Custom, Excise & Service Tax Tribunal
M/S. Alphine Panels vs Order-In-Original No.13/2002-Scc ... on 29 December, 2010
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
SOUTH ZONAL BENCH AT BANGALORE
Appeal No: E/3107/2002; E/3109/2002; E/3110/2002; E/4131/2003; E/4132/2003
(Arising out of Order-in-Original/Appeal No: (as given in the table below) passed by the Commissioner of Central Excise & Customs,)
1.
Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
No
2.
Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
No
3.
Whether their Lordship wish to see the fair copy of the Order?
Seen
4.
Whether Order is to be circulated to the Departmental authorities?
Yes
Appeal No.
Appellant
Respondent
Impugned Order
E/3107/2002
M/s. Alphine Panels
The Commissioner of Customs & Central Excise, Visakhapatnam.
Order-in-Original No.13/2002-SCC (84) dt.5.6.2002
E/3109/2002
M/s. Deccan Veneers Pvt. Ltd.
The Commissioner of Customs & Central Excise, Visakhapatnam.
Order-in-Original No.81(10)/2002-03-SCC dt.17.5.2002
E/3110/2002
Sanjiv Agarwal,
M/s. Deccan Veneers Pvt. Ltd.
The Commissioner of Customs & Central Excise, Visakhapatnam.
Order-in-Original No.81(10)/2002-03-SCC dt.17.5.2002
E/4131/2003
The Commissioner of Customs & Central Excise, Visakhapatnam.
M/s. Deccan Veneers Pvt. Ltd.
Order-in-Original No.81(10)/2002-03-SCC dt.17.5.2002
E/4132/2003
The Commissioner of Customs & Central Excise, Visakhapatnam.
M/s. Alphine Panels
Order-in-Original No.13/2002-SCC (84) dt.5.6.2002
Appearance
Shri G. Venkatesh, Advocate for the appellants.
Mrs. Sudha Koka, SDR for the revenue.
CORAM
SHRI M. V. RAVINDRAN, HONBLE MEMBER (JUDICIAL)
SHRI P. KARTHIKEYAN, HONBLE MEMBER (TECHNICAL)
Date of Hearing: 24.11.2010
Date of decision: 29.12.2010
FINAL ORDER No._______________________2010
Per Shri M. V. Ravindran
The following appeals are disposed of by this common order as they arise out of the following impugned orders.
Appeal No.
Appellant
Respondent
Impugned Order
E/3107/2002
M/s. Alphine Panels
The Commissioner of Customs & Central Excise, Visakhapatnam.
Order-in-Original No.13/2002-SCC (84) dt.5.6.2002
E/3109/2002
M/s. Deccan Veneers Pvt. Ltd.
The Commissioner of Customs & Central Excise, Visakhapatnam.
Order-in-Original No.81(10)/2002-03-SCC dt.17.5.2002
E/3110/2002
Sanjiv Agarwal,
M/s. Deccan Veneers Pvt. Ltd.
The Commissioner of Customs & Central Excise, Visakhapatnam.
Order-in-Original No.81(10)/2002-03-SCC dt.17.5.2002
E/4131/2003
The Commissioner of Customs & Central Excise, Visakhapatnam.
M/s. Deccan Veneers Pvt. Ltd.
Order-in-Original No.81(10)/2002-03-SCC dt.17.5.2002
E/4132/2003
The Commissioner of Customs & Central Excise, Visakhapatnam.
M/s. Alphine Panels
Order-in-Original No.13/2002-SCC (84) dt.5.6.2002
The issue arising in all these appeals is common and interlinked and hence, all relevant facts which are herein below noted will apply to these appeals commonly.
2. M/s. Deccan Veneers Pvt. Ltd. (hereinafter referred to as DVPL) and M/s. Alpine Panels (AP) are the assessee-appellants and are manufacturers of wood veneer falling under the Tariff sub-heading No.4408.90 of the Schedule to the Central Excise Tariff Act, 1985. The said veneer is used in the manufacture of plywood and the appellants are discharging the duty liability on the said veneer. Basing on an intelligence, that both the asssessee-appellants were suppressing quantity of the production by suppressing the quantity of logs received in their factories, investigations were carried out in the factory premises and residence of Shri Sanjiv Agarwal, Director of DVPL (Appellant in Appeal No. E/3110/2002) was conducted. Statements of various persons were recorded and on examination of records and registers seized, the officers of the Central Excise came to the conclusion that DVPL and AP received into their factory certain quantity of veneer logs imported by M/s. NCC Trading Company (hereinafter referred to as M/s. NCC); M/s. Rekung Timber Traders (hereinafter referred to as M/s. Rekung); Maxworth Plywoods, and Tru-woods. During the course of investigation, it was also noticed by the officers that DVPL, AP, Maxworth Plywoods and Tru-woods were all the same, there was a systematic flow of funds and only in order to avail ineligible benefit under small scale industries by DVPL, they created dummy units. The views reached by the lower authority, concluded in issuance of show cause notice to the appellants mainly on the grounds of clandestine manufacture and clearance of veneer out of unaccounted logs; dummy nature of Maxworth Plywoods, AP and True wood; removal of veneer manufactured by M/s. DVPL through Tru-woods without payment of duty; removal of veneer manufactured by M/s. DVPL through Maxworth Plywoods without payment of duty and shortages or excesses noticed during the stock taking wherein a demand of duty to the tune of approximately rupees five crores was raised along with proposition for imposition of penalties and recovery of interest. Assessee-appellants along with Director contested the show cause notice, submitting that the allegation of the department regarding alleged clandestine removal of veneers is erroneous and unsustainable. They produced documentary evidence to prove that the forest permit showing the name of the appellant is not conclusive to prove that the timber logs were received in the factory premises, and that the clubbing of the clearances of all the three units is incorrect, as each unit were independent unit of other and hence, the clearances cannot be clubbed. Adjudicating Authority after considering the oral and written submissions, came to the conclusion that there is definitely an alleged clandestine removal of clearances of the goods, and confirmed demand of duty and dropped proceedings as regards dummy nature of other three units and passed the following orders.
