Custom, Excise & Service Tax Tribunal
Star Industries Ltd vs Daman on 17 October, 2019
Customs, Excise & Service Tax Appellate Tribunal
West Zonal Bench At Ahmedabad
REGIONAL BENCH- COURT NO.3
Excise Appeal No. 11942 of 2019
[Arising out OIO-DMN-EXCUS-000-COM-039-18-19 passed by Commissioner of Central
Excise, Customs and Service Tax-DAMAN]
M/s. Star Industries Ltd ........Appellant
Plot No. 31, Dabhel Industrial Estate
Daman-Gujarat
VERSUS
C.C.E. & S.T. Daman ........Respondent
3rd Floor...Adarsh Dham Building, Vapi-Daman Road, Vapi Opp.Vapi Town Police Station, Vapi,Gujarat-396191 APPEARANCE:
Sh. Jitendra Motwani, Advocate for the Appellant Sh. Sameer Chitkara, Authorised representative for the Respondent CORAM: HON'BLE MEMBER (JUDICIAL), MR. RAMESH NAIR HON'BLE MEMBER (TECHNICAL), MR. RAJU Final Order No. A/ 11944 /2019 DATE OF HEARING: 17.09.2019 DATE OF DECISION: 17.10.2019 RAMESH NAIR The present appeal is filed against Order No. DMN/Excus-000-Com- 039-18-19 dated 05.02.2019. The impugned Order confirms a demand pertaining to show cause notice which was issued more than 20 years ago i.e. on 12.01.1999.
1.1 The brief facts of the case are that the Appellant M/s Star Industries Ltd., Daman has one more independent unit at Thane. The unit at Thane manufactures plain PVC films/sheets falling under Chapter sub-heading 3920.11 and 3920.12 and clears the same on payment of duty to the Daman unit who are the Appellants herein. The Appellant as mentioned in para 1 of the show cause notice, carry out post calendaring operations like checking/inspection of PVC films/sheets, cutting/slitting and packing jumbo rolls into smaller rolls.
2|Page E/11942/2019-DB 1.2 Initially 19 show cause notices were issued to the Thane unit for
the period October 1992 to December 1999 proposing to recover additional duty on the ground that the value at which the goods are cleared to the Daman unit is lower than the comparable market price. This Tribunal vide Order dated 10.04.2014 reported in 2014 (307) ELT 314 (Tri-Mumbai) set aside the demand raised on the Thane unit and upheld the valuation at which the goods were cleared to the Daman unit.
The said order has been accepted by the department and attained finality.
1.3 Simultaneously a show cause notice was issued to the Thane unit proposing to recover central excise duty of Rs. 5,35,74,360/- on certain cash amount purported to have been recovered towards printing charges. The Commissioner of Central Excise, Mumbai IV vide Order in Original dated 04.12.1998 noted that since the issue was in relation to the Daman unit, the show cause notice issued by the Thane unit was without jurisdiction. Accordingly, a fresh show cause notice was issued on 12.01.1999 to the appellant herein for recovery of Rs. 5,20,18,003/- .
1.4 The show cause notice culminated into OIO No. 2/MP/Vapi/2000 dated 11.09.2000 by which the duty sought to be recovered was confirmed alongwith interest and penalty. Appeal filed before this Tribunal against the said OIO was decided vide Order No. C-1/1569- 1570/WZB/2001 dated 19.05.2001 when the appeal of the appellant was allowed by way of remand and the adjudication authority was directed to pass fresh orders after deciding plea of the appellant seeking cross- examination of various witnesses. The operative part of the order is reproduced herein.
"We therefore allow this appeal and set aside the Commissioner's order. Mr. Nankani says he will within 30 days of receipt of this order, addresses a letter to the commissioner offering his justification for cross examination of various person. On receipt of this letter, the Commissioner shall decide which person if any, he chooses to make available for cross examination in accordance with the law on this subject, and intimate the appellant or its counsel. Thereafter he shall give the appellant an opportunity of being heard and pass orders in accordance with law".
