Custom, Excise & Service Tax Tribunal
Giriraj Irosteel Company Pvt Ltd vs Meerut-Ii on 12 September, 2019
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
ALLAHABAD
REGIONAL BENCH - COURT No. I
Excise Appeal Nos.50740, 50749 & 50750 of 2015-[DB]
Excise Appeal No. 50749 of 2015
(Arising out of Order-in-Original No.38/Commissioner/Hapur/2014-15 dated
26/11/2014 passed by Commissioner of Customs, Central Excise & Service
Tax, Hapur)
M/s Giriraj Irosteel Company Pvt. Ltd., .....Appellant
(17th K.M. Stone, Village-Lakhan, Delhi-Hapur Road, Hapur)
VERSUS
Commissioner of Central Excise, ....Respondent
(Meerut-II) APPEARANCE:
Ms Rinki Arora, Advocate & Ms Stuti Saggi, Advocate for the Appellant Shri Rajeev Ranjan, Addition Commissioner Authorised Representative for the Respondent WITH Excise Appeal No.50740 of 2015 (Arising out of Order-in-Original No.38/Commissioner/Hapur/2014-15 dated 26/11/2014 passed by Commissioner of Customs, Central Excise & Service Tax, Hapur) Shri Sunil Kumar Agarwal, .....Appellant (B-31B, Sushant Lok-I, Phase-I, Gurgaon-122002) VERSUS Commissioner of Central Excise, ....Respondent (Meerut-II) APPEARANCE:
Ms Surabhi Sinha, Advocate for the Appellant Shri Rajeev Ranjan, Addition Commissioner, Authorised Representative for the Respondent AND Excise Appeal No.50750 of 2015 (Arising out of Order-in-Original No.38/Commissioner/Hapur/2014-15 dated 26/11/2014 passed by Commissioner of Customs, Central Excise & Service Tax, Hapur) Shri Purushottam Rathi, .....Appellant Excise Appeal Nos.50740, 50749 &
2 50750 of 2015-[DB] (Director of M/s Giriraj Irosteel Company Pvt. Ltd.) VERSUS Commissioner of Central Excise, ....Respondent (Meerut-II) APPEARANCE:
Ms Rinki Arora, Advocate & Ms Stuti Saggi, Advocate for the Appellant Shri Rajeev Ranjan, Addition Commissioner Authorised Representative for the Respondent CORAM: HON'BLE SMT. ARCHANA WADHWA, MEMBER (JUDICIAL) HON'BLE MR. ANIL G. SHAKKARWAR, MEMBER (TECHNICAL) FINAL ORDER NOS-71746-71748 / 2019 DATE OF HEARING : 01 August, 2019 DATE OF PRONOUNCEMENT : 12 September, 2019 PER: ARCHANA WADHWA Above stated three appeals are taken together for decision, since all of them are arising out of common impugned Order-in-Original No.38/Commissioner/Hapur/2014-15 dated 26/11/2014 passed by Commissioner of Customs, Central Excise & Service Tax, Hapur.
2. Brief facts of the case are that M/s Giriraj Irosteel Company Pvt. Ltd. (hereinafter referred to as 'appellant') were engaged in the manufacture of MS Bars and MS Ingots. They were registered with Central Excise and were paying Central Excise duty and were also filing ER-1 returns regularly. Appellant entered into an agreement with M/s Kamdhenu Ispat Ltd.
