Custom, Excise & Service Tax Tribunal
M/S Mittal Pigement Pvt. Ltd vs Cce, Jaipur on 26 August, 2016
IN THE CUSTOMS, EXCISE & SERVICE TAX
APPELLATE TRIBUNAL
West Block No. 2, R.K. Puram, New Delhi 110 066.
Date of Hearing: 12.8.2016
Date of Pronouncement: 26.8.2016
Appeal No. E/2058-2059/2009-Ex.(DB)
(Arising out of common Order-in-Original No. 25/2009(C.E.) Commissioner dated 20.5.2009 passed by the Commissioner of Central Excise, Jaipur)
For Approval & Signature :
Honble Mr. Justice (Dr.) Satish Chandra, President
Honble Mr. Ashok K. Arya, Member (Technical)
1.
Whether Press Reporter 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?
M/s Mittal Pigement Pvt. Ltd. Appellant
Shri Ramesh Kumar Agarwal
Vs.
CCE, Jaipur Respondent
Appearance Shri A.R. Mahdav Rao, Advocate - for the appellant Ms. Neha Garg, D.R. - for the respondent CORAM: Honble Mr. Justice (Dr.) Satish Chandra, President Honble Mr. Ashok K. Arya, Member (Technical) Final Order No. 53232-53233/2016 Per Ashok K. Arya :
1. Both the sides have been heard in detail.
2. The appellants M/s Mittal Pigment Pvt. Ltd. and Shri Ramesh Kumar Agarwal, Director are is in appeal against the order in original No. 25/2009(CE) dated 22.5.2009 passed by Commissioner of Central Excise, Jaipur-I whereunder a demand of Rs.2,30,39,602/- along with interest has been confirmed and equivalent amount of penalty has also been imposed. The impugned order also confirms central excise duty of Rs.1,31,898/- for short found inputs which had been deposited by the assessee-appellant and was appropriated to the Government account by the impugned order. A penalty of Rs. 40 lakhs has also been imposed on Shri Ramesh Kumar Agarwal, Director of the appellant company under Rule 26 of the Central Excise Rules, 2002.
3. The respondent is Commissioner, Central Excise, Jaipur-I. The case of the Revenue is that as the appellant No. 1 is a manufacturer of Zinc Oxide, who during different periods depending upon the form of raw material have had different yields of the product viz. Zince Oxide, but the yield has to be in the range of 70% to 84%, which comes to an average of 77.60%. The statement of Shri Ramesh Kumar Agarwal, Director of the appellant company was recorded. The Revenue came out with the data indicating suppression of product on the part of the appellant to the show cause notice in this regard indicated that for the subject suppressed goods (zinc oxide) total duty of Rs.2,30,39,602/- was not paid. In this regard, a show cause notice dated 11.2.2008 was issued by Commissioner, Central Excise, Jaipur-I. Commissioner, Central Excise, Jaipur-I vide his order in original (O-I-O) dated 19.5.2009 confirmed the duty demand of Rs.2,30,39,602/- along with interest.
4. The appellants have been represented by ld. Advocate Shri Madhav Rao, who has inter alia submitted as under :
(i) Annexure A to the show cause notice (at page 20 of the appeal) shows that on an average the output for all the periods under consideration has to the extent of 77.60%. For the year 2002-03 the yield has been 94.41% and there is no demand, similarly for 2005-06 where the yield has been 87.96% there is no demand. Applying this extremely gross manner of arriving at the output, for the year 2003-04 the production has been hiked to 84% where the percentage output was 80.04% achieved, for 2004-05 from 67.06% achieved to 84% and lastly for 2006-07 from 65.41% achieved to 84% of the inputs basket in quintals.
(ii) It is pertinent that no input output norms have ever been fixed by the Department for this type of manufacture of zinc oxide, and indeed they cannot be fixed considering that any number of impurities are present in the input also varying from batch to batch, and there is no standard input with standard predetermined quantity of zinc. In the statement itself which is relied upon, extracted at page 35 (of Paper Book) it has clearly come out that from zinc dross the output would be 70 to 80% and from scrap 50 to 70% for the recovery of zinc oxide. A perusal of pages 49/50 (of appeal) shows that the input basket will have materials like iron, aluminium, lead and so on. Even assuming for a minute all the inputs had 70% of zinc, one cannot fix the output based on the ratio of output of zinc oxide from pure ingot of 99.95% purity. The impurities in the inputs themselves take away the zinc metal and hence the yield of zinc oxide goes down.
(iii) If indeed a quantity of 1545 metric ton zinc oxide with the concomitant duty implication of Rs.2.30 crores had been removed, with a value of over 14 crores, then evidence as to dispatch particulars from transporters, realisation of such level of sale proceeds, finished products received details from the buyers, excess power consumption required for such a volume of manufacture would surely be available. However, the Department has not led in any evidence whatsoever in this regard. The allegation of clandestine removal has to fail on the strength of the decision of the Honble Allahabad High Court in the case of Continental Cement Company Vs. Union of India 2014 (309) ELT 411.
(iv) That the input output norms so grossly fixed and arrived at by the Department in the show cause notice cannot sustain an allegation of clandestine removal and reliance is placed on the following decisions:
(a) Hindustan Coca Cola Beverages Pvt. Ltd. Vs. CCE, Thane- 2006 (205) ELT 700.
(b) Jaganath Sweets Vs. Deputy Commissioner of Sales Tax, Cuttack-I.
(c)
(v) The imposition of penalty, duty and interest, it is humbly prayed may kindly be set aside on the company and in the case of the Director the penalty may kindly be set aside.
5. We have carefully considered the facts on record and the submissions of both sides along with the case laws cited.
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 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 proving the case of suppressed production and clandestine clearance by the appellants. In this regard we seek support from Honble Allahabad High Courts decision in the case of Continental Cement Company Vs. Union of India 2014 (309) ELT 411 (All.) and Supreme Courts decision in the case of Oudh Sugar Mills Ltd. Vs. Union of India 1978 (2) ELT (J.172)(SC) and CESTATs in the case of Punalur Paper Mills Ltd. Vs. CCE Vide Final Order No. 996-997/2008 dated 26.8.2008. The Honble 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.
8. The impugned order has confirmed another Central Excise duty of Rs.1,31,898/- on short found inputs which was deposited by the assessee and was appropriated to the government account. In this regard, there has not been any submissions by the appellants. Therefore, this part of the order confirming the said duty of Rs.1,31,898/- does not warrant any intervention from this Tribunal. It is hereby sustained.
9. Both the appeals are disposed off in above terms.
(Pronounced in open Court on 26.8.2016) (Justice Dr. Satish Chandra) President (Ashok K. Arya) Member (Technical) RM 8