Custom, Excise & Service Tax Tribunal
Portland Cement (I) Ltd vs C.C.E. Lucknow on 14 January, 2015
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL,
WEST BLOCK NO.II, R.K. PURAM, NEW DELHI-110066.
SINGLE MEMBER BENCH
Court No.4
Appeal No. E/1729, 1730, 1731, 1732/2006-EX(SM)
(Arising out of OIO No. 36/Commissioner/LKO/2005 dated 25.02.2006 passed by the CCE, Lucknow)
Date of Hearing: 26.12.2014
Date of Pronouncement: 14/01/2015
For approval and signature:
Honble Mr.Manmohan Singh, 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 should 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?
seen
4
Whether Order is to be circulated to the Departmental authorities?
Yes
Portland Cement (I) Ltd. Appellant
Vs
C.C.E. Lucknow Respondent
Present for the Appellant: Shri Bipin Garg, Advocate Present for the Respondent: Shri A.K. Dhawan, DR Coram: Honble Mr.Manmohan Singh, Member (Technical) FINAL ORDER NO.50040-50043/2015 There are four appeals arising out of a common Order under which the learned Commissioner of Central Excise Lucknow has demanded Central Excise duty amounting to Rs.19,77,133/- from M/s Portland Cement (I) Ltd. (Appellant No.1) and duty Rs.1,89,280/- from M/s Portland Chemicals (Appellant No.2) besides imposing the penalties of equal amount on both the Appellants respectively. Adjudicating Authority also confiscated 1210 bags of cement valued at Rs.1,21,000/- with an option to redeem the same on payment of Rs.3,700/- for 369 bags to the Appellant No.1 and fine of Rs.8,400/- for 841 bags to the Appellant No.2. The Commissioner also confiscated 1962 empty bags valued at Rs.11,572/- with an option to redeem the same on payment of fine of Rs.1,100/- to the Appellant No.1. A penalty of Rs.2,50,000/- was imposed on Shri S.P. Agrawal, Director of Appellant No.1 and a penalty of Rs.50,000/- was imposed on Shri B.P. Agrawal, Partner of the Appellant No.2 under Rule 209A of the erstwhile Central Excise Rules, 1944.
2. Since all the four appeals arise out of a Common Adjudication Order, all the appeals are taken simultaneously for the decision.
3. Facts are recapitulated to appreciate the issued. The Central excise Officers Division, Aligarh visited the factory premises of Appellants No.1 and 2 on 21.03.1997 and detained 1210 bags of cement as the same were not accounted for in RG-1 Registers, along with empty bags. The detained bags were finally seized on 22.05.1997. The Central Excise officers had also resumed certain records which included loose papers also. The demand of duty Rs.1,89,280/- has been confirmed on the basis of some of the loose papers and the duty Rs.19,77,133/- has been confirmed on the basis of the meter reading of DG sets installed in the factory premises as shown in loose papers.
4. The learned Advocate Shri Bipin Garg submitted that there was no evidence of clandestine clearance of goods by both the Appellants Nos.1 and 2 and the entire case was based upon presumptions. The learned Advocate also mentioned that the duty has been demanded in respect of 11,414 bags of cement on the basis of loose sheets. He has submitted that these sheets neither bear the name of the company nor the names of the factory nor the description of the commodity. He contended that in absence of these details, it could not be presumed that the loose sheets pertained to Appellants and were in connection with the production and clearance of cement. The learned Commissioner has presumed without any evidence that these sheets pertained to cement bags since in a cement factory, bags produced would be of cement. He placed reliance on the judgment in the case of Oudh Sugar Mills Vs Union of India, 1978 (2) ELT (J172) (SC) wherein the Supreme Court has held that a finding based only on inferences involving unwarranted assumptions was vitiated by error of law. The learned Advocate further contended that the learned Commissioner has accepted that the said sheets were prepared by the labour contractor. He further contended that slips pertaining to removals and statements of witnesses were not sufficient to establish clandestine removal based on the decision in the case of Essvee Polymers (P) Ltd. Vs CCE, 2004 (61) RLT 918 (CESTAT-CHE). He further referred that RUD H-1 was unsigned, the learned Commissioner has relied upon it by stating that these unsigned sheets are reflection of unrecorded production and clandestine clearance. Fact can not be proved merely on presumption and assumption. In the case of Forge Pvt. Ltd. Vs CCE, 2005 (179) ELT 336, the Tribunal has held that without clarity to its author and obtaining their version as to what and why he recorded therein, would be in the realm of assumption and presumption and no reliance could be placed upon the same.
