Custom, Excise & Service Tax Tribunal
Som Sugandh Industries Ltd vs Cce, Rohtak on 8 November, 2016
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL SCO 147-148, SECTOR 17-C, CHANDIGARH-160017 COURT NO.1 Appeal No. E/402 to 405/2012-(DB) [Arising out of the OIO No.11/CE/Commr/BKJ/RTK/2011 dt.21.11.2011 passed by the CCE, Rohtak) Date of Hearing: 11.08.2016 Date of Decision: 08.11.2016 For Approval & signature: Honble Mr. Ashok Jindal, Member (Judicial) Honble Mr. B. Ravichandran, Member (Technical) 1. Whether Press Reporter may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? No 2. Whether it would be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? No 3. Whether their Lordships wish to see the fair copy of the order? seen 4. Whether order is to be circulated to the Department Authorities? Yes Som Sugandh Industries Ltd. Appellant Satish Seth, Director Ashok Nahata, Director Gyan Chand Sharma, Authorized Signatory Versus CCE, Rohtak Respondent
Appeal No. E/ 609/2012-(DB) CCE, Rohtak Appellant Versus Som Sugandh Industries Ltd. Respondent Appearance Ms.Seema Jain, Advocate/Sh.R.R.Yadav, Consultant for the appellant and vice versa Shri Satyapal, AR for the respondent and vice versa CORAM: Honble Mr.Ashok Jindal, Member (Judicial) Honble Mr. B. Ravichandran, Member (Technical) FINAL ORDER NO. 61619-61623 / 2016 Per : Ashok Jindal:
Both sides are in appeals against the impugned order which is as follows:
(i) I confirm the demand for Central Excise Duty of rs. 3,45,474/- (Rupees Three Lakhs Forty five Thousand Four Hundred and Seventy Four Only) under first proviso to section 11A(1) of the Central Excise Act, 1994 against M/s Som Sugandh Industries Limited, Sonepat. An amount of rs. 3,45,474/- already deposited by them is ordered to be appropriated and adjust against the said demand of duty.
(i) I confirm the demand for Central Excise Duty of Rs. 8,25,00,000/- (Rupees Eight Crore Twenty five Lakhs Only) under first proviso to Section 11A(1) of the Central Excise Act, 1944 against M/s Som Sungandh Industries Limited, Sonipat. An amount of Rs. 8.00 Crore already deposited by them is ordered to be appropriated and adjust against the said demand of duty.
(ii) I confirm the recovery of interest on (i) & (ii) above payable at the rate prescribed under notifications issued from time to time under section 11AB of the Central Excise Act, 1944, from due date of payment to the actual date of payment of duty.
(iii) I impose penalty of rs. 8,28,45,474/- (Rs. 8,25,00,000/- + Rs 3,45,474/-) under Rules, 25 of the Central Excise Rules, 2002 read with section 11AC of the Central Excise Act, 1944 upon M/s Som Sgandh Industries Limited, Sonipat. They shall be eligible to pay penalty equivalent to 25% of Rs. 8,28,45,474/- in terms of proviso to section 11Ac of the Central Excise Act, 1944, subject to the condition that duty confirmed at (i) & (ii) above is fully paid along with interest confirmed at (iii) above within 30 days of the receipt of this order, the 25% of penalty will also be required to be paid within 30 days of the receipt of the order provided the first condition is fulfilled by them.
