Custom, Excise & Service Tax Tribunal
Dhariwal Industries Limited vs Commissioner Of Central Excise ... on 20 October, 2014
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL SOUTH ZONAL BENCH BANGALORE Final Order No. 21956-21964 / 2014 Application(s) Involved: E/Stay/28513/2013, E/Stay/28527/2013, E/Stay/28528/2013, E/Stay/28529/2013, E/Stay/28530/2013, E/Stay/28587/2013, E/Stay/28634/2013, E/Stay/28683/2013, E/Stay/28893/2013 in E/27931/2013-DB, E/27933/2013-DB, E/27934/2013-DB, E/27935/2013-DB, E/27936/2013-DB, E/27979/2013-DB, E/28015/2013-DB, E/28058/2013-DB, E/28229/2013-DB Appeal(s) Involved: E/27931/2013-DB, E/27933/2013-DB, E/27934/2013-DB, E/27935/2013-DB, E/27936/2013-DB, E/27979/2013-DB, E/28015/2013-DB, E/28058/2013-DB, E/28229/2013-DB [Arising out of Order-in-Original No.45/2013 dated 22/07/2013 passed by Commissioner of Central Excise, BANGALORE-I ] Dhariwal Industries Limited No.2, 3 & 4, Singasandra, Hosur Road BANGALORE - 560068 KARNATAKA Appellant(s) Prashanth S Bafna Ceo, Dhariwal Industries Limited, No. 2, 3 & 4, Singasandra Hosur Road, BANGALORE - 560068 KARNATAKA Appellant(s) Prakash R Dhariwal Managing Ditrector, Dhariwal Industries Limited, No. 2 3 &4, Singasandra, Hosur Road BANGALORE - 560068 KARNATAKA Appellant(s) Rasiklal M Dhariwal Chairman, Dhariwal Industries Limited, No. 2 3 &4, Singasandra, Hosur Road, BANGALORE - 560068 KARNATAKA Appellant(s) Jeevan B Sancheti Ceo Dhariwal Industries Limited, No. 2 3 &4, Singasandra, Hosur Road, BANGALORE - 560068 KARNATAKA Appellant(s) Sohanraj Mehta Partner Metha Associates No. 776/1, 1st Floor, 3rd Stage, Iii Block, Basaveswarnagar BANGALORE - 560079 KARNATAKA Appellant(s) Pavan Kumar Mehta No.52/1, 2nd Floor, Lalbagh Road, BANGALORE - 560027 KARNATAKA Appellant(s) Champion Packing Industries Pvt Ltd No.374 D, Bommasandra Industrial Area, BANGALORE - 560099 560099 Appellant(s) Shri M B Mallikarjuna Managing Partner Ms Sri Gajanan Arecanut Traders No. 799/6, Anekal Road, Chandapura, Shop No.2, BANGALORE - 560081 KARNATAKA Appellant(s) Versus Commissioner of Central Excise ,Customs and Service Tax Bangalore-i POST BOX NO 5400, CR BUILDINGS, BANGALORE - 560001 KARNATAKA Respondent(s)
Appearance:
HARI RADHAKRISHNAN ADVOCATE 17 1ST CROSS ST, 4TH AVENUE, BESANT NAGAR, CHENNAI - 600090 TN For the Appellant S.S RADHAKRISHNA # 17, 1ST CROSS STREET, IV TH AVENUE, BESANT NAGAR, CHENNAI - 600086 TAMILNADU For the Appellant B.G.CHIDANANDA URS #520, AMRUTH NIVAS, 7TH MAIN, 13TH CROSS, RMV 11 STAGE, DOLLARS COLONY, BANGALORE -560094 For the Appellant M.S. NAGARAJA, ADV M/S. T.RAJESWARA SASTRY & ASSOCIATES, NO.48, 11TH MAIN ROAD, BANASHANKARI II STAGE, BANGALORE 560070 For the Appellant RAVI SHANKAR & CHANDER KUMAR, ADVOCATES 504,4TH FLOOR, OXFORD TOWERS, NO.139, OLD AIRPORT ROAD, KODIHALLI, BANGALORE - 560008 KARNATAKA For the Appellant CORAM:
HON'BLE SHRI B.S.V.MURTHY, TECHNICAL MEMBER HON'BLE SHRI S.K. MOHANTY, JUDICIAL MEMBER Date of Hearing: 20/10/2014 Date of Decision: 20/10/2014 Order Per : B.S.V.MURTHY M/s. Dhariwal Industries Ltd. (DIL), Bangalore is a manufacturer of pan masala and gutkha falling under tariff heading 2403 99 90.
