Custom, Excise & Service Tax Tribunal
M/S. Rubo Mix India Ltd vs Cce, Calicut on 17 May, 2010
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
SOUTH ZONAL BENCH AT BANGALORE
Bench Division Bench
Court I
Date of Hearing: 13/04/2010
Date of decision:..
Appeal No.E/574-577/06
(Arising out of Order-in-original No.01/2006 dt. 18/1/2006
passed by CCE&C, Calicut)
For approval and signature:
Honble Mr. M.V. Ravindran, Member(Judicial)
Honble Mr. B.S.V. Murthy, Member(Technical)
1.
Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
No
2.
Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
No
3.
Whether their Lordship wish to see the fair copy of the Order?
Seen
4.
Whether Order is to be circulated to the Departmental authorities?
Yes
M/s. Rubo Mix India Ltd.
M/s. Praveen Rubbers
M/s. Rubo Black
Mr.PP Subar, Prop. Of M/s. Praveen Rubbers
..Appellant(s)
Vs.
CCE, Calicut
..Respondent(s)
Appearance Mr. Jayashankar, Advocate for the appellants.
Ms. Sudha Koka, SDR for the Revenue.
Coram:
Honble Mr. M.V.Ravindran, Member(Judicial) Honble Mr. B.S.V. Murthy, Member(Technical) FINAL ORDER No._______________________2010 Per M.V.Ravindran These four appeals are directed against the Order-in-Original No.01/2006 dt. 18/1/2006.
2. The relevant facts that arise for consideration are that the appellant units are engaged in the manufacture and sale of Tread Rubber. All the units are managed by one person and they have different premises and different registrations for the purpose of various revenue statutes such as Central Excise Act and Sales Tax Act. The appellants have also been paying central excise duty on the clearances effected from time to time. Pursuant to the investigations carried out by DGCEI, a show cause notice dt. 26/11/2001 was issued to the appellants calling upon them to show cause as to why duty amount of Rs.4,77,297/- , Rs.16,29,268/- and Rs.39,19,766/- should not be recovered from them towards alleged differential duty on the clandestine removals of Tread Rubber by the said appellants during the period 1996-97 to 1999-2000. The said notice also proposed to impose separate penalties and interest on the appellants, their proprietors , partners, and directors. The appellants filed an interim reply and also sought for cross-examination of certain witnesses on whose statements, the Department placed reliance while issuing show cause notice. After cross-examining the witnesses who were made available by the Department, the appellants made specific request for cross-examination of the remaining witnesses but this could not be acceded as Revenue expressed their inability to produce the said witnesses for cross-examination. Subsequently appellants preferred a reply to the show cause notice rebutting the evidences. The adjudicating authority after granting a personal hearing, vide the impugned order accepted partly the contentions of the appellants as regards the quantification of the liability, but confirmed the differential duty demand against the appellant units. Aggrieved by such an order, the appellants are before us.
3. Since all these four appeals are directed against the very same Order-in-Original and issue being inter-connected, they are being disposed off by a common order.
4.1. Ld. Counsel appearing on behalf of the appellants would submit as under:-
A. In any case of alleged clandestine manufacture and removal, the fact of clandestine manufacture must first be established by the department and only thereafter can one proceed to examine the evidence with regard to alleged clandestine removal.
While examining the consumption pattern of raw materials, department cannot be selective and examine the consumption pattern of only some of the raw materials Their findings must be based on the shortfall, if am notwed, in respect V, of all the raw materials or at least the major raw materials.
- In the instant case, the consumption pattern of natural rubber or Synthetic Rubber or Sulphur is not even examined by the department. Reliance is placed on a shortage of Carbon Black and Cisamer in one of the units (Rubomix India Ltd) and this is taken as the basis for alleging clandestine manufacture in all the three units.
- Since no shortage of raw materials was noticed in any of the other units and even in Rubornix India Limited, the shortage noticed is not of the main raw materials, the department has no material other than figures relating to electricity to doubt the correctness of the accounted production disclosed by the appellants.
- Although in the show cause notice, an estimation of actual production is attempted based on statements of dealers, entries in private notebooks, railway receipts and courier receipts, the Commissioner, in the impugned order, finds that such estimation cannot be resorted to and proceeds to estimate the actual production based solely on electricity consumption figures. He too does not consider the fact that there was no shortage noticed by the department in the stock of the main raw materials.
- The Commissioner also erred in adopting a totally new basis for quantification of the demand wholly different to what was proposed in the show cause notice and in respect of which proposal, the appellant was not put to notice prior to adjudication.
- The formula adopted by the department for estimation Viz. 1.19 units of electricity is required for production of 1 Kg of tread rubber - is only one of a number of possible formulae. There is evidence to show that the accounted production of the appellant was achieved using 1.32 units of electricity for i Kg of tread rubber.
