Custom, Excise & Service Tax Tribunal
M/S. Lawn Textile Mills Pvt. Ltd vs Commissioner Of Central Excise, Salem on 23 June, 2016
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL, SOUTH ZONAL BENCH, CHENNAI Appeal Nos.E/1007 /2004 & E/1006/2004 (Arising out of Order-in-Appeal No. 238/2004-CE (SLM) dated 30.04.2004 passed by the Commissioner of Central Excise (Appeals) Salem) 1. M/s. Lawn Textile Mills Pvt. Ltd. Appellants 2. C. Sundaramurthy -Vs- Commissioner of Central Excise, Salem Respondent
Appearance :
Shri M.A. Mudimannan, Advocate , For the Appellant Shri L.Paneerselvam, A.C (A.R) For the Respondent CORAM:
Honble Shri P.K.Choudhary, Judicial Member Date of Hearing : 24.05.2016 Date of Pronouncement : 23.06.2016 FINAL ORDER No.41029-41030/2016 These appeals have been preferred by the appellant against the Impugned Order-in-Appeal dt. 30.04.2004 passed by the Commissioner of Central Excise (Appeals), Salem vide which he had confirmed the Order in Original dt. 27.09.2002 of the Joint Commissioner of Central Excise, Coimbatore.
2. The brief facts of the case are that the appellant is engaged in the manufacture of Cotton yarn falling under Chapter 52 of schedule of CETA,1985. The officers of the department visited the appellants unit on 18.09.1999 and carried out investigation and also verified the stock of raw materials and finished goods and recovered the documents and recorded the statements. On the basis of investigation and statements recorded from various persons, a SCN dated.10.03.2000 was issued to the appellants alleging that they had clandestinely manufactured and removed the final products without payment of duty. The Adjudicating Authority in his OIO Sl.No.162/2002 dated 27.09.2002 confirmed the demand of Rs. 9,28,805/- being the excise duty involved on the said cotton yarn for the period from 01.01.1999 to 17.09.1999 and also ordered for confiscation of 2295 kgs of 30s Cotton yarn (Cones) for the value of Rs. 1,97,370/- and imposed redemption fine apart from interest and imposed penalties on the appellant-company [Appellant No.1] and imposed a penalty of Rs.10,000/- on Shri. C. Sundaramurthy [appellant No.2], the Commission agent. The Commissioner (Appeals) has affirmed that order with modification after considering the cum-duty-benefit and recalculated the duty amount as Rs. 8,52,787/- and accordingly imposed interest and penalty. Being aggrieved by the order of the Ld. Commissioner (Appeals), the appellants are in appeal before this Tribunal.
3. The Ld. Counsel Shri. M. A. Mudimannan, Advocate representing the appellants reiterated the contentions raised in the grounds of appeal, and filed the written submissions on the following various grounds relying on the various decisions in support thereof.
3.1. The Ld. Counsel submits that the statement dt. 18.09.1999 of the Factory Manager and statement dt. 30.09.1999 of the Managing Director was obtained under coercion and both the statements were retracted immediately on 20.09.1999 and 01.10.1999 respectively. He drew my attention to findings in the orders that these retractions were acknowledged by both the Original Authority and the Lower Appellate Authority and referred the retraction of the statements in Page 17 and Para 26 of the Order in Original and Page 7 & 8 , Para 5.6.1 of the Order in Appeal. He relied on the decision of the Tribunal in the case of Rattan Steel Works Vs. CCE, Chennai 2009(236) ELT 152 (Tri. Chennai.) to support this contention.
3.2. The Ld. Counsel also submits that the appellant had requested for cross examination of third party statement, Mahazar drawn from the officers of the respondent and witnesses, but it was not considered by both the original authority and the Lower Appellate Authority. Though this issue was referred in Page 16, Para 25 of the Order in Original and it was referred in Page.9 , Para 5.7.1 of the Order in Appeal. Non-consideration of the request of the Appellant is in violation of principles of natural justice. He relied on the decisions of Tribunals in the case of Syed Saleem Vs CC, Bangalore - 2001 (128) ELT 276 (Tri. Chennai.) & the decision of the Tribunal in the case of Braco Electricals Vs CCE, Mumbai - 2004 (167) ELT 329 (Tri. Mum).
3.3. He further submits that the investigating officers finding of excess of finished goods and shortage of raw materials in stock was merely by visual examination and not based upon any actual weightment basis. The entire demand based on visual examination for shortage and excess stock of goods without any actual weighment is not sustainable, He relied on decision of the Tribunal in the case of Malwa Cotton Spinning Mills Ltd Vs- CCE, Chandigarh - 2003 (155) ELT 161 (Tri.-Del.) wherein the Bench has observed that without actual weighment, neither the duty demand could be confirmed nor the penalty could be imposed on the assessee. He also relied upon the Tribunal's decision in the case of Dhebar Steel Rerollers s CCE Raipur - 2002 (142) ELT 194 (Tri-Del.) on this issue.
