Custom, Excise & Service Tax Tribunal
M/S Hindustan Coca Cola Beverages Pvt. ... vs Commr. Of Central Excise & Service Tax, ... on 22 March, 2011
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL, EAST REGIONAL BENCH : KOLKATA
Ex. Appeal Nos.EDM-118 & 494/06, 49 & 325/09
Arising out of O/0 Nos. 44-46/M.P./Ayukt/2005 dt.30.11.2005, 10/M.P./Ayukt/2006 dt.31.5.2006, 26/MP/Commr./2008 dated 31.10.2008 & 04-05/MP/Commissioner/2009 dated 25.2.2009 all passed by Commissioner of Central Excise & Service Tax, Patna.
For approval and signature:
SHRI S. S. KANG, HONBLE VICE PRESIDENT
SHRI M. VEERAIYAN, HONBLE TECHNICAL MEMBER
1. Whether Press Reporters may be allowed to see
the Order for publication as per Rule 27 of the
CESTAT (Procedure) Rules, 1982? :
2. Whether it should be released under Rule 27 of the
CESTAT (Procedure) Rules, 1982 for publication
in any authoritative report or not? :
3. Whether His Lordship wishes to see the fair copy
of the Order? :
4. Whether Order is to be circulated to the Departmental
Authorities? :
M/s Hindustan Coca Cola Beverages Pvt. Ltd.
APPELLANT(S)
VERSUS
Commr. of Central Excise & Service Tax, Patna
RESPONDENT (S)
APPEARANCE Dr. Samir Chakraborty & Shri A. Biswas, both Advocates for Ex. Appeal Nos.EDM-118 & 494/06 & Shri Vikram Nankani, Advocate for Ex. Appeal Nos.EDM-49 & 325/09 Shri B. B. Agrawal, Jt. CDR for the Revenue CORAM:
SHRI S. S. KANG, HONBLE VICE PRESIDENT SHRI M. VEERAIYAN, HONBLE TECHNICAL MEMBER Date of hearing & decision : 22. 03. 2011 ORDER NO..
Per Shri M. Veeraiyan :
1.1 Ex.Appeal No.118/06 is against a demand of Rs.3,59,26,359/- relating to the period June, 2000 to March, 2005 along with interest and imposition of an equal amount of penalty by the Order-in-Original No. 44-46/M.P./Ayukt/2005 dt.30.11.2005 by which three show-cause notices dated 7.12.04, 2.5.2005 and 29.4.2005 were decided. The show-cause notices were issued based on investigations consequent to the visit of the Preventive Officers on 25.6.2003 relying, inter alia, on the statements of the concerned persons taken on 22.2.2004, 5.7.2004 and 8.7.2004.
1.2 Ex.Appeal No.494/06 is against the Order-in-Original No.10/MP/Ayukt/2006 dated 31.5.2006 passed by the Commissioner by which a duty demand of Rs.8,45,247/- relating to the period August 2000 to March 2005 was confirmed based on show-cause notice dated 5.9.05 proposing demand of Rs.86,46,279/-. There is also demand of interest besides imposition of penalty of Rs.8,45,247/-. This proceeding has been initiated consequent to the visit of the audit team to the appellants unit during the period 3.12.2002 to 5.12.2002.
1.3 Ex.Appeal No.49/09 is against the demand of Rs.33,66,46,078/- relating to the period March 2002 to April 2007 along with interest and penalty of an equal amount imposed by the Order-in-Original No.26/MP/Commr./2008 dated 31.10.2008 which decided the show-cause notice dated 7.6.07 issued consequent to Audit visit.
1.4 Ex.Appeal No.325/09 is against the demand of duty of Rs.4,20,42,698/- relating to the period May 2007 to June, 2008 along with interest and imposition of penalty of an equal amount imposed by the Order-in-Original No.04-05/MP/Commr./2009 dated 25.2.2009 which decided show-cause notices dated 23.5.08 & dated --.9.08 This proceeding was also in pursuance to the visit by the Audit team.