2. The Income Tax Department as part of their investigations in 2009 had raided the premises of one Shri Manoj Mithulal and seized certain records, loose papers and sheets which are said to be owned by Shri Sohanraj Mehta, the C & F Agent of the appellant. After obtaining the loose papers/sheets from the Income Tax authorities, the Central Excise authorities initiated investigations and a show-cause notice was issued on 1.8.2012 against M/s. DIL and several other persons associated with the company as well as employees/part of management of DIL. As a result of the proceedings, impugned order has been passed. In the impugned order, it has been held:
(i) 57085 cartons of RMD gutkha cleared by the assessee has to be treated as clandestinely removed without payment of duty during the period from July 2007 to February 2008 and held to be liable to confiscation.
(ii) Central Excise duty of Rs.26,57,29,571/- with interest is payable.
(iii) A redemption fine of Rs.2.6 crores in lieu of confiscation has to be paid.
(iv) Penalty of Rs.26,57,29,571/- is payable by DIL.
(v) Penalty of Rs.50 lakh is payable by Shri Rasiklal M. Dhariwal, Chairman of DIL.
(vi) Penalty of Rs.50 lakh is payable by Shri Prakash R. Dhariwal, Managing Director of DIL.
(vii) Penalty of Rs. 10 lakh is payable by Shri Sohanraj Mehta, Partner of Mehta Associates, the C & F Agent.
(viii) Penalty of Rs.5 lakh payable by Shri Prashanth S. Bafna, CEO,DIL.
(ix) Penalty of Rs.5 lakh is payable by Shri Jeevan B. Sancheti, CEO, DIL.
(x) Penalty of Rs.2 lakh is payable by Mr. Pavan Kumar Mehta, Proprietor of M/s. Mehta Marketing.
(xi) Penalty of Rs. 5 lakh is payable by Shri M. B. Mallikarjuna, Managing Partner, M/s. Sri Gajanana Arecanut Traders.
(xii) Penalty of Rs.2 lakh is payable by M/s. Champion Packaging Industries Pvt. Ltd.
(xiii) Penalty of Rs.1 lakh is payable by M/s. Rajhans Enterprises.
All are in appeal.
3. We kept the no of cases less because it had been stated that the issue would take a lot of time for hearing. Accordingly the learned counsel for DIL and other counsels for other appellants were heard who took us through the facts of the case in detail and their defence. We also heard the learned AR who vehemently argued and supported the impugned order and the findings therein. After considering the submissions made during the hearing and after going through the records, we found that even though we are reluctant to do so especially after hearing the matter in such detail, the following observations would show that we had no alternative but to resort to remanding the matter to the learned original authority for fresh decision. We also consider it appropriate to remand the matters under the circumstances since the appeals may not come up for final hearing in the near future if a stay is granted. However, having regard to the fact that the issue involved is clandestine removal, and in view of the fact that large number of persons are involved and the issue involved is also complicated if the adjudication proceedings to be taken afresh we have to proceed directly without delay, it may be necessary to put the appellants to some terms even if we are remanding the matter. This amount will be indicated at the end of the order.
3.1. The submissions made which have convinced us that the matter has to be remanded are only discussed and other details have been left out. The submissions and the discussions and conclusions are as under:
i. The learned counsel for DIL brought a carton and showed us and submitted that if 57085 cartons were to be removed without payment of duty and transported from the factory to the C & F Agent and thereafter to the dealers, more than 900 trucks would have been required for doing so. He also submitted that to carry the required supari supplied by the suppliers, a similar number of trucks would have been required. However not a single truck carrying such gutkha/pan masala removed without payment of duty or supari received in excess has been intercepted or seized. ii. There are no corroborative statements from any of suppliers of lamination rolls or other suppliers also. iii. The C & F Agent Shri Sohanraj Mehta had admitted and retracted; and finally in 2012 before the Central Excise authorities admitted that there were transactions which were not accounted for. It is his submission that in his statement before the Income Tax authorities which was subsequently retracted also he had stated that he was not only selling the products of DIL but also products from other manufacturers which he was not supposed to do. He had submitted that in respect of products received from others, he was using the Code A and in respect of goods received from DIL, he was using the Code DIL. He submitted that adjudicating authority has interpreted products with Code A as clearances made without payment of duty which is totally wrong. It was submitted that the statement of Shri Sohanraj Mehta that one gutka package according to the codes used by DIL and according to Shri Sohanraj Mehta means one lakh rupees and on this basis the amounts paid have been calculated. He submitted that the excess payments as per Shri Sohanraj Mehta has been discussed but not a single person to whom Shri Sohanraj Mehta is said to have paid the money have been contacted or statement recorded. Excess payments have been made to some suppliers but suppliers have stated that they had supplied everything on record and received the payments in cheques. In respect of additional payments, no statement has been recorded. Not a single buyers statement has been recorded admitting that he had purchased the appellants products without invoice and by payments in cash.
