Custom, Excise & Service Tax Tribunal
C.Meera Ramdas, Director,M/S. ... vs Hyderabad-Iii on 4 June, 2019
(1)
Appeal No: E/1400-1404/2011
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
REGIONAL BENCH AT HYDERABAD
Division Bench
Court - I
Appeal No. E/1400/2011
(Arising out of Order-in-Original No.27/2010 (Denovo)-CE-Hyd-III Adjn. Commr.
dt.31.12.2010 passed by CCCE & ST, Hyderabad - III)
M/s Venkateswara Industrial Products P Ltd
H.No.6-1-103/104, Abhinav
Colony, Padmarao Nagar,
Secunderabad - 500 025 ......Appellant
VERSUS
Commissioner of Central Excise, Customs
& Service Tax, Hyderabad - III,
Kendriya Shulk Bhavan, L.B. Stadium Road,
Basheerbagh, Hyderabad,
Telangana - 500 004 ......Respondent
With Appeal No. E/1401/2011 (Arising out of Order-in-Original No.27/2010 (Denovo)-CE-Hyd-III Adjn. Commr.
dt.31.12.2010 passed by CCCE & ST, Hyderabad - III) C. Ramdas, Director M/s Venkateswara Industrial Products P Ltd H.No.6-1-103/104, Abhinav Colony, Padmarao Nagar, ......Appellant Secunderabad - 500 025 VERSUS Commissioner of Central Excise, Customs & Service Tax, Hyderabad - III, Kendriya Shulk Bhavan, L.B. Stadium Road, Basheerbagh, Hyderabad, Telangana - 500 004 ......Respondent With Appeal No. E/1402/2011 (Arising out of Order-in-Original No.27/2010 (Denovo)-CE-Hyd-III Adjn. Commr.
dt.31.12.2010 passed by CCCE & ST, Hyderabad - III) M/s Venkateswara Industrial Paint Industry H.No.6-1-103/104, Abhinav Colony, Padmarao Nagar, Secunderabad - 500 025 ......Appellant VERSUS Commissioner of Central Excise, Customs & Service Tax, Hyderabad - III, Kendriya Shulk Bhavan, L.B. Stadium Road, Basheerbagh, Hyderabad, Telangana - 500 004 ......Respondent (2) Appeal No: E/1400-1404/2011 with Appeal No. E/1403/2011 (Arising out of Order-in-Original No.27/2010 (Denovo)-CE-Hyd-III Adjn. Commr.
dt.31.12.2010 passed by CCCE & ST, Hyderabad - III) C. Meera Ramdas, Director M/s Venkateswara Industrial Paint Industry, H.No.6-1-103/104, Abhinav Colony, Padmarao Nagar, ......Appellant Secunderabad - 500 025 VERSUS Commissioner of Central Excise, Customs & Service Tax, Hyderabad - III, Kendriya Shulk Bhavan, L.B. Stadium Road, Basheerbagh, Hyderabad, Telangana - 500 004 ......Respondent and Appeal No. E/1404/2011 (Arising out of Order-in-Original No.27/2010 (Denovo)-CE-Hyd-III Adjn. Commr.
dt.31.12.2010 passed by CCCE & ST, Hyderabad - III) G. Muthyalu, Production-in-Charge, Ramchem Survey No.45, Boduppal, Hyderabad - 500 039 ......Appellant VERSUS Commissioner of Central Excise, Customs & Service Tax, Hyderabad - III, Kendriya Shulk Bhavan, L.B. Stadium Road, Basheerbagh, Hyderabad, Telangana - 500 004 ......Respondent Appearance Present for the Appellants: Shri R. Muralidhar, Advocate Present for the Respondent: Shri N. Bhanu Kiran, Authorized Representative.
