Customs, Excise and Gold Tribunal - Tamil Nadu
Sri Jayalakshmi Printing Mills vs Commissioner Of C. Ex. on 11 October, 2002
Equivalent citations: 2002(84)ECC739, 2003(151)ELT567(TRI-CHENNAI)
ORDER Jeet Ram Kait, Member (T)
1. These appeals arise out of Order-in-Original No. 7/2001 (Commissioner), dated 12-3-2001 passed by the Commissioner of Central Excise, Coimbatore whereby he has confirmed a duty demand of Rs. 16,09,897.08 on appellant M/s. Jayalakshmi Printing Mills under Section 11A of the CE Act, 1944 and confiscated 720 LM of processed fabrics valued at Rs. 4,680/- under Rule 173Q of the CE Rules, 1944 besides imposing penalty of Rs. 5,00,000/- on this appellant under Rule 173Q of the CE Rules. A separate penalty of Rs. 2,00,000/- has also been imposed on the other appellant NR Nachimuthu, the partner of the appellants under Rule 209A of the CE Rules.
2. This is the second round of appeal before the Tribunal. The matter was once remanded back vide Tribunal Order Nos. 1465 and 1466/2000 dated 19-10-2000 and while remanding the matter the Tribunal observed as under:
"(a) The Board has issued orders under Section 37B for clubbing of production of two units which was binding on the Collector. The impugned order does not indicate how the clubbing of the production of two units in this case has been done in view of this order of the Board under Section 37B as reported in 1993 (45) ECR 47C wherein trade notice issued by the Madurai Collectorate has been extracted which is based on this order of the Board. This matter is therefore required to be remanded to be re-determined in the light of this order which is binding on the Collector.
(b) We also find that although the Collector has dealt with the request for cross-examination of the witness he has denied the same. Therefore, it was his duty to have considered the documents submitted by the defence in the reply to the show cause notice and determined thereafter as to why these documents did not indicate that the two units will be separate legal entities entitled to the benefit of the separate production. We find from the impugned order that this has not been done. Therefore, we are of the opinion that a serious prejudice has been caused to the defence in determining the quantum of duty against them. Therefore, the impugned order is required to be set aside for de novo adjudication.
(c) Since we are setting aside the order and remanding back the matter for de novo adjudication, we direct while determining the penalty and redemption fine, etc., the Collector shall take into consideration the decision in the case of Pioneer Mills Pvt. Ltd. [1995 (80) E.L.T. 507]"
3. The brief facts of the case required for the purpose of deciding this case are that the Central Excise officers on a visit to the premises of appellants M/s. Jayalakshmi Printing Mills (M/s. JPM for short) on 27-11-92 found that finished goods available in the factory was not tallying with the recorded stock. They recovered one order from Book of Sri Devi Felt Calender containing details of dyed fabrics, delivered to M/s. Bharat Printing Mills (M/s. BPM for short). As a follow up action, the officers took statement from Sri N.R. Machimuthu, partner of the appellant-firm M/s. JPM wherein he stated that the order form did not belong to them and that M/s. BPM were only a trading unit in hand processed fabrics. The officers visited the premises of another firm M/s. Senthil Andavar Calendering Mills and recovered documents relating to both the other units i.e. M/s. JPM and M/s. BPM. The partner of M/s. Senthil Andavar Calendering Mills stated on his statement dated 23-12-92 that they were receiving processed fabrics from both the other units and both the fabrics were consigned from the factory at Perundurai Road and were delivered at 39 TVS Street Erode after calendering at his factory. Proceedings were thereafter initiated by issue of show cause notice to both the firms viz. M/s. JPM and M/s. BPM and the proceedings culminated in the order impugned which is challenged by the appellants herein, on the following grounds :
(a) The period of dispute was May, 1988 to 26-11-92 when the duty leviable on mill made textile fabrics (processed with the aid of power on steam) was additional duty of Excise (in lieu of sales tax) under the Additional Duties of Excise (Goods of Special Importance) Act, 1957.
(b) M/s. JPM, the assessee had not committed any offence with intent to evade payment of duty and had not abetted with M/s. BPM.
(c) Since the Additional Duties of Excise (Goods of Special Importance) Act, 1957 as it existed at the relevant time did not contain any specific provision for penalty, the imposition of penalty and confiscation are not warranted and so also confiscation of the goods.
