Customs, Excise and Gold Tribunal - Delhi
Man Industries (India) Ltd. And Shri ... vs Cce on 22 December, 2003
Equivalent citations: 2004(92)ECC588, 2004(175)ELT435(TRI-DEL)
JUDGMENT
P.G. Chacko
1. The appellants were engaged in the manufacture of Aluminium profiles, bars & rods, tubes & pipes etc. falling under Chapter 76 of the Schedule to the Central Excise Tariff Act 1985. On 16.8.1996, officers of Central Excise visited their factory, checked the physical stock of finished goods vis-a-vis, the stock recorded in statutory records and seized the goods found unaccounted. They also visited certain other premises of the appellants and also the premises of their dealers. Records relevant to the investigation were resumed from the various premises. Subsequently, on different dates, the officers recorded statements (under Section 14 of the Central Excise Act) of some executives and employees of the appellant-company as also of others. From the documentary and oral evidence gathered by the investigating officers, it appeared to the department that the appellant-company had evaded payment of Central. Excise duty through clandestine removal of certain finished goods and deliberate under valuation of certain other finished goods. Therefore, show-cause notice [SCN] dated 3.3.1999 was issued to M/s Man Industries (India) Limited (appellants in E/2673/2002), the company's Managing Director Shri J.C. Mansukhani (appellant in E/2674/2001) and two other functionaries of the company. The SCN, which invoked the larger period of limitation under the proviso to Section 11A(1) of the Central Excise Act, raised the following demands of duty on the company:
1.
Physical weight of the goods exported was less than the weight (catalogue weight) shown in the export documents. The differential quantity was retained in the factory and cleared clandestinely.
Rs. 1;05,67,090
2. Consumption of raw material in excess of the quantity shown as consumed in the statutory account i.e. Form-IV Register.
The unaccounted finished goods manufactured out of such excess unaccounted raw material were cleared clandestinely.
Rs. 2,99,83,430
3. Removed anodized Aluminium profiles of higher value in the guise of mill finished Aluminium Profile, which had resulted in undervaluation and short-payment of duty.
Rs. 20,860
4. Extra amount collected from customer as 'Die Charges' not included in the assessable value.
Rs. 16,050
5. Finished goods weighing 680.90 kgs. found short of the stock recorded in the RG-1, removed clandestinely.
Rs. 9,703 The notice also proposed penalties on the company under Rule 173Q of the Central Excise Rules, 1944 and Section 11 AC of the Central Excise Act, 1944 and on others under Rule 209A of the said Rules. It also proposed to confiscate land, building, plant, machinery etc. under Rule 173Q of the above Rules. The allegations raised in the SCN were denied and the demands of duty and other proposals therein were contested. The Commissioner of Central Excise, in adjudication of the SCN, confirmed the demands of duty to the extent shown below:
(1) Rs. 64,82,565 out of Rs. 1,05,67,090;
(2) Nil out of Rs. 2,99,83,430;
(3) Rs. 20,860;
(4) Rs. 3,750 out of Rs. 16,050 [Rs. 12,300 having been paid by the company]; (5) Rs. 9,703.
He also held the company liable to pay interest on duty under Section 11AB of the Central Excise Act and also imposed on them penalties of Rs. 40 lakhs and Rs. 25,81,508 under Rule 173Q and Section 11AC respectively. A penalty of Rs. 10 lakhs was imposed on Sh. J.C. Mansukhani also.