Coram:
HON'BLE MR. ANIL CHOUDHARY, MEMBER (JUDICIAL) HON'BLE MR. P. VENKATA SUBBA RAO, MEMBER (TECHNICAL) FINAL ORDER No. A/30549-30553/2019 Date of Hearing: 12.04.2019 Date of Decision: 04.06.2019 (3) Appeal No: E/1400-1404/2011 [Order per: P. VENKATA SUBBA RAO.]
1. These appeals are filed by the appellants M/s Venkateswara Industrial Products Pvt Ltd (VIPPL), its Director Shri C. Ramdas, M/s Venkateswara Industrial Paint Industry (VIPI), its Proprietrix Smt Meera Ramdas and Shri G. Muthyalu against the same impugned order (Order-in-Original) No. 27/2010 (Denovo) CE (Hyd-III) Commr dated 31.12.2010 and hence are being disposed of together.
2. Heard both sides and perused the records. This is the third round of litigation with respect to these matters. The show cause notices were issued in 1992 and 1994 and after decision vide Order-in-Original No. 22/1998 dated 28.01.1998, the matter was remanded by the Tribunal vide Final Order No.517-524/2003 to reconsider the issue afresh. In the second round of litigation vide Final Order Nos. 1470-1474/2009 the matter was again remanded to the original authority with specific direction to consider the issue of classification which was disputed but not considered despite the direction of CESTAT in the original remand order. In the impugned order, the question of classification of products was discussed and the demands were confirmed. The issue in brief is that VIPPL is a limited company engaged in manufacture of two products called "Cable Filling Compound"
(CFC) and "Cable Cleaning Compound" (CCC). They avail the benefit of SSI exemption. Show cause notice No.150/92 was issued alleging that the turnover of VIPPL should be clubbed together with the turnover of VIPI, Newton and Appolo Engineering Industries (AEI) alleging that these three are not separate manufacturing units but are fictitious entities operating from the same premises. Accordingly, differential duty has to be paid after reckoning the total turnover of all these companies as clearances by VIPPL.
The second show cause notice No.184/94 is issued primarily to VIPI with VIPPL as a co-noticee. The issue of classification was not a point of issue during the initial stages or in both show cause notices. However, when this issue was contested before the Tribunal, it has directed the Commissioner to examine this claim as well. Relying on the expert opinion of a Chartered Engineer which they obtained, the appellants' claim that the product CFC is classifiable under Chapter heading 3403 and therefore it is fully exempted (4) Appeal No: E/1400-1404/2011 from payment of duty vide notification 287/1986 dated 05.05.86. Once the classification is decided in their favour, the demand does not survive at all.
3. In the impugned order, the learned Commissioner records that CFC (also known as Splice Filling Compound) is classifiable under Chapter heading 3823 and not 3403 as claimed by the appellants and therefore they are not entitled to the benefit of notification 287/1986. We proceed to decide this issue of classification first as this has been the reason for earlier two rounds of litigation. The assessee obtained an opinion of a Chartered Engineer dated 21.07.2010 which is placed at Pg.37 to 43 of the paper book. Apart from the opinion, the assessees themselves sent some questions to the Chartered Engineer and he answered those questions in Paras 4 & 5 which are as follows:
"4. The product, namely, 'Cable Filling Compound' called also as splice filling compound is used in jointing PIJF telephone cables. The method consists of preparing both ends of the cables, cleaning the copper conductors, making the joint or connectors crimping of the copper conductor ends, fitting in the heat sinkable sleeves, filling the cable / splice filling compound, and finally sealing thermally.
5. As per the specifications laid down by the DOT's Research Unit, there are over 12 type tests which the cable filling compound has to successfully pass through. The whole purpose of these tests is to ensure that no water ingress takes place into the joint irrespective of external weather conditions and the normal hazards associated with cables buried in earth. And also the compound should have electrical insulating and anti aging properties. The material should be easy to handle by technicians at site and should be odourless and non toxic. In effect the cable filling compound has to act as a seal protecting the signal carrying wires at the cable joint from exposure to various hazards."
