Customs, Excise and Gold Tribunal - Bangalore
Deccan Granites vs Commissioner Of Central Excise on 15 November, 2002
Equivalent citations: 2003(85)ECC194, 2003(151)ELT582(TRI-BANG)
ORDER S.S. Sekhon, Member (T)
1. This appeal is filed against the Order-in-Original No. 5/98, dated 3-3-1998 passed by the Commissioner of Central Excise, Hyderabad, in terms of which he has demanded duty of Rs. 36,05,245/- under Rule 9(2) of the Central Excise Rules, 1944 read with proviso to Section 11A(1) of the Central Excise Act, 1944 and imposed a penalty of Rs. 3,50,000/- under Rule 209 read with Rules 9(2) and 226 of the Central Excise Rules, 1944. He has also confiscated goods valued at Rs. 14,32,924/- under Rule 209 of the Central Excise Rules, 1944 with an option to redeem them on payment of a fine of Rs. 1,50,000/-.
2.(a) The appellants are a registered 100% EOU engaged in the manufacture of Polished granite slabs falling under Chapter sub-heading 6807 of the Central Excise Tariff Act, 1985. Substantial part of the goods manufactured are exported by the appellants. The appellants are also permitted to sell 5% of their production as rejects in the D.T.A. on payment of appropriate duty.
(b) The officers of the Central Excise Department visited the premises of the appellants on 7-11-1992 and undertook a verification of the stock position of the finished goods and also the goods lying as rejects. After undertaking the verification, they alleged that there was an excess of stock in certain varieties and shortage in respect of certain other varieties. They also recorded statements from the officials of the company. In pursuance to the above enquiries, a show cause notice dated 4-5-1993 was issued proposing to demand duty and imposing penalties. After the appellants submitted their replies to the show cause notice, the impugned order has been passed by the Commissioner confirming the demand of duty and imposing penalty.
3. After hearing both sides and considering the matter it is found :
(a) Demand of duty has been made by invoking Proviso to Section 3 (1) of the Central Excise Act, 1944. The demand has been worked out by applying a rate of Rs. 50/- on the differential quantity in question, to arrive at the value and the rates of customs duty, auxiliary duty have been applied to arrive at the total demand. The case of the Revenue is that a certain unaccounted quantities of polished granite slabs in question had been cleared by the appellants to the Domestic Tariff Area (D.TA.) without applying for any permission and/or obtaining the same from the concerned authorities. Relying on the case law of Kunthal Granites [2001 (132) E.L.T. 214 (T)] and Siv Indus tries [2000 (117) E.L.T. 281 (S.C.) = 2000 (37) RLT 583 (S.C.)] it was contended by the learned Advocate for the appellants that the levy of Central Excise duty under first proviso to the Central Excise Act, 1944 in case of an EOU Section 3 is sui generis, it cannot be equated with the concept of levy as on other goods produced or manufactured in another unit. It was submitted in the case of Siv Industries - 2000 (117) E.L.T. 281 S.C., it has been held after recording the say of UOI that proviso to Section 3(1) would apply only when goods are allowed to be sold in India.
The Circular Nos. 618/9/2002-C.E., dated 13-2-2002 issued by the Central Board of Excise and Customs has also settled the position that in a situation where goods have been cleared without getting the permission from the Development Com missioner i.e. not allowed to be sold, duty in that case, be demanded only on the basis of main Section 3 of the Central Excise Act. In this case, the Department has not made a demand under Section 3 and in any case all goods vide Notification 125/84, dated 26-5-84 shall be exempt from demand of duty for the levy if any under Main Section. It therefore can be concluded that the goods as in this case, for which unquestionably there is no permission to allow the sale in D.T.A., there cannot be any duty. They also rely upon Notification No. 125/84-CE., dt. 26-5-1984. We find a similar view was taken in the case of Nod Agritech Ltd., 2001 (128) E.L.T. 227 by Chennai Bench of this Tribunal.
(c) The appellants have also taken strongly the plea, as submitted by their Manager (Marketing), that the figure in the statements indicating the gross areas of the slabs would indicate only 'gross area' and not the 'subsequent salvage recoverable areas'.
The payments have been received from their buyers only reckoned with 'salvage recoverable area'. The gross areas are being considered for purposes of internal control documents to re duce the unrecoverable waste areas. This position has been confirmed by the statements of the Managing Director of the Company. The appellants contest that it is the trade practice in Trade, even today, known to the department, as is confirmed by a report dated 21-5-2002 of the Jurisdictional Superintendent of Central Excise to the Deputy Commissioner in the case of M/s. Diuyashakthi Granites, made available in page 88 of the pa per book, that when sale of defective granite polish slabs is effected the 'salvageable area' is only reckoned and charged.