2. We have heard both the sides and have carefully considered their submissions.
3.1 The company had cleared goods for export also. The export documents showed the "catalogue weight" of the goods, which was more than the actual (physical) weight recorded in RG-1 register. Consequently, the weight of goods actually exported was less than what was shown in the export documents viz. AR4s, invoices etc. The SCN alleged that the differential quantity of goods had not been accounted and the same had been clandestinely cleared without payment of duty during the period, February 1994 to January 1999. This allegation was also based on the finding that the "gate register" and other records seized from the factory premises had shown that goods had been cleared without invoice and without payment of duty. The demand of Rs. 1,05.67,090 was raised on a total quantity of 641.145 MTs of goods which was allegedly cleared in the above manner during the above period, corresponding to which the total quantity of exports as noted by the Commissioner was 6507.073 MTs. The adjudicating authority has found that, out of this quantity of total exports, the exports made to M/s Man Intertrade Co. (UAE) are not to be taken into account for demanding duty and accordingly it has requantified the demand as Rs. 64,82,565. That authority has worked out this demand on the basis of the appellants' own records and statements. For instance, a letter issued by Sh. U.D. Selvan, Senior Engineer of the company, to their Indore office showed the catalogue weight of certain Aluminium Sections as 21986 kgs. and its physical weight as 21404.2 kgs. Shri Selvan, in his statement, confirmed this fact. Some official correspondence between functionaries of the company also indicated that the catalogue weight of export goods was 5-10% more than the actual weight. Shri Deepak Das, Senior Manager (Tool Room), who was confronted with the letters, admitted that the catalogue weight (despatch weight) was always more than the physical weight. Shri Prahalad Das Sarda, Excise Officer & Authorised Signatory, stated that it was his function to make entries in RG-1 register on the basis of the Packing Department's reports which were prepared on the basis of actual weight. But he could not explain as to how the differential quantity of goods was disposed of. He further stated that he had only acted as per the directions of the Managing Director and the latter alone could offer any explanation. Shri J.C. Mansukhani, in his statement, admitted that, in some cases of exports, the catalogue weight was higher than the physical weight and the differential quantity of goods remained in the factory. However, he could not say as to how this quantity was disposed of. In the aforesaid example, the quantity of Sections exported under GP2 No. 58 dated 29.12.93 was shown as 21986 kgs (catalogue weight) whereas the actual weight was only 21404.2 kgs. The differential quantity (581.8 kgs.) was not actually cleared and exported, though, in RG-1 it was shown as debited for clearance for export.
Shri Mansukhani, in his statement, conceded this factual position but could not say as to how the 581.8 kgs. of Sections remaining in the factory were disposed of. The Consultant for the appellants submitted before us that J.C. Mansukhani and Deepak Das had been wrongly quoted in the SCN and the Commissioner's order. He added that the allegation of clandestine removal of goods had not been proved by the department. Yet another submission made by the Consultant was that the difference in weight of the goods was less than 5% which, according to him, was too negligible to be taken into account. The DR submitted that the demand of duty was based only on the differential quantity admitted by the appellants and hence was irresistible. We are unable to accept the Consultant's arguments as we have noted that the demand of duty of Rs. 64,82,565 is based on the unrebutted documentary evidence gathered from the appellants' premises as well as the unretracted statements of the Managing Director and other responsible functionaries of the company.
We have perused these statements and find that the adjudicating authority has correctly quoted and appreciated the same. The statements were never retracted, nor was any of the documents disowned. The result was that the differential quantity of goods, i.e. the difference between the actual (physical) weight and the weight shown to have been cleared for export, was proved to have been removed from the factory without invoices and without payment of duty. The differential quantity was admitted but its accountal and clearance in terms of the legal provisions were not shown. (In view of the admission of the differential quantity by the company authorities, it was not necessary for the adjudicating authority to allow them to cross-examine any officer of the department). The department's allegation of clandestine removal of the said quantity stood proved. The appellants have stated that the total exports quantity noted by the Commissioner (6507.073 MTs) is not correct and that the correct figure must be less by 95.614 MTs and, on this basis, the demand of duty should be reduced. We are unable to accept this claim as we find that the Commissioner has noted the above quantity from a report of the Deputy Commissioner of Central Excise, Division II, Indore, which has not been called in question in these appeals. Yet another ground of challenge to the demand of duty is that many of the exports taken into account by the Commissioner had taken place prior to the period of demand. This, again, cannot be accepted as J.C. Mansukhani admitted that the differential quantities remained in the factory. Such quantities which accumulated from past exports could well be removed during the period of demand. We uphold the above demand of duty for the reasons recorded.