5. With regard to documents H-2 to H-33 the learned Advocate submitted that the said documents did not show the name of the commodity as well as factory and though some truck numbers were mentioned thereon, the Department has not further investigated the owners/drivers of the said trucks and the labours named in the said slips to come to correct. The finding of the Commissioner that their statements would have corroborative value for Department and not for the Appellants defy the logic. The learned Advocate emphasized that if it was so why the Department did not interrogate these persons so that the case of the Department would have become stronger. The Tribunal has held in CCE Vs Supreme Fire Works Factory, 2004 (163) ELT 510 that mere suspicious cannot take the place of proof and evidence of purchase of raw material, sale of finished goods clandestinely was necessary. The demand of duty was not upheld in absence of corroborative evidence.
6. He has also relied upon the decision in CCE Vs Sangmitra Cotton Mills Ltd., 2004 (163) ELT 472 wherein the Tribunal has held that Private Note Book and file entries in Note Book or details containing in file are not sufficient to prove charge of clandestine manufacture and clearance for want of evidence of use of inputs. The learned Advocate also referred to decision in D.P. Industries Vs CCE, 2007 (218) ELT 242 (T-Del) wherein the Tribunal has held that the suspicion, however strong, cannot take the place of evidence and the clandestine clearance has to be established beyond reasonable doubt.
7. The learned Advocate further submitted that the demand based on meter reading of DG sets installed has been confirmed on the basis of RUD H-2 to H-33 and demand has been worked out on the basis of formula of 45 bags production per unit consumption of power for the entire period 08.07.1996 to 19.03.1997. The learned Advocate has submitted that the entire consumption of electricity generated by DG sets was not used for production of cement only. The power so generated was used in handling raw materials, removing raw materials and finished bags from one place to another, packing of bags and other sundry jobs in the factory including light and handling of machinery etc. Moreover, the said documents do not show name of factory and commodity and the authors of these documents are not known. The demand of duty was arbitrary and the formula was untenable and the demand on the basis of such arbitrary formula was not sustainable. The Tribunal in Goa Bottling Co. Ltd. Vs CCE, 2001 (98) ECR 44 held that demand based on theoretical ratio of production of beverages was not maintainable. Similarly, in CCE Vs Warren Pharma Pvt. Ltd., 2004 (64) RLT 825, the Tribunal held that there could be no duty demand on assumption and presumption purely relying upon theoretical calculations. Reliance was placed on the decision in Kamar Ali & Sons Vs C.C.E, 2006 (200) ELT 104 (T-Kol) wherein the Tribunal has held that apart from the entries made in the private record, there is no other evidence to establish the clandestine activities on the part of the Appellant Companies.
8. The learned Counsel vehemently contended that merely on the basis of power consumption, clandestine removal could not be alleged without any corroboration. The Department has not adduced any evidence about procurement of raw material, payment thereon and the transport of raw materials and finished goods and the buyers to whom the alleged bags of cement had been sold. He relied upon the decision in R.A. Castings Pvt. Ltd. Vs C.C.E., Meerut-1, 2009 (237) ELT 674 (Tri-Del) wherein the Tribunal has held that the clandestine manufacture and removal of excisable goods is to be proved by tangible, direct, affirmative and incontrovertible evidences relating to :
(i) Receipt of raw material inside the factory premises, and non-accountal thereof in the statutory records;
(ii) Utilization of such raw material for clandestine manufacture of finished goods;
(iii) Manufacture of finished goods with reference to installed capacity, consumption of electricity, labour employed and payment made to them, packing material used, records of security officers, discrepancy in the stock of raw materials and final products;
(iv) Clandestine removal of goods with reference to entry of vehicle/truck in the factory premises, loading of goods therein, security gate records, transporters documents, such as L.Rs, statements of lorry drivers, entries at different check posts, forms of the Commercial Tax Department and the receipt by the consignees;
(v) Amount received from the consignees, statement of the consignees, receipts of sale proceeds by the consignor and its disposal.
He insisted that no such evidences to the above effect have been brought on record.