- While estimating the production based solely on the consumption pattern of electricity, the Commissioner overlooks the fact that consumption of electricity can vary depending upon the type of die used for extrusion (whether it is a narrow one or wide one) and the nature of work (whether it is mixing or extrusion). Electricity is also consumed during the idle time of the machines when the machines are running but work is stopped so as to change the dies on the machines.
- The accounted production, when read with the formula used, tallies with the consumption pattern of raw materials disclosed by the assessee. In the absence of any material to suspect the correctness of the figures relating to manufacture/production, therefore, the department cannot reject the same and proceed to estimate the production based on some other formula.
B. The evidence relied upon by the department to support the allegation of clandestine clearances is far from satisfactory and is not corroborated in any manner with reference to other documentary evidence or evidence suggesting manufacture of the goods.
- The findings as regards clandestine removals are based on (i) Private notebooks maintained by Subair for the period January June, 1999; (ii) Slips obtained from Praveen Rubber for the period March May, 1999; (iii) Documents obtained from Sales Tax authorities; (iv) Parallel invoice obtained from Rubomix; (v) Details of Tread Rubber Bookings from Vaniyambalam and Angadipuram Railway Offices; (vi) Private notebooks obtained from customers premises and (vii) Statements obtained from customers and employees.
- The diaries seized from Subair contained figures which were in draft form. They were notings made at the time of negotiations with prospective purchasers. For corroboration, the department relies on similarity in quantity and purchaser as entered in Railway receipts but no enquiry is made with the purchaser to establish receipt of the goods at his end. That apart, most of the corroboration attempted through RRs is based on an alleged similarity in the handwriting of an employee which has not been verified through a handwriting expert. The employee in question has also clarified in cross-examination that in some cases he had entered the details in the RR at the request of other persons.
- When it comes to corroboration of the figures in the private notebooks seized from Subairs residence, the department also relies on entries in private notebooks maintained by certain dealers. The scribes of the notebooks are however not examined by the department in some cases (eg: VVS) and in other cases were not offered for cross-examination by the appellants. The said material cannot, therefore, be relied upon to substantiate a ease against the appellants. It is also relevant to note that while some of the entries in Subairs notebooks are corroborated through reference to invoices of accounted transactions, the department itself admits that some of the accounted transactions are not mentioned in Subairs notebooks. It was therefore clear that the entries in the notebooks could not be relied upon for any purpose.
- As regards the single instance of parallel invoicing mentioned in the show cause notice, this was explained by the appellants as a mistake and further that the invoice was never used. It is also apparent from a perusal of the invoice itself that it does not bear the signature of the proprietor which is usually there on all invoices. TMs aspect has also been clarified by Mr. Unnikrishnan in cross-examination.
- A single instance of alleged parallel invoicing cannot he used h the department to infer a practice of parallel invoicing.
- Details of tread rubber bookings from Vaniyambalam and Angadipuram Railway Stations are taken and assumed to be from the units of the appellants. Corroboration is attempted through comparison with entries in the private notebooks seized from Subair. No verification or enquiry is made with the consignee shown in the RR or the courier slip. This is fatal to the case of the department.
C. The demand of Differential Central Excise duty against the appellants is barred by limitation as the department has not established any willful suppression or mis-statement on the part of the appellants with a view to evade payment of duty.
- It is relevant to note that insofar as there was no complete exemption during the years 1998-99 and 1999-2000 and substantial amounts were paid by way of duty it cannot be presumed that the Central Excise authorities were not aware of the fact of manufacture of tread rubber and clearance of the same from the noticee units. There was, therefore, no justification for recourse to the larger period of limitation while issuing the show cause notice.