3|Page E/11942/2019-DB 1.5 Pursuant to the aforesaid directions, the appellant filed a letter on 19.09.2001 providing for reasons for allowing cross examination of following witnesses viz.,
(i) Mr. K.M. Mathew (Sales Manager of Star Industries Ltd.,)
(ii) Mr. Rohit Amin, former Director of M/s. Star Industries Ltd)
(iii) Mr. J.J. Baria, Director of M/s. Star Industries Ltd
(iv) Mr. Om Prakash S
(v) Panchnama witnesses viz., Smt. Meena A Kriplani; and Shri N.A. Kumble of the action at the residence of Mr. Om Prakash Sarawagi on 11.07.1996 1.6 A request for cross examination was again made by the appellant herein on 19.10.2002.
1.7 A personal hearing was fixed after more than 18 months of the remand order on 12.06.2003, 24.06.2003 and 07.07.2003. The Appellant on each of the occasion filed an adjournment letter seeking cross examination of the witnesses. On 22.07.2003 the appellant appeared for personal hearing and submitted that activity carried out at Daman unit did not amount to manufacture and further requested for cross- examination of witnesses named in the earlier letters.
1.8 Vide letter dated 26.06.2003, the appellant filed submissions to submit that the duty paid PVC films received in jumbo rolls from the Thane factory and the activity of slitting/cutting and embossing did not amount to manufacture. The impugned Order observes that the show cause notice was transferred to Call Book Register on 09.12.2004 to await the decision of Supreme Court in the case of Rajpurohit GMP India Limited, vs. CCE, Surat.
1.9 Thereafter, approximately 14 years thereafter, personal hearing notice was issued to the appellant at their Mumbai address on 18.06.2018. In response, an adjournment was sought by the appellant. Thereafter various correspondences were exchanged between the adjudicating authority and the authorised representative of the appellant for obtaining the copy of SCN and relied upon documents as has been mentioned the Impugned order. Copy of the SCN was thereafter given to the appellant. Since, the Witnesses did not appear for cross examination, the appellant requested the adjudicating authority to proceed with the hearing of the show cause notice as the same was pending for over 20 years.
4|Page E/11942/2019-DB 1.10 The impugned order thereafter came to be passed by the adjudicating authority which has been challenged by way of the captioned appeal.
2. Shri Jitendra Motwani, Ld Counsel appearing on behalf of the Appellant made following submissions:
- Activities carried out at Daman unit did not amount to manufacture and therefore, even if the allegations mentioned in the show cause notice are assumed to be correct, no duty can be demanded. Heavy reliance was placed on the decision of this Tribunal in M/s. Bombay Kunststoff Pharma Supplies P. Ltd v. CCE & S.T. Daman [Final Order No. A/11571-11578/2018-CESTAT, Ahmedabad] wherein after placing reliance on the decision of Supreme Court in Caprihans India Ltd., v. Commissioner of Central Excise [2015 (325) ELT 632 (S.C.) it has been held that activity of printing of PVC Sheets did not amount to manufacture;
Apart from the above reliance was placed on the following decisions
(i) Union of India v. J.G. Glass Industries Ltd [1998 (97) ELT 5 (S.C)]
(ii) Commissioner of Central Excise, Thane v. Caprihans India Ltd [2005 (181) ELT 77 (Tri.Mum)]
(iii) Commissioner v. Caprihans India Ltd., [2016 (336) ELT A188 (SC)]
(iv) CCE & C, Hyderabad -IV V.s Rasmi Wax Coated Paper & Printing Industry reported in 2015 (325) E.L.T. 292 (A.P.)
- Alternatively, he submitted that show cause notice was adjudicated after a period of over 20 years and the proceedings should be set aside on the ground of delay alone and in this regard, reliance was placed on the following decisions:
(i) Premier Ltd., v Union of India 2017 [(354) ELT 365 (Bom.)]
(ii) Union of India v. Premier Ltd [2018 (360) ELT A181 (SC)
(iii) Parimal Textiles v UOI [2018 (8) G.S.T.L 361 (Guj.)]
(iv) Union of India v. Parimal Textiles [2018(13) GSTL J143(SC)]
(v) Alidhara Textiles Engineers Ltd. v. UOI [2018 (360) ELT 493 (Guj.)]
(vi) Pooja Tex Prints Pvt. Ltd v. UOI [2018 (9) G.S.T.L. 129 (Guj).