9. The learned Advocate also submitted that 369 bags in Appellant 1s factory could not be entered in RG-1 due to absence of dealing clerk for two days. Further 841 bags| found at the premises of M/s Portland Chemicals were the trial production since 17.03.1997 and therefore, question of entering the same in RG-1 did not arise. Further the empty 1962 bags could not be confiscated under Rule 173Q(d) of the erstwhile Central Excise Rules, 1944 on the presumption that the said bags were kept to supply for packing of unaccounted production as and when required. He relied upon the decision in J.J. Packagers (P) Ltd. Vs CCE, 2008 (196) ELT 391 (T-Del). Finally, he submitted that penalties were not imposable since no duty at all was demandable from the Appellants No.1 and 2. Further penalties are not imposable on Shri S.P. Agrawal and Shri B.P. Agrawal as no evasion was proved.
10. The learned A.R. for the Department reiterated the findings as contained in the impugned Order and submitted that the learned Commissioner has considered all submissions made by the Appellant and has confirmed the demand on the basis of loose papers resumed from the premises of the Appellants. The learned A.R. submitted that, as held by the Supreme Court in the case of D. Bhoormul reported in 1983 (13) ELT 1546, the Department is not expected to prove their case with mathematical precision.
11. Heard both side and also examined records.
12. I have gone carefully the submissions of both the sides. I find that admittedly the entire case has been made out on the basis of loose papers resumed from the factory premises of the Appellants. The Appellants have contended that the documents do not bear the name of factory and it is not written that commodity packed in bags was cement. I have perused these loose slips and found that the said slips carry neither the name of Company nor the description of goods. No doubt these slips have been resumed from the factory premises of the Appellants but that is not sufficient to establish the charge of clandestine manufacture and clearance of goods. I find that many names had been mentioned in the said loose slips. However, statement of none of these persons had been brought on record to establish the fact that the said slips pertained to the Appellants and reflected the transactions in bags of cement effected by both Appellants 1 and 2. It is well settled that the charge of clandestine manufacture and clearance of goods is a very serious charges and is required to be proved beyond doubt. It has been held by Courts and the Tribunal that suspicion however strong cannot be a substitute for evidence. The Tribunal has held in D.P. Industries, supra, that no doubt, the seized records indicate to a high probability of the existence of clandestine clearance and raised the suspicion of the departmental officers. The suspicion, however, strong cannot take the place of evidence. There are several decisions of the Tribunal holding that clandestine clearance has to be established beyond reasonable doubt and not on the basis of preponderance of probability. Merely on the basis of private E records, clandestine clearance cannot be upheld. There should be sufficient corroborative evidences.
13. In the present matter, I observe that the department has not adduced any corroborative evidence to support the charge of clandestine manufacture and removal of goods. The Adjudicating authority has drawn inferences from the recovery of the slips without any independent material that since the slips had been recovered from the factory premises, these relate to cement bags only. The presumption made by the learned Commissioner is not supported by any independent material on record. It has been mentioned in the impugned Order that the sheets were signed by workers of the factory. However, there is no statement of any workers on record to establish the said fact.
14. The Adjudicating authority has himself mentioned in the impugned Order that there are references of truck nos. in the sheets and the investigation with respect to the truck owners/drivers would have been relevant. It is felt that as the investigation has not been conducted from the truck owners/drivers, the said sheets do not establish conclusively that the Appellants had manufactured and removed alleged bags of cement clandestinely. The Adjudicating authority has presumed without any basis that the statements of the truck owners/drivers would have had a corroborative value for the Departments case and not the Assessee. This presumption could not replace evidence to properly corroborate the clandestine activity.
15. It is also settled law that merely on the basis of statement of director, charge of clandestine manufacture and clearance cannot be established. Appellants reliance on CCE Vs Seven Seas Corporation, 2010 (259) ELT 652 (Bom.) wherein the Bombay High Court has held that in the absence of any other material to corroborate the confessional statement by the person in charge of the business, the liability cannot be fastened on the persons. Evidence is not coming up in strength to argument the charge of clandestine activity. Their contention is fortified by tribunals decision in 2006(200) E.L.T. 234 where it was held that entries in rough register could not be made the sole basis for concluding clandestine manufacture.