4. The learned counsel also submitted that during the period, as per the Boards instruction there was vigorous inspection and control over gutkha and pan masala manufacturers. He showed about 20 reports from the level officers of Superintendent to the Assistant Commissioner to submit that not even on a single instance there was any discrepancy found in the factory of the appellants either in the stock or in the records.
5. Even though the Commissioner has concluded that there was such removal of huge quantity of finished products, there is no discussion or evidence available to show excess consumption of raw materials, electricity, etc. No statement of people concerned with production has been recorded. The whole case is based on loose sheets recovered from the house of Shri Manoj Mitulal. These sheets belong to Shri Sohanraj Mehta according to the Revenue. However, no statement has been recorded from Shri Manoj Mitulal at all. He was not made available for cross examination also. The whole case depends upon the interpretation of loose sheets and the version of Shri Sohanraj Mehta which was changed several times during the period and unless the cross-examination of the persons was allowed, the appellants could not defend the case properly. The raw materials suppliers are also in appeal and their contentions is also that they have not supplied or purchased the appellants products removed clandestinely. It was also submitted that an audit was conducted, which was headed by a Commissioner and they also did not find any discrepancy in the records.
6. Even though we are not able to agree with the submission that the Revenue should have conducted investigation on the lines suggested by the learned counsel and unless that is done, the clandestine removal cannot be proved yet we find that in this cases there are certain important points have not been discussed and not considered. In our opinion, what is required to be proved by the department is preponderance of probability and therefore we need to examine whether on the basis of evidence collected and investigations done, a case has been made out against the appellant or not and we are not required to examine what are the omissions in the investigation. We find that in the impugned order there is no mention of surprise visits of the officers and the supervision/control exercised by the department and how the assessee could produce excess quantity in spite of such intense supervision. We take note of the fact that the Commissioners observation and the conclusion apparently is that the excess production and clandestine removal happened from the factory of the appellant which is registered with the Department. There is no indication to show that there was excess consumption of raw materials or there was mis-declaration of consumption by the appellants; there is no conclusion or evidence to show that quantum of production declared by the appellant was less than what was possible with support of evidence; no evidence has been gathered to show that there was excess use of machines or additional shifts of work done by the appellants during the relevant period; as already observed no consignment have been seized or intercepted while clearing without payment of duty; even though consumption of raw materials has been considered, how it has helped excess production has not been discussed. The fact of retraction of SLM has not been discussed; even though shri SLM had accepted certain income before the Income Tax authorities no questions were asked as to the what commission was earned and how much excess quantity he had sold and how he undertook these transactions; other than the statement of SLM, there is no other evidence to show that the meaning of codes A and Gutka package. The learned counsel questioned the correctness of the quantification based on loose sheets. No question has been asked and no verification has been conducted as regards the claim of Shri Shri Sohanraj Mehta that he was selling other products also. In our opinion, there is a need for detailed consideration of all evidences gathered; implication thereof and the correct classification on the basis of the evidence is required and this has not been done. We definitely are not saying that the fact that several aspects have not been investigated and therefore no case has been made out. What we say is that there is need for more detailed consideration of the available evidence and there is a need to show that with the available evidence, case has been made out. We also find that appellants had asked for cross-examination of only three persons and only one has been allowed and no reasons has been given for denying the cross examination of others. We feel that this also needs reconsideration. The learned counsel also submitted that even though it has been stated that a Chartered Accountant had been paid an amount of Rs.38 lakhs, no investigation has been done on this aspect also.
7. In our opinion, the Commissioner to whom we are remanding the matter should consider each and every point that may be submitted by the appellants, record his observations and consider details of evidence gathered and why submissions of the appellants are not acceptable.
8. In view of the above observation, we consider that the matter is required to be remanded for fresh adjudication by the learned Commissioner and we direct the appellant DIL to deposit an amount of Rs.40,00,000/- (Rupees Forty Lakhs Only) within eight weeks and report compliance to the original adjudicating authority who shall take up adjudication of the matter thereafter. We also request the learned Commissioner to communicate his acceptance or otherwise of the request for cross-examination of the persons requested for by the appellants in advance and hear the appellants and thereafter reach a conclusion in accordance with law.
9. As regards the remaining appellants on whom penalties have been imposed, we consider that their cases also are required to be heard afresh in view of the observations made hereinabove and further they also should be given reasonable opportunity to present their case. In their cases, we are not requiring them to deposit any amount since we have not required the appellant DIL also to deposit any portion of the penalty.
(Operative portion of the order has been pronounced in open court) S.K. MOHANTY JUDICIAL MEMBER B.S.V.MURTHY TECHNICAL MEMBER rv 2