ORDER
(i) I confirm the duty of an amount of Rs.86,86,444/- (Rupees eighty six lakhs eighty six thousand four hundred and forty four only) on the goods which have been manufactured in their unit and clandestinely cleared out all the unaccounted logs received in their unit.
(ii) I drop the proceedings on dummy nature of M/s. Maxworth Plywood Ltd., M/s. Alpine Panel and M/s. Truewood Pvt. Ltd. holding them that they are independent units in their own right.
(iii) I confirm duty of Rs.1,02,277/- on the goods cleared from DVPL to Truewood without payment of duty and without explanation for the nature of the goods.
(iv) I drop the duty demanded for removal of veneer manufactured by M/s. DVPL through M/s. Maxworth cleared on commercial challans of M/s. Maxworth.
(v) I hold that there is no convincing proof of duty paid nature of the goods cleared in the lorry receipts from M/s. Maxworth, however I do not find any documentary evidence to hold the said goods to have been cleared from DVPL therefore, I drop the charge against M/s. DVPL. However, I would like to confirm the said against M/s. Maxworth in the respective order.
(vi) Against shortage and excess stock of excisable goods found on physical stock taking, I ordered confiscation of goods and give the option to the party to redeem the seized goods on payment of redemption fine of Rs.5,000/-.
(vii) I drop the charge on clearance of Core Veneer by M/s. DVPL to M/s. Maxworth in excess of the documented quantities in the concerned invoices issued under Rule 52A.
(viii) I order payment of interest at appropriate rates from 1st day of April, 99 and First day of November, 2000 for the amount quantified against the said years as ordered at (i) above, and from first day of November, 2000 in respect of Rs.1,02,277/- as ordered at (iii) above.
(ix) I impose a penalty of Rs.87,88,721/- under Section 11AC of Central Excise Act.
(x) I impose a penalty of Rs.1,00,000/- on Mr. Sanjiv Agarwal for his role under Rule 209A of Central Excise Rules, 1944.
(xi) I confiscate the plant and machinery under Rule 173Q and allow redemption on payment of Rs.1,00,000/-.
(xii) I impose a penalty of Rs.5,00,000/- collectively under Rule 9(2), 52A and 173Q(1) of Central Excise Rules, 1944.
(xiii) I adjust the entire amount of Rs.31.09 lakhs cash towards payment of duty.
2.1 Appellant-assessees are in appeal against the confirmation of the duty confirmed, equivalent amount of penalty, other penalties and redemption fine imposed by the authorities, while revenue is in appeal against the order of the learned Commissioner for dropping the proceedings of clubbing of clearances.
3. Learned Counsel appearing on behalf of the appellants would submit that demand of duty on the ground of alleged manufacture and clandestine removal, is not sustainable as the alleged manufacturing of veneer based upon unaccounted timber logs is incorrect. It is the submission that entire demand is based on the ground that the details contained in the survey reports and the forest transport permits shows appellant as the consignee and the receipt of the same in the appellants factory, which is incorrect. He would demonstrate the non-receipt of the logs in the appellants factory by taking an example in the case of import of logs through marine vessel M.V. Grand Noble and demonstrated the correlation. It is his submission that the quantity of 181 logs shown to be received by DVPL, in fact was never imported by DVPL and was imported by M/s. Bothra Shipping Services and was sold on high seas sales basis to M/s. Rekung. He would also submit that the high seas buyer M/s. Rekung filed bill of entry for the clearance of said logs. It is his submission that the bill of entry, high sea sales documents, bill of lading, etc., all indicate that the appellants herein were never importers, there was an apparent error in the survey report indicating the appellants name as importers. He would submit and draw our attention to the statement of surveyor wherein he has stated that the particulars so entered were not true and the particulars were only for the purposes of raising bills on the CHA who had engaged the surveyor. It is his further submission that the show cause notice has relied upon certain forest transport permits and delivery challans in respect of the same vessel M.V. Grand Noble but the appellants had proved to the Adjudicating Authority with documentary evidence that whenever the forest transport permits were issued in the appellants name, they had received the cargo and accounted the same for in their books. As an example, he would draw our attention to the very same example of imports of logs through M.V. Grand Noble wherein in respect of 290 logs imported were shown as the appellant DVPL and the said logs were properly accounted in their log register and it is the submission that the Commissioner was confused with this argument and he had dropped the demands arising out of demands raised in the show cause notice arising out of such accounted logs. It is his submission that Commissioner, however, had confirmed the demands on the remaining logs which were never imported by the appellant. He would submit that they had produced evidences before the learned Commissioner regarding the documents obtained from Sales Tax check-posts which indicated that the logs were transported to the northern parts of the country. He would submit that in the above manner, they submitted the documentary evidence for the entire quantity of the logs for which demands were raised against the assessee-appellant. It is his submission that the confirmed demand against the appellants-assessee is totally on the basis of assumptions relying upon unreliable third party documents. There is no other corroborative evidence to show that the appellants had actually received this quantity of timber logs in the factory and manufacturing activity has taken place; evidence as regards the consumption of electricity was not established by the department to show that there is a manufacturing activity and physical clearance of the veneer by the appellants without payment of duty. It is the submission that there is also no seizure made by the department of any vehicles showing the clearance of veneers without payment of duty and there is also no flow back of monetary consideration of alleged clandestine clearances of veneer. On this regard, he would rely upon the following decisions.
(i) Saheli Synthetics Pvt. Ltd. Vs. CCE, Vadodara 1999 (113) ELT 1000 (Tribunal)
(ii) Sharma Chemicls Vs. CCE, Calcutta-II 2001 (130) ELT 271 (Tri.-Kol.)