4. Based on this opinion of the Chartered Engineer the appellants claim that the goods in question deserve to be classified as lubricating preparations/ preparations of a kind used for oil or grease treatment of textile materials etc., under Chapter heading 3403.99. Learned counsel for the appellants submits that the expert opinion of the Chartered Engineer should have been accepted by the Commissioner or he should have countered it by referring it to another expert in the matter. Since he has not referred another expert, he is bound to accept the Chartered Engineer's certificate and the goods should have been classified under Chapter heading 3403 as claimed by them. On this point, learned departmental representative submits that the adjudicating authority has not in any way disputed the Chartered Engineer's certificate but has come to a conclusion regarding the classification based on the report of the Chartered Engineer (5) Appeal No: E/1400-1404/2011 itself. He draws the attention of the bench to Para 15 to 20 of the impugned order which reads as follows:
"15. I will now take up the issue of classification of CFC: whether CFC falls under chapter heading 34.03 or not. For ease of reference 34.03 is reproduced below:
34.03 LUBRICATING PREPARATIONS (INCLUDING CUTTING OILS PREPARATIONS BOLT OR NUT RELEASE PREPARATIONS, ANTI RUST OR ANTI-CORROSION PREPARATIONS AND MOULD RELEASE PREPARATIONS, BASED ON LUBRICANTS) AND PREPARATIONS OF KIND USED FOR THE OIL OR GREASE TREATMENT OF TEXTILE MATERIALS, LEATHER, FURSKINS OR OTHER MATERIALS, BUT EXCLUDING PREPARATIONS CONTAINING, AS BASIC CONSTITUENTS, 70% OR MORE BY WEIGHT OF PETROLEUM OILS OR OF OILS OBTAINED FROM BITUMINOUS MINERALS.
- Containing petroleum oils or oils obtained from bituminous minerals;
3403.11 -- Preparations for the treatment of textile materials, leather,
furskins or other materials
3403.19 -- Other
3403.91 -- Preparations for the treatment of textile materials, leather,
furskins or other materials
3403.99 -- Other
16. The classification sought by the noticee is 3403.99 i.e. as "other". According to the noticee, the CFC is akin to lubricating preparations and therefore, attracts classification under 34.03 in terms of the explanatory notes to the heading 34.03. Lubricating preparations are designed to reduce friction between the moving parts of machinery, vehicles, etc. and that such lubricants usually consist of or are based on, mixtures of enamel, vegetables or mining oils, facts or greases. I find from the Chartered Engineer's Certificate dated 21.07.2010 submitted by the notice that the essential property of CFC is sealant property required for prevention for water seepage. The certificate further adds that it has additional qualities of lubricating preparation/ anti-rust/ anti-frozen preparation. The certificate concludes that CFC is of a consistency like a semi- viscous mix or blend product and its use is of a speciality oil for filling in enclosures as a sealant protecting the telephone underground cable joint. It contains basically oils to the extent of 50%. The product may also find application in such uses as anti-rust and anti-corrosive preparations.
17. Thus, I find the essential characteristics of cable filling compound is of sealant or insulation and lubrication is not the essential character. It is an established principle that classification is to be done on the basis of the essential character and not on residual or auxiliary character. 34.03 applies to lubricating materials. Therefore, I hold that CFC does not fall under 34.03. Next question is of appropriate classification? Department's view is that it is classifiable under 38.03 as a residuary product of chemical or allied industries, not elsewhere specified or included. The main contention of the notice against classification under 38.03 is that CFC is not a product of chemical or allied industry. The Chartered Engineer has opined that the product is not a chemical substance but while preparation seasoned for a specific purpose for using underground telephone cables. Answers given by the Chartered Engineer in question No. 4 & 5 are reproduced.