Counsel 4.2. He would rely upon the following case laws:-
1. Sanket Food Products Pvt. Ltd. Vs. CCE, Aurangabad [2005(188) ELT 107(Tri. Del.)]
2. Bhor Rubber Factory Vs. CCE, Pune-II [2006(198) ELT 549(Tri. Mum.)]
3. Rama Shyama Papers Ltd. Vs. CCE, Lucknow [2004(168) ELT 494(Tri. Del.)]
4. United Veneer Mfg. Co. Vs. CCE, Kolkata-I [2004(168) ELT 503(Tri. Kol.)]
5. Arch Pharmalabs Ltd. Vs. CCE, Hyderabad [2005(182) ELT 413(Tri. Bang.)]
6. CCE, Chennai Vs. R.V.Steels Pvt. Ltd. [2009(243) ELT 316(Tri. Chennai)]
7. Nav Karnataka Steels Pvt. Ltd. Vs. CCE, Belgaum [2008(225) ELT 454(Tri. Bang.)]
8. T. Hari Balakrishnan Vs. CCE, Calicut [2006(197) ELT 418 (Tri. Bang.)]
9. Chandan Tubes & Metals Pvt. Ltd. Vs. CC, Vapi [2006(193) ELT 48 (Tri. Mum.)]
10. Shalimar Rubber Inds. Vs. CCE, Cochin [2002(146) ELT 248(SC)]
11. Oudh Sugar Mills Ltd. Vs. UOI [1978 ELT (J 172)]
12. Abba Rubbers Vs. CCE, Cochin [2006(193) ELT 471(Tri. Bang.)]
13. Jagatpal Prem Chand Ltd. Vs. CCE, Delhi-I [2004(178) ELT 792(Tri. Del.)]
14. Kochar Sung-up Acrylic Ltd. Vs. CCE, Jalandhar [2007(208) ELT 284( Tri. Del.)]
15. CCE, Indore Vs. G.M. Products [2007(207) ELT 723 (Tri. Del.)] 4.3. It is his specific assertion that that the adjudicating authority while arriving at the amount of differential duty has relied upon the figures of consumption of electricity which was not the basis for raising the demand in the show. It is his submission that the Department having not filed an appeal against such an order, the findings of the adjudicating authority as to discarding of all other evidences has attained finality and the appeals of the appellants be allowed.
5. Ld. SDR on the other hand would take us through the entire case records and also bring to our notice that there is evidence regarding the clandestine removal of the goods. It is her submission that it has been accepted that there was unaccounted products and those are recorded in the private records and said private records matched with the entries which took place in respect of booking of the lorry services, train parcel services and payment of customers. It is her submission that there was also parallel invoices found in one of the cases, that itself shows that the appellant lacks bonafide. It is her submission that though the records were seized from other dealers and customers, the records were matching in details with the private records maintained by the main man behind the appellants. It is her submission that shortage in raw material account of main raw material like Carbon block and Cisamer are not minor discrepancies and it is contended that the fact that there would be evidences to show that the clandestine manufacturing and clearance of the goods, the adjudicating authority was correct in confirming the demand. She would rely upon the following decisions:-
a. Suresh Singh Chhabra [1997(89) ELT 646(SC)].
b. Bhana Khalpa Bhai Patel [1997(96) ELT 211(SC)] c. Shama Fireworks Industries [2008(225) ELT 63(Bom.)]
6. We have considered the submissions made at length by both sides and perused records. The main issue that is to be decided in this case is whether there is clandestine removal or not. We find from the records that investigating officers recovered evidences like private documents etc. based on which the show cause notice was issued demanding an amount of differential duty from the appellants and also for imposition of penalties on the partners. It is seen from the show cause notice that the show cause notice proceeds for demand of differential duty based upon the calculation arrived at as per the entries made in the notebooks and correlation of them with the LRs and railway receipts and the statements. The show cause notice did indicate in the allegation that the appellant has used excess power for manufacturing of Tread Rubber.
7. Ld. adjudicating authority, at internal page no.26 of the Order-in-Original and under the heading Quantification has recorded as under:-
I find that the investigating officers have produced sufficient evidences to prove the modus operandi adopted for the clandestine production and clearances by the assessee units. These findings are found to be properly corroborated with the figures of total power consumed in the units. However, the total un-accounted production and clearance computed by the department on the basis of the entries of the note books seized from Shri Subair, entries form the Railway and Lorry receipts, entries from the registers maintained by certain dealers, slips seized from the premises of M/s. Praveen Rubbers are found to be overlapping. Also the method adopted to calculate the un-accounted production of the each unit on the basis of ratio delvered from the accounted clearance of each unit to the accounted clearance of all the units are not correct. .. . (Emphasis supplied)
8. It can be seen from the above reproduced finding that after recording such a finding, the adjudicating authority proceeded ahead and confirmed the demand of the differential duty on all the appellants and imposed penalties based upon the consumption of electricity for the entire tyre industry as ascertained from Deputy Director, Technical Consultancy Division, Ministry of Commerce, Rubber Board, Kottayam on the basis that of 1.9 units of electricity is required for manufacture of 1 kg. of conventional rubber in the kind of plant and machinery which is found in the appellants units. It is seen from the records that this was not put to the appellants in notice. Since this calculation was brought up first time by the adjudicating authority in the Order-in-Original, we are constrained to hold that this cannot be the basis for confirmation of the differential duty. We have also seen that there is some kind of indication on the consumption of electricity in the show cause notice. In our considered view, the adjudicating authority has to adjudicate the matter entirely within the parameters as has been indicated in the allegation in the show cause notice. We are fortified this stand by the decision of the Honble High Court of Bombay in the case of CCE, Mumbai-IV Vs. Beekalene Fabrics Pvt. Ltd. [2008(229) ELT 659 (Bom.)].
9. In view of the above, we set aside the impugned order and remand the matter back to the adjudicating authority to re-consider the issue afresh and come to a conclusion after following the principles of natural justice.
(Pronounced on .) (B.S.V. MURTHY) Member (Technical) (M.V. RAVINDRAN) Member (Judicial) Nr ??
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