(iii) TGL Poshak Corporation Vs. CCE, Hyderabad 2002 (140) ELT 187 (Tribunal-Chennai)
(iv) Kothari Synthetic Indus. Vs. CCE, Jaipur 2002 (141) ELT 558 (Tri.-Del.)
(v) K. Rajagopal Vs. CCE, Madurai 2002 (142) ELT 128
(vi) Shabroc Chemicals Vs. CCE, Kanpur 2002 (149) ELT 128
(vii) CCE Vs. Moon Beverages Ltd. 2002 (150) ELT 976
(viii) CCE Vs. Annapurna Industries Ltd. 2003 (153) ELT 586
(ix) Dalmia Vinlys (P) Ltd. Vs. CCE 2005 (192) ELT 606
(x) CCE Vs. Moogambigai Soap Works 2006 (204) ELT 126
(xi) Ruby Chiorates (P) Ltd. Vs. CCE 2006 (204) ELT 607
(xii) CCE Vs. S.S.D Spinning Mills Ltd. 2008 (222) ELT 392
(xiii) CCE Vs. R. V. Steels Pvt. Ltd. 2009 (243) ELT 316 3.1 It is his further submission that the authorities recorded statements from M/s. NCC and M/s. Rekung, wherein there was no admission or implication of the appellant by the said parties, that they had sold unaccounted timber logs to the appellants. It is his submission that the revenue had on identical set of facts and allegations of clandestine removal confirmed demands against M/s. Shri Bajrang Ispat & Plywood Ltd. Vs. CCE, which was set aside by the Tribunal as per Final Order No.711-712/2005 dated 2.5.2005 as well as in the case of M/s. Evergreen Veneers Pvt. Ltd. Vs. CCE - 2007 (220) ELT 319. It is his submission that the various demands confirmed by the learned Adjudicating Authority are on the ground of the clearance of goods by the appellant without payment of duty to M/s. Truwood, which is incorrect.
4. The learned departmental representative on the other hand would submit that M/s. Bothra Shipping Services themselves imported consignment of wooden logs and before arrival of ships they sold logs on high sea sales to M/s. Rekung Timber Traders and Century Panels, etc. It is her submission that when the ship entered the port of Visakhapatnam, M/s. Bothra had engaged the services of M/s. Marine Consultants and Surveyors Pvt. Ltd. for the purpose of attending the unloading of the logs from the ships at Visakhapatnam harbour in respect of various consignments on which demands was raised. It is her submission that the survey reports prepared by M/s. Marine Consultants and Surveyors Pvt. Ltd. indicate that DVPL and AP were the consignees and they received the consignment. It is her submission that diversion of the goods to the appellants cannot be confirmed from the bills of entry or from any other documents as the said diversion has taken place subsequently but the fact remains that the survey report was prepared based upon the direction given by M/s. Bothra Shipping Services. It is her submission that survey report which has been prepared is a strong evidence to indicate that the logs were imported by the appellants herein and the challans and the certificates prepared by M/s. Bothra Shipping Services indicates that the appellants were the consignees, is an enough evidence. She would draw our attention to the correlation made by the department in respect of the three imports through marine vessel M. V. Pagon, M. V. Chayastar and M. V. Sukaria. It is her submission that application for forest permits were made by M/s. Rekung and had requested the forest department to issue the forest permit to transport the wooden logs to M/s. DVPL or AP. It is her submission that the forest permit reveals that the consignment under question were transported to DVPL and were not accounted in the records of the appellants, which was later on used for clandestine manufacture and clearance of veneer. She would submit that in the facts of the instant case, there is enough evidence that the bills of entry can be correlated with surveyors report with regard to the bill of lading, name of the vessel, description, marks and numbers and quantity of goods except for the name of the consignee mentioned in the bills of entry. It is her submission that the survey report which is the starting point is prepared by the authorized surveyor, while overseeing the unloading of the goods from the ship into the port and dispatching the goods from the port of importation to the consignees premises and this survey report is valid document for claiming insurance or refund of duty from the department. It is her submission that in the instant case, M/s. Bothra Shipping Services who were original importers of the goods had engaged surveyor M/s. Marine Consultant and Surveyors Pvt. Ltd. It is her submission that the final survey report will be prepared after dispatch of the consignment to the parties as mentioned in the survey report and during the course of discharge of the goods, surveyor are posted continuously for tallying the cargo and noting the individual marks and other details of the logs. It is her further submission that the high sea sales entered by the parties for import in some case indicate the consideration which is very low, while in some cases the consideration is not written at all, which would indicate that this high sea sale agreement were made only to create paper transactions. It is her submission that the high sea sales agreement between M/s. Bothra and M/s. Rekung and M/s. NCC and others had no consideration and hence, the final conclusion would be that the logs so purchased and sold were delivered to DVPL or AP. It is her submission that the entire evidence indicates that the logs were dispatched to DVPL as delivery challans of M/s. Bothra Services indicates the consignee as DVPL. It is her submission that the learned Commissioner has not appreciated entire evidence on record and has summarily confirmed demand at less than the demands raised in the show cause notice and hence, matter may be remanded back to the Commissioner for appreciating the facts and coming to a proper conclusion.
5. In rejoinder to the submission, the learned counsel submits that revenue cannot ask for remand of the matter in an appeal filed by the assessee. It is his submission that as regards the claim of the revenue that the Commissioner dropping of the substantial quantity of demand with regard to clubbing of clearances, filed by the assessee to be incorrect and this cannot be raised by the revenue at this stage as they have not filed any appeal against such finding. It is his submission that the delivery challans relied upon by the learned SDR do not indicate the acknowledgement of said logs in the factory premises of the appellant. It is his submission that they had given the entire set of records to the learned Commissioner in their replies to the show cause notice by properly correlating the entries of imports of the logs and the disposal of the same.