1.5 All these appeals involve a common issue alleging suppression of production and clandestine removal of aerated water bottles. In Appeal No.118/06, there is another issue relating to denial of credit amounting to Rs.1.63 Crores on crates.
2. We have heard both sides extensively.
3.1 The relevant facts in brief are that during the period 3.12.2002 to 5.12.2002, after examining the records, the Audit Officers felt that there was suppression of production and clandestine removal during the period August, 2000 to March, 2005 on the ground that there was a mis-match between the quantity of concentrate consumed by them and the quantity of aerated water bottles recorded in RG I Account. Such view has been taken comparing the production recorded by the appellant Unit with the quantity of concentrate consumed during 1999-2000. Based on input output ratio arrived at for the 1999-2000, the production was estimated and shortage was found and the short found goods have been held to have been cleared without payment of duty and duty demand confirmed along with interest and penalty imposed.
3.2 Again based on the Audit objection taken it was held that there was a mis-match between the consumption of electricity and production accounted by the appellant unit. On this ground, three show cause notices have been issued relating to the period May, 2002 to June, 2008 and duty demand about Rs.38 Crores along with interest has been confirmed and penalties imposed.
3.3 Based on investigation by the Preventive Wing, three show-cause notices were issued, inter alia, alleging suppression of production of aerated water bottles on the basis of alleged excess use of crown corks and alleging irregular availment of Cenvat credit on plastic crates and duty demand of about Rs.3.6 Crores along with interest has been confirmed and penalty imposed.
4.1 Ld. Advocate, Dr. Samir Chakraborty contested the demand based on alleged excess consumption of crown cork and made the following submissions :
(a) The show-cause notice and the order of the Commissioner have not taken into account the fact that the corks issued were also utilized for 200 ml aerated water bottles, and the demand has been made holding, as if the entire quantity of aerated bottles manufactured by them were 300 ml aerated water bottles variety only. Though they have specifically made the above submissions in reply to the show-cause notice, the same have not been dealt with by the Commissioner.
(b) Statements of the Representative of the appellants were recorded and referred to in the show-cause notice and the same were not furnished to them. The Commissioner has relied upon these statements without giving an opportunity to the appellants by providing copies of the same.
(c) The demand has been made merely based on presumption. The wastage of corks takes place under different circumstances during manufacture and during subsequent stages. There is no unusual excess shortage. In this regard, he relies on the statements of re-conciliation filed along with the replies which are relating to the period 1999-2000 to 2003-2004. The statements have been presented productwise i.e. separately in respect of Coca Cola, Fanta, Sprite, Thumps up, Limca and Kinley Soda which have not appreciated by the Commissioner.
(d) The appellants have furnished all relevant details in the periodical returns and there was no suppression of any relevant materials and therefore, extended period can not be invoked for demanding duty.
4.2 The ld. Advocate also contested the demand by denying the credit on crates. He submits that the crates are to be treated as packing materials and the same are durable and returnable in nature. He also submits that the proportionate cost of the crates stands included in the cost of aerated water bottles. Relying upon the decisions of the Tribunal in the case of CCE, Ludhiana Vs. Ludhiana Beverages Pvt. Ltd. reported in 2009 (92) RLT 612 (CESTAT-Del.) and in the case of Collector of Central Excise, Calcutta I Vs. Black Diamond Beverages Ltd. reported in 1997 (91) ELT 422 (Tribunal), he submits that they are eligible for credit.
5.1 Regarding demand of duty on the alleged suppression of production on the ground of mis-match between the quantity of concentrate used in the production of beverages, ld. advocate submits that the Commissioner has relied upon input output ratio on the basis of quantum of concentrate used in the production of beverages in the year 1999-2000 and adopted the same for demanding duty for the period from August, 2002 to March, 2005. He submits that the different products manufactured by them required different percentages on concentrates. Therefore, the average based on 1999-2000 has been mechanically and wrongly adopted for the other years without any regard to the proportional ratio of the various products manufactured during the relevant period.