16. It is settled legal position that the demand cannot be worked on the basis of mere meter readings or power consumption. The demand has been computed on the basis of formula of 45 bags production per unit consumption of power. I find that there is no reference in the impugned show cause notice and the Adjudication Order about any specific study undertaken in this regard. No technical basis of such calculation has been arrived at. The charge of clandestine activities is required to be corroborated by production of independent evidences. In the present case, no evidence is record to show the receipt of raw materials and removal of finished goods and details of transportation with truck numbers. In Warren Pharma Pvt. Ltd. referred supra, the Tribunals finding that case of unaccounted production by basing calculation on a theoretical consumption of the main ingredient was not sustainable.
17. It is also observed that the department has not adduced any evidence of procuring the excess raw materials without which the cement cannot be manufactured. Further there is no material brought on record to establish the suppliers of raw materials, its transportation to the factory of the Appellants, sale of unaccounted bags of cement to the buyers and receipt of sale proceeds etc. For want of such evidences relating to these aspects, clandestine removal cannot be sustained merely on the basis of the meter readings of the D.G. sets installed in the factory premises. The decision of the Honble Tribunal in the case of R.A. Castings Pvt. Ltd., supra which has been upheld by the Honble Allahabad High Court in CCE Vs R.A. Castings Pvt. Ltd. as reported in 2011 (269) ELT 337 (All) which, in turn, has been affirmed by the Honble Supreme Court reported in 2011 (269) ELT A108 (S.C.), fully fits into the facts of the case and does not support the departments case. Accordingly I find force in the contention of the appellants that department has not been able to conclusively prove the clandestine manufacture and clearance. Once clandestine manufacture and removal is not conclusively proved, even though there are indications in this regard, no case for demand of duty is made and demand of Rs. 19,77,133/- from M/s Portland Cement (I) Ltd (Appellant No. 1 and demand of Rs.1,89,280/- for M/s Portland Chemicals (Appellant No. 2) deserves to be dropped. Once demand deserves to be dropped, there could be no reason for imposition of penalty on the both the appellants (no. 1 & 2) and both directors/partners. Deeper investigations into the movements of trucks which were used for clearance of so call unaccounted Cement, could have lead to irrefutable, evidence affecting outcome of the case.
18. Appellants have also come in appeal against the seizure of 1962 empty bags valued at Rs. 11,572/-. Commissioner has confirmed the seizure and ordered for confiscation under Rule 173 Q (T) of the Central Excise Rules, 1944. I do not find any valid reason for seizure of empty bags which are packaging material. It is agreed that due account of these bags has to be made. But mere non-entry of small number of bags cannot warrant such a severe action. No intention has been brought on record by the Adjudicating Authority to indicate that these bags were to be used for packing clandestinely manufactured cement and consequent clearance without payment of duty. On this account, I do not find force in the departments finding. Accordingly I do not hold the seizure/ confiscation and set aside the redemption fine imposed on the appellant.
19. There is also a seizure of 1210 bags of cement valued at Rs. 1,21,000/- (369 bags) seized in the factory of M/s. Portland Cement (India) Limited and the remaining 841 in the factory of M/s. Portland Chemicals. As per facts indicated in the Adjudicating Order, it clearly comes that all the bags had attained RG1 stage as these were duly stitched. Appellants plea that entries in RG1 could not be made due to absence of dealing clerk for 2 two days cannot be accepted as it is the duty of the management to make an alternative arrangement and entries in RG1 cannot be postponed just because one of the employees was on leave. Further, the statement of Sh. S.N. Dargarh dated 21/3/1997 has clearly indicated that these bags were kept ready for removal without payment of duty. Circumstantial evidences as well as confessional statement indicate that these bags have not been entered in the record with cleared intention to remove the excisable goods without payment of duty. Accordingly, I uphold the finding of the Adjudicating Authority in this regard along with consequent imposition of redemption fine of Rs. 3,700/- on M/s. Portland Cement (India) Limited and also fine of Rs. 8,400/- for 841 bags on M/s. Portland Chemicals.
20. In view of the finding that clandestine manufacture and clearance of cement based on generator reading have not been uphold. Penalty is imposed on Mr. B.P. Aggarwal, partner of M/s. Portland Chemicals and Mr. S.P. Aggarwal, Director of the Portland Cement (India) Limited and partner of M/s. Portland Chemical are set aside.
21. Appeals are partly allowed in above terms.
(Pronounced in Court on 14/01/2015) (MANMOHAN SINGH) MEMBER (TECHNICAL) K. Gupta 2