3.4. He also explained in detail about the various discrepancies in quantification of demand by the authorities. In particular, for a sample he has produced the copy of RG1 for the period 01.09.1999 to 15.09.1999 and shown the differences of about 9,000 kgs between the Show cause notice and RG-1 Register. The said discrepancies clearly would prove that the quantification of the alleged clandestine removal has been arrived without properly going into the records and documents relied upon but has been done is haste and arbitrarily.
3.5. He vehemently argued that the entire demand is based only upon the statements which were retracted immediately and he further stated that the entire demand is based upon the private diary maintained by the Factory Manager and his statement but it was retracted. He further argued that other than the retracted statements, the allegation was not corroborated with any other tangible evidences like Transportation, supplier details, purchaser details, transporter details , power consumption etc., Particularly, in clandestine removal cases the onus is on the department only to prove beyond all reasonable doubts with other corroborative evidences.
3.6 He submits that even if private records are discovered during raid, it is necessary to have some positive evidence of clandestine removal. To support his contention, he relied upon the following case laws :-
(i) CCE Madurai Vs Madras Suspensions Ltd.
2003 (156) ELT 807 (Tri.-Che)
(ii) Monarch (I) Pvt. Ltd. Vs CCE Kolkata
2006 (197) ELT 396 (Tri.-Kol)
(iii) CCE Chandigarh Vs Laxmi Engineering Works
2010 (254) ELT 205 (P & H)
(iv) CCE Coimbatore Vs Sangamitra Cotton Mills (P)Ltd. 2004 (163) ELT 472 (Tri.-Che) He also relied on the latest decision of this Bench of the Tribunal in the case of A.R. Shanmugasundaram - Vs CCE, Salem in 2016 (333) ELT 158 (Tri. Chennai.) and drew my attention to the findings of the Tribunal at paras 16 & 17 holding that mere statements and private records cannot be relied upon for establishing the clandestine removal without material evidence corroborating the statements. Ld. counsel submits that this case law would squarely apply to the appellants case. He also referred to the Supreme Court's judgement of CCE, Surat Vs Swati Polyester reported in 2015(321) ELT A217 (SC) wherein the Hon'ble Apex court dismissed the SLP filed by Revenue against Hon'ble Gujarat High Court judgement reported in 2015 (321) E.L.T. 423 (Guj.) which upheld Tribunals order involving demand and clandestine production and removal and holding that department failed to establish by any substantive evidence, unaccounted production and clandestine removal of goods and the demand was based only on assumptions, retracted statements and also barred by limitation .
4. The Ld. AR on behalf of the Revenue reiterated the findings of OIO as well as Order-in-Appeal. He explained the sequences of statements and argued that it has been corroborated with the shortages noticed in the account registers. He further stated that parallel set of invoices were found at the time of investigation. He also stated that the retracted statements and cross examination was clearly dealt by the lower authorities. The lower authorities have confirmed the demand based on the clear findings in the form of statements, records and seizure, which was clandestinely removed and un accounted. He further referred to the judgement of Alagappa Cements Pvt. Ltd -Vs- CEGAT Chennai reported in 2010 (260) ELT 511 (Mad).
5. In a rejoinder, the Ld counsel for the appellant advanced his arguments that the case law referred to by the AR will not be applicable to the present case, since in the referred case, the statements were not retracted, there was no denial of cross examination, no violation of principles of natural justice and there is also no dispute in quantification of demand, no other corroborated/tangible/positive evidences to prove the clandestine removal of the finished products.
6. Heard both sides and perused the records and examined the written submission & citations submitted by the appellant as well as the Ld. AR.
7. The issue for consideration in the present case is as to whether the appellant herein had indulged in the manufacture of dutiable cotton yarn in cones without accounting the same in the statutory records and clearing the said cotton yarn in cones clandestinely without payment of duty and without recording the said transactions in the statutory records during the period from 1.1.1999 to 17.9.1999. I find that in the instant case the lower authorities have determined the duty liability of cotton yarn manufactured and cleared illicitly without payment of duty based on recovery of private records such as diaries, daily production reports containing the data of annual production as against the production shown by them in the statutory register. The authorities have confirmed the demand for the reason that the appellant had manufactured and cleared cotton yarn clandestinely without accounting for the same in the statutory records and thereby not following the procedures elaborately set out in law. In the instant case, the appellant has recorded the productions in the private records and it is not known as to why the private records are being used to record their final production. This is not just a case where there is a demand arisen on account of difference between the private records and the RG.1 registers but as per the record that there has also been corroboration with the shortages noticed in the raw material account. In the instant case, there have been confessional statements although there has been a retraction of the said statements. It is to be noted that retractions, as rightly observed by the lower authorities were merely an after-thought and if the case of the department is just based on the retracted statements, the appellant could possibly have a reasonable case to contest but in the instant case, there have been confessional statements, private registers and those private registers also substantially matched with the shortages. The Ld. Commissioner (Appeals) has also observed that retractions given by the party were not sent by the appellant by the Registered Post but only under Certificate of Posting. The Honble Supreme Court has held that the Certificate of Posting is not a valid mode of service. This very mode raises suspicion as to whether at all the said retractions were sent to the department.