(d) The Commissioner has passed the impugned order on re-adjudication without causing any verification or inquiry or investigation for the presence of M/s. BPT as a small hand operated factory processing cotton fabrics and for the voluminous records/documents filed by the defence despite clear direction given by the CEGAT while remanding the matter. Thus the very purpose for which the matter has been remanded has been defeated. The impugned order also does not say anywhere that the de novo order passed is after verification of the various records and hence the Tribunal order has not been complied with by the Commissioner which resulted in miscarriage of justice.
(e) The licensed premises of M/s. JPM is housed in Door No. 130-A on the Erode-Coimbatore Road while that of M/s. BPM is located on door No. 130-C and hence both are located on separate premises.
(f) During the cross-examination of Shri P. Natarajan, one of the Inspectors, admitted about the existence and functioning of M/s. BPT.
(g) M/s. BPM has been operating Bank account with Central Bank of India, Erode Branch from 1984 onwards and this proves existence of M/s. BPM as a separate entity from 1984 onwards.
4. The appellants also relied upon the decision of the Tribunal in the case VVS Conast Ltd. v. CCE, Allahabad reported in 2002 (139) E.L.T. 81 wherein in para 5 it is held that "..........the report makes no mention of the mill being a high speed mill. The applicant had specifically claimed the mill to be a low speed before the Commissioner and the Tribunal. The remand order had noted this. The case was remanded by the Tribunal so that the Commissioner would pass a proper order after verifying relevant facts. However, without verifying the facts another order has been passed confirming the previous order. This is nothing other than abuse of power". They have also relied upon the judgment of the Hon'ble High Court of Allahabad in the case of Quality Exports and Chemicals v. CEGAT, New Delhi reported in 2002 (140) E.L.T. 362 (All.) wherein it was held that demand is not sustainable on the basis of seized GRs when no enquiries were made from consignors and consignees but sufficient material produced by the assessee by way of certificate from them, supported by factum of payments made through bank drafts and in such situation the charge of clandestine removal made on surmises and presumptions without substantial evidence on record and without verification, is not sustainable and confiscation and penalty are required to be set aside.
5. Shri K. Krishnamurthy, Id. Consultant appeared for the appellants and argued the matter on the above lines. He also pressed into service the judgment of the Hon'ble Supreme Court in the case of Rajasthan Processors (India) Ltd. v. CCE [2002 (143) E.L.T. A75 (S.C)], whereby the Apex Court dismissed civil appeal filed by the Revenue against the decision of the Tribunal reported in 1995 (75) E.L.T. 427 and while dismissing the appeals, the Apex Court passed the following order :
"The civil appeals must be dismissed, being covered against the Revenue by the decision of this Court delivered on 10th April, 2002 in the case of Union of India and Ors v. Sanghi Textile Processors (Civil Appeal Nos. 1851-1857 of 1994)".
The Tribunal in its judgment had held that penalty for evasion of additional excise duty (in lieu of sales tax ) on processed textile fabrics was not leviable in the absence of any authority of law for levy of penalty under Additional Duties of Excise (Goods of Special Importance) Act, 1957 and the provisions of Central Excise Act, and the rules made thereunder could not be imported in the Additional Duties Act. The learned Consultant sought for setting aside the impugned order and allowing the appeal with consequential relief.
6. The learned DR defended the impugned order and submitted that the terms of the remand order of the Tribunal has been complied with by the Commissioner in the de novo order and further submitted that the contention of the appellants that the Commissioner has not caused verification of voluminous records is not correct and the order impugned needs to be sustained and the appeal dismissed.
7. We have considered the rival submissions and gone through the records and perused the various judgments cited by the appellants. We observe that the issue revolves round on the question whether M/s. Bharat Printing Mills (M/s. BPM) has been created as a dummy unit by another factory viz. M/s. Jayalakshmi Printing Mills (M/s. JPM) for the purpose of evading Excise duty. We observe that as noted under Para 2 above, the matter was remanded with specific direction to the lower authority to conduct the de novo proceedings in the light of Section 37B order issued by the Board and to indicate (i) as to how the clearances of the two units can be clubbed, (ii) how the documents indicate that the two units are separate legal entities as claimed by the assessee (iii) why cross-examination was not allowed, and (iv) to determine the penalty and redemption after taking into consideration the judgment of the Hon'ble Delhi High Court in the case of Pioneer Silk Mills Pvt. Ltd. reported in 1995 (80) E.L.T. 507. Therefore, the lower authority should have come to his conclusions after verifying the voluminous documents relied upon by the defence. For convenience of reference we extract-below the order portion of the impugned order :
"(i) I confirm the demand of duty of Rs. 16,09,897.08 (Rupees sixteen lakhs, nine thousand, eight hundred ninety-seven and paise eight only) under Section 11A of Central Excise Act, 1944, [demand the same from M/s. JPM.