"4. From the ingredients used in producing the preparations made in accordance with the specification given by department of Telecommunication, can the preparation be countenanced as chemical product and if so, what type of categorization can we give to this? Is it a chemical product or alcoholic product? If it is not so what product it is?(6)
Appeal No: E/1400-1404/2011 Ans. The resultant substance on integration of components is NOT a chemical compound. It is simply a physically homogenous compound sharing the physical characteristics of the constituents.
5. In case you find this product as a chemical products, kindly let us know its similarity to any other product.
Ans. The question is superfluous since the product is not a chemical product. Basically because no chemical product can be produced with these ingredients no chemical reaction can take place in the process of preparation. All the ingredients retain their individual characteristics. This is therefore not a chemical substance".
18. I find from the above answers that because the CFC is produced without any chemical reaction it is certified as not a chemical product. This view is not acceptable. Following are the extracts from the explanatory notes under 38.23 "(B) CHEMICAL PRODUCTS AND CHEMICAL OR OTHER PREPARATIONS ... subject to the above conditions, the preparations and chemical products falling here include:
1. -------
2. -------
3. -------
4. -------
5. -------
6. Mixtures of Calcium Carbide, Calcium Carbonate (lime stone) and other materials such as carbon or fluorspar prepared for using as de-sulphuriser in steel making.
It can be seen that at 6 above, there is no chemical reaction but it is a mixture and yet the item falls under 38.23. There are similar examples in the explanatory notes such as mixed polyethylene glycodes, mixtures of mono, tie and dry, fatty acids Easters of glycerol used as emulsifier for fats.
19. Thus the main objection against classification under heading 38.23 falls apart. Therefore, I hold that CFC is classifiable under 38.23. In German Dyes and Chemical case reported in 2004 (171) ELT 480 (Tri-Del) cable filling compound is stated to fall under chapter heading 38.24.
Next question is about applicability of the notification 287/86. This notification exempts speciality oils falling under 2710.99 or 3403.00 from the whole of the duty of the excise. Speciality oil has been defined in the explanation as follows:
Explanation - For the purposes of the notification, "speciality oil" means any preparation made by blending or compounding of mineral oils falling under Chapter-27 of schedule to the Central Excise Tariff Act, 1985 (5 of 1986) with other oils in any other substance and is intended for industrial uses (other than for use as lubricant and of which the lubrication function, if any, is only secondary in nature.
20. Since CFC falls under 38.23 benefit of 287/86 is not available. I also find that neither CFC nor CCC conform to above description of speciality oils. One of the conditions for specialty oil is that it is intended for industrial use (other than for use as lubricant and of which lubrication function, if any, is only secondary in nature). Even if the classification of CFC is accepted under 34.03, it would mean that its main function is lubrication. In that event it will not be a speciality oil. As regards CCC, the decision is similar i.e., since it is classifiable under 34.03 its main function is lubrication, and it goes out of the purview of speciality oil. In either case, benefit of notification 287/86 is not available, neither to CFC nor to CCC."
(7)Appeal No: E/1400-1404/2011
5. We have considered the arguments on both sides on this point of classification. We do not agree with the learned counsel for the appellant that the classification has to be decided by a Chartered Engineer. A Chartered Engineer can give his expert opinion regarding the nature of the material but the classification is to be done by the officers or the adjudicating authority or the appellate authorities. We do not find that the adjudicating authority has in any way disputed the Chartered Engineer's certificate. Drawing from the Chartered Engineer's certificate he concluded that the product in question is not classifiable as lubricating preparation but as a miscellaneous chemical under Chapter heading 3823. A plain reading of Chartered Engineer's certificate also does not convince us that CFC is in the nature of a lubricant. Therefore, we find no force in the argument of the appellant and we find that the adjudicating authority was correct in classifying the product under Chapter heading 3823. Therefore, the question of exemption under notification 287/1986-CE does not apply in this case. We also note that classification was not an issue in the show cause notice and the appellant has also not made out a case to reclassify the goods and claim benefit.