(hereinafter referred to as 'M/s KIL') on 07.05.2007 and as per Excise Appeal Nos.50740, 50749 & 3 50750 of 2015-[DB] the said agreement appellant was entitled to use trademark 'Kamdhenu' on the goods manufactured by the appellant. In lieu of use of said trademark, appellant were required to pay specified amount per MT along with applicable service tax on the same to M/s KIL after the end of month on the basis of total quantity of goods manufactured by them for which such trademark was used. On 12.11.2008 several premises belonging to M/s KIL were searched by the officers of DGCEI. One of the premises searched by them was at J-1200, Palam Vihar, Gurgaon. At the said premises certain Pen-drives, Computers and Laptops were recovered by the officers. The said recovered electronic devices were got examined through Government Examiner of questioned documents. On the basis of data retrieved by the Government Examiner of questioned documents, the officers of Central Excise Intelligence came to know that said data also had reversed the royalty charges recovered by M/s KIL from the franchisee users including the present appellant. Therefore, Officers of Central Intelligence initiated investigation in respect of the appellant. The manufacturing unit of the appellant was visited by the officers on 05.05.2012. At the time of visit statements of Shri Jagdish Prasad Jindal, Manager and Shri Deepak Maheswari, Accountant were recorded. In his statement dated 05.05.2012 Shri Jagdish Prasad Jindal, Manager stated that they used the brand 'Kamdhenu' since 2007-08 and paid royalty @ Rs.200 per MT after the end of the month and the payments were made through cheques and no payment was aware made in cash. In Excise Appeal Nos.50740, 50749 & 4 50750 of 2015-[DB] respect of the difference between the details of royalty payment provided by him and available in the retrieved data, he informed that he had no knowledge about the same and stated that the appellant had paid royalty and service charge as per the chart provided by him which tallied with their ledger and bills raised by M/s KIL. In his statement dated 05.05.2012 Shri Deepak Maheswari, Accountant stated that the payments to M/s KIL were made through bank only and no cash payment was ever made in respect of royalty. On the basis of difference between royalty payments reflected in the books of account of appellant and those in the retrieved statement, it appeared to revenue that appellant had paid royalty both through cheque and cash and total royalty paid if calculated would resulted in more quantity manufactured by the appellant than reflected in ER-1 return for the months of April, 2008 to September, 2008. Therefore, through show cause notice dated 03.05.2013 a demand of Central Excise duty of around Rs.5.5 crores was raised against the appellant with proposal to impose penalties on the other two appellants. The proposal for imposition of penalty on the other two appellants was through invocation of Rule 26 of Central Excise Rules, 2002. On contest, the said show cause notice was adjudicated through the impugned Order-in-Original wherein the Original Adjudicating Authority has confirmed the demand of Central Excise duty amounting to Rs.5,58,89,762/- and has imposed equal penalty on the appellant. Further, under the provisions of Rule 26 of Central Excise Rules, 2002 he imposed penalty of Rs.50 lakhs on Shri Purushottam Rathi, Excise Appeal Nos.50740, 50749 & 5 50750 of 2015-[DB] Director of the appellant and the other appellant in the present case and a penalty of Rs.25 lakhs was imposed on Shri Suneel Kumar Agarwal, Director of M/s KIL. Aggrieved by the said order, all the three appellants are before this Tribunal.
3. Heard Ms Rinkki Arora and Ms Stuti Saggi both Advocates appearing on behalf of M/s Giriraj Irosteel Company Pvt. Ltd. and Shri Purushottam Rathi and Ms Sugabhi Sinha on behalf of Shri Suneel Kumar Agarwal. Ms Rinki Arora has submitted that the similar matter in respect of M/s Advance Impex Pvt. Ltd. was decided by this Tribunal through Final Order dated 15.11.2018 and the same is distinguishable from the present matter. In the said matter of M/s Advance Impex Pvt. Ltd. the merits were not contested and this Tribunal had observed that the appellant had not contested the aspects of manufacturer such as consumption of raw material, consumption of electricity, transport of goods and availability of customers to whom such goods were cleared and therefore, M/s Advance Impex Pvt. Ltd. did not make out a case for inference. However, in the present case the appellant is contesting on the merit as well as time bar and therefore, the present case is distinguishable as compared to the case of M/s Advance Impex. She has further submitted that on visit by officers to the manufacturing facility of the appellant on 01.03.2011 and 05.05.2010 no discrepancy was noticed and through the statement dated 05.05.2010 both Shri Jagdish Prasad, Manager and Shri Deepak Maheswari, Accountant clearly stated that during the period from April, 2008 to September, 2008 payments were made to M/s KIL only through cheques and Excise Appeal Nos.50740, 50749 & 6 50750 of 2015-[DB] no cash payments were made and the payments made through cheques tallied with the books of account and therefore, the demand raised on the basis of third party evidence were without any corroboration and therefore, the same is not sustainable. She further submitted that there is no evidence adduced by the department to show that the appellant had received unaccounted raw material or consumed more electricity to produced and cleared the alleged huge quantity of impugned goods as mentioned in para no.19 of show cause notice. Therefore, in absence of any clinching evidence against the appellant demand of duty is not sustainable and that in the said show cause notice there is no whisper of any inquiry made by the department regarding the alleged production and sale of impugned branded goods and realization of sale proceeds thereof. Further, no customer has been identified to whom the alleged quantity of goods have been sold. She further relied on the ruling by Hon'ble Allahabad High Court in the case of M/s Continental Cement Company Vs Union of India reported at 2014 (309)ELT 411 (All.) and submitted that as held by Hon'ble Allahabad High Court in the said case in the absence of such evidences the clandestine manufacture cannot be established. She has further submitted that the records of M/s KIL were resumed on 12.11.2008 whereas the show cause notice was issued to the appellant on 02.05.2013 and therefore, the present show cause notice is barred by limitation particularly when ER-1 returns were filed in time and the information submitted in the said ER-1 returns was not disputed by Revenue during relevant time.
