Customs, Excise and Gold Tribunal - Delhi
Ureka Polymers Ltd. vs Commissioner Of Central Excise on 5 September, 2000
Equivalent citations: 2001(127)ELT618(TRI-DEL)
ORDER G.R. Sharma, Member (T)
1. In the impugned order Ld. Commissioner ordered as under:
"(1) It has been proved beyond doubt that M/s. UPL had been receiving unaccounted raw material i.e. plastic granules and have clandestinely manufactured and cleared the finished excisable product out of the said under counted raw material during the relevant period and have thus evaded the Central Excise duty to the tune of Rs. 23,73,934/- (as per duty recalculation chart in para 29 supra). This duty is determined under Rule 9(2) read with Section 11A by applying the extended period vide proviso to this Section on the Grounds that the aforesaid noticee Had concealed the facts of production and removal of excisable goods and had wilfully misstated the facts related thereto.
(ii) M/s. UPL have removed excisable goods by not recording the production in their excise records and cleared the same without payment of Central Excise Duty, thus have contravened the provisions of Rules 9(1), 52A, 53, 173G(4), 173F and 226 of the Central Excise Rules and rendered themselves liable for penal action under Rules 9(2), 52A, 173Q and 226 of the said Rules.
(iii) M/s. UPL have also rendered themselves liable to penal action under Section 11 AC and to the payment of penal interest as the duty amount held recoverable from them as per (i) above.
(iv) I also hold that Shri Dinesh Rustagi, MD of M/s. UPL has concerned himself in manufacturing, selling and dealing in the excisable goods with the conscious knowledge that those were liable for confiscation under the Central Excise Law and hence has rendered himself liable to penal action under Rule 209A.
ORDER I, accordingly, order as under :
(i) I demand Central Excise duty of Rs. 23,73,934/- (Rs. Twenty three lakhs seventy three thousand nine hundred thirty four only) under Rule 9(2) read with Section 11A(1) of the Act which should be paid/recovered within 30 days of receipt of this order.
(ii) I impose a penalty of Rs. 23,73,934/- under Rule 173Q read with Section 11 AC of the Act. I also order penal interest on account of duty not paid and as demanded in this order at the applicable rate in terms of Section 11AB.
(iii) I do not make any order as to the confiscation of plant and machinery in view of the invocation of the above penal provisions; and
(iv) I also impose a personal penalty of Rs. 2,00,000/- (Rupees two lakhs) on Shri Dinesh Rustagi, MD of M/s. UPL under Rule 209A".
Being aggrieved by these findings, the assessee has filed these two appeals, one by the firm and the other by the Managing Director of the firm.
2. The facts of the case in brief are that the appellants are engaged in the manufacture of co-extruded Multilayer Film and Lay Flat Tubing falling under Chapter Heading 39.28 and 39.17 of the Schedule to the Central Excise Tariff Act, 1985. Plastic granules are the principal raw material used in manufacture apart from master batches and packing material. The raw materials are procured from dealers as well as manufacturers.