6. The learned SDR as regards the appeal filed by the revenue, submits that the entire activity of DVPL is connected with Truewood Ltd., Maxworth Plywoods and AP by common procurement of the logs and distribution among the units. It is her submission that Maxworth Plywoods did not have the facility to manufacture veneers and veneers manufactured by DVPL is cleared under the invoice of other units. It is her submission that there was common workforce, though the workers handled all the works of the units independently but they were paid by one unit. It is her submission that all the units were established independently, there has been no payment of any accommodation expenses to DVPL and statement recorded under Section 14 of the Central Excise 1944 clearly brings about the fact that all the units functioned under the management of one unit only. She would submit that there is a case of centralized manufacturing and decentralized clearances, and there is inter-movement of goods between the units, for which no consideration were received. It is her submission that Shri Sanjiv Agarwal, Director of DVAPL is managing the entire affairs of all the units. It is her submission that there is interest in each others business as the activities of all the assessees is interlinked even if there is existence. It is her submission that Adjudicating Authority has not considered the evidence in show cause notice in proper prospective. She would rely upon the following case laws for this submission.
(i) M/s. Industrial Supplies and Services Vs. Collector of Central Excise, Udaipur 2001 (128) ELT 175 (Tri.-Del.)
(ii) Calcutta Chromotype Ltd. Vs. Commissioner of Central Excise, Calcutta 1998 (99) ELT 202 (SC)
(iii) Commissioner of Customs, Bangalore Vs. Vikram Jain 2009 (244) ELT 504 (Kar.)
(iv) Commissioner of Customs, Madras and Others Vs. D. Bhoormull 1983 (13) ELT 1546 (SC)
7. The learned counsel while replying to the appeal filed by the revenue would submit that the main ground of the department regarding clubbing of clearances is ex-facie unsustainable. He would submit that there are various documentary evidences, which were filed along with reply to the show cause notice. The facts on record indicate that each of four units were independent entities, hence clearances of all the units cannot be clubbed. It is his submission that all the units were independent companies and cannot be clubbed as clarified by the board. It is his submission that the fact that the learned Commissioner issued show cause notices demanding duty from individual entities and having also confirmed demand against each unit itself will show that they are independent entities. It is his submission that department in their appeal have not challenged the findings of the Commissioner and there is no financial flow back between the units which would prove that there is no question of clubbing of clearances of four units. In support of the above proposition, he relies upon the following case laws.
(i) Supreme Washer (P) Ltd. Vs. CCE 2003 (151) ELT 14 (SC)
(ii) Arca Controls Pvt. Ltd. Vs. CCE 2003 (158) ELT 272 (SC)
(iii) Malik & Company Vs. CCE 2003 (161) ELT 466
(iv) L. D. Industries Others Vs. CCE 2003 (157) ELT 459
(v) CCE Vs. Madhusudan Chemical Industries 2004 (174) ELT 335
(vi) Tapasya Steels Pvt. Ltd. Vs. CCE 2004 (174) ELT 108
(vii) Poly Printers Vs. CCE 2002 (139) ELT 295 (affirmed by Supreme Court in 2003 (151) ELT A 303)
(viii) Special Machines Vs. CCE 2004 (169) ELT 275
(ix) Bentex Industries Vs. CCE 2003 (151) ELT 695 (affirmed by Supreme Court in 2004 (173) ELT A79.
In view of the foregoing submissions, he prayed that the departments appeal seeking clubbing of clearances is not supported by any evidence and hence, needs to be dismissed.
8. We have considered the submissions made at length by both sides and perused the records.
8.1 The issue involved in this case are (I) whether the appellants companies has manufactured excess quantities from the unaccounted logs received in their factories. (II) Whether the Adjudicating Authority was correct in dropping the proceedings against other companies for clubbing of clearances with the main appellants.
8.2 We record our findings which are as under:
(I) The issue regarding receipt of excess quantities of logs and unaccounted by the appellants and the allegation that the finished goods have been manufactured out of unaccounted logs and cleared clandestinely.
The entire issue on this point arises from the investigation conducted by the authorities. The authorities have procured the survey report done by M/s. Marine Consultants & Surveyors Pvt. Ltd. at the time of unloading of the logs from the ship in Visakhapatnam. It was noticed by the authorities that in the survey reports, DVPL and AP have been shown as consignee. We have perused the survey report given by the said M/s. Marine Consultants & Surveyors Pvt. Ltd. In order to ascertain the factual matrix of the submissions made by the learned counsel, we took up an example of import of logs through M.V. Grand Noble during March and April 1998. We perused the survey report which is annexed at page 326 - 336 of Volume-II in the paper-book. On perusal of the said survey report, we find that the surveyors had prepared the survey report for 142 and 39 logs and 290 logs. It is seen from the said report that the consignee has been shown as DVPL and another company known as M/s. Evergreen Veneers (P) Ltd. (EVPL). As regards the consignment of 290 logs, and the consignee company shown as DVPL in the survey report, there is no dispute as M/s. DVPL has shown and recorded the same in their books and accepted and admitted by the Adjudicating Authority in his impugned order and not challenged by the revenue. We perused the records to ascertain the factual matrix of the 142 and 39 logs. The survey report though mentioning the consignees as DVPL, the documents annexed in the said memorandum at page 337-338 and 346-347 in volume-II indicate High Seas Sale Agreement (HSSA) between M/s. Bothra Shipping Services and M/s. Rekung. The said HSSA were produced before the lower authorities. We reproduce below the contents of one of the HSSA.
HIGH SEAS SALE AGREEMENT This HIGH SEAS SALE AGREEMENT is made and entered into at Visakhapatnam this 04.04.199 between M/s. BOTHRA SHIPPING SERVICES, hereinafter called THE SELLER of the first part and M/s. REKUNG TIMBER TRADERS hereinafter called as THE BUYER of the second part.