6. We now proceed to discuss and decide other issues related to the two demands.
7. Show cause notice No.150/92 dated 08.04.93 demanded duty of Rs.17,86,832/- and proposed confiscation of land, building, plant and machinery under Rule 209 of Central Excise Rules, 1944 and imposition of penalty under Rules 9(2), 52A, 173Q and 209 of Central Excise Rules, 1944. In the impugned order the adjudicating authority has finally confirmed demand of Rs.7,51,833/- (BED: Rs.6,53,768/- + SED: Rs.98,065/-) along with interest under section 11AB from VIPPL. He also imposed penalty of Rs.2 lakhs on VIPPL under Rule 9(2), 52A, 173Q & 209 of Central Excise Rules, 1944. Further, he imposed personal penalty of Rs.1 lakh on Shri C. Ramdas, Director of VIPPL under Rule 209A. He confiscated the goods valued at Rs.2,72,220/- which were provisionally released and imposed a fine of Rs.75,000/- which has to be recovered by enforcement of bond and bank guarantee. He, further ordered confiscation of plant, machinery, land and buildings under Rule 173Q(2) and gave VIPPL an option to redeem the same on payment of fine of Rs.1 lakh. He released the vehicle seized (8) Appeal No: E/1400-1404/2011 unconditionally and imposed no penalty on Shri K. Sailu. As far as this demand is concerned, learned counsel for the appellants submits that of the total amount of Rs.7,51,833/- which has been confirmed by the learned adjudicating authority, an amount of Rs.2,05,601/- pertains to demand on CCC which the department itself has classified under Chapter heading 3403 as well as under 2710. Products under both these headings are eligible for exemption under notification 287/1986. Therefore, the demand to that extent does not sustain. As far as the balance demand of Rs.5,46,232/- is concerned, it is on CFC on account of clubbing together the turnover of VIPPL with the turnover of VIPI, Newton and AEI. Learned counsel would submit that VIPI had a separate SSI registration and they are also registered under Andhra Pradesh Sales Tax during the period. Similarly both Newton and AEI had separate AP Sales Tax registration. Therefore, the clubbing of turnover by these organisations with that of VIPI is incorrect and therefore, demand on this count needs to be set aside. Countering these arguments, learned departmental representative submits that as far as the demand with respect to CCC is concerned, the adjudicating authority has clearly discussed as to why the exemption under notification 287/1986-CE dated 05.05.86 is not applicable to the product. He would draw the attention of the bench to this notification which reads as follows:
"In exercise of the powers conferred by Sub Rule (1) of Rule 8 of Central Excise Rules, 1944, the Central Government hereby exempts speciality oils falling under Sub heading No. 2710 or 3403 of the Schedule to the Central Excise Tariff Act, 1985...."
8. There is an explanation at the bottom of the notification which says, "for the purposes of this notification, 'speciality oil' means any preparation made by blending or compounding of mineral oils (falling under Chapter 27 of the Schedule to the Central Excise Tariff Act) with other oils or any other substance and is intended for industrial uses (other than for use as lubricant) and of which lubrication function, if any is only secondary in nature." He would submit that neither the CFC nor the CCC confirm to this description of speciality oils in the notification. Unless the product is speciality oil, the same will not be entitled to the exemption. The exemption being an exception to the general rule should be construed strictly with any benefit of doubt being given to the revenue. He would submit that the CCC goes out of the definition of speciality oil as envisaged in the notification.
(9)Appeal No: E/1400-1404/2011
9. Regarding the balance demand of Rs.5,46,232/-, he would submit that VIPPL was a private limited company and VIPI is an individual firm operated by one of the Directors of VIPPL. Both Newton and AEI are dealers of VIPPL. As dealers, they have obtained their own sales tax registration. None of these agencies except VIPPL had any manufacturing facility. The entire manufacturing was taken place in the premises of VIPPL only. Mere book entries were made and invoices were being raised to show some of the goods as having been manufactured by the other three entities. Therefore, they are merely sham entities and their turnover must be clubbed with the turnover of VIPPL and duty must be demanded accordingly. Merely because they got themselves registered as SSI units and have raised separate invoices, their turnover cannot be different. What is important is who the actual manufacturer was, which in this case, is VIPPL.