(iv) I impose penalty under Rule 26(1) of the Central Excise Rules, 2002 as under:-
Sh. Satish Seth, Director Rs. 1 Crore (Rupees One Crore) Sh. Ashok Nahata, Director Rs. 25 laksh (Rupees Twenty Five Lakhs) Sh. R.K. Jaggi, Production Supervisor Rs. 5 Lakhs (Rupees Five Lakhs) Sh. Gyan Chand Sharma, Authorised Signatory Rs. 5 Lakhs (Rupees Five Lakhs) Sh. Manoj Rajouria Rs. 10 Lakhs (Ten Lakhs)
2. The facts of the case are that an intelligence was received that M/s.Som Sugandh Industries Ltd. (hereinafter referred to as M/s.Som) was evading Central Excise duty by way of suppression of production and clandestine removal of their finished goods. The information also indicated that the documents evidencing suppressed production and clandestine clearances ware secreted at the residence of one Shri Manoj Rajouria located at 525, village, Kundli, Sonepat. Searches were conducted simultaneously at the factory premises of M/s.Som and at the residence of Shri Manoj Rajouria on 20.10.2007 by the officers of Anti-Evasion, Central Excise, Rohtak. At the time of search, the factory was found operational and was engaged in the manufacturing of Pan Masala, Gutkha and Khaini of various brands. During the course of search, the stock was verified and certain documents were resumed. It was revealed that a shortage of stock of 18480 poly packs of Gutkha involving central excise duty of Rs.3,45,474/-. M/s.Som could not explain the shortage and voluntary debited the amount of duty of Rs.3,45,474/- through PLA. The search conducted at the residence of Shri Manoj Rajouria resulted in the recovery of certain incriminating documents, which were resumed. These records mainly included loose slips about various raw materials for manufacturing gutkha/pan masala/khaini, private records of date-wise production and dispatch of gutkha/pan masala/khaini by M/s.Som and the consignment notes in respect of dispatch of finished goods through various transporters including certain central excise invoices issued by M/s.Som. On the basis of these records resumed from the residence of Shri Manoj Rajouria and the statement recorded, it was alleged that the appellant has cleared 27732 bags (50.89 crores pouches) of gutkha, pan masala and khaini without payment of duty through railways and private transporters. On the basis of that, a duty of Rs.15,15,67,401/- was demanded from the appellant, M/s.Som has already paid Rs.1,74,01717/-, therefore, balance duty proposed to be demanded by way of issuance of show cause notice of Rs.13,41,65,685/- alongwith interest and penalties were also sought to be imposed on the co-appellants. During the investigation, M/s.Som paid a sum of Rs.8,00,00,000/- the same was appropriated. M/s.Som has approached to the Settlement Commission for settling the issue but it could not be materialized. Thereafter, the adjudication took place. The Commissioner while adjudicating the matter, has found that the appellant is not having the capacity to produce 50.89 crores of pouches with a short span time of 20 days. He held that only 30.06 crores of pouches could have been manufactured during the said period. Therefore, at his best judgement on the production capacity of M/s.Som he demanded duty as per Pan Masala Packing Machines (Capacity Determination & Collection of Duty) Rules, 2008. Accordingly, he confirmed demand the demand of duty of Rs.8,25,00,000/- against M/s.Som which was to be paid alongwith interest and imposed penalty of Rs.8,28,45,474/- under Rule 25 and various penalties on the co-appellants. Aggrieved with the said order, M/s.Som and its directors and authorized signatory are in appeal. The Revenue has challenged the said order on the ground that the adjudicating authority fell in error by doing best judgement assessment.
3. Learned Counsel appearing on behalf of M/s.Som and co-appellants and submits that the order passed by the adjudicating authority is beyond the allegation made in the show cause notice. In fact, in the impugned order, the duty has been demanded under compounded levy scheme whereas there was no such proposal in the show cause notice. Moreover, Pan Masala Packing Machines (Capacity Determination & Collection of Duty) Rules, 2008 were not in existence during the relevant time. Therefore, the impugned order is to be set aside as the adjudicating authority cannot go beyond the allegation made in the show cause notice. To support her contention, she relied on the decision of Honble Apex Court in the case of Sun Pharmaceuticals Industries Ltd.-2015 (326) ELT 3 (SC) and Manjit Singh-2015 (323) ELT 377 (Tri.-Mum.).
4. She further submits that as the provisions of compounded levy scheme were not in force,therefore, the duty cannot be demanded on the basis of provisions of compounded levy scheme and the said scheme cannot be operational retrospectively.
5. She further submits that the statements of directors, employee cannot be relied on to conclude that there was clandestine removal and manufacture by the M/s.Som. It is her submission that the adjudicating authority has not given due regard to the cross examination of Sh. Manoja Rajouria and Shri R.K. Jaggi and others which was conducted during the course of adjudication. The adjudicating authority has mainly relied upon the fact that M/s.Som admitted the offence before the Settlement Commission where there was no threat was given to M/s.Som indulged in the clandestine removal of the goods. It is her submission that M/s.Som approached to the Settlement Commission for immunity from prosecution as Shri Satish Seth was arrested by the Central Excise officers and was granted bail and was further threatened with dire consequences. Therefore, the admission before the Settlement Commission was therefore only to get immunity from prosecution and to buy peace of mind with the authorities. It is her submission that Sh.Satish Seth was forced to give the department six cheques for Rs.13,41,65,378/- on the date of his first statement was recorded and three cheques were dishourned by the bank for which cheques bouncing cases were initiated against him in various courts. In that circumstance, M/s.Som had filed application for settlement of its case agreeing to pay duty on all 99 machines for 20 days at the speed determined by the Central Excise officers for 20 hours. It is her submission that admission before the Settlement Commission does not amount to admission of guilt as held by the larger bench of this Tribunal in the case of Bosch Chassis Systems India Ltd.-2008 (232) ELT 622 (Tri.-LB).
