Customs, Excise and Gold Tribunal - Mumbai
Virama Laminates P. Ltd., Antony ... vs Commissioner Of Central Excise on 24 October, 2003
ORDER Krishna Kumar, Member (J)
1. Shri. R Ravindran, Ld. Advocate appeared on behalf of M/s.Virama Laminates P. Ltd, Shri. R.K. Ghadge, Consultant appeared on behalf of M/s. Antony Garages Ltd., Shri. D.D. Gwalani, ld. Advocate appeared on behalf of In-coach Builders, Shri. Prakash Shah, ld. Advocate appeared on behalf of M/s. Bharat Coach Pvt. Ltd. and Shri. J.C. Patel, Advocate appeared on behalf of M/s. Bharati Work Shop. The Revenue was represented by Shri. S. Singhal, Ld. JDR.
2. Briefly stated the facts of the case are that the officers of the Preventive Branch of Excise Department made surprise visit to the factory of the appellant No. 1 on 23.12.1994. It was observed from the records maintained by the appellant No. 1 that the LA sheets manufactured on job work basis and cleared by them back to the suppliers of the raw materials was such that the suppliers who have sent the raw materials were using the said L.A. Sheets in the manufacture of bus body. It is the contention of the department that the appellants No. 1 were required to pay Central Excise duty at appropriate rate on the said goods which were cleared by them to the suppliers of the raw materials. Since the appellants No. 1 were availing the benefits of the small scale exemption and since the addition of the value of the goods cleared back to the suppliers required to be discharged on duty the show cause notice has been issued to the appellant No. 1 denying the excise benefit as the total value of the goods manufactured in a particular year has exceeded the value stipulated in the exemption notification. The show cause notice issued by the Commissioner levelled the said allegations on appellants No. 1 and they were called upon to pay duty on the goods.
Show cause notice invoked panel provisions on appellants 2 to 5, suppliers of raw materials as they appeared to have falsified the records and filed false declarations at their end to the department and they intend to avail the benefits of notification 214/86 and or Rule 57F(2) which has seen from the records was not available to them. Based on the said notification, the show cause notice was issued to the appellants calling interalia as to why the duty amount of Rs. 87.89 lakhs should not be recovered from them and also penal provisions invoked against them as well as suppliers of the raw materials. The adjudicating authority confirmed the allegations made in the show cause notice as well as confirmed the duty demand on appellants No. 1 and imposed penalties on other appellants. All the appellants are in appeal against the order passed by the Commissioner.
3. The Ld. Counsel appearing on behalf of the appellants No. 1 has forcefully contended that despite repeated requests of the appellant for cross examination of the witnesses, the statement of whom have been relied in the impugned order, have not been allowed the cross examination. On the other hand, they were told that the request for the cross examination will be considered after the arguments are over. Besides, the Ld. Counsel also contended that the appellants were also denied the proper records withdrawn from them during the surprise visit and the said records have been relied on by the Commissioner in the impugned order. Thus in the absence of the said records being made available to the appellants, it was not possible for them to have defended themselves effectively. He contended that on both counts i.e. the denial of cross examination of the witnesses relied on by the Commissioner in the impugned order as well as the denial of the proper records, the principles of natural justice have been violated blatantly in the case and the impugned order requires to be set aside on these grounds alone.
4. In reply to the show cause notice dated 10.10.1996 the appellant has contended that the show cause notice was issued on 31.07.1996 purporting to invoke the extended period of 7 years under proviso to Section 11A (1) of the Central Excise Act 1944. The ld. Counsel contended that the show cause notice is misconceived, mis-directed, illegal, null & void as there is no documentary evidence whatsoever against the appellants to invoke the extended period. The show cause notice invoking the extended period has been issued with a view to cover the limitation without any basis. His contention is that the appellants have declared their activities in their classification lists, which were duly approved by the department year after year. That they were doing job work under notification 214/86 CE was specifically declared in the classification list. Raw materials were received under pre-authenticated challans. Appellants always operated On the basis of the declaration filed by the respective raw material suppliers. Therefore, the fact that the appellants were operating under job work for such parties either under notification 214/86 CE or under notification 83/94 CE and 84/94 CE were well within the knowledge of the department. If the declaration filed by the raw materials suppliers were improper and/or illegal, nothing prevented the department from checking the correctness of the claim made by the respective parties. In any event, having operated under the challans issued by the raw material suppliers, the responsibility to pay duty is entirely on the raw material suppliers and not on the appellants. He contended that the extended period is not invokable and show cause notice is clearly barred by limitation as the demand relates to the period 1991-95 and whereas the show cause notice has been issued on 31.7.1996, which is much beyond the prescribed period under the statute. He submitted that as regards the job work demand, the same can be divided into two different period;
(a) 1.3.93 to April 94 - under notification 214/86 CE.
(b) May 1994 to April 1995 - under notification 83/94, 84/94 and 214/86.