10. Countering these arguments learned counsel for the appellants submit that the department themselves have admitted that VIPI is separate entity and had issued second show cause notice No.184/94 to VIPI. He draws the attention of the bench to Para 8 of this show cause notice which reads as follows:
"M/s VIPPL is a private limited unit manufacturing cable filling compound and cable cleaning compound located at 60B, IDA, Cherlapally. M/s VIPI is a proprietary concern manufacturing cable filling compound (CFC) located at 60A, IDA, Cherlapally. The Directors of VIPPL include Shri C. Ramdas and Smt Meera Ramdas. Smt Meera Ramdas is proprietrix of M/s VIPI....."
11. He would submit that the department themselves have agreed in a subsequent notice that VIPI is a separate manufacturer and not same as VIPPL, although the former is a proprietary concern and the later is a limited company. He would submit that if the turnover of VIPI is deducted from the show cause notice No.150/92, the demand on appellant would be substantially reduced and therefore, demand needs to be dropped to that extent. He also prays that the penalties and fine imposed under this show cause notice in the impugned order may be set aside.
12. We have considered the arguments on both sides. As far as this show cause notice is concerned, the entire demand arises on the presumption that VIPPL is the only true manufacturer and VIPI as well as Newton and AEI are dummy entities create solely for the purpose of splitting the total turnover (10) Appeal No: E/1400-1404/2011 so as to remain under SSI limit. The turnover during the relevant period of these entities was as follows:
Sl. No. Name of the entity Turnover (in Rs.)
1. VIPL 37,39,694/-
2. VIPI 48,25,538/-
3. Newton 11,76,933/-
4. AEI 6,16,285/-
Total Turnover 1,03,58,452/-
13. BED is proposed to be charged @ 15% and SED @ 15% of the BED on the above amount. In order to club these clearances the department has to prove that the other three entities are dummy entities. The evidences on record are the statements and results of investigation that there are no separate manufacturing facilities or records of stock of raw materials or finished products. Therefore, all other three are dummy units. We find that the department themselves contradict this position in their subsequent notice partly by admitting that VIPI is a separate entity. If the turnover of VIPI as shown above, therefore, needs to be deducted from the total turnover in this show cause notice and demand needs to be reduced to that extent. We also do not find sufficient justification for imposition of fine and penalties in this background.
14. As far as the demand under second show cause notice No.184/94 is concerned, the allegation is that VIPI have cleared MODVAT availed raw materials as well as final products and then showed them as sales returns.