- He submitted that the adjudicating authority in the impugned order has observed that the matter was transferred to call book to await
5|Page E/11942/2019-DB the outcome of the matter pending before Hon'ble Supreme Court in the case of Rajpurohit GMP India Ltd. He submitted that the Hon'ble Supreme court in the year 2008 itself had upheld the view of the Tribunal by holding that activity of slitting and cutting sheets from jumbo rolls to smaller size did not amount to manufacture. The decision is reported in 2008 (231) ELT 577 (S.C.) It is his submission that once the matter was kept in call book to await the decision of the Hon'ble Supreme court, then the adjudicating authority was wrong to ignore the same as the law therein was passed in favour of the Appellant. It was alternatively submitted that there was no reason to keep the matter in call book for a period of around 10 years thereafter.
- He further submitted that the reliance placed by the adjudicating authority on the decision of the Hon'ble Supreme Court in the case of Siddhartha Tubes v. CCE reported at 2000 (115) ELT 32(SC)wherein it is held that even where the process was not amounting to manufacture the expenditure incurred upto the factory gate clearances were includible in the assessable value is not correct inasmuch as the Hon'ble Supreme Court in later decision viz., Maruti Suzuki India Ltd., v. Commissioner of Central Excise, New Delhi has held that to invoke the valuation provisions under Section 4, there must be manufacture under Section 3. He further submitted that the decision in Siddhartha Tubes (supra) cannot be applied to the present case as facts are completely different therein in as much as in that case the pipes were manufactured and activity of galvanisation was carried out in the same factory whereas in the present case the activity of cutting/slitting and printing of already manufactured PVC sheets was carried out at Daman factory and since the same did not amount to manufacture, Daman unit was not required to obtain central excise registration under law.
- It was submitted that the show cause notice was issued demanding duty on cash purported to have been received on basis of documents seized from third party and statements of witnesses who could be cross examined due to lapse of time. He placed reliance on decision of the Supreme Court in the case of Andaman Timber Industries v. Commissioner of C. Ex., Kolkata-II [2017 (50) S.T.R. 93 (S.C.)] to submit that statements cannot form sole basis
6|Page E/11942/2019-DB of the demand in absence of cross examination. Further reliance was placed on the judgement of the Gujarat High Court in Commissioner of C. Ex., Ahmedabad v. Sakeen Alloys Pvt. Ltd. [2014 (308) E.L.T. 655 (Guj.)] which while upholding the decision of this Hon'ble Tribunal reported in [2013 (296) E.L.T. 392 (Tri. - Ahmd.) held that reliance cannot be placed on documents seized from third party without independent corroboration. Paragraphs of SCN were shown to us wherein it was recorded that the demand is sought to be confirmed on the basis of the documents seized from premises of one Mr. Omprakash.
- It was finally submitted that the show cause notice issued on 12.01.1999 was barred by limitation as the same proposes to confirm duty for goods cleared during the year 1993-94 to 1996-97 (upto June 1996) as the issue of whether duty was required to be paid on printing of plain PVC films were ultimately settled by the Hon'ble Supreme Court in favour of the assesse in the case of Caprihans India Limited (supra). It was also submitted that on similar grounds 16 SCNs were issued to Thane unit for the period October 1992 to August 1999. Further Thane unit was issued another SCN in the year December 1996 on the very same allegations which are made in the impugned SCN issued in 1999 which culminated into the impugned order and as such in view of law laid down by Hon'ble Supreme Court in Nizam Sugar Factory v. Collector -- 2006 (197) E.L.T. 465 (S.C.) demand is barred by limitation.
3. Shri Sameer Chitkara, Additional Commissioner (AR) appearing on behalf of the revenue reiterated the findings of the impugned Order.
4. We have carefully considered the submissions made by both sides including written submissions filed by the Appellant post final hearing and perused the records. We find that there is no dispute regarding facts of the case between the revenue and the appellant in relation to activity carried out at the Daman factory. It is evident from the show cause notice, that the Appellant used to carry out post calendaring operations like checking/inspection of PVC films/sheets, cutting/slitting, printing and packing jumbo rolls into smaller rolls. The said fact is clear from the Show Cause Notice dated 12.01.1999 issued to the Appellant. Even the impugned order has confirmed the demand against the Appellant after
7|Page E/11942/2019-DB holding that the aforesaid activity of printing carried out at Daman unit amounted to manufacture.
4.1 Keeping the above fact in mind, the moot question that needs to be decided is whether the activity carried out in the Daman factory of cutting/slitting of jumbo rolls of plain PVC Sheets into smaller rolls and printing of the same amounts to manufacture or otherwise.