5. He submitted that as regards the period 'a' above is concerned, the raw material suppliers continue to send their alluminium sheets under Annexure II under Notification 214/86. Under Notification 162/86 as amended by the Notification No. 63/93.CE dated 28.2.1993, there were three entries relating to motor vehicles. Entries 2 and 6 attracted duty @ 15% ad valorem and entry 18 granted exemption subject to certain conditions. He contended that since the suppliers continued to send their inputs for job work under Annexure II issued under Notification 214/86, the appellants believed that the raw material suppliers were clearing their final product on payment of duty. The appellants also maintained the records in Annexure V as per the procedure. This is also pre-authenticated register. The suppliers of alluminium sheets had given the necessary undertaking to the department that they are paying Central Excise duty on the final products. On that basis, they availed benefits under notification 214/86. Notification No. 214/86 itself clearly states that as a necessary condition, the responsibility for payment of duty is entirely on the raw material suppliers. By letter No. 21/34/87/TRU dated 23.9.1987 it was clarified that it is only the supplier of the raw material who has to obtain permission not only from his Jurisdictional Assistant Commissioner but also from the Assistant Commissioner having jurisdiction over job workers factory. The job worker was not required to obtain any permission from his Jurisdictional Assistant Commissioner. The Board's Circular No. 33/33/94/CX.8 dated 4.5.1994 prescribed the procedure for the job work, inter alia in respect of Notification No. 214/86. The undertaking was required to be given by the supplier of raw material. The role of a job worker is merely to return the goods after processing along with Challan and maintain record in the pre-authenticated register specified in Annexure-V. The liability to pay duty entirely rested with the supplier of raw materials in terms of the undertaking given by them under Notification No. 214/86 if they were not eligible for the benefit envisaged thereunder. Hence no demand can be made against job worker. 1997 (93) ELT 615(Tri.). As regards the period from May 1994 to March 1995, he submitted that the raw material suppliers have sought to obtain benefit of notifications 83/94 and 84/94 and made necessary declaration before their Jurisdictional authorities. The appellants only drew the attention of the raw material suppliers to the benefits available from these notifications provided they are eligible for it and they strictly observe the conditions imposed therein. The Ld. Counsel contended that this cannot be construed to be any misguidance on the part of the appellants. He also contended that the benefit of wrong declarations accrued to the raw material suppliers and not to the appellants who are only the job workers. He drew our attention to the Circular No. M.F(DR) F. No. B.32/1/94-TRU dated 18th April 1994 at para (4) specifically provides that whether it is the failure of the job worker or the failure of the supplier of the raw materials, the liability to pay duty will be on the supplier and not on the appellant. He contended that the instructions of the Government are binding on the department and the show cause notice cannot be issued contrary to such instructions being in violation.
6. Shri. R.K. Ghadge, Consultant appearing on behalf of M/s. Antony Garages Pvt. Ltd. submitted that a fine of Rs. 10 lakhs has been imposed on his client under Rule 209A of the Central excise Rules 1944. The period involved March 93 to March 95. He submitted that his client never claimed the benefit of Notification 1/93. He submitted that his client was engaged in the body building which was fully exempted from duty as per Notification No. 63/93 dated 28.2.1993. He contended that he has fully disclosed in his declaration the said fact. His client has acted on the instance of M/s Virama Laminates and his client has never abated M/s Virama Laminates. Therefore the finding that his client has misdeclared is totally baseless and not supported by any documentary evidence. His contention is that the imposition of fine of Rs. 10 lakhs is therefore not justified.
7. Shri. D.D. Gwalani, Ld. Advocate appearing on behalf of the In-Coach Builders submitted that the imposition of penalty of Rs. 10 lakhs under Rule 209A is not justified. His contention is that the period covered is 1992-93, 1993-94 and 1994-95. He submitted that his clients are engaged in the building of body on the chassis under heading 87.02 and 87.04 as its stood at the material time. He contended that his clients were availing Modvat scheme on inputs for payment of duty. They were sending alluminium sheets for lamination under Rule 57F(2). His contention is that the activities of his clients became exempt by virtue of Notification No. 63/93 dated 28.2.1993 as amended by Notifications No. 162/86 dated 1.3.1996. After the said acts became exempt they were not availing modvat credit and the question of sending aluminium sheets to M/s. Viroma Laminates did not arise. However by letter dated 11.3.95, Asst Commissioner informed his client that, benefit under Notification 84/94 was not available. He contends that his clients was not availing Notification 1/93. They were availing Notification 162/96 dated 1.3.86 as amended by Notification No. 63/93 dated 28.2.1993. He contended that, they were misguided by M/s Virama Laminates. His contention is that, the question of levy of any fine does not arise and as such his submission is that the same may be set aside.
