Customs, Excise and Gold Tribunal - Delhi
Heemanshu Traders vs Commissioner Of Central Excise on 17 July, 2000
Equivalent citations: 2000(122)ELT555(TRI-DEL)
ORDER Jyoti Balasundaram, Member (J)
1. The facts of the case are that on 07.04.1988, the Central Excise officers of Valsad Division intercepted a truck bearing registration No. GRW-2645 on Umbergaon-Sanjan Road and the driver of the truck produced challan No. 862, dated 07.04.1988 for MS scrap issued by M/s. Heemanshu Auto Ltd., Umbergaon. The driver could not produce the Central Excise Gate pass. The Superintendent of Central Excise recorded the statement of the Excise clerk of M/s. Heemanshu Traders in which he stated that he had received oral instructions from Shri Girishbhai Shah to prepare challan for despatch of 12,285 kgs of MS scrap from M/s. Heemanshu Traders and to prepare the challan in the name of M/s. Heemanshu Auto Ltd. The truck was seized under the reasonable belief that it was liable to confiscation. Statutory records of M/s. Heemanshu Traders were examined and they revealed that duty determined under Excise gate pass for the period 4th April 1988 to 7th April, 1988 had not been debited. Certain goods such as Electric horns received by different customers from M/s. Heemanshu Traders, were seized and statements of various persons were recorded. Detailed examination of records of M/s. Heemanshu Traders, M/s. Heemanshu Auto Pvt. Ltd., M/s. M.K. Industries, M/s. Shri Hari Industries and Shri Krishna Industries of Umbergaon showed that all the partners and/or Directors are members of the Shah family i.e. father, brother, uncle and sons or their wives and that they had mutual interest in the business of each other and that M/s. Heemanshu Traders was controlling the overall activities of manufacture and sales of these units.
2. The Department was of the view that M/s. Heemanshu Traders had by fraud, wilful mis-statement and suppression of facts evaded payment of duty on 12,285 kgs of MS scrap seized from the truck on 07.04.1988 did not account for day to day production of scrap in their statutory records, cleared electric horns without payment of duty. The records also showed that all the units above named, together with Shri Vishnu Industries, M/s. M.C. Industries and M/s. D.G. Auto Industries affixed the brand name of M/s. Heemanshu Traders on electric horns and C.B. Points, worked under the directions of M/s. Heemanshu Traders and therefore, appeared that there was relationship between M/s. Heemanshu Traders and other manufacturing units under the supervision and control of M/s. Heemanshu Traders. Evidence on record brought out the fact that the partners and Directors of M/s. Heemanshu Traders and the above units had more than one factory of production and the aggregate value of clearance of excisable goods exceeded the exemption limit of Rs. 1.5 crores in terms of the proviso to Notification 175/86, dated 01.03.1986 and therefore, M/s. Heemanshu Traders was not entitled to SSI exemption.
3. Show cause notice proposing recovery of duty of Rs. 24,31,502/- on goods manufactured and removed by all the units during the period from 1985-86 to 1987-88 and proposing confiscation of seized goods and imposition of penalty, was issued on 04.10.1988 to the appellants.
4. The Adjudicating Authority held that M/s. Heemanshu Traders used M/s. M.K. Industries as cover for availing of benefit of exemption during 1986-87. M/s. Heemanshu Traders used the inputs of M/s. Heemanshu Auto Ltd, M/s. M.K. Industries, M/s. Shri Hari Industries, M/s. Krishna Industries and M/s. M.C. Industries for this purpose and during the year 1987-88, M/s. Heemanshu Traders used M/s. Heemanshu Auto Pvt. Ltd., M/s. M.K. Industries, M/s. Shri Hari Industries for the purpose of evasion of duty by showing clearance from different factories. He held that M/s. Heemanshu Traders was the manufacturer of excisable goods in question and therefore, confirmed the duty demand on goods cleared without payment of duty. He imposed a penalty of Rs. 10 lakhs on M/s. Heemanshu Traders and a penalty of Rs. 5 lakhs each on the remaining six appellants and also confiscated seized goods. He also confiscated land, plant, building and machinery belonging to appellant No 1, 2, 3, 5, 6 and 7 with option to redeem on payment of a fine of Rs. 25,000/-. Hence these appeals.
5. None appears for the appellants although today's date was fixed in the presence of Shri C.M. Panchal, Representative of the Company and notices were also issued to all the appellants. Since the cases have been adjourned from time to time, we see no reason to keep the appeals pending any longer and hence we heard the learned DR and perused the records.
6. At the outset, we discussed the grievance of the appellants that the principles of natural justice have been contravened by the Adjudicating Authority's rejection of the appellants request for cross examination of the concerned persons. The Collector has dealt at length with this point in paras 39.2 to 39.7 of the impugned order. He has noted that the request for cross examination was turned down in view of the fact that no justification for cross examination was made out by the appellants and they only reiterated the same request. He has also noted that summons for personal hearing were returned; that several opportunities for hearing were extended to the appellants; that all the copies of the relied upon documents had been supplied and therefore, there was full compliance with the principles of natural justice.