4.2 We find that this Tribunal in the case of Bombay Kunststoff Pharma Supplies Pvt. Ltd v. CCE final order no. A/11571/11578/2018 dated 30.07.2018 has decided a similar issue where it is held as under:
"On similar issue many more judgments cited by the Ld. Counsel, wherein the same view has been taken. As regard, the Ld. AR's submission that since the printed sheet has a different use and marketability, the same is distinct product. This submission stand negated in view of all the above judgments of the Hon'ble Supreme Court wherein also the same facts were involved that the use of the printed product has a different marketability and use, despite this fact the Hon'ble Supreme Court has taken a view that printing activity either on the PVC sheet or glass bottle does not bring the new and distinct product. As regard the Hon'ble Supreme Court judgment in case of Fitrite Packers (supra) relied upon by Ld. AR, we after careful reading the same found that in that case plain paper was printed with Logo of 'Parle'. In such case the said printed paper cannot be used other than 'parle' hence view was taken that being specific use, it is a distinct product, which is not the case here. In the present case the printing is of general nature and not meant for any specific person and specific use. Hence the Apex Court's case in Fitrite Packers stand distinguished. As regard the issue raised by the Ld. Counsel on limitation, we find that there is no dispute that the issue involved is neat question of law that whether the activity of printing of PVC sheet is amount to manufacture or otherwise. There were catena of judgments on the same set of facts moreover, on the same activities and same product, therefore, the matter involved is pure interpretation of law. The Appellant had a bonafide belief that in view of all the judgments particularly in the case of Caprihans India Ltd. (supra) activity of printing of PVC Sheet is not amount of manufacture. There were conflicting decisions of Tribunal in the case of Caprihans India (supra). Therefore, we are of the view that the extended period could not have been invoked. Hence, the demand for the extended period is not sustainable on the ground of limitation also. As per our above discussion, we hold that the activities of printing of PVC sheet by the Appellant does not amount to manufacture. Hence, the same is not liable for any duty. Accordingly, all the impugned orders are set aside and the appeals are allowed.
8|Page E/11942/2019-DB 4.3 While deciding the aforesaid case, the Tribunal relied upon the following decisions of the Hon'ble Supreme Court in the case of.
a. Caprihans India Ltd. vs Commissioner 2010 (255) ELT A44(SC) b. Caprihans India Ltd. vs Commissioner of C.Ex. 2015 (11) TMI 1170-Supreme Court c. Commr. of C. Ex. Jaipur vs Pitamber Coated Paper Ltd. 2015 (319) ELT 357 (SC) d. UOI vs J.G. Glass Industries 1998 (97) ELT 5 (SC) e. UOI vs Alembic Glass Industries Ltd. 2010 (259) ELT 8 (SC) 4.4 Apart from the above, it would be important to reproduce the observation of the Adjudicating Authority in Para V, Internal Page 9 of the OIO:
(V) On 09.12.2004, the impugned show cause notice was transferred to the Call Book Register citing the case of M/s.
Rajpurohit GMP (I) Ltd. Silvassa and Others v. CCE Surat which was pending before the Hon'ble Apex Court for decision on the issue as to whether cutting and slitting of jumbo roll amount of manufacture or not. The impugned show cause notice was retrieved from the Call Book Register on 06.2.2018. A fresh personal hearing was granted on 18.06.2018 and a copy of PH letter was also sent to assessee's Mumbai address besides Daman address. In response, M/s. Economic Laws Practice vide their No. ELP/JHM/VSC/44/2018 dated 15.06.2016, on behalf of the assesse sought adjournment in the matter."