5.2 The Commissioner in her order dated 31.5.06 has also taken into account the demand vide order dated 30.11.05 arising out of mis-match between the crown cork and the production and accordingly dropped the demand relating to the period wherever duty has already been demanded on the higher side based on shortage of crown cork, but she has chosen to demand differential duty whenever the demand based on alleged mis-match of concentrate was higher compared to alleged mis-match of crown cork. In other words, she has relied upon Order-in-Original dt.30.11.05 in confirming the demand vide order dated 31.5.06.
6.1 Ld. Advocate, Shri Vikram Nankani appearing in Appeal Nos.49/09 & 325/09 assailed the order of the Commissioner confirming demand of duty based on electricity consumption. The demand has been made holding that during November, 2002, the electricity consumption was 45910 units whereas the actual electricity consumption was 76729 units. Since a lower quantum of electricity was taken as a basis, the per unit production has been estimated as 97.1 bottles whereas it should be only 57.08 bottles. The appellants produced the original during personal hearing before the Commissioner, but the Commissioner has chosen to record that the original has not been produced for verification. After the personal hearing, the Commissioner has deputed a team of officers on several occasions for verification of electricity bills monthwise and in spite of co-operation extended by the appellants, the Commissioner has recorded that the said document was not produced before the authorities.
6.2 Even otherwise merely based on electricity consumption, no demand can be made on presumption of excess production and alleging clandestine removal of such excess production in the absence of other evidence corroborating the allegation.
6.3 The Commissioner has not appreciated the fact that more than 20 Crores bottles of 200 ml verities were manufactured and cleared by the appellants during the disputed period and has chosen to treat the entire aggregate production of about 28 Crores bottles as 300 ml bottles. Though a specific submission was made in this regard, the Commissioner has not dealt with the same.
6.4 The production of aerated bottles have to be viewed not merely taking into account the electricity supplied by the Electricity Board, but also taking into account electricity consumed using DG Sets. The fluctuation in electricity consumption presumed merely based on bills of Electricity Board is not a reliable one. The Commissioner has also wrongly recorded that the appellants have failed to produce the details of electricity consumption using DG Sets.
6.5 The ld. Advocate, Shri Nankani relying on the decision of the Honble Supreme Court in the case of Oudh Sugar Mills Ltd. Vs. Union of India reported in 1978 (2) ELT (J 172) (S.C.), submits that no duty demand can be raised merely based on assumption and presumption. He also submits that the burden is on the department to prove that there was excess production and that what was excess produced has been clandestinely removed. The department has not relied upon any evidence in the form of confessional statements of the representatives of the appellants or any documents showing transportation of un-accounted goods or identified any buyers of such un-accounted goods.
6.6 It is not the case of the department that they have invoked provisions similar to Rule 173E of erstwhile Central Excise Rules to determine a normal production and subsequently, the appellants were asked to explain the variation from the normal production.
6.7 Ld. Advocate also submitted that demand invoking extended period of limitation is not justified.
6.8 He also submits that remanding the matter may lead the department making out a fresh case and that the appellants should not be made worse of by filing appeal before the Tribunal.
7.1 The ld. Jt. CDR, Shri B. B. Agrawal, appearing for the Revenue supported the orders of the Commissioner. He ably assisted the Tribunal by presenting the facts relating the different appeals. Consequent to introduction of self removal procedure, lot of trust is reposed on the assessees records The audit has been conducted only based on documents provided by the appellant unit. The appellants have not co-operated in the further verification process based on audit objection. He particularly submits that the electricity consumption figures relied upon in the show-cause notices including for the month of November, 2002 were basically taken from the records provided by the appellants.
7.2 They have failed to produce the original bill for the month of November, 2002 before the Commissioner. The claim that they produced the same before the Commissioner during personal hearing is false as seen from the records. Even in their letter dated 1.10.2008 submitted after the personal hearing, no such claim of submitting the original to the Commissioner during personal hearing has not been made. He also draws our attention to the specific finding of the Commissioner that the appellants have failed to produce evidence regarding use of generator during the relevant period.