6. She further submits that Sh. Manoja Rajouria is the third party who was the director with the appellants in 2005 and he was made to resign from the directorship when M/s.Som was formed and was not taken as director or employee and had no role in the working of M/s.Som. His statement that he was given Rs.10,000/- per month to keep GR account has not been corroborated by any evidence. Records resumed from third party premises cannot be relied upon without independent corroboration. She submits that visit was on the basis of intelligence that the documents evidencing suppressed production and clandestine clearances were secreted at the residence of Sh. Manoja Rajouri. Such explicit information itself speaks of the malafide intention of the informer to implicate the M/s.Som.
7. It is her submission that, Shri R.k.Jaggi, production supervisor author of some of the seized documents in cross examination admitted that no production/dispatch slips used to be officially prepared and that he had given the production documents to Shri Manoja Rajouria on friendship basis to assist him in getting revenge with Sh. Satish Seth and Sh. Ashok Nahata, directors and these documents were prepared on the basis of actual production and dispatches through some of the figures could be fabricated. He also stated that he did not prepare the dispatch slips.
8. It is her submission that, Shri Manoja Rajouria in his cross examination stated that as he had enmity with Sh. Satish Seth and Sh.Ashok Nahata, he had collected the incriminating evidence and prepared it in form of these documents on the basis of production information prepared by Sh.R.k.Jaggi. He also stated that he got the dispatch slips prepared by a person known to him on the basis of information given by Sh. R.k.Jaggi and that some of the information given by Sh. R.K.Jaggi could be incorrect also.
9. She also submits that Sh. Satish Seth retracted his statement on the next day. Second statement was recorded on the very next day again retracted. The adjudicating authority has alleged that that these were sent under postal certificate was not received in their office. But it is a matter of record that Sh.Satish Seth sent the complaint letter through UPC and its delivery was not in hands of Sh.Satish Seth. However, a police complaints receipted copy shows that Sh.Satish Seth had also made complaint to Commissioner of Central Excise. In his affidavit, he has stated that his statements are dictated by the officers during illegal detention and that the documents resumed from preemies of Sh. Manoj Rajouria are not related to M/s.Som.
10. She further submits that the entries in the documents seized from the residence of Sh. Manoj Rajouria do not corroborate with the evidence collected by the department. The documents recovered from Sh. Manoj Rajouria have date wise dispatch of the goods through Old Delhi Railway station, New Delhi Railway Station, Nizamudin Railway Station and various transporters. The department has procured the PWBs from the Railways during the said period showing transport of Gutkha etc. through railways. A comparison of the railways receipts and the resumed documents show that there is no record of transport of goods through railways to many destinations mentioned in the dispatch slips. Moreover, the department has clubbed together several railway receipts, sometimes different dates to correspond with the quantity of gutkha shown as transported in the resumed documents.
11. She submits that it is common knowledge there are several gutkha manufacturers in and around Delhi who transport their goods through railways. In the absence of the name of M/s.Som or the brand name of the goods manufactured by M/s.Som on RRs, the goods transported through railways cannot be attributed to M/s.Som.
12. It is her submissions that one of the transporters shown to have transported the goods of M/s.Som in the seized documents was M/s. Transolutions Pvt.Ltd. The department visited premises of M/s.Transolutions Pvt.Ltd. and procured the consignment notes of M/s.Transolutions Pvt.Ltd. in respect of gutkha booked by it. The names of the various traders appear as consignors in the consignment notes, neither the name of the M/s.Som nor the brand name appear on the consignment notes. Not a single bill book of the various traders was found in the premises of M/s.Som or for that matter in the premises of Sh. Manoj Rajouria also. The department has added together several consignments in order to tally the dispatch as mentioned in the seized documents. Therefore, there is no evidence that gutkha transported through M/s. Transolutions Pvt.Ltd. was of M/s.Som. There is no corroboration between the GR account maintained by Sh.Manoj Rajouria in his hand writing with the dispatch details from his premises.
13. It is her submissions that M/s.Som has no capacity to manufacture goods as per seized documents. The departmental officers ascertained the speed of machines at the time of visit as recorded in the panchnama. Even if all 99 machines ran for 22 hours for 20 days, they could not have manufactured the quantity of goods as per seized records.