4.5 It is clear from the above that the show cause notice was transferred to the Call Book Register citing the case of M/s. Raj Purohit GMP India Limited v. Commissioner of Central Excise. We have perused the said decision of the Tribunal and note that the issue before the Tribunal was whether activity of slitting or cutting sheets/plastic sheets amounted to manufacture. The Tribunal vide Order dated 13.06.2003 reported in 2003 (162) ELT 431 has held as under:
"In the instant case, the facts are entirely different. Here after the product has been cut and slit, it remains the steel product. No evidence has been mentioned in the show cause notice nor any evidence by means of affidavit from the persons who deal with them has been produced by the department, stating that the resultant products are known from having a different character, name and use as from the original product. As stated earlier, in the absence of the same, it will be very difficult for us to accept the case of the department. The subsequent judgment of Bemcee Ltd. - 2003 (151) E.L.T. 545 has been referred to by the learned Counsel for the Appellant for this proposition, namely the change in classification of the final product from that of first
9|Page E/11942/2019-DB product after processing is irrelevant for deciding the excisability. As far as the judgment of the Supreme Court in the case of Lal Woollen and Silk Mills (P) Ltd. is concerned, the same has been answered by the later judgment of the Supreme Court in the case of CCE v. Markfed Vanaspati & Allied Indus. - 2003 (153) E.L.T. 491 (S.C.) referred to above. Therefore, in our view, in the absence of any material evidence furnished by the department, we are unable to agree with the stand taken by the department in the instant cases. Our comments regarding hot-rolled sheet products will equally hold good for plastic products. We are therefore of the view that the impugned order passed by the adjudicating authority is wrong in law and therefore set aside."
4.6 The appeal filed by the department before the Supreme Court was dismissed as reported in 2008 (231) ELT 577 (SC). The Supreme Court while upholding the decision of the Tribunal held that the activity of cutting and slitting sheets/films did not amount to manufacture. Once it is not in dispute that the matter was transferred to Call Book awaiting the aforesaid decision of the Hon'ble Supreme Court, the Adjudicating Authority was in error in ignoring the ratio laid down by the Hon'ble Supreme Court. In our view the issue in the said decision and in the case of Caprihans India Ltd. (supra) was identical to the case in hand. Similar issue was favourably decided by the Andhra Pradesh High court in the case of CCE & C, Hyderabad -IV V.s Rasmi Wax Coated Paper & Printing Industry reported in 2015 (325) E.L.T. 292 (A.P.).
4.7 The Adjudicating Authority in the impugned Order has held that the activity of printing amounts to manufacture by placing reliance on the decision of the Hon'ble Supreme Court in the case of Laminated Packaging v. CCE [1990 (49) ELT 326 (S.C.). On perusing the said decision we are of the view that the same will not be applicable to the facts of the present case. In Laminated packaging (supra) the activity of lamination of papers was held to be amounting to manufacture on the basis of the evidence led in support of the submission that plain kraft paper and laminated kraft paper are distinct and separate products known in the market. whereas in the present case, after the activity of cutting/printing carried out on already manufactured PVC sheets does not bring about any new product in existence as PVC sheets remain PVC sheets only. The SCN has not even alleged that a new commodity comes into existence after the activity of cutting/slitting and printing is carried out at the Daman unit of the Appellant. In any event we find merit in the 10 | P a g e E/11942/2019-DB contention of the Appellant that PVC sheets after cutting/slitting and printing remains the same and the basic characteristics of the sheet also remains the same.
4.8 As noted above on the same issue, the Hon'ble Supreme court in M/s. Raj Purohit GMP India Limited (supra) and Caprihans India Limited (supra) have settled in the issue in favour of the Appellant. This Tribunal in Bombay Kunststoff (supra) has followed the said view and held that activity of printing of PVC sheets does not amount manufacture. Respectfully following the aforesaid decisions, we hold that the activity carried out at Daman unit did not amount to manufacture. Consequently, demand against the Appellant will have to be dropped.
4.9 The Adjudicating Authority has further placed reliance on the decision of the Hon'ble Supreme Court in the case of Sidhartha Tubes (supra) to hold that all expenditure incurred upto the stage of factory gate when removed on payment of duty are inclusive in the assessable value of excisable goods. We find that the reliance placed on the aforesaid decision of Siddhartha Tubes by the Adjudicating authority is incorrect as the same is not applicable to the facts of the present case. In Sidhartha Tubes (Supra) the assessee therein manufactured mild steel pipes and tubes and 30% of the production was cleared at that stage on payment of duty. Balance production was taken to separate shed in the same factory premises and galvanised. The dispute was whether the cost of galvanization even if the same did not amount to manufacture was includible in the value of the pipes or not. To this the Hon'ble Supreme Court held that, the mere fact that galvanization was done subsequent to paying duty on the M.S. black pipes could not, by itself, be a ground for not including the cost of galvanisation in the assessable value of the black pipes subjected to the process of galvanisation. It was held that since galvanization was carried out in the same factory the manufacturing process got completed after the process of galvanization. The facts in the present case are completely different as in the present case undisputedly the plain PVC sheets are manufactured in Thane unit and the activity of printing is carried out at a completely different factory/unit i.e. at Daman. The Daman unit receive already manufactured PVC sheets. In view thereof once it is held that PVC sheets cleared by Thane unit was a final product and activity of cutting/slitting and printing carried out at Daman unit did not amount to manufacture, 11 | P a g e E/11942/2019-DB then question of paying duty on printing charges by the Appellant did not arise.