Only such 'net area' is considered for accounting purposes. We find that the internal documents showing the gross area, will not necessarily indicate or confirm that excess goods have been cleared without payment of duty. That differential quantity has also been sold to the same customer, cannot be concluded in absence of any evidence brought on record, by department regarding payment of or excess receipts, of such additional amounts. We find there is force in the assertion of the appellants, that the total monetary realisation made by them from the customer for the net quantity even though gross area delivered may be more, the same has to be considered as realisation made for the 'complete area' including the 'unretrievable area' i.e. gross area, on which the duty is now being demanded by the Department. In other words, if the total area of a slab is 100 Sq. ft., and the retrievable area is 20 square feet for which the Appellants charge the customer a price of say Rs. 100/- and if the Department alleges that the differential quantity of 80 square feet has gone to the same customer, in the absence of any evidence by the Department that any extra realisation has been made from the customer, the realisation of Rs. 100/- is to be taken as proceeds for the 100 sq. ft area. In view of the fact that duty on the granites is chargeable on ad valorem basis, the rate of duty has to be applied on such total realisation of proceeds, made by the appellants, which would be Rs. 100/- in this example and on which duty has been paid by the appellants. Consequently, no differential duty would be liable to be paid by the appellants on other non-retrievable or gross area's. To arrive at the above conclusion, reliance in this behalf is placed on the following decisions of the Tribunal.
(a) Reckitt & Colman of India v. CCE, Calcutta reported in 1993 (44) ECR 33, and
(b) Manisha Pharmo Plast P. Ltd., v. CCE, Surat reported in 1999 (108) ELT 273.
And Trade practice evidence brought on record which leads us to conclude that in absence of 'any extra realisations', there is no material or case of concluding clandestine removal of extra quantity of area in this case.
(d) As regards the demand of Rs. 6,41,417/-, this demand according to the Department, is based on the documents representing a date-wise, customer-wise and variety-wise statement of despatches of the goods. The Department alleges that the different quantity has been sent to the customers as indicated in Annexure-VIII while duty has been discharged on lesser quantity. The appellants submit that, the differential quantity only represents the gross area of the same slab, that had been supplied to the customer. In view of the accepted fact that the differential quantity has also been supplied to the same customer and in the absence of any evidence that the customer to have paid any amount, in excess of the sale invoice raised amounts to the appellants or anybody else, the actual realisation made from the customer has to be construed as realisation made for the total quantity delivered. Therefore there would be no further demand of duty as found at (c) above.
(e) As regards the demand of duty of Rs. 8,62,617/-, the basis of this demand is set out in Annexure-VII to the show cause notice. This annexure is based on a document available at Annexure-IV to the show cause notice. According to the Department, the figures indicated in the sheet of paper represents the quantity despatched during the period April, 1991 to June, 1991. The appellants submit that a conclusion of clandestine removal cannot be based on a single document. The mere fact that the title of the document indicates 'local despatch' and that cannot be the sole ground to conclude that the quantity indicated therein has been removed without payment of duty, especially when the writer of the document has not been examined. The identity of the writer had been informed to the officers by Shri Arjun Rao in his statement dated 16-4-1993. A single document written by an employee which is not even examined, cannot be the basis to allege clandestine removal. A number of decisions by the Tribunal, some of which are as follows :-
