less than 25% of the rubber compound and more than 25% of the rubber compound.The calculation given by the them. In view of this, it is evident that the appellants had manufacture drubber belting containing more than 25% rubber of the compound chargeable to Central Excise duty. The revenue has come in appeal against this findings of the Commissioner contending that the Commissioner should have given an opportunity to his Preventive Department to explain. We do not find any force in this contention. The Department neither in the appeal filed by it not at the time of hearing before us presented any evidence to show as to how the findings reached by the Commissioner was wrong. The Revenue has only mentioned in Memorandum of Appeal that in the calculation sheet presented by the Party in Column 3, weight of the fabric had been indicated and cloth was never traded on weight basis. We observe from Annexure 5 to the show cause notice that column 3 7 4 pertain to "(1) Code of Fabric, (2) Length of Fabric in Mtrs./Weight of Fab.m kgs." It is thus apparent that the Revenue itself has taken the weight of fabric into consideration which is further evident from the Note below Annexure V. which reads as under:--
"Total weight of these 14 rolls cleared are 900 kgs. as per despatch chit pasted in the register at P/38 bearing S1. No.135. Out of 900 kgs. 402 kgs. is the weight of rubber compound which are 44.66% by weight."
Accordingly we are of the view that the Revenue had not been successful in substantiating their contention that the Appellants had not manufactured Rubber belting containing less than 45% rubber compound by weight.
9. The other issue, is whether the benefit of Notification No. 175/86 is available to the Appellants, and if yes, from which date. There is no substance in Revenue's submission that benefit of SSI notification can be claimed only by an Assessee who is maintaining records of production and clearance in a system and transparent manner and not in a coded fashion n private notebooks. The benefit of exemption Notification is available to a manufacturer, if he satisfies the conditions, if any, specified in the Notification. Once the conditions in the Notification are complied with, the benefit of Notification has to be extended to such manufacturer. The Appellants have claimed that once they got registered as SSI the benefit should be available to them the date of issue of the Notification No. i.e. We do not agree with this submission. The benefit of the Notification will be available to them only after they comply with the conditions of the notification. The provisions of para 4 of Notification No. 175/86 are very explicit as it provide that the exemption contained in this Notification shall be applicable only to a factory which is registered with the Director of Industries in any State or with the Development Commissioner as SSI under the provisions of Industries (D & R) Act, 1951. The benefit of Notification cannot be given retrospectively even after they complied with the conditions of the Notification. Their reliance on the decision in the case of Satya Narayan Agarwal (supra) is misplaced as the facts of both the cases are different. In the said case the Notification provided confessional rate of duty, if the capital investment on plant and machinery was not more than Rs 7.5 lakhs. The Asstt. Commissioner extended the benefit only from the date when he was satisfied about the initial investment. In that context the High Court of Allahabad held that date on which Asstt. Collector was actually satisfied or the time which he took in arriving at the satisfied or the time which he took in arriving at the satisfaction were wholly immaterial to the liability of the factory to the excise duty. If an industry is not registered with the Director of Industries or the Development Commissioner it cannot be claimed that the benefit of Notification will be applicable from the date of the issue of Notification after it gets a registration certificate from the competent authority. The other contention of the Appellants is that they had taken the factory from M/s. Vikrant Udyog in June, 1986 and as the factory of M/s. Vikrant Udyog was registered as SSI the benefit of SSI should be available to them since para 5 of the Notification talks of factory and not the manufacturer. A perusal of the registration certificate of M/s. Vikrant Udyog reveals that it certifies only that Vikrant Udyog has been registered a SSI unit and not the place where they are located. Once the Appellants have purchased the factory from the partners of M/s. Vikrant Udyog, Vikrant Udyog ceased to exists and the certificate issued to them also becomes inoperative as Vikrant Udyog whom the licence was issued is no more in existence. The decision in the case of Lucky Traders (supra) is not relevant to the present matter as, in that case, the issue involved was, whether the Appellants therein who had set up their factory by purchasing machinery and leasing out the premises of another manufacturer who had already availed of the benefit, would be entitled separately to claim further exemption from the beginning under the Notification No. 71/78. The Tribunal in that case denied the benefit of Notification in terms of Clause (c) of Notification No. 71/78.
In this context, the Tribunal held that the reference to factory is related to the place of manufacture. The decision in the case of Raja Valve Industries (supra) is also not applicable to the present matter as, in that case, the name of the new Concern was endorsed on the certificate itself whereas, in the present matter, a new certificate has been issued to the appellants. Accordingly,t he benefit of SSI notification cannot be claimed by the Appellants on the basis of registration certificate issued in favour of Vikrant Udog. However, we find force in the submissions of the learned Advocate that the benefit of SSI exemption will be available to them from the date they applied for registration as SSI with the Director of Industries and not from the date of granting registration to them. This has been the view of the Tribunal in the case of Melvin Powleen Vanaspati & Industries and Kohinoor Plastics (supra). The decision in the case of Kutch Cement Pvt. Ltd. is not applicable as the facts were different inasmuch as the Appellants therein were a registered DGTD unit and their status can be said to have been changed only from the date of grant of SSI certificate. The decision in the case of Manga Vision Electronic Ltd. (supra) is also not applicable as, in that case, the Tribunal observed that "there is no plea from the Appellants when they had applied for this certificate during the relevant period of time and the authorities took their own time to issue the certificate and for that reason, therefore, they could have urged a plea that the certificate could be valid from the date of application.In the absence of that, the only conclusion that we have been able to come to is that the certificate is valid from the date of issue." Accordingly the delay on the part of the certificate issuing authority should not affect the availment of benefit of Notification by the Appellants. Any delay in issuing the certificate which cannot be attributed to the Appellants should not deprive them of the benefit of SSI notification. We, thus, hold that the Appellants are eligible for availing exemption under Notification No. 175/86 w.e.f. 31.7.87 when they applied for SSI certificate.
10. We also agree with the Appellants that the value of the clearance for the year 1990-91 cannot be worked out on the basis of prorata, taking into consideration the challans available with the Department. The matter is, therefore, remanded to the Adjudicating Authority for redetermining the liability to duty of the Appellants in the light of the conclusions reached by us. The Appellants have contended that the calculation mistake has been carried out by the Adjudicating Authority without pin pointing the page number or pagewise total. As the duty liability to be redetermined, the correction on account of totalling mistake should also be done by the Department after pointing out the same to the Appellants and giving them an opportunity of clarifying the same. As the duty liability is to be worked out, the penalty imposed is set aside and the Commissioner is at liberty to impose the penalty after redetermining the duty liability.
11. The Appeals are disposed of in these terms.