4.10 Apart from the above we note that the Hon'ble Supreme Court in the case of Maruti Suzuki India Ltd., v. Commissioner of Central Excise, New Delhi reported in 2015(318) ELT 353 (SC) has held as under:
19. Shri Guru Krishna Kumar, learned senior counsel, then cited Siddhartha Tubes Ltd. v. Commissioner of Customs & Central Excise, Indore (M.P.) [(2005) 13 SCC 559 = 2006 (193) E.L.T. 6 (S.C.)]. This case again concerned manufacture of galvanised pipes. This Court, in a very significant passage, stated :
"At the outset, we may state that value is the function of price under Section 4(4)(d)(i) of the Act. The concept of "valuation" is different from the concept of "manufacture".
Under Section 3 of the Act, the levy is on the manufacture of the goods. However, the measure of the levy is the normal price, as defined under Section 4(1)(a) of the Act. It is not disputed that galvanization as a process does not amount to manufacture. However, on facts, it has been found by the Commissioner that the process of galvanization has taken place before the product is cleared from the place of removal, as defined under Section 4(4)(b). Further, on facts, the Commissioner has found that galvanization has added to the quality of the product. It has increased the value of the pipes. Hence, the costs incurred by the assessee for galvanization had to be loaded on to the sale price of the pipes. Therefore, the cost had to be included in the assessable value of MS galvanized pipes. We do not find any error in the reasoning of the adjudicating authority."
20. It is clear, as is apparent from the opening words of Section 4 of the Central Excise Act, 1944, that there must first be manufacture in order to attract the charging section, namely Section 3 of the Central Excise Act, 1944 before one comes to valuation of goods under Section 4.
21. On the facts of the present case, we have first, therefore, to arrive at whether there is "manufacture" at all and only subsequently does the question arise as to if this is so, what is the valuation of the processed goods and whether duty is payable upon them. ...
4.11 It is clear from the aforesaid that to include any amount towards assessable value of goods, there must first be manufacture to attract the charging section of the Central Excise Act and only then the valuation of goods under section 4 will have to be looked into. In the present case, as stated above, since the activity of cutting/slitting and printing of PVC sheets does not amount to manufacture, the question of including any 12 | P a g e E/11942/2019-DB charges towards printing in the assessable value will not arise. The decision of Sidhartha Tubes (supra) will not be applicable to the present case for the above reason also.
4.12 While on merits we have held that in law activity of printing does not amount to manufacture, it will be important to peruse the show cause notice dated 12.01.1999 and understand the reasons on the basis of which the demand is sought to be confirmed against the Appellant. The present investigation was initiated on the basis of an allegation that the Appellant was receiving some sale proceeds in cash. The show cause notice records that the demand is sought to be confirmed based on certain records which were seized from the residence of one Mr. Om Prakash who was working with the Auditors of Star Industries, Thane. Internal page 8 and 9 of the SCN reads as under:
The demand is worked out on the basis of records/files no. 2 & 5 seized under panchanama on 11.7.96 from the residence of Shri. Om Prakash S. in the said files the assessee have maintained information of receipt of "F/FF"
for the year 1993-94, 1994-95, 1995-96 & 1996-97 (till June 96'). Shri Om Prakash S, employee of Auditor of M/s Star Industries Ltd. in his statement recorded under section 14 of Central Excise Act, 1944 on 5.12.96 (Annexure III(xvi)) has stated that file no. 2 & 5 are seized from his residence on 11.7.96 contains information of "F/FF"
transactions and monthwise calculation in respect of M/s Star Industries Ltd. Shri Om Prakash has signed all the papers of these files in a token of custodian of the record and attached a note in each file.