7.3 He also submits that no specific submissions have been made regarding the Commissioner not taking into account 20 Crore bottles of 200 ml variety, whereas the order-in-original clearly records that the demand related to 300 ml bottles variety based on cork issued for the said variety only.
7.4 He also submits that the quantity of crown corks which are claimed to have been wasted is a huge quantity and they are of substantial value and the appellants have not claimed that they have sold such quantity of crown cork which have wasted.
7.5 Drawing our attention to the re-conciliation statement of cork for the year 1999-2000 relied upon by the ld. Advocate, he submits that in respect of at least two varieties, namely, Thumps Up and Limca, there are major discrepancies. He particularly submits that as per show-cause notice, in 20100 cases of Limca crowns were used in 482400 bottles at the ratio of 24 bottles per case whereas in the work-sheet given alongwith in reply by the appellants, 20100 cases of Limca were claimed to have been used in 274032 bottles. Similarly, wide variation between the figures in the show-cause notice and the figures in Annexure to the reply is noticed in respect of Thumps Up.
7.6 The ld. Jt. CDR also submits that the statements recorded by the officers of the Preventive Department have been clearly relied upon in the show-cause notice and the same has also been relied upon in Para 60 of the Order-in-Original. It cannot be presumed that copies of these statements have not been given to the appellants, even though these were not specifically listed as Annexure to the show-cause notice as relied upon documents. Even if, they were not furnished to them, nothing prevented the appellants from seeking copies of the same. Therefore, the allegation in this regard is un-founded. The demand has been made relying on production yield report and computed raw materials monthly report, but these documents have not been produced by the appellants along with their appeal memorandum.
7.7 The decision relied upon by the appellants that no demand can be made on the basis of allegation of shortage of one raw material may not be applied to the facts of the present case.
7.8 He specifically draws our attention that for the period May, 2002 to March, 2005, there was an excess usage of crown cork as well as concentrate and the same were being claimed as due to wastage and the power consumption was also quite high. During this period, the appellants were duty bound to explain reasons for such wide variation in the relevant parameters of production. He also draws our attention to the order of the Commissioner on concentrate to some extent has taken into account the factor relating to un-explained excess use of crown which was claimed as wasted.
7.9 Regarding the claim for Cenvat credit on crates, the ld. Jt. CDR submits that in the proceedings before the Commissioner, there is no submission that the apportioned cost of crates is included in the value of the aerated bottles. Such a claim has been made for the first time before the Tribunal. The claim that they have included the cost of crates in the value of aerated water bottles, has to be viewed in the context of specific provision of Section 4 which excludes the cost of durable and returnable containers.
8.1 We have carefully considered the submissions made from both sides and perused the case records. The manufacture of aerated water bottles requires several ingredients, like water, sugar, carbon-di-oxide gas, concentrate and bottles etc. We find that the audit team had visited the unit during December, 2002. It is seen that two different objections have been raised. One objection related to mis-match between production recorded and the quantity of concentrate used and the other objection related to consumption of power vis-`-vis production recorded. It is not known why the department chose to issue show-cause notices based on each of these two parameters separately when undisputedly concentrate and electricity are common production factors in respect of aerated bottles.
8.2 We also find that the preventive department has embarked on investigation in May, 2003 focussing on only one factor of production, namely, crown cork apparently not aware of the audit objections based on other factors of production and show-cause notices have been issued based on discrepancies noticed on consumption of crown corks.
8.3 The show-cause notices involved in four appeals have been issued on different dates. Surprisingly, some of the show-cause notices have been issued based only on one parameter even after the Tribunal has passed interim orders against the department in August, 2006 and December, 2006. We find that for the period May, 2002 to March, 2005, there are allegations of suppression of production compared to use of crown cork, use of concentrate and also use of power. It would have been appropriate that the investigating authorities linked the investigation at least for the overlapping period and issued one show-cause notice. Having failed to integrate the investigation, it is expected that at least the adjudicating authority should have linked the show-cause notices proposing demand on the same final product namely, aerated water bottles on three different grounds.