14. It is her submissions that the Revenue has failed to produce any evidence of unaccounted purchase of raw materials needed to manufacture such large quantity of goods. In fact, Sh.Satish Seth, director in his statement dated 13.11.2007 gave a list of 22 suppliers of raw material alongwith the goods supplied and the addresses but no investigation was carried out from the suppliers end to ascertain whether there was supply of raw material in excess of the recorded supplies. Therefore, it is settled law that there has to be evidence of purchase, receipt and consumption of raw material for clandestine manufacture, payment in cash and removal of finished goods and receipt in cash to establish clandestine manufacture and removal. To support her contention, she has relied on the following decisions:
(i) AUM Aluminuim Pvt.Ltd. vs. CCE, Vadodara-2014 (311) ELT 354
(ii) Balajee Perfues vs. CCE, Delhi (Final Order No.50025-50028/16-Ex (DB)
(ii) Ruby Chlorates (P) Ltd. vs. CCE, Trichy-2006 (204) ELT 607
14. She further submits that the documents recovered from the third party cannot be made basis for upholding clandestine removal without corroboration with independent evidence. To support her contention she relied on the following decisions:-
(1) Aswani & Company vs. CCE, Delhi-2015 (327) ELT 81 (2) Savitri Concast vs. CCE, Jaipur-2015 (329) ELT 213
15. The factory was running on generators. No evidence of purchase of excess diesel for running generators was brought on record.
16. In view of these submissions, she prayed that the impugned order is to be set aside and the appeal filed by the Revenue is to be dismissed.
17. On the other hand, learned AR appearing for the Revenue submits that the adjudicating authority has not given due credence to the records resumed from the premises of Sh.Manoj Rajouria. Records resumed from the premises of Sh. Manoj Rajouria clearly shows that there was clandestine removal of the goods by M/s.Som which was secreted over there. Moreover, the transporters also revealed that the goods have been dispatched for clandestine removal by M/s.Som. The Commissioner while adjudicating the case has gone into the production capacity of the machines. As per the statement of Sh.Satish Seth the speed of the machines could have been altered and after alteration, the machine could have produced such huge quantity of 50.89 crores pouches. Therefore, the demand is to be confirmed on the basis of documents resumed from the premises of Sh. Manoj Rajouria.
18. Heard the parties and considered the submissions.
19. On careful consideration of the rival submissions of both sides, the following issues has emerged:
(1) Whether the Commissioner is correct in demanding duty on the basis of production capacity which is not alleged in the show cause notice.
(2) Whether the Commissioner is correct in demanding duty under the compounded levy scheme as per Masala Packing Machines (Capacity Determination & Collection of Duty) Rules, 2008 or not (3) Whether the documents resumed from the residence of Sh. Manoj Rajouria can be relied upon to demand duty from M/s.Som.
4. Whether in the absence of any evidence on record except the documents recorded from the residence of Sh.Manoj Rajouria, the duty can be demanded or not?
Issue No.1
20. Admittedly in the show cause notice, the demand has been proposed on the basis of the documents resumed from the premises of Shri Manoj Rajouria and not on the basis of production capacity of the machines installed in the premises of M/s.Som. Therefore, the impugned order lacks demanding duty on the basis of production capacity as the same is beyond the scope of show cause notice as held by the Honble Apex Court in the case of Sun Pharmaceuticals (supra), wherein the Honble Apex Court has observed as under:
5.?We may first take up Civil Appeal No. 3263 of 2009. This has to be allowed for simple reason that the aforesaid reasons given by the CESTAT in support of its view clearly reveals that CESTAT has gone beyond the show cause notice inasmuch as this was not even the case set up by the Department in the show cause notice.
21. We further find in the case of Manjit Singh (supra), this Tribunal has observed as under:
7.?Therefore, we are of the confirmed view that the impugned order passed by the learned Commissioner on appreciation of erroneous facts, and beyond the scope of the show-cause notice. Therefore, the impugned order is not sustainable in the eyes of law. We do not agree with the contention of the learned Spl. Counsel for remanding the matter back to the adjudicating authority for de novo adjudication as the issue raised in the show-cause notice has been answered by the adjudicating authority after relying on the judicial pronouncements of the Honble Apex Court as discussed here-in above. Therefore, the impugned order is set aside. Appeals are allowed with consequential relief, if any.
22. Therefore, the issue No.1 is answered that the adjudicating authority has gone beyond the scope of show cause notice, therefore the impugned order is not sustainable in the eyes of law.
Issue No.2
23. As the Pan Masala Packing Machines (Capacity Determination & Collection of Duty) Rules, 2008 were not in existence during the relevant time. Moreover, these rules have not been made effective retrospectively, in that circumstance, the duty cannot be demanded under Pan Masala Packing Machines (Capacity Determination & Collection of Duty) Rules, 2008. Therefore, the method of calculation of demand in the impugned order is also set aside.