Where as the party of the first part has placed an order for import of MYANMAR GURJAN LOGS from M/s. FARLIN TIMBER INT PTY. LTD. SINGAPORE. The said goods are shipped from VICTORIA POINT, MYANMAR PORT TO VISAKHAPATNAM PORT, vide Bill of Lading No.EBP-910 Dt.02.04.98.
NOW THE AGREEMENT WITHNESSES AS UNDER :
1. The Bill of Lading No. EBP-910 B Dt.02.04.98 of M/s. FARLIN TIMBERS INT. PTY. LTD., AUSTRALIA, for 225.55 CBM is sold by the party of the first part to the party of the second part of consideration of Rs.23,27,205/-.
2. The goods have been shipped from VICTORIA POINT, MYANMAR PORT to VISAKHAPATNAM PORT by sellers and covered under the shippers invoice No.FAR/910/98 B Dt.04.04.98.
3. On endorsement of Bill of Lading of delivery order, in the event of the late receipt of Bill of Lading in favour of the first part of the first part title of the said goods will be unconditionally transferred to the said party of the second part.
4. The goods having been sold as aforesaid on arrival of the said goods at VISAKHAPATNAM PORT all duties, levies, rates, clearing, forwarding, freight and demurrage, fluctuation in foreign exchange rate, interest, seller commission, if any, as per the law applicable shall exclusively be borne by the party of the second part only.
5. The disputes if any, between the parties here to arising out of or in relation to this agreement for HIGH SEAS SALE shall be referred to under the Arbitration Act, 1940 and award of the Arbitration Act, 1940 and award of the Arbitrator / Arbitrators or the Umpore, as the case may be shall be final and binding on both the parties hereto.
In witness where of, the parties here to have set and subscribed their respective hands on day and year first here in above written.
Signed and Delivered by the in presence of For BOTHRA SHIPPING SERVICES Signed and delivered by the within names THE BUYER M/s. REKUNG TIMBER TRADERS Date: 04.04.98 Place : VISAKHAPATNAM Consequent to such HSSA, M/s. Rekung have filed bills of entries which are annexed at page 339 and 348 of Volume - II of the paper-book. The same is reproduced herein below.
It can be seen from the above recorded factual matrix that consignment 142 and 39 logs was unloaded by marine vessel M. V. Grand Noble at Visakhapatnam port. The surveyors M/s. Marine Consultants & Surveyors Pvt. Ltd. appointed by clearing agent had indicated consignee as DVPL while the evidence brought on record before the lower authorities as well as before us indicate that the imports were only made by M/s. Bothra, who by HSSA sold the same to M/s. Rekung. The bills of entry filed also indicate importer as M/s. Rekung. As against these evidences, the learned SDR submitted that the HSSA and the challans prepared by M/s. Bothra, clearing agent indicate the consignee as DVPL. It is her submission that HSSA agreement indicates different consideration for the consignments came from the same place. The Adjudicating Authority on this issue has recorded the following findings.
(xxi) To summarise the facts, during period 98-99 and 99-00 it is found that goods have been imported and there after High Sea Sales have been made. The Clearing and Forwarding Agent has obtained forest permits in name of all the companies for anticipated clearances giving known addresses. Subsequent to clearance of these goods from the port, some of the goods have been transported up country though initial destination in the forest permit was DVPL factory area. There have been a few mistakes in account in CHAs end and those figures have been duly deleted. The department have laid hands on 3295 CBM forest permits. It has not been possible for the Department to get forest permits for other consignments. Party has also collected forest permits for 1107.1170 CBM which, though endorsed in the name of DVPL has been sent elsewhere, giving proof of diversion of permits. If there were similar diversion to other parties of the goods covered by those permits, party would surely have come up with that evidence. They have not got evidence of further diversion because there was perhaps none. The party would like to inject a degree of suspicion in the evidential value of all the records and statements on the basis of these few mistakes. Considering the nature of industry, there seems to be preponderance of evidence that the goods have gone to DVPL.
Regarding the judicial pronouncements quoted by Dr. Chatterjee, I would like to mention that in the case of Rajendra Prabhu Vs. UOI, 1999 (107) ELT 293 (Ker.), the Honble High Court mentioned that the department is not required to prove its case with mathematical precision to a demonstrable degree.
With due deference to the Case Laws cited by Dr. Chakraborti, I am more inclined to follow the decision of Rajendra Prabhu Vs. UOI and hold that the department has proved its facts with reasonable degree of reliability. I therefore hold the consignments have been received by DVPL in their factory for production and clearance of the same clandestinely.
Thus, a total of 885.5514 CBM of logs is held to have been received by DVPL and veneer has been manufactured therefrom and cleared for home consumption.