Accordingly, searches were conducted at various places and it was revealed that the total clearances of VIPI as evidenced from their sales tax returns was Rs.30,96,434/- during 1991-92. It was further found that AEI were also operating from the same premises and were doing second sales i.e., trading. AEI had no separate manufacturing premises and VIPI had been showing its own manufacture and sales in the name of AEI. The total clearances of AEI during the period was Rs.15,99,953/-. The total clearance of VIPI and AEI during 1991-92 was Rs.46,96,387/- on which the duty of demand after (11) Appeal No: E/1400-1404/2011 allowing SSI exemption works out to Rs.1,48,301/-. Similarly, the total clearances during 1992-93 works out to Rs.32,28,220/- and the duty thereon is Rs.5,56,868/-. Further it was found that during June, 1993 to November, 1993, VIPI cleared goods worth Rs.4,62,730/- in excess of value declared in RT-12 returns, the duty on which worked out to Rs.23,136/-. It was also found that VIPI has been maintaining a second set of invoices and the duty involved on the duplicate invoices worked out to Rs.4,24,264/ for the period 17.12.92 to 30.04.93. It was also found that VIPI had undervalued their goods and differential duty on this account works out to Rs.2,13,736/-. There were some invoices without corresponding Central Excise gate passes, the duty on which worked out to Rs.22,486/-. Thus, the total demand of Rs.13,88,790/- was made under Rule 9(2) of Central Excise Rules read with section 11A of Central Excise Act on VIPI as above. It was also proposed to impose penalty on them under Rule 9(2), 52A, 173Q and 226 of Central Excise Rules, 1944. It was also proposed to confiscate machinery used for manufacture of goods under Rule 173Q. Further, there was also a demand on VIPPL in this show cause notice. It is alleged that from the auditor's statement of VIPPL the total value on clearances for Income Tax purposes was declared as Rs.1,26,48,744/- during 1992-93. After allowing necessary deductions, the assessable value works out to Rs.1,14,82,180/- whereas the value declared with the Central Excise is only Rs.1,05,24,501/-. Accordingly, differential duty on the value of Rs.9,60,679/- amounting to Rs.1,65,717/- was demanded from them. It was further alleged that VIPPL had maintained four separate registers and the total duty shown to have been paid as per the registers in a month in excess of the amount of duty actually paid as per RT-12 returns. Thus, it was concluded that VIPPL had collected excess duty from their customers but did not deposited the same to the Government Treasury and this amount works out to Rs.1,52,241/-. Thus, it was proposed to demand total duty of Rs.3,17,958/- under Rule 9(2) read with section 11A. It was also proposed to impose penalties under Rule 9(2), 52A, 173Q and 226 of the Rules. It was also proposed to confiscate plant and machinery and impose personal penalty. In the impugned order the adjudicating authority has demanded duty of Rs.13,62,382/- from VIPI; he demanded duty of Rs.3,17,958/- from VIPPL; he demanded interest on the above amounts from the two entities; he confiscated plant and machinery of VIPI and gave them an option to (12) Appeal No: E/1400-1404/2011 redeem the same on payment of Rs.2 lakhs as fine. He further confiscated plant and machinery of VIPPL and gave them an option to redeem the same on payment of fine of Rs.1 lakh; he imposed pena penalty lty of Rs.2 lakhs on VIPI and Rs.1 lakh on VIPPL under Rule 9(2), 52A and 226. Further, he imposed personal penalty of Rs.1 lakh on Smt Meera Ramdas, Rs.1 lakh on Shri C. Ramdas and Rs.10,000/ Rs.10,000/- on Shri G. Muthyalu, their employee.
15. As far as the demand on VIPPL is concerned, learned counsel submits as follows:
16. As far as the demand on VIPI under this show cause notice is concerned, he would submit that of the total amount a demand of Rs.1,52,241/- was initially dropped by the earlier adjudicating au authority thority in Order-in-Original Original No. 10/2005 dated 28.06.2005. Aggrieved by this decision, the department filed an appeal before the Tribunal. The appellant also filed an appeal being aggrieved by the balance confirmation and the appellant's appeal was remande remandedd and the department's appeal was subsequently dismissed vide Final Order No. 21986/2015 dated 23.09.2015. Therefore, the demand needs to be dropped to this extent on this count alone.
(13)Appeal No: E/1400-1404/2011
17. Learned counsel further submits that with respect to both the units there is a question of interpretation of statutory provisions and classification of goods and therefore, any allegation of suppression with an intent to evade payment of duty cannot be fastened on the appellants and hence extended period of limitation needs to be set aside. Further, if any demand is confirmed they should be given the benefit of cum-duty to the extent it is confirmed. He, further pleads that there is no case for confiscation of machinery or imposition of redemption fine or imposition of penalties either on the firms or on the individuals. Therefore, he pleads that the entire demand may be dropped.