3. The officers of the Central Excise visited the factory of the appellant on 28-11-96. They also visited the premises of M/s. Moon Light Printer and Paper Converter, New Delhi. From the premises of M/s. Moon Light Printer and Paper Converter; 21 rolls of 'Plain Poly Film' weighing 1247 kgs. were seized in the reasonable belief and they were liable to confiscation. Certain records and documents were resumed in the premises of the appellant which were seized. Premises of M/s. Shree Ram Polymers and M/s. Ajanta Goods Carrier were also searched. M/s. Shree Ram Polymers are engaged in trading of plastic granules. M/s. Ajanta Goods Carrier is a transport company. Statements of Shri Sanjay Gupta, Proprietor of M/s. Shree Ram Polymers and Manager of M/s. R.K. Traders were recorded. They were subsequently also summoned and their statements were recorded first on 14-1-97 and subsequently on 24-1-97, 27-1-97, 28-1-97 and 7-11-97. Statement of the owner of M/s. Ajanta Goods Carrier was recorded on 10-6-97, 11-6-97 and 13-6-97. Statements of Shri Devnath Singh, an employee of the appellant company, Shri Arun Kumar Sinha, Shri Subodh Arya were also recorded. Statement of Shri Dinesh Rustagi, M.D. of the appellant Company was recorded on 17-9-97 and 14-1-98. On a scrutiny of the seized records and the statements indicated that the appellant had manufactured and cleared goods clandestinely without payment of Excise Duty and without cover of invoices from its factory. It was alleged that the appellant had received raw material (plastic dana) with cover of invoices which they did not account for in their records and used the same in the clandestine manufacture of Lay Rat Tubing and Multilayer Film which was also not recorded in the statutory records and were clandestinely removed without payment of Excise Duty. Accordingly, a SCN was issued to the appellant asking them to explain as to why they did not record 2,95,472 kgs. of plastic granules received in their raw material account during the period from 1-11-93 to 11-1-97; why did they not make correct entries of the goods manufactured in their statutory records; why did they clandestinely removed 2,65,395 kgs. of finished goods and 29,486 kgs. of waste and scrap without determining the duty due thereon and without following the proper procedure; why duty amounting to Rs. 48,11,943 on 2,65,395 kgs. of finished goods and Rs. 76,946.00 on 29,486 kgs. of waste goods should not be demanded from them and why penalty should not be imposed. In reply to the SCN, the appellant submitted that since the allegations of clandestine receipt of the raw-material, clandestine manufacture of the finished goods and clandestine clearance of the finished goods were generally based on the statements of suppliers and transporters of raw-material, on statements of some customers and employees of the company, therefore, the position shall have to be clarified in this respect. It was also contended that for the purpose of arriving at the figures, documents of the third party have been relied upon. They made a number of submissions stating that they had rebutted all the allegations. Ld. Commissioner, however, decided the matter as indicated in the preceding paragraph.
4. Shri Vinay Garg, Ld. Counsel arguing the case for the appellants submits that the Ld. Commissioner has categorically held that the appellants had been receiving raw-material from M/s. S.R.P. and M/s. R.K. Traders through one of their employees Shri Subodh Arya. Ld. Counsel submits that the contention of the Department is based on the records of M/s. S.R.P., M/s. R.K. Traders and the statement of Shri Sanjay Gupta of M/s. S.R.P. Ld. Counsel submitted that Shri Sanjay Gupta had stated that plastic dana was sold to the appellant through their employee Shri Subodh Arya. He submitted that Shri Subodh Arya was not making any purchases on behalf of the appellant; that the fact remains that no incriminating document has been recovered from the appellant to show that Shri Subodh Arya was acting on behalf of the appellant; that there was no receipt signed by Shri Subodh Arya testifying receipt of plastic dana in the appellant's factory. Ld. Counsel submits that Shri Subodh Arya was working as a Commission Agent supplying plastic dana to various customers after ordering the same from M/s. SRP/R.K. Traders; that the affidavit of Shri Subodh Arya filed with the Defence reply to the show cause notice makes the position clear in the affidavit. Shri Subodh Arya has made it clear that he was showing in his Income Tax Return the income earned by him acting as a Commission Agent. Ld. Counsel submits that there are a number of discrepancies in statement of Shri Sanjay Gupta; that in his statement dated 14-1-1997 Shri Sanjay Gupta stated that M/s. R.K. Traders had no dealings with the appellants; that Shri Sanjay Gupta had stated that M/s. SRP, Ghaziabad had been started in Dec '90 and was closed in March '94 but the SCN indicates sale of plastic granules to the appellants by M/s. SRP as per their Ledger/Slip Note Books even after its closure. Ld. Counsel submitted that on cross examination on 10-5-99 Shri Sanjay Gupta stated that M/s. SRP and M/s. R.K. Traders had no godown in Ghaziabad; that they were lifting the materials from the various places in Delhi and supplying it directly to the customers; that the goods receipt recovered from M/s. Ajanta Goods Carriers Ghaziabad showed movement of goods from Ghaziabad to Polygraphics and Sanex India; that thus there is contradiction; that in view of this contradiction, Sanjay Gupta statement need not be relied upon. Ld. Counsel submitted that there was no corroboration of the statement of Shri Sanjay Gupta.