The Adjudicating Authority after appreciating the evidences led by the assessee have allowed majority of the demand but upheld the demand as indicated in earlier portion of this order (Paragraph 2). It can be seen from the above reproduced findings recorded by the Adjudicating Authority in Order-in-Original, that the he has accepted the fact that the HSSA entered by various parties were genuine and there is no dispute as to that. This portion of the order is not challenged by the revenue in their appeal. In the absence of any findings that HSSA were improper or were made only for the purpose of misleading authorities, it has to be accepted and admitted that HSSA were genuine and there was high seas sales. We find from the records that in all the cases wherein the Adjudicating Authority has confirmed demands on the appellant, (wherein the appellant has not recorded the receipt of logs in the factory premises), there are evidences to show that there was HSSA between the parties and the importer was not the appellants DVPL or AP, as the case may be. In an example, which we took was of the same fact in all the cases wherein the Adjudicating Authority has confirmed the demand. We find that the entire argument of the revenue in the impugned order as well as before us revolves around the challans raised by M/s. Bothra as CHA, copies recovered from their office. On careful perusal of the said delivery challans and certificate issued by CHA, while transporting the logs from the port, the consignees name mentioned was DVPL. It is seen from the records that these challans which were prepared by M/s. Bothra and recovered from the office of M/s. Bothra as a clearing agent, do not have any acknowledgement of the recipient of the said consignments in their factory premises. It is a common knowledge that any document which does not indicate the acknowledgement of the recipient of the goods in their premises, cannot indicate that the goods were delivered at such premises. If there is no acknowledgement of the receipt of the consignment at the DVPL or AP factory premises, adverse interference is to be drawn as to receipt of logs. There being no other copies, recovered from the CHAs place, containing an acknowledgement delivery of the consignment, our observation is fortified. Further, it is to be seen that the reliance placed by the revenue on the said evidence, is short of any corroborative evidence, inasmuch as though their transporters name as well as the vehicle number is being mentioned on each and every unacknowledged challans; from the show cause notices and the relied upon documents from the show cause notice, it is seen that the revenue authorities have not recorded any statement from the transporters or the drivers of the said lorries. Such a statement would have definitely indicated where delivery of the consignment took place. In the absence of any such statement, merely going by the challans and the certificate issued and prepared by M/s. Bothra, cannot be indicative of the facts that the logs were purportedly delivered in the factory premises of DVPL is correct. Further, we also note that the appellant companies herein were always taking a plea that the importers might have sold the consignment to various other parties. The revenue officers recorded statements from some representatives of M/s. NCC Trading Company and M/s. Rekung who were importers of such logs. In their statements recorded, the representatives of both the companies M/s. NCC and M/s. Rekung did admit to have filed the bills of entry and made payment for the customs duty and other parties, to the clearing agent and gave the details of the subsequent disposal of the consignments imported by them. The revenue authorities have not recorded any other statements from the representatives of M/s. NCC and M/s. Rekung to indicate that the logs imported by them were in fact delivered to DVPL or AP. In the absence of any such evidence or statements indicating that the logs which were imported and cleared by M/s. NCC and M/s. Rekung were in fact delivered to DVPL or AP, the conclusion reached by the Adjudicating Authority is incorrect. In the absence of any evidence indicating that the logs which were imported by M/s. NCC and M/s. Rekung were in fact delivered to DVPL, we find that the decision of this bench in the case of M/s. Shri Bajrang Ispat & Plywood Ltd. (supra) and M/s. Evergreen will squarely apply. We may reproduce the relevant paragraphs.
M/s. Shri Bajrang Ispat & Plywood Ltd. Vs. CCE & vice versa (supra)
3. On a careful consideration, we notice that the appellants case pertains to 3 Bills of Entry, which are noted. The allegation is that the goods in terms of 3 Bills of Entry which numbers are noted supra, were imported by M/s. Shiv Timbers and M/s. Hemkung Timbers and they were diverted to the appellants factory. However, there is not a piece of evidence on record. The transporter has not been examined nor any person from M/s. Shiv Timbers and M/s. Hemkund Timbers has been examined. Practically there is no piece of evidence to show that the imported logs were diverted to the appellants factory. Therefore, the confirmation of demand with regard to the 3 Bills of Entry is required to be set aside and we do accordingly. The appellant is not contesting the confirmation of duty of Rs.72/- in terms of Annexure 3. The same is confirmed. The appeal is allowed accordingly.
Evergreen Veneers Pvt. Ltd. Vs. CCE, Visakhapatnam (supra)
11. The learned? Advocates during the hearing emphasized the point that the goods belonging to other importers were also dumped near the appellants yard and while sending these goods, the transport documents indicated the destination to be M/s. Evergreen Yard as the area was well known. In other words, it does not mean that all the timber received in the year adjacent to the yard of the appellants was on account of the appellant and they had used the same for manufacture and clandestine clearance. He said that the Revenue has gone by these assumptions and slapped up a huge demand on the appellants. It was further pointed out that the appellants do not have the capacity to manufacture such a huge quantity of plywood and veneers, as assumed by Revenue. He also pointed out to the above observations of the Adjudicating Authority and his conclusions, which are quite contrary to his observations. It was further pointed out that there is not even a single evidence to show that the goods cleared clandestinely have been received by any buyer. There is no evidence of excess electricity consumption. Moreover, the Commissioner has ignored certain evidence of sale of timber by the appellants and assumed that all the timber received had been utilized in the manufacture of plywood and veneer for clandestine clearances. We find that the entire demand is based only on presumptions and assumptions, as considered by the Commissioner in his order. The demand has been worked out theoretically. The Show Cause Notice has assumed zero percentage wastage.
12. In view of all? this, we find that the Show Cause Notice as well as the adjudication order are highly defective. No thorough investigation has been made by the Departmental officers. The appellants have given their explanations with regard to the demands made in every annexure to the Show Cause Notice issued. We also find that the Departmental officers have been making periodic visits to the unit. If such huge quantity has been removed clandestinely, as alleged in the Show Cause Notice and confirmed by the Adjudicating Authority at least there should at least few instances of seizure of such removals. What is clear from the adjudication order and the Show Cause Notice is that there have been irregularities in the maintenance of accounts. On account of this fact, one cannot jump to a conclusion that there has been clandestine removal. When the irregular maintenance of accounts leads to the suspicion that there has been clandestine production and removal, Revenue should have undertaken thorough investigation. The Departmental officers could not get the list of buyers who purchased the goods clandestinely removed from the appellants. They are not able to establish excess consumption of electricity. There is also no evidence of seizure of unaccounted sale proceeds. The Commissioner has thoroughly discussed the clubbing of clearance and has come to the conclusion that in the present case M/s. Tirumala Timbers and M/s. TVPL cannot be considered as dummy units. In his view, the evidences relied in the Show Cause Notice are not sufficient in the light of the decided case laws and Boards circular to club the clearances. In these circumstances, we are not inclined to confirm the demand on account of clandestine clearance and undervaluation. The appellants have also clearly explained the alleged shortages noticed at the time of stock taking on 2-11-1999. It appears that the work in process has not been taken into account in the RG-I register at the time of visit of the Departmental officers. In view of all the above reasons, we feel that the Revenue has not made out a strong case against the appellants and the Order-in-Original cannot be sustained. For these reasons, the appeal of the Revenue has also no merits and hence we allow the appeals of the parties with consequential relief and reject Revenues appeal.