Excise Appeal Nos.50740, 50749 & 7 50750 of 2015-[DB]
4. Ms Surbhi Sinha has submitted that Shri Suneel Kumar Agarwal was director of M/s KIL and he has been penalized in the present proceedings for helping the appellant to evade payment of Central Excise duty. She submitted that since the clandestine manufacture is not established the question of helping to evade Central Excise duty does not arise and therefore, the penalty imposed on Shri Suneel Kumar Agarwal disserves to be set aside.
5. Heard the learned Addition Commissioner Shri Rajeev Ranjan Authorised Representative appearing on behalf of revenue. He has supported the impugned order.
6. Having considered the submissions from both the sides and on perusal of record, we note that fundamental argument is on account of absence of any evidence about the alleged manufacture of goods on which Central Excise duty is demanded. Learned Counsel for the appellant has submitted that there was no inquiry made by Revenue regarding the alleged production and sale of the goods and realization of sale proceed thereof and non-identification of customers and there was absence of any evidence about clandestine removal. The learned Counsel also relied on the decision by Hon'ble Allahabad High Court in the case of M/s Continental Cement Company Vs Union of India (supra). Learned Counsel has also referred to para no.19 of the show cause notice. On perusal of para no.17 to para no.20 of the said show cause notice, it is clear that on the basis of information retrieved by Government Examiner of Questioned Excise Appeal Nos.50740, 50749 & 8 50750 of 2015-[DB] Documents and on the basis of royalty charges paid by the appellant as reflected in their books of account, it appeared to revenue that the royalty payment as reflected by retrieved data was more than actually reflected in the books of appellant. Therefore, on the basis of alleged excess payment of royalty charges, revenue has calculated the quantity of goods on which such royalty charges were paid and compared the said quantity with the quantity reflected in the records of the appellant and on the balanced quantity demanded Central Excise duty. For demand of such Central Excise duty, revenue has not produced any evidence about the excess production of Final product nor produced any evidence in respect of procurement of excess raw material. There is no evidence on record about the dispatch of excess quantity of goods through the transporters. Further, customers were also not identified and the consumption of power was also not taken into consideration. We note that Hon'ble Allahabad High Court in the case of Continental Cement Co. (supra) in para 12 & 13 has held as follows:-
"12. Further, unless there is clinching evidence of the nature of purchase of raw materials, use of electricity, sale of final products, clandestine removals, the mode and flow back of funds, demands cannot be confirmed solely on the basis of presumptions and assumptions. Clandestine removal is a serious charge against the manufacturer, which is required to be discharged by the Revenue by production of sufficient and tangible evidence. On careful examination, it is found that with regard to alleged removals, the department has not investigated the following aspects :
(i) To find out the excess production details.
(ii) To find out whether the excess raw materials have been purchased.
Excise Appeal Nos.50740, 50749 & 9 50750 of 2015-[DB]
(iii) To find out the dispatch particulars from the regular transporters.
(iv) To find out the realization of sale proceeds.
(v) To find out finished product receipt details from regular dealers/buyers.
(vi) To find out the excess power consumptions.
13. Thus, to prove the allegation of clandestine sale, further corroborative evidence is also required. For this purpose no investigation was conducted by the Department."
7. The retrieval of data by Government Examiner of questioned documents only establishes that such data was maintained by M/s KIL. We note that such maintenance of data by representative of M/s KIL does not establish actual payment by the appellant. No evidence of actual payment has been brought on record by revenue. Further, as held by Hon'ble Allahabad High Court that clinching evidence of the nature of purchase of raw material, use of electricity, sale of Final Products, Clandestine removal and the more flow back of funds are required to be established in the case of clandestine removal. Such aspects have not been investigated into and therefore, the ruling by Hon'ble Allahabad High Court in the case of Continental Cement Co. (supra) are applicable in the present case. We, therefore, hold that manufacture of such quantity of goods on which Central Excise duty of around Rs.5.5 crores was demanded is not established. Since Central Excise duty is on manufacture and manufacture is not established, therefore, there is no basis for demand of Central Excise duty to the tune of Rs.5,58,89,762/-. Since the demand is not sustainable the penalty is on the appellants are not sustainable.
Excise Appeal Nos.50740, 50749 & 10 50750 of 2015-[DB]
8. We, therefore, set aside the impugned order and allow all the appeals with consequential relief to the appellants.
(Pronounced in open court on-12 September, 2019) SD/-
(Archana Wadhwa) Member (Judicial) Sd/-
(Anil G. Shakkarwar) Member (Technical) akp