5. Regarding the statement of Shri Subodh Arya Ld. Counsel submitted that though a statement of Shri Subodh Arya was recorded on 16-1-97 yet this statement was not listed in their relied upon documents of the SCN; that the entries found in the Ledgers and documents of M/s. SRP/R.K. Traders in the name of Shri Subodh Arya cannot be accepted as Shri Subodh Arya was not confronted with the entries; that there was no reason why entries made in the name of Shri Subodh Arya in the records/ledger of M/s. SRP/M/s. R.K. Traders should be deemed to be on behalf of the appellants when not even a single receipt signed by Shri Subodh Arya had been recovered nor was there any other document.
6. Ld. Counsel submitted that all the records i.e. ledger/cash books maintained by M/s. S.R.P/M/S. R.K. Traders had been alleged to be written by omitting two zeros from the figures. However, no explanation has been coming forth to explain as to why this was being done.
On the allegation that Shri Sanjay Gupta in his statement stated that he was preparing the bills in the name of Polygraphics or 'Subodh' but the goods were delivered at the appellants' premises on the orders of Shri Dinesh Rustagi. Ld. Counsel submits that Shri Sanjay Gupta was doing a patently illegal act on the alleged directions of Shri Dinesh Rustagi, but there was no independent evidence that Shri Dinesh Rustagi had ever given any such direction. Ld. Counsel submitted that Shri Dinesh Rustagi was not asked on the statement of Shri Sanjay Gupta. He submitted that in the light of the above submissions, Sanjay Gupta's statements are not worthy of any evidence. Ld. Counsel also found fault with the observance of the Ld. Commissioner that None disclosed such thing (that their statement was recorded under duress) even during the cross examination; that this observation is patently wrong as Shri Sanjay Gupta in cross examination stated that his earlier statement had been tendered under duress under threats that his case will be given to Income Tax/Sales Tax.
7. Ld. Counsel submits that Shri Praveen Rustagi, Partner of M/s. Polygraphics in his cross examination confirmed that his statement on 8-7-97 had been retracted. Ld. Counsel submitted that there is no corroboration of the statements given by an accomplice; that the Commissioner has placed reliance on the statement of Shri Sanjay Gupta and Shri Ramesh Chand Sharma which as stated above do not deserve to be relied upon. Ld. Counsel submitted that no incriminating document was recovered from the appellants' premises and there was no independent evidence to corroborate the entries in the documents recovered from the possession of Shri Sanjay Gupta and Shri Ramesh Chand Sharma; that there was no statement of any driver recorded showing transport of the disputed goods to the premises of the appellant. It was also contended by him that though the allegation of clandestine receipt was for the period 1-11-93 to 1-11-97, the goods receipts pertained to the period Oct '96 to Feb '97. Ld. Counsel submits that Shri Parveen Rustagi of M/s. Polygraphics in his cross examination stated that the goods consigned to Polygraphics as per Goods Receipt/Invoices were infact received by M/s. Polygraphics.
8. Ld. Counsel in his written submissions submitted that for procurement of raw-material over and above that recorded by the appellant, no documentary proof has been produced; that no entries in their registers were found to be doubtful; that the entire evidence relied upon by the Department is from the suppliers, who in cross examination clearly admitted in favour of the assesses. Ld. Counsel submits that the statements in cross examination cannot be ignored and that they cannot be just termed as afterthought.
9. Ld. Counsel submits that in so far as manufacture in the factory is concerned, the Department has relied upon slips pertaining to the period 6-11-96 to 27-11-96; that these production slips do not uniformly show lower production recorded in R.G.I than the figures shown in the production slips. On certain occasions the figures of production in the production slips are much less than the figures recorded in R.G.I Register. Ld. Counsel, therefore, submits that these production slips cannot be basis for fastening such a huge demand on the appellants for a period of more than three years.