In view of this, the impugned order confirming demand on both the appellants, of the duty liability arising out of manufacture and clearance of the veneers from the logs which were unaccounted, seems to be without any evidence and is on presumptions and assumptions and hence, is liable to be set aside. Further, it is also to be noticed that the revenue authorities have not adduced any corroborative evidence as regards the excess consumption or unaccounted consumption of electricity, etc., and other inputs, for the manufacturing alleged excess quantities clandestinely manufactured and cleared from the factory.
8.3 The next issue is regarding:
(II) Clubbing of clearances i.e., dummy nature of Maxworth Pvt. Ltd. Alpine Panel and Truewood Pvt. Ltd.
The Adjudicating Authority on this allegation has dropped the proceedings initiated by the show cause notice by recording the following findings.
(xv) In the light of these judgments, it has to be analysed whether the 3 units, namely Alpine Panels, Truwood and Maxworth were the dummy units of DVPL. Each of the units has large factories. They employed large number of persons both skilled and unskilled. The production of these units during the last 3 years were as under:
1999-2000 1998-99 1997-98 Maxworth Rs.1.69 crore Rs.1.79 crore Rs.1.78 crore Truwood Rs.3.28 crore
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Alpine Rs.3.72 crore Rs.2.77 crore Rs.2.21 crore No. of employees Maxworth 72 107 100 Truwood 44 34 37 Alpine 66
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(xvi) As per the records, they have been purchasing the goods from the market themselves, importing logs themselves individually. Whenever there is any inter factory transfer, the financial transaction is taking place through books. Debiting the clearance from the unit to another is made through invoices on debit of duty. Therefore even if they have common / joint decision making and they are all sister concerns, they are floated by the same family and they share telephone facilities, still as per above Tribunal judgments, they are not non-existent, dummy units. The facts of these cases do not match the facts of the case of Industrial Supplies and Services case cited above.
(xviii) From the evidences produced by the party, it is seen that factually they are separate large manufacturing concerns and they have been purchasing their raw materials separately and Maxworth is also trading the raw materials on its own. They have produced documentary evidence that proportionate charges of telephone facilities were paid to DVPL by Maxworth and Alpine (Annexure T). Similarly, separate books of accounts have been maintained and each one of them have transactions with banks and other concerned authorities. (See Annexure WW and RR). Thus factually, they are not the units on papers only.
The Adjudicating Authoritys above findings have been challenged by the revenue in their appeals. The revenues grounds of appeal in the instant case on the issue reads as under :
5. Dummy nature of M/s. Maxworth Plywoods, M/s. Alpine Panels and M/s. Truwoods:
5.1 This is a case of centralized production and de-centralised clearance. The Commissioner has dropped the proceedings on the allegations of the dummy nature of M/s. Maxworth Plywoods, M/s. Alpine Panels and M/s. Truwoods Pvt. Ltd., holding them that they are independent units in their own right.
5.2 It is also seen that M/s. Deccan Veneers had cleared Veneer to M/s. Truwoods without payment of duty with a direction to sell the same in the name of M/s. Truwoods which has been held as proved by the Commissioner in the said order. Similarly, it is also seen that, M/s. Deccan Veneers have cleared Veneer without payment of duty through M/s. Maxworth Plywoods on the commercial challans of Maxworth Plywoods. It is very clear from the above that, the goods manufactured by M/s. Deccan Veneer have been freely moving to other units without payment of duty and sale is being made by these units. There has been no evidence of sale made by M/s. Deccan Veneers to these units. Therefore, it is proved that, there has been common funding.
5.3 In this connection, it is pertinent to mention that, the Honble CEGAT in the case of M/s. Industrial Supplies and Services Vs. Collector of Central Excise, Jaipur (2001 (128) E.L.T. 175 (Tri.-Del.) has held that, it is not a statutory requirement under the Central Excise Act or under the General Law that, for proving the dummy character of any unit, the money flow back from that unit to the Principal Unit must be established. It is a matter of common knowledge that whenever a principal unit with intent to evade payment of duty creates the dummy units, the money transaction between them would never be transparent, rather it would be under hand / under table. Therefore, it would be neither within the reach / sight of the department nor possible for the department to proof the flow back of the money between the two units.
5.4 The Honble Supreme Court, in the case of Calcutta Chromotype Limited Vs. CCE, Calcutta [1998 (99) ELT (202)] have held that, the principle that a company under the Companies Act, 1956 is a separate entity and therefore, they are noting more than related persons is not of universal application. The Supreme Court has held that, once it is found that the persons behind the units are the same, there is no bar on the authorities to lift the veil of the company to see whether the companies are not wearing that mask. Once it is found that the persons behind the units are the same, then regard being had to the common course of natural events, human conduct and public land private business, it can be presumed that they have interest direct and indirectly in the business of each other.