18. Learned departmental representative with respect to this show cause notice reiterates the findings in the impugned order and submits that the demands were, after due consideration, confirmed and therefore, the demand, interest as well as the penalties need to be upheld.
19. We have considered the arguments on both sides. With respect to this show cause notice, we find that the demand against VIPI is on the following grounds:
(1) Clearances without payment of duty amount to Rs.1,21,892/-: The relevant period for this is 01.04.1991 to 31.03.1992. Learned counsel submits that this demand will not be sustainable if the department hold that VIPI is a dummy unit and VIPPL is the only correct unit as alleged in the first show cause notice. We have considered this argument and find that as far as the allegation regarding VIPI being dummy unit is concerned, we have not accepted it and therefore, set aside partly the demand with respect to the first show cause notice. Therefore, the demand to this extent under this show cause notice sustains. It is based on the clearances made in the name of VIPI and clearances in the name of AEI operating from the same premises with no separate manufacturing facilities and no separate stocks of raw materials or finished products.
(2) Clearances after obtaining Central Excise registration between November, 1992 to March, 1993: Learned counsel submits that this demand has been made by adding turnover of AEI to their turnover (14) Appeal No: E/1400-1404/2011 for which there is no corroborative evidence. Since there was no separate manufacturing facility and AEI was operating from the same premises with no separate stock of raw materials or finished products, it can only be called a dummy unit and the department was justified in clubbing these clearances with that of VIPI.
(3) Difference between Private Register No. 106 and RT-12 returns value: We find there was a difference between the two but there is no sufficient corroborative evidence to show that the difference represents the clandestine removal. The demand on this account, therefore, needs to be dropped.
(4) Allegation of under valuation: This demand was arrived at for clearances made to 33 parties on the ground that clearances were shown to have been made @ Rs.42/- per Kg while in case of others, the price adopted was Rs.126/- per Kg. The statement of one of the recipients was recorded which he retracted during cross examination. Therefore, we do not find sufficient evidence to substantiate a demand on this ground.
20. In conclusion, we find there is ground to confirm the demand to the extent of clubbing the clearances by AEI with VIPI but there is insufficient evidence to substantiate the demands on other grounds. Consequently, we find there is no sufficient ground to substantiate the confiscation, fine and imposition of penalties on VIPI.
21. As far as VIPPL is concerned, the demand in this show cause notice was only on account of the fact that there was a difference between the value of sales shown in Central Excise and the sales income shown in the IT Returns. Such a difference can be a cause for suspicion and investigation but by itself cannot be conclusive evidence that goods were clandestinely removed and sold. Accordingly, the demand on this count and consequential penalties need to be set aside and we do so.
22. In view of the above:
a) The demand against VIPPL under show cause notice No. 150/92 dated 08.04.1993 is upheld after deducting the value of clearances in the name of VIPI which, the department, itself has (15) Appeal No: E/1400-1404/2011 agreed in the subsequent show cause notice, to be a different entity and treating any non-duty paid clearances as cum-duty clearances.
b) The demand against VIPI under show cause notice No. 184/94 to the extent of demand by clubbing the value of clearances of AEI as indicated in Annexure XII A and Annexure XII B to the show cause notice are upheld after giving the benefit of SSI exemption, if any and treating any non-duty paid clearances as cum-duty clearances.
c) All other demands against VIPI are dropped due to lack of sufficient evidence.
d) The demand of duty against VIPPL is dropped due to lack of sufficient evidence.
e) All confiscation, redemption fine, penalties (including personal penalties) under both show cause notices are set aside.
f) The matter is remitted to the original authority for the limited purpose of calculation of differential duty as per (a) and (b) above.
23. The appeals are disposed of as herein above.
(Order pronounced in the open court on 04.06.2019) (ANIL CHOUDHARY) MEMBER (JUDICIAL) (P.VENKATA SUBBA RAO) MEMBER (TECHNICAL) Veda