Ld. Counsel submits that though the appellants had furnished the figures of consumption of electricity, use of D.G. Sets, average consumption of electricity etc. to show that the applicants could not produce the quantity estimated by the Department and that the normal production which was recorded in R.G.I Register was the normal production based on the above consumption. Ld. Counsel submitted that the only evidence filed in support of alleged clandestine removal was the statement of M/s. Moon Light Printers and Shivam Plastics. He submitted that neither Shivam Plastics nor Moon Light Printers have stated anywhere that they received the finished goods without payment of duty and therefore, on their statements, the allegation of clandestine removal is not proved; that the findings of the Commissioner that Shri Rajesh Rustagi of Moon Light Printers had admitted receiving the goods from the appellant without payment of duty is not correct.
10. Ld. Counsel submitted that the Department has not discharged the burden of proving that raw-material was received but not recorded in the records; that there was clandestine manufacture and clandestine removal of the goods. He submitted that this burden has not been discharged by the Department and therefore, the duty cannot be demanded on this score. Ld. Counsel also submitted that even if the contention of the Department about evasion of duty is accepted then it comes to only 3.5% of the total duty paid during the period in dispute; that no prudent manufacturer would try to manipulate to save just 3.5%. Ld. Counsel submits that the appellants were entitled to take Modvat credit on plastic granules and therefore, there was no incentive to evade payment of duty inasmuch as the duty on plastic granules was comparably quite high and only a small amount was required to be paid from the PLA. In support of his contentions Ld. Counsel cited and relied upon the following case laws:
1. 2000 (115) E.L.T. 502 (Tribunal) - Amba Cement and Chemicals v. CCE
2. 1996 (85) E.L.T. 260 (paras 3 & 4) - Rhino Rubbers Pvt. Ltd. v. CCE
3. 1999 (33) RLT 15 (Paras 2, 9 to 12 and 14) - CCE v. Moon Beverages Ltd.
4. 1999 (82) ECR 33 - Kothari Products Ltd. v. CCE
5. 1999 (31) RLT 863 (paras 3,4,5) - Premier Glass Industries v. CCE
6. 1996 (82) E.L.T. 347
7. AIR 1977 SC 1712 (para 16) - Sita Ram Babu Patil v. Ram Chandra Nago
8. (1994) 3 SCC 569 (Para 278) - Kartar Singh v. State of Punjab
9. 2000 (124) E.L.T. 444 (Tribunal) -Moder Steel Industries v. CCE Ld. Counsel, therefore, prayed that in view of the above submissions the appeal may be allowed.
11. Shri Mewa Singh, Ld. DR submitted that the case of the Department is based not only on the statement of raw material suppliers and finished goods dealers but also on the accounts maintained by them. He submits that the statement of various persons including the employees of the appellant factory showed that the appellants were procuring huge quantity of raw-material. They were not recording it in their records, manufacturing finished goods from this excess raw-material and clandestinely removing the finished goods manufactured out of this excess raw-material received and not account for. He submits that the Counsel for the appellants has submitted that in cross examination they had backed out. Ld. DR submits that statement of these persons was not recorded on a single day. It was spread over a period of time, if they had retracted it, they would have retracted it immediately and would have not waited for the cross examination which was after lapse of time. He submitted that Ld. Commissioner has dealt with each point raised by the assessee. Ld. DR to support this point of view read copiously from the Order-in-Original and submitted that the Ld. Commissioner has been fair in conceding the point of the appellant wherever it was necessary. Reiterating the findings of the Ld. Commissioner, ld. DR submits that the appeal may be rejected.
12. We have heard the rival submissions. We have perused the case law on the subject and the evidence on records. We have gone through the statements in detail wherever it was necessary. We find in the instant case that in the SCN, duty demanded was Rs. 40,88,889/- which was subsequently adjusted to be Rs. 23,73,934/- and ultimately the duty demanded amounted to Rs. 21,59,760/-.