Issue No.3 and 424. Now we come to the evidence in the form of the documents resumed from the premises of Sh. Manoj Rajouria can be relied on for adjudication of the case or not. We have seen that in this case, Sh.Manoja Rajouria is the third party who was the director in 2005 and he was made to resign from the directorship when M/s.Som was formed and was not taken as director or employee and had no role in the working of M/s.Som, these facts have not been denied by the Revenue. With regard to the records recovered from the premises of Shri Manoj Rajouria, in his cross examination, Shri Manoj Rajouria categorically stated that he had enmity with the other directors and wanted to take revenge. He was helped to collect the incriminating documents and prepared these in the form of these documents recovered from the premises. These documents were prepared on the basis of production information prepared by Sh.R.k.Jaggi, production supervisor of M/s.Som. With regard to the despatch slips, in his cross examination, he categorically stated that he got the dispatch slips prepared by a person known to him on the basis of information given by Sh. R.k.Jaggi. The cross examination of the Shri R.k.Jaggi revealed that the documents prepared on the basis of actual production and stated that some of the figures could be fabricated.
25. The documents recovered from the premises of Shri Manoj Rajouria are the sole basis for issuance of the show cause notice to M/s.Som and its directors and the employee. In the cross examination, Shri Manoj Rajouria stated that due to enmity with M/s.Som and its directors, he had prepared these documents. By doing this, Shri Manoj Rajouria has taken his revenge from M/s.Som and its directors, therefore, the documents recovered from the residence of Sh.Manoj Rajouria have lost the evidentiary value as it cannot be said an independent evidence. Therefore, the duty cannot be demanded on the basis of the documents recovered from Shri Manoj Rajouria and the documents recovered from Shri Manoj Rajouria cannot be taken as evidence.
26. The charts have been prepared for dispatch as per resumed documents and actual production through the railways and various transporters. Some of the charts are reproduced below:
26. On going through those documents, we find that the entries do not correspond with each other as the documents recovered from the premises of Shri Manoj Rajouria has date-wise of despatch through various railway stations and various transporters. The department procured PWBs from the railway station during the said period showing transport of gutkha through railways. On comparison of railways receipts and the resumed documents it is clear that there is no record of transport of goods through railways to many destinations mentioned in dispatch slips. Moreover, the department has clubbed together several railway receipts, sometimes of different dates to correspond with the quantity of Gutkha shown as transported in the resumed documents. It is not correct as there are several gutkha manufacturers in and around Delhi who transported their goods through railways but no efforts have been made to ascertain whether the gutkha has been sent by M/s.Som.
On Careful analysis of various evidence on record, the following points are noted as relevant:
a) On the date of physical verification of records and stocks at the factory premises of M/s. Som, there was a shortage of 18,480/- polypacks of Gutkha. As the shortage could not be explained, the appellant discharged duty of Rs. 3,45,474/- on the same. There is no context on this liability. This is apparently admitted unaccounted clearance of gutkha.
b) Officers could collect private records, loose slips showing raw materials for manufacturing Guthka/pan Masala/Khaini, date wise production, dispatch, consignment notes, central excise invoices etc. the corroborative/evidentiary value of these are to be appreciated in proper perspective.
c) The allegation in the notice was that during the relevant period, M/s Som manufactured/cleared 50.89 Crore pouches, involving duty of Rs. 15.15 Crores whereas quantification of duty has been made based on best judgment method, following the norms of Panmasala Rules, 2008. These rules which were of later origin per se cannot be made applicable to the impugned period. Though it can be argued for Revenue that the provisions were considered as bench mark only and not as applied law, the dispute still remains regarding correct quantification duty demandable from M/s. Som.
d) The reliance on various railway receipts requires re-examination. All such receipts cannot be clubbed for the reasons already discussed above.
e) Similarly, consignment notes and other private records are treated in a summary manner while arriving at conclusion.
f) M/s. Som paid Rs. 8 Crores towards admitted duty liability and applied before the settlement Commission to settle the case. This by itself will not establish their guilt. However, considering the overall facts and circumstances of this case, the said development cannot be totally brushed aside as of no material consequence. It is recorded here only to emphasis that whatever evidences gathered during investigation requires objective and close scrutiny before arriving at the final quantification of duty not paid by M/s. Som during the impugned period. Such quantification cannot be summarily made, but made rationally with reasons.
In view of the above discussion and analysis, we set aside the impugned order and remand the matter to the Original Authority for a fresh decision. The appellants shall be provided sufficient opportunity to present their side of the case.
(Pronounced in the open court on 08.11.2016)
(B. Ravichandran) ( Ashok Jindal)
Member (Technical) Member (Judicial)
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