3.2 The demand of Rs. 20,860 was raised on the differential value of the "anodized" products found to have been cleared by the company to some customers at lower prices applicable to mill-finished (non-anodized) products. It resulted from a scrutiny of the "work order register" and the relevant invoices coupled with the statements of J.C. Mansukhani and P.D. Sarda, both of whom in their respective statements admitted that the goods had been manufactured in terms of the work orders (which were for "anodized" products) but described as "mill finished" in the invoices and cleared at lower prices applicable to mill-finished (non-anodized) goods. The Commissioner has rightly upheld the demand on the basis of clear evidence which was not rebutted at investigative or adjudicative stage. In the present appeals, we have not found any valid ground of challenge against the demand of duty on the added value of the goods.
3.3 A demand of Rs. 16,050 has also been confirmed against the company by the adjudicating authority. This demand of duty is on the value of Rs. 1,07,000 collected by the Company from their customers towards "die research & development charges". It is noted that the payments of Rs. 10,050 and Rs. 2250 (totalling to Rs. 12,300) made by the company towards this element of duty of excise, through debits in Modvat account in March and May 1998, have been appropriated by the adjudicating authority towards the demand and the outstanding demand against the assessee is only of Rs. 3750. It, however, appears that, while stating the total quantum of duty demand in the operative part of his order, the Commissioner has not excluded the above payments of duty. Had the above payments been excluded, the total demand of duty would have been Rs. 65,16,878 instead of Rs. 65,29,178 mentioned in the operative part of the impugned order. With reference to the above demand of Rs. 16,050, the appellants have raised yet another grievance that an amount of Rs. 25,000 which is claimed to have been credited to customers' accounts has not been reckoned by the Commissioner in determining the quantum of duty on "die charges". We find that the liability of the appellants to pay duty on the "die research & development charges" collected from their customers is not in dispute. The dispute is only with regard to the quantum of "die charges" on which duty of excise can be demanded. It is claimed by the appellants that they had credited an amount of Rs. 25,000 in the accounts of customers and it is contended to the effect that this amount should have been excluded from the quantum of "die charges" for the purpose of demanding duty. We are of the view that, if any part of the aforesaid "die charges" of Rs. 1,07,000 was duly credited back to customer's accounts, the dutiable quantum of "die charges" should stand reduced to that extent. It is for the adjudicating authority to examine this aspect.
3.4 The demand of Rs. 9703 confirmed by the adjudicating authority against the company is on a quantity of 680.90 kgs. of aluminium sections/profiles, which was found short in their factory on 16.8.96 by Central Excise officers. The SCN alleged that this quantity of goods had been clandestinely removed without payment of duty amounting to Rs. 9703. The party contested this allegation by submitting that there could be no shortage as some profiles had been accounted alongwith some other finished goods which were found as excess. This very plea has been repeated in the present appeals. We find that the adjudicating authority has rightly rejected the plea by recording a finding that the party had not shown any mistake in physical verification of stock of the goods. The demand of Rs. 9703, therefore, requires to be sustained.