13. The main allegation in this case is that a huge quantity of raw-material (plastic dana) was being procured by the appellant; was being used for manufacture of the finished product and the finished product was being cleared without payment of duty. The evidence to prove these are the entries in the registers, note books and ledgers of the suppliers of raw material mainly M/s. SRP and M/s. R.K. Traders. Statements of the responsible persons of M/s. SRP/M/s. R.K. Traders were recorded who confirmed the supply of raw-materials though in some cases the raw materials were indicated to be supplied to Polygraphics and Subodh Arya but actually delivered to the appellants. The appellants have submitted that third party records need not be relied upon as no evidence was available with the Department to prove that raw material was actually received by them. They have also filed certain affidavits. However, the affidavits though sworn in early but was submitted after lapse of time. We note that the statement of the raw-material suppliers were recorded over a period of time. It was not a question of one day when the statement was recorded. Statements were recorded on a number of days. In no statement did the appellants state that the statements were recorded in duress as they stated in their cross examination. Since the statements were recorded over a period of time and since during that period the persons whose statements were recorded did not complain of any threat or duress, therefore, claiming duress and threat is an afterthought. The affidavits were sworn in much earlier but were produced in reply to the SCN which was after a lapse of time. Looking to the above facts and the submissions made before us as also the evidence on record, we hold that raw material was received in the premises of the appellant which was used by them in manufacture of co-extruded multi-layer films and Lay Rat Tubings.
14. On the question of conversion of this unaccounted raw material (plastic dana), we note that there were production slips for about 15 days. In these production slips it was generally found that the production on particular dates was much higher than the production recorded in R.G.I Register. The contention of the appellant was that on certain occasions; the quantity shown produced was less in the production slips but the one recorded in R.G.I Register was much higher. The Bench asked a question of the Counsel for the appellant about the documents on the basis of which the R.G.I Register was being written. He, however, could not give any satisfactory explanation as to how the figures in R.G.I Register was being recorded. Then we note that 21 rolls of film were found in the premises of M/s. M.L. Traders. The employee of the firm when questioned stated that he does not have any duty paying document in respect of these films. No doubt subsequently it was stated that the goods were duty paid and the appellants also stated that they were supplying duty paid material to M/s. M.L. Traders. We also note that there are other evidences to show that excess goods were being manufactured and disposed of without payment of duty. We, therefore, hold that there was clandestine manufacture of dutiable excisable goods and clandestine removal of such goods.
15. Having regard to the facts that the transporters have stated that they had transported the goods; having regard to the fact that excess raw materials were received; having regard to the fact that the figures were available in the ledgers and other accounts of the supplier of raw materials; having regard to the fact that 21 rolls of finished goods were seized in the premises of M/s. M.L. Traders; having regard to the fact that there were production slips for a period of about 15 days, we hold that clandestine manufacture and clandestine removal of the goods is established. We, therefore, confirm the demand for duty.
16. It was contested before us that Ld. Commissioner did not take into consideration other raw materials nor did he examine the contention that the appellants could not produce the alleged quantity of finished product based on the consumption of electricity and use of generating sets. We find that the main raw material for the finished goods in the instant case was plastic granules; others are subsidiary material and not significant at all. Therefore, it was not necessary to examine the other materials being used etc. In so far as consumption of electricity vis-a-vis, the production of goods is concerned, we note that there was no regular record to show that as to how much electricity for how long was being produced by the generating sets and thus even if an exercise was conducted that would have led nowhere.
17. Regarding the affidavit of Shri Subodh Arya that he was doing on his own account as Commission Agent, the contention does not appear to be correct. Shri Subodh Arya was an employee of the appellant's firm and therefore, would not normally do the same business as Commission Agent and thus his contention that he was doing business on his own account is not convincing.
18. In so far as imposition of penalty is concerned, we note that the appellant firm was not keeping correct record of the raw material received, used for manufacture and was removing the goods without payment of duty. We, therefore, hold that the imposition of penalty is warranted. However, looking to the facts of the case, we reduce the penalty to Rs. 5 lakhs on M/s. Ureka Polymers.
19. We find that Shri Dinesh Rustagi during the material period was the Managing Director of the appellant firm. He was concerned with manufacturing, selling, dealing in excisable goods. We, therefore, hold that penalty was imposable. However, looking to all the facts and circumstances of the case, we reduce the penalty on Shri Dinesh Rustagi to Rs. one lakh.
20. The appeals are disposed of in the above terms.