5.5 It may be seen that, all the 4 units i.e., M/s. Deccan Veneers, M/s. Maxworth Plywoods, M/s. Alpine Panels and M/s. Truwoods belong to the same family. It has also been admitted that M/s. Deccan Veneers, M/s. Maxworth Plywoods, M/s. Alpine Panels conduct their manufacturing activities from the same compound. It has also been admitted that M/s. Deccan Veneers, M/s. Maxworth Plywoods, M/s. Alpine Panels and M/s. Truwoods opeate from the same city office. It has also been admitted that, the other three units did not pay any amounts to M/s. Deccan Veneers for accommodation and telephones. It has also been admitted that, the staff of all the four units operate from the same city office and the staff work interchangeably for more than one unit. It has also an established fact that the staff is not separately compensated for doing the work of other units. Totality of all the evidences point to the fact that this is a fit case for lifting the corporate veil. In other words they are common employees working for all the four units. It has also been admitted that, there has been common decision making for all the units in as much as Sri Sanjiv Agarwal, Director of M/s. Deccan Veneers has been the common Director of all the other companies.
5.6 All points for clubbing the clearances mentioned in the show cause notice are not discussed in the Order-in-Original. So, the conclusion arrived is not correct.
5.7 In the light of the above, it appears that M/s. Maxworth Plywoods, M/s. Alpine Panels and M/s. Truwoods Plywoods are indeed dummy units and the clearances of such units will have to be clubbed and duty has to be determined accordingly.
It can be seen from the above reproduced grounds of appeal that the revenue has not put forth any evidence to fault with the factual findings by the Adjudicating Authority. The factual findings of the Adjudicating Authority as is reproduced by us, very clearly indicates that the appellants were able to show from the records that the purchases of the goods from the market, import of the logs were done individually and their financial transactions have been properly accounted.
9. We are in agreement with the Adjudicating Authority that even if there is common / combined decision making and they all being sister concerns, these facts themselves do not lead to the conclusion of clubbing of clearances. Final products manufactured by DVPL are different than those of others. On the specific query from the bench, the learned counsel would submit that everything is recorded in the show cause notice. On perusal of the show cause notice, we find that it is a mere allegation recording the non-payment of duties to another company and there being interest in each others business. We are of the considered view that the findings which have been recorded by the Adjudicating Authority are on sound principles after considering the entire evidence which was produced before the Adjudicating Authority. The learned SDR has relied upon the decision of the judgment of Honble Supreme Court in the case of Supreme Washers (P) Ltd. Vs. CCE, Pune - 2003 (151) ELT 14 (SC); H.T. Bhavnani Chemicals (P) Ltd. Vs. CCE, Baroda - 1997 (92) ELT 502 (Tribunal); Chemicals and Calcutta Chromotype Ltd. Vs. CCE, Calcutta - 1998 (99) ELT 202 (SC) to press home the point that the value of clearances needs to be clubbed. We note that in the case of Supreme Washers (P) Ltd. Vs. CCE (supra), there was an evidence to show that there was common procurement of raw materials, common stock accounting and common stock of raw materials and some finished goods. While in the case before us, it has been recorded by the Adjudicating Authority that all the units are large manufacturing units having their own factory premises and their own machineries. This particular finding has not been disputed by the revenue in the grounds of appeal or proceedings. In the absence of contrary evidence, other than case laws relied by the SDR would not carry the case of revenue any further inasmuch, as in all those cases there was an evidence to show that there was clubbing of clearances needed to be done. In the absence of any contrary evidence to indicate that the findings of the Adjudicating Authority that the factories were in existence and had their own procurement of raw materials and manufacturing activity, we find that the Adjudicating Authority was correct in coming to a conclusion that there cannot be any clubbing of clearances. Accordingly, we reject the appeals filed by the revenue.
10. Other two small issues in the case of DVPL is regarding the demand of Rs.1,02,277/- and redemption fine of Rs.1,00,000/- under Rule 173Q of Central Excise Rules.
10.1 The said confirmation of the demand has arisen on the ground that DVPL had cleared to Truewood certain quantities of logs without payment of duty and no explanation was given. We find that before us also there is no convincing explanation given by the appellants and hence, we uphold this demand of duty as confirmed by the Adjudicating Authority. Since there is a demand of the duty, equivalent penalty imposed on this account needs to be upheld. As regards the redemption fine imposed, we find that the said redemption fine is correct as the appellant is not able to give satisfactory answer regarding the shortages and excess of the stocks of excisable goods found on physical stock taking. It is seen from the order that the Adjudicating Authority has demanded interest at appropriate rate from the appellants in respect of Rs.1,02,277/- which is correct, as we have upheld the said demand. As regards the confiscation of plant and machinery under Rule 173Q and redemption of the same on payment of Rs.1,00,000/-, since, we have held that there is no clandestine manufacture or clearance of the goods, we vacate this confiscation and also the combined penalties imposed on the appellant company under Rule 9(2), 52A and 173Q (1) of Central Excise Rules, 1944.
10.2 In sum, we confirm the demand of Rs.1,02,277/- and the interest thereof and equivalent amount of penalty and set aside various other demands raised in the show cause notice and confirmed by the Adjudicating Authorities. To that extent, assessees appeals are allowed and the revenues appeals to the extent it challenges the dropping of the charges of clubbing of clearances is rejected for the reasons hereinabove recorded.
10.3 We see from the records that the Adjudicating Authority has adjusted the entire amount of cash which was recovered from the assessee was adjusted against the demand as has been confirmed by him. Subject to the adjustment of the amount which has been confirmed by us and the interest and penalty from the amount seized, the balance amount which is in the hands of the revenue needs to be returned back to the appellant.
10.4 Since we have dropped the entire proceedings except for a few amounts, the personal penalty on Shri Sanjeev Agarwal, Director, is unwarranted and hence, set aside.
11. In the case of AP, we uphold the confirmation of demand of Rs.3,470/-.
12. Since we have disposed of the case on merits itself, we are not recording any findings on various other lengthy submissions made by both sides.
13. All these appeals are disposed off as indicated hereinabove.
(Pronounced in open Court on 29.12.2010 )
(P. KARTHIKEYAN)
Member(T)
(M. V. RAVINDRAN)
Member (J)
/rv/
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