(1) CCE, Meernt v. Raman Ispat (P) Ltd. - 2000 (121) E.L.T. 46 (2) Gurupreet Rubber Industries v. CCE, Chandigarh, 1996 (82) E.L.T. 347 (3) International Cylinders Private Ltd. v. CCE, Chandigarh,-1999 (112) E.L.T. 584 (4) CCE, Bangalore v. Jindal Aluminium Ltd. - 1998 (29) RLT 183 (5) Kothari Products Ltd. and Ors. v. CCE, Kanpur and CCE, Kanpur v. Kothari Products Ltd. - 1999 (31) RLT 67 (6) Raj Sandeep Co. Gian Singh v. CCE & Customs, Chandigarh -1999 (31) RLT 324 (7) Birla Tyres and Ors. v. CCE, Bhnbaneswar - 2000 (126) E.L.T. 1079 (Tri.) - 1999 (33) RLT 52 (8) Arti Steel Ltd. v. CCE, Chandigarh -1999 (114) E.L.T. 537 (T) = 1999 (35) RLT 162 (9) Amba Cement and Chemicals v. CCE, Allahabad - 2000 (115) E.L.T. 502 (10) Suvarna Polymers Pvt. Ltd. v. CCE, Hyderabad - 2000 (120) E.L.T. 148 (t) - 2000 (38) RLT 891. (11) CCE, Meerat v. Raman ispat Pvt. Ltd. - 2000 (121) E.L.T. 46 (12) CCE, Chandigarh v. Dashmesh Casting (P) Ltd. - 2000 (40) RLT 1077. (13) Deena Paints v. CCE, New Delhi - 2001 (43) RLT 805 (14) Utkal Polyweave Industries (P) Ltd. and Ors v. CCE & C, BBSR-I - 2001 (136) E.L.T. 520 (T) - 2001 (42) RLT 1004 (15) Sharma Chemicals v. CCE, Calcutta-II - 2001 (130) E.L.T. 271 (16) Dulichand Silk Mills (P) Ltd. v. CCE, Hyderabad - 2001 (133) E.L.T. 468 - 2001 (98) ECT 113 (Tribunal) (17) CCE v. Brindavan Beverages (P) Ltd. - 1999 (106) E.L.T. 403 (18) Arunachal Plywood Industries Ltd. v. CCE - 1999 (107) E.L.T. 513 (19) CCE v. Indian Hume Pipe Co. - 2000 (118) E.L.T. 733 (20) MM. Dyeing 6- Finishing v. CCE, Chandigarh - 2002 (139) E.L.T. 143
relied upon by the learned Advocate to induce us to conclude that duty on this account based on this single unexamined document cannot be determined and demanded.
(f) As regards the demand of duty of Rs. 12,12,211/- found short, the basis of this demand is made on comparison to the RG 1 register maintained by the appellants and on annual verification of the quantities physically available which shows a shortage of 36,386.42 sq. ft. and this has been alleged to have been cleared in contravention of provisions of Rules 9(1), 53, 100D, 100E and 226. A reading of Rule 100A of the Central Excise Rules, 1944 indicate that an EOU is not required to maintain a RG 1 register. Therefore, the RG 1 being maintained in this case cannot be a document prescribed by law to indicate any shortage whatsoever. It cannot be used for purposes of any comparisons. No penalty can be imposed under Rule 226. Since provisions of Chapter VIIA under which Rule 173Q falls are not applicable to EOUs covered under Chapter VA of the Central Excise Rules, 1944. When excess/shortages as arrived at based on RG 1 as in this case cannot be upheld, the question of the confiscation under Rule 209 does not arise. As far as shortage is concerned, the alleged quantity represents 5.14% of the total production of the appellants and since for an 100% EOU there is no presumption of an illegal removal in the case of shortage as the EOUs are under physical supervision of the officers. Therefore any such alleged illegal removal has to be proved beyond all reasonable doubts and cannot be merely interpreted, on the basis of alleged shortages which is assumed on comparisons made with RG 1 record which is not required to be maintained. The stock taking appears to have been done on higher estimation basis and it cannot be a ground to alleged clandestine removal. We find no reason to support the Collector's finding that the stock verification was done piece by piece as the Mahazar documents do not hear the same out.
(g) A perusal of the Commissioner's order does not indicate that the plea of limitation was considered by him. It is found that there is no ground taken on limitation in the grounds made out in the appeal paper book. The ground taken before us is that the appellant has not been put on notice for violation of any particular ingredient of proviso to Section 11(A). A copy of the show cause notice is not in the appeal filed. We therefore do not consider to arrive at any findings on this ground.
(h) Since we find on merits no excess area as commercially understood in trade is delivered or is proved to have been removed and there is no evidence if any additional payments, than whatever the customers have paid for the billed usable area, we cannot sustain the demands as made out. As regards the shortages and excesses, the fact that the shortages and excesses have not been established, we find no reason for upholding the confiscation and the demand of any duty on the shortages as worked out.
(i) In view of the fact that we are not upholding any levy of duty or demand of shortages or excesses or quantities removed to have been established. We find no reason to invoke penal clauses of the Central Excise Act, or the Rules 209, 9(2), 226 or to find any goods liable to confiscation. Redemption fine set aside.
4. In view of our findings the order as such is set aside and appeal allowed.