(ii) I confiscate the seized 720 LM of processed fabrics valued at Rs. 4680/-under Rule 173Q of the CE Rules, 1944.
(iii) Impose penalty of Rs. 5,00,000/- (Rupees five lakhs) under Rule 173Q of Central Excise Rules, 1944 on M/s. Jayalakshmi Printing Mills Erode.
(iv) I also impose penalty of Rs. 2,00,000/- (Rupees two lakhs) on Shri N.R. Nachimuthu, under Rule 209A of Central Excise Rules, 1944.
We are constrained to observe that, apart from the fact that the impugned order is bristled with contradictions, it cannot be said that the directions of the Tribunal In the remand order have been fully complied with, for the following reasons :
(a) In the first show cause dated 14-5-1993, proviso to Section 11A was invoked for demand of duty and the Order-in-Original No. 59/93, dated 14-12-1993 also demanded the duty by invoking the proviso to Section 11A of the Act. However, in the de novo proceedings, while demanding duty of Rs. 16,09,897.08, proviso to Section 11A has not been invoked.
(b) In the 1st impugned order, option to redeem the 720 LM of processed fabrics valued at Rs. 4,690/- was given to the as sessee, but in the de novo proceedings passed after remand, confiscation has been ordered without any option to redeem the same in spite of the specific direction given by the Tribunal to determine the redemption fine. The Commissioner ought to have known that in terms of Section 34 of the CE Act, 1944, whenever confiscation is adjudged under the Act or the rules made thereunder, the officer adjudging it, shall give the owner of the goods an option to pay in lieu of confiscation such fine as the officer thinks fit. We are not able to understand as to under which provisions of the Act or the rules made thereunder the Commissioner has refrained from giving option of redemption of the goods when the law on this aspect is quite clear.
(c) In terms of the remand order, the Commissioner was duty bound to verify the various documents submitted and relied upon by the defence, but the impugned order is silent as to the verification done by the department before passing the order. However, as regards cross-examination of the witnesses, the impugned order indicates that opportunity was provided by the department for cross-examination of the investigating officers, but the Consultant for the appellants during personal hearing on 10-1-2001 declined to cross-examine them. This factual position is not controverted by the appellants. We also observe that the appellant vehemently argued that during cross-examination on 22-9-2000 before the Court of Judicial Magistrate, Erode, Shri P. Natarajan, one of the detective Inspectors had given evidence as follows :
"They were operating Bharat Printing Mills after obtaining all required permissions".
This factual position is not disputed by the department either.
(d) The case of the department is built up on the strength of the declarations filed by M/s. BPM before the Pollution Control Department where they have alleged to have declared that all the machineries required for processing of fabrics with the aid of power, as their machinery, were alleged to have been shown in the inventory of M/s. JPM as well. In other words, the machinery of M/s. JPM were shown as the machinery of M/s. BPM. The other allegation was that permit for kerosene was obtained in the name of M/s. BPM. As seen from the impugned order, the assessee has submitted that M/s. BPM came into existence in the year 1971 and M/s. JPM in the year 1984 and that M/s. BPM had applied for permission for kerosene along with the machinery available with them. As regards the obtaining consent from the pollution control board, they (M/s. JPM) stated that they did not get the consent from the pollution control officer, Erode because the price of hand processed fabrics was far less than the power operated fabrics and the working class preferred the hand processed fabrics and that the polluted water from their factory was absorbed by the plantation within the factory compound and it did not enter the public canal. The appellants have also filed certificate from the Central Bank of India together with photocopy of ledger folio which shows that they are independently operating an account with the said Bank. Annexure D filed in the paper book shows 35 documents involved in the case, but the department does not appear to have verified these documents in the de novo proceedings and instead it is stated in the impugned order that the facts have been discussed at length by the Commissioner in the earlier order. We observe that the remand order has been passed by the Tribunal after perusal of the earlier order-in-original and therefore, the adjudicating authority was duty bound to cause re-verification of the various documents listed by the defence to establish their case. But the department instead of doing that exercise has discussed only two piece of evidence i.e. material collected by them from the pollution control board and from the Civil Supplies Department for which also the defence has filed reply. Therefore the de novo proceedings have been passed without verification of the various othef documents as required under the remand order and hence it is ' not a speaking order.