8. Shri. Prakash Shah, Ld. Advocate appearing on behalf of the M/s Bharat Coach Pvt. Ltd. submitted that his clients are engaged in the activity of body building on the chassis which was exempted till 28.02.1993. He submitted that during this period his clients were availing modvat credit. His contention is that, by virtue of Notification 63/93 dated 28.2.1993, the product in question has become exempt as they did not avail modvat credit. His clients continued to send the goods to M/s. Virama Laminates under the provisions of Notification 214/86 dated 25.3.86. This procedure continued till 10.08.95. He admitted that, his clients filed wrong declaration. However, he contended that, he has suspended his supplies to Virama Laminates since 1995 and as such the provisions of Rule 209A cannot be invoked against his client because his clients acted under a bonafide belief. In support of his contention, he relied on the order dated 12.6.2003 passed by Court II in the case of HBL Nife Power Systems Ltd v. CCE, decision in Desh Rolling Mills v. Commissioner - 2001 (122) ELT 481 and the decision reported in the case CCE v. Span Heat Transfer Equipment Manufacturers Pvt. Ltd - 2001 (135) ELT 861 and submitted that his clients are not liable to any penalty and as such the impugned order needs to be set aside as the Commissioner has failed to attribute any malafide on the part of his clients. Therefore, the provisions under Rule 209A are not attracted.
9. Shri. J.C. Patel, Ld. Advocate appearing on behalf of M/s. Bharati Workshop submitted that the period involved in the case is May 94 to March 95 whereas the period for 1993-94 is involved for part of the duty. His clients acted on the letter of M/s. Virama Laminates dated 4.5.1994 under bonafide belief. He submitted that filing of wrong declaration is not an offence. As such the question of any penalty does not arise. He also contended that, his clients acted bonafidly and as such the penalty cannot be imposed on him. In support of his contention he relied on the decision in the case of Swathy Chemicals Ltd. v. CCE - 1999 (114) E.L.T 531 (Tri.).
10. Shri. S. Singhal, Ld. JDR appeared on behalf of the Revenue and he interalia submitted that all the classification lists filed by M/s Virama Laminates will become ineffective the day Notification 214/86 ceases to have effect. It was on the advice of M/s. Virama Laminates that, the suppliers have acted and as such, the duty liability falls on M/s. Virama Laminates. The Ld. DR drew our attention to page 20 of the Order-in-Original, relating to discussion and findings portions and submitted that the Commissioner has recorded that, so far as demand for adhesive (Pt.1 of the SCN) is concerned, M/s. Virama Laminates have themselves declared that they are manufacturing adhesives in their C.L. No. 4/91-92 effective from 1.3.92. In this C.L., they have claimed exemption under Notification No. 217/86. Since the laminated aluminium sheets in which the disputed adhesives were used, were exempted from duty under Notification No. 214/86 during April 91 to March 1993, the period of the demand, exemption under Notification No. 217/86 was not available and duty ought to have been paid on these adhesives. When M/s. Virama Laminates have thus declared that they are manufacturing adhesives for captive consumption in LA sheets which are not exempted, they cannot turn around and claim that there is no manufacture in case of the same adhesives when they are used in exempted LA sheets, simply to avoid payment of duty, M/s Virama did not declare the use of adhesives in LA sheets exempted under Notification No. 214/86, in their classification lists nor did they maintain any record of adhesives manufactured and consumed in job work. He also contended that, since the laminated sheets cleared by them after 1.3.93 have been used in the exempted bus body, they are liable to pay duty. He fairly conceded that, as regard imposition of penalty is concerned there, is no material on record to impute mens rea. The penalty has been imposed on the appellants on the basis of presumption.
11. In his rejoinder, the Ld. Counsel for M/s.Virama Laminates submitted that, the provisions of Section 11AB came into existence on 28.9.86 and since the period involved in the present case is 1991 - 1995, the interest is not leviable. He also contended; that, the issue of advice by his client to the raw material suppliers, has been raised for the first time before this Tribunal. The same cannot be raised before the Tribunal as the same was not raised before the lower authorities.
12. After hearing the rival submissions and perusal of the records and case laws, we find that the denial of the cross examination of the witnesses relied on by the Commissioner in the impugned order goes to the root of the matter as it is a clear violation of the principles of natural justice. Since M/s Virama Laminates have been denied all the opportunity of the cross examination, the duty liability imposed on them cannot be sustained. Besides, non-supply of relevant documents as asked for by them also results in the violation of the principles of natural justice and the impugned order cannot be allowed to sustain on this count also. The Commissioner has clearly failed to record her finding on the applicability of circular No. M.F.(DR) F. No. B.32/1/94-TRU dated 18.04.1994 with regard to para (4) which specifically provides whether it is failure of the job workers or the raw material suppliers, the liability to pay duty is not on the job workers. This is a very basic legal flaw in the order passed by the Commissioner. In these circumstances, we are of the opinion that unless the Commissioner records his findings on each and every aspect mentioned in this para, it is difficult to arrive at the finding of confirmation of duty and imposition of penalty. After due consideration of the above position, possibility of passing an Order contrary to that passed by the Commissioner cannot be ruled out. In these circumstances, we find it reasonable as also in the interest of the justice to set aside the impugned order and allow the appeals by way of remand for fresh adjudication and to pass a fresh speaking order and record findings on each and every issues to be raised before the Commissioner after affording reasonable opportunity of being heard to the appellants and after ensuring that the necessary cross examination and after the relevant documents are supplied.
(Pronounced in Court)