3.5 The appellants have no case that any of the duty demands is time-barred.
4.1 The penalty imposed under Section 11AC has been challenged on the ground that no such penalty could be imposed in relation to duty demanded for any period prior to 28.9.96 (date on which Section 11AC came into force). A similar contention has been raised in respect of the interest sought to be charged under Section 11AB on the duty recoverable for any period prior to the said date. It has also been contended that, even otherwise, the quantum of penalty imposed on the company is too high to match the gravity of offence found against them. The Commissioner has imposed a penalty of Rs. 25,81,508 on the company under Section 11AC after noting that, out of the total demand of duty confirmed against them, Rs. 25,81,508 is the duty for the period from 28.9.96. But, as for interest on duty, his order is for a levy on the entire amount of duty demanded for the entire period notwithstanding the fact that Section 11AB was not in force prior to 28.9.96. We set aside this demand of interest and hold that no interest can be charged under Section 11AB on duty for any period prior to 28.9.96. Penalty equal to duty, under Section 11AC, is not mandatory but it is the maximum limit prescribed by Parliament, which means, it is open to the adjudicating authority to impose a lesser penalty under the said provision of law having regard to the facts and circumstances of the particular case. In these appeals, the invocation of the proviso to Section 11A (1) of the Act (to demand duty for period beyond the normal period of limitation) is not under challenge. The grounds for penalty under Section 11AC are no different from those for invoking the larger period of limitation under the above proviso. Hence, imposition of a penalty, in this case, under Section 11AC cannot be faulted. But it must not be harsh as in the Commissioner's order. Taking all circumstances and aspects of the case into account, we reduce the quantum of penalty under Section 11AC to Rs. ten lakhs.
4.2 A separate penalty of Rs. 40 lakhs has also been imposed on the company. We find that this penalty has been imposed for the reasons stated in para 35 of the impugned order, which reads thus "The Noticee No. 1 have evaded Central Excise duty by suppressing and mis-declaring the facts with intent to evade payment of duty and since demand confirmed for recovery also includes the period when Section 11 AC came into force, the Noticee No. 1 is. therefore, liable for penal action under Rule 173Q of the Central Excise Rules. 1944". We find that the reasons so stated for holding the company liable for penalty under Rule 173Q are not relevant to the rule. The penalty of Rs. 40 lakhs imposed on the company under Rule 173Q on irrelevant grounds requires to be set aside.
5. The adjudicating authority has also imposed a penalty of Rs. 10 lakhs on J.C. Mansukhani, Managing Director of the company, under Rule 209A of the Central Excise Rules, 1944. The reasons for this penalty are seen to have been stated in para 36 of the impugned order. It has been stated that Mansukhani was aware of, and had acted in furtherance of, all activities of the company and had dealt with the goods which, he had reason to believe, were liable to confiscation and, therefore, he rendered himself liable for penalty under Rule 209A. The appellant has challenged this penalty on the strength of this Tribunal's decisions in the cases of Cipta Coated Steels Ltd. v. CCE, 1999 (113) ELT 490 and Anil Kumar Saxena v. CCE, 2001 (129) ELT 351. We find that, in the present case, no positive evidence of personal knowledge or belief that any goods were liable to confiscation was found against the appellant. There is no finding by the Commissioner that such knowledge or belief is inferable or discernible from the statement of Mansukhani or any document. The fact that the appellant was the Managing Director of the company claiming to be aware of all activities of the company would not per se suffice to hold him liable for penalty under Rule 209 A. There should be positive evidence of mens rea against a person for holding him so liable because both 'knowledge' and 'belief are mental attributes. Such evidence is missing in this case. The department has not succeeded in discharging their burden of proof under Rule 209A. Therefore, following the ratio of Cipta Coated Steels (supra) and Anil Kumar Saxena (supra), we set aside the penalty imposed on J.C. Mansukhani.
6. In the result, we pass the following order:
A(i) The duty demands of Rs. 64,82,565, Rs. 20,860 and Rs. 9703 are sustained. The demand of Rs. 16050 is set aside and the Commissioner is directed to requantify the demand in terms of para (3.3) of this order;
(ii) Interest is payable under Section 11AB on duty payable for the period from 28.9.96 only;
(iii) Penalty imposed under Section 11AC is reduced to Rs. Ten Lakhs;
(iv) Penalty imposed under Rule 173Q is set aside;
(v) Appellant-company shall be given a reasonable opportunity of being heard in the duty requantification proceedings and shall pay the duty as per Clause (i) above, alongwith interest as per Clause (ii) above;
(vi) Appeal No. 2673 is disposed of in the above terms.
(B) Appeal No. 2674 is allowed.