(e) We observe from the impugned order in para 36 that an observation has been made by the adjudicating authority that "Further it is pertinent to note that the notice never tried to establish that M/s. BPM did not exist". We observe that all along it was not the case of the assessee that the M/s. BPM did not exist and what they have been claiming was that M/s. BPM is a separate legal entity and hence their clearances cannot be clubbed with that of the assessee (M/s. JPM). It was also claimed by them that M/s. BPM was located in a separate premises operating from Door No. 130-C while their premises was housed in Door No. 130-A, and the distance between the two was 50 feet.
(f) The remand order specifically required the lower authority to determine the penalty and redemption fine in the light of Hon'ble Delhi High Court judgment in the case of Pioneer Silk Mills Pvt. Ltd. (supra). However, the lower authority in the de novo proceedings confiscated the goods without giving option for redemption and also imposed penalty holding that the matter was subjudice. The lower authority failed to note that there was no stay granted by the Apex Court against the judgment of the Hon'ble High Court in the matter of Pioneer Silk Mills Ltd. under Rule 173Q alone. However, we note that the question with regard to imposition of penalty in such case has been finally settled by the Hon'ble Supreme Court against the Revenue, on 16-4-2002 with the dismissal of the Civil Appeal Nos. 22-23 of 1996 [2002 (143) E.L.T. A75 (S.C.)] filed by the Collector of Central Excise, Jaipur against CEGAT Order Nos. 142-146/94-A, dated 23-5-94 in the case of Rajasthan Processors (India) Ltd. v. Collector, reported in 1995 (75) E.L.T 427. While dismissing the appeals the Hon'ble Apex Court passed the following order :
"The Civil appeals must be dismissed, being covered against the Revenue by the decision of this Court delivered on 10th April 2002, in the case of Union of India and Ors v. Sanghi Textile Processors and Ors (Civil Appeal Nos. 1851-1857 of 1994)."
The Appellate Tribunal in its impugned order had held that penalty for evasion of additional excise duty (in lieu of sales tax) on processed textile fabrics was not leviable in the absence of any authority of law for levy of penalty under Additional Duties of Excise (Goods of Special Importance) Act, 1957, and the provisions of Central Excise Act and the rules made thereunder could not be imported in the Additional Duties Act.
Further, we note that in the earlier impugned order, a combined penalty of Rs. 5,00,000/- under Rules 9(2) and 173Q and 226 of the Rules, was imposed on appellant M/s. JPM, but in the de novo proceedings, the same quantum of penalty has been imposed on them under Rule 173Q alone. In view of above, the lower authority is required to re-examine the confiscability of the goods with reference to the period involved in the case, levy of redemption fine and imposition of penalty, in the light of the judgment of the Hon'ble Delhi High Court in the case of Pioneer Silk Mills (Supra) and the judgment of the Hon'ble Apex Court in the case of Collector of Central Excise, Jaipur v. Rajasthan Professors Ltd. (supra).
8. In view of what has been discussed above, it would be seen that the impugned order is not legal and proper and it reflects non-application of mind on the part of the adjudicating authority. We, therefore, set aside the same and are constrained to remand the matter once again for de novo consideration in the light of our observations above. The Sower authority is directed to pass an order afresh, after affording effective opportunity of hearing to the appellants in accordance with law as expeditiously as possible since this is the second time that the Tribunal is remanding the matter. Both the appeals are thus remanded in the above terms. Before parting with this case we would like to observe that though it cannot be said that there has been deliberate and conscious defiance of the terms of remand order, and bypassing the provisions of Section 34 of the CE Act 1944, on the part of the Commissioner, the impugned order has been passed in a cursory manner and non-application of mind is writ large in the impugned order.