8.4 If the appeals were separately listed before the Tribunal, perhaps each appeal would have been decided only based on single parameter. Now, we are dealing with appeals involving several demands on aerated water bottles and for substantial period, the demands are undisputedly overlapping.
8.5 Further, we find that there is no evidence that the statements recorded from the representative of the appellants in connection with the mis-match of crown cork with the recorded production which have been referred in the show-cause notice and relied upon by the Commissioner in his order have been supplied to the appellants.
8.6 We also, prima-facie, find that there is no clear decision on the claim of the appellants regarding 200 ml bottles having been treated as 300 ml bottles. If 3 litres of aerated water of a particular varity is to be filled in 300 ml bottles, the number of bottles required will be 10 bottles and crown cork required will be 10. On the other hand, if 3 litres of the same aerated water are to be filled in 200 ml, the number of bottles required and the crown cork required will be 15. Neither the show-cause notice makes it clear as to how much number of crown corks were issued, varietywise nor the reply by the appellants make a categorical claim supported by the statistics for the relevant month. These are basic facts which could have been re-conciled in the appellants reply by producing extracts from RG I and the monthly returns. We find that neither the show-cause notice nor the reply to the show-cause notice nor the order-in-original is in a position to help us to decide these facts on issue.
8.7 Further, demand has been made taking the electricity consumption for the month of November, 2002 as 45910 units whereas the appellants are claiming the same to be 76729 units. The claims were being made that the bills were produced before the Commissioner and also subsequently to the teams of officers. This claim is contradicted by the Department. The Commissioner could have called for this or alternatively the appellants could have come forward to produce the same before the Commissioner. We feel sad to comment any further on this issue. During hearing, the original electricity bill was produced for our perusal. We deem it appropriate that an opportunity should be given for producing the original before the Commissioner. Under these circumstances, we deem it appropriate that an opportunity to the appellants should be given to produce the original before the Commissioner. We also find wide variation between the quantity of electricity referred monthwise in the show-cause notice and the quantity of electricity as per bills of Electricity Board as provided by the appellants. This should be reconciled if need be by deputing a team of officers to the Electricity Board and procuring copies of the bills directly from them along with payments details. On this ground also, we deem it appropriate that the matter is to be go back to the original authority.
8.8 Regarding the demand by denying Cenvat Credit, we find that the appellants are claiming for the first time before us that the sale value included apportioned cost of crates and as submitted by the ld. Jt CDR, this also requires verification.
8.9 We thus find that the appellants are challenging the very factual basis of demands. For example, the electricity consumption figures relied for 1999-2000 which is the basis for massive demand is disputed ; the consumption figures of crown corks are being disputed. We also find overlapping of demands by the orders as the period involved is clearly overlapping. Further, we find that Commissioner vide order dated 31.5.06 has linked her findings to earlier order dated 30.11.05 and adopted different yardsticks for confirming demand of duty.
9. In view of the above, we set aside the impugned orders of the Commissioner and remand the matters for fresh consideration. We expect the appellants to co-operate in the adjudication proceedings. We direct the appellants to make further submissions on various points within 45 days from the date of receipt of this order. The Commissioner shall, if necessary, conduct verification with the Electricity Board and result of such verification shall be made available to the appellants. Copies of the statements which have been relied upon in the show-cause notice shall also be made available to the appellants within one month from the date of receipt of this order. The Commissioner shall grant a reasonable opportunity of hearing before taking a decision in the matters.
10. We clarify that we have not expressed any opinion on the merit of the case. Both sides are at liberty to raise all points before the Commissioner.
11. The denovo proceedings should be completed expeditiously preferably within six months from the date of receipt of this order.
(Dictated and pronounced in the open Court)
sd/ Sd/
( S. S. KANG ) ( M. VEERAIYAN )
VICE PRESIDENT TECHNICAL MEMBER
mm
10
Ex. Appeal Nos.EDM-118 & 494/06,
EDM- 49 & 325/09