7. We have gone through the above mentioned paragraphs and are of the view that the principles of natural justice have not been violated by the Collector. Therefore, we proceed to discuss the merits of the case.
8. The main issue to be decided is whether the appellants had correctly availed the benefit of Notification 175/86-C.E., dated 01.03.1976 on clearance of Electric horns and C.B. points under the brand name `HT' or whether the value of their clearance was required to be clubbed resulting in denial of the benefit of the SSI notification. The clubbing of value of clearance of the units is permissible if the units have been created for the purpose of evasion of duty provided there exists mutuality of interest and financial control i.e. financial interest in the business of each other unit. We find that the Collector has carefully scrutinized all the evidence on record to come to the conclusion that M/s. Heemanshu Traders had created other units for the purpose of circumventing the restriction of value of clearances contained in the SSI notifications. M/s. Heemanshu Traders had been issuing challans for their goods in the name of M/s. Heemanshu Auto Ltd in order to remain within the exemption limit. Bills were manipulated by M/s. Heemanshu Traders for the same purpose. Ledgers and cash books of the unit showed that M/s. Heemanshu Traders and M/s. Heemanshu Auto Ltd transferred money among the sister concerns. Financial interest between M/s. Heemanshu Traders, M/s. Heemanshu Auto Ltd., M/s. Shri Hari Industries, M/s. M.K. Industries and M/s. D.G. Auto Industries is also brought out by several circumstances such as payment by M/s. Heemanshu Traders to M/s. Hari Industries, M/s. M.K. Industries and M/s. D.G. Auto Industries, purchase of raw materials by M/s. Heemanshu Traders and supply of the same to all the other units etc. Payment of salary of the employees of M/s. M.K. Industries was directly controlled through M/s. Heemanshu Traders. Financial transaction for mutual benefit between M/s. Heemanshu Traders and M/s. Shri Hari Industries is also brought out by the evidence on record. The evidence also disclosed that M/s. Heemanshu Traders was managing the administrative matters like printing of letter heads, sending blank bill books, etc. to the other units. File No. 84 pertaining to M/s. Heemanshu Traders is found to contain detailed expenses of M/s. Heemanshu Auto Ltd. The file also contains particulars of loan or deposit of Rs. 10,000/- or more taken or accepted by M/s. Heemanshu Traders from M/s. Shri Krishna Industries and M/s. Heemanshu Auto Ltd. Bills made out in the name of M/s. Heemanshu Auto Ltd. bear the address of M/s. Heemanshu Traders. The cumulative effect of the entire evidence clearly supports the Collector's finding that M/s. Heemanshu Traders had created a legal facade by floating different units in order to avail the SSI exemption under Notification Nos. 85/85 and No. 175/86 which was not otherwise legally available. The creation of different units for the purpose of evasion of duty clearly amounts to suppression on the part of M/s. Heemanshu Traders and there-' fore, extended period of limitation has been rightly invoked in this case. We therefore, confirm the duty demand. Penalty under Rule 173-Q on M/s. Heemanshu Traders is also justified; however, having regard to the totality of the facts and circumstances of the case, we reduce the penalty to Rs. 5 lakhs.
9. Regarding penalty under Rule 209A on appellant Nos. 2 to 7, the Collector has recorded reasons for holding them liable to penalty under paragraph 35.2 of the impugned order. He has held as under :
"I note that the sister units of M/s. Heemanshu Traders as mentioned in para 49 of the show cause notice against whom the penal action has been initiated has wilfully and deliberately colluded and 'knowingly' concerned in the evasion of the Central Excise duty by remaining within the exemption limits as stipulated under the relevant SSI notification operative during the relevant years, and they have 'reasons to believe that all their operations namely marketing' managerial sale and purchase of raw materials and correspondence with their customers were done under the direction/control/effective umbrella of M/s. Heemanshu Traders having head office at 1305, Prasad Chambers, 1st floor, Near Roxy Cinema, Bombay 400 004 and hence these are the persons who acquired possession of, or were in any way concerned in transporting, removing, depositing, keeping, concealing, selling or purchasing or in any other manner dealt with, excisable goods which they knew or had reasons to believe that they were liable for confiscation under the Act and Rules made thereunder, and hence they are liable for penal action under Rule 209A of the Central Excise Rules, 1944".
10. We agree with the above finding and hence uphold penal action against appellant Nos. 2 to 7 but reduce the penalty to Rs. 2.5 lakhs on each of these units. We also uphold confiscation of seized goods, land, plant, building and machinery.
11. In the result, subject to modification by way of reduction in penalties as set out above, the appeals are rejected.