8. The next grievance of the appellant is that their request for cross-examination were not considered by the lower authorities. The observation by the Commissioner (Appeals) to the effect that the material evidences in the form of seized goods, the evidences for non-accountal of raw materials stand further corroborated with the Managers Diary cannot be faulted with for the reason that if cross-examination is granted, the same would serve no purpose as the facts in the instant case are very much clear and the denial of cross-examination would not result in the violation of principles of natural justice in the facts of the present case.
9. With regard to case laws cited by the appellant, I find that those are cases where the demand for clandestine removal was made based on assumptions and presumptions. In the instant case, however, I find that the department has raised the demand based on private registers coupled with confessional statements along with materials which were wholly manufactured and kept ready for dispatch. All these factors cumulatively would show that the conclusion arrived at by the authorities cannot be faulted with. While it is true that the burden to prove clandestine removal is on the department, it cannot be expected of the department to prove the same with mathematical accuracy and precision as clandestine removal is a suruptious activity and in such type of cases, direct evidence would very rarely be forthcoming which would prove a case beyond all reasonable doubts. As stated above, in the facts of the present case, the clandestine manufacture and removal stands proved.
10. Accordingly, I find that there is no reason to interfere with the order passed by Commissioner (Appeals). Accordingly the appeal is dismissed as devoid of merit.
11. With regard to appeal of Shri C.Sundaramurthy, the appellant who has filed appeal for waiver of penalty of Rs.10,000/- imposed on him under Rule 209A of the erstwhile Central Excise Rules, 1994. It would be appropriate to read Rule 209A as it existed during the relevant period reads as under :-
"Any person who acquires possession of, or is in any way concerned in transporting, removing, depositing, keeping, concealing, selling or purchasing, or in any other manner deals with, any excisable goods which he knows or has reason to believe are liable to confiscation under the Act or these rules, shall be liable to a penalty not exceeding three times of value of such goods or five thousand rupees, whichever is greater."
From the above, the said rule makes it clear that the said penalty can be imposed only when the person has acquired the excisable goods or concerned himself in transporting or removing or depositing or keeping or concealing or selling or purchasing or in any other manner dealing in the excisable goods which he knew or had reason to believe were liable for confiscation under the C.Ex. Act or the Central Excise Rules. No such allegation is made in the SCN to the effect that appellant did any of the above said acts knowingly or he had reason to believe that the Cotton yarn he alleged to have purchased were liable for confiscation. On a perusal of the OIO and even the SCN merely alleges that Shri C. Sundaramurthy had contravened the provisions of Rule 209A of the Central Excise Rules, 1944 inasmuch as he has purchased 50 bags of Cotton Yarn in Cones without invoices from M/s.Lawn Textiles (P) Ltd. and sold the same without raising invoices which is not a good ground for sustaining the penalty. To substantiate this point, I place reliance on the decision of this Bench of the Tribunal in the case of Farwood Industries (P) Ltd. Vs CCE Chennai 2005 (185) ELT 401 (Tri.-Chennai). The relevant paragraph of the Tribunal's order is extracted below :-
6.?The Managing Directors appeal is against penalty under Rule 209A. For such a penalty, there should be a finding that the person concerned acquired possession of, or otherwise physically dealt with, excisable goods with the knowledge or belief that such goods were liable to confiscation. Such a finding against the appellant is missing in this case. Therefore, the penalty on the Managing Director under Rule 209A is vacated. Appeal No. E/3192/1998 stands allowed.
12. Accordingly penalty of Rs.10,000/- imposed on Shri C.Sundaramurthy is hereby set aside.
In view of foregoing discussion and findings, the appeal No.E/1007/2004 filed by M/s.Lawn Textile Mills Pvt. Ltd. is dismissed. Appeal No.E/1006/2004 filed by Shri C. Sundaramurthy is allowed.
(Order pronounced in open court on 23.06.2016) (P.K.CHOUDHARY) JUDICIAL MEMBER gs 1