4.13 Apart from the above statements of employees of Star Industries, Thane viz., Shri K.M. Mathew, Sales Manager, Star Industries Limited. Statement of Mr. J.J. Baria and Mr. Rohit Amin, Directors of Star Industries, Thane have been relied upon in support on allegations pertaining to undervaluation of printed PVC sheets.
4.14 Though the Appellant has raised a grievance before the Adjudicating authority about non receipt of the relied upon documents, the impugned order is silent on whether the same were supplied to the Appellant in the past. Another Submission made by the Appellant that each witness whose statement has been relied upon were not employed with Daman unit have been not been addressed by the Adjudicating authority. However, one fact that cannot be disputed is that the witnesses whose statements form the basis of the allegation of the SCN 13 | P a g e E/11942/2019-DB could not be cross examined due to inordinate delay of around 20 years in passing the impugned order. It has been recorded that two witnesses could not appear from cross examination due to old age and ill health. Further one witness could not be traced. The said issues could have been avoided if the adjudication proceedings could have been conducted without inordinate delay. We also find merit in the submission of the Appellant that charges of undervaluation are required to be established by production of sufficient and positive evidence leading to inevitable conclusion and the same cannot be upheld on the basis of documents seized from third party. In such a situation granting of cross examination of the said third party becomes very important to bring to the fore the true picture. In absence of such corroboration which prove the alleged guilt of the assessee beyond doubt, third party evidence in the form of price list purported to have been seized from the premises of Shri Omprakash and statements of witnesses who could not be cross examined cannot be relied upon to confirm serious allegations of undervaluation. The department has not carried out any investigation at the purchasers end who could have confirmed if any cash payment was collected by the Appellant over and above the invoice value. Further no evidence has been produced during investigation with respect to the price at which similar goods (PVC printed sheets) were sold in the market to show if the price at which goods were sold by the Appellant was as per the prevailing market rates during the period of dispute or the same were undervalued. Our view is supported by the decision of the Hon'ble Gujarat High court in the case of Commissioner v. Saakeen Alloys Pvt. Ltd. -- 2014 (308) E.L.T. 655 (Guj.) wherein it is held as under:
"7...In absence of any material reflecting the purchase of excessive raw material, shortage of finished goods, excess consumption of power like electricity, seizure of cash, etc., the Tribunal noted and held that there was nothing to bank upon except the bare confessional statements of the proprietor and of some of the persons connected with the manufacturing activities and such statements were retracted within no time of their recording. The Tribunal also noted the fact that the requisite opportunity of cross examination was also not made available so as to bring to the fore the true picture and therefore, it concluded against the Revenue observing that not permitting the cross-examination of a person in-charge of records of M/s. Sunrise Enterprises and absence of other cogent and positive evidences, would not permit it to sustain the demand of Rs. 1.85 Crores raised in the Demand notice and confirmed by both the authorities below."
14 | P a g e E/11942/2019-DB 4.15 The aforesaid decision has been upheld by the Hon'ble Supreme Court in Commissioner v. Saakeen Alloys Pvt. Ltd. - 2015 (319) E.L.T. A117 (S.C.).
4.16 Further this Tribunal in Rutvi Steel & Alloys v. Commissioner of Central Excise, Rajkot 2009 (243) E.L.T. 154 (Tri. - Ahmd.) has held as under:
"8... It does not require the support of precedent decisions to hold that the charges of clandestine removal are required to be established by production of sufficient and positive evidence leading to inevitable conclusion and the same cannot be upheld on the basis of the entries made in a diary recovered from the third party's premises and the statement of the authorized representative of that party. We are, accordingly, of the view that the findings of clandestine removal are unsustainable. We accordingly set aside the demand of duty of Rs. 1,21,290/- along with penalty of identical amount imposed under Section 11AC."
4.17 In the present case as well the evidence relied upon in the form of price lists have been resumed from the residence of Mr. Omprakash who as per Appellant was never employed with them. Apart from that, the fact that cross examinations could not be conducted due to delay in adjudication cannot be overlooked. Further we find force in the submission of the Appellant that while the SCN records that the said pricelist were recovered from the residence of Shri Omprakash, the Adjudicating authority in impugned order at Para VII (d) (iii) has held that as per Shri JN Rathod, Administration manager the price list for printed sheets were never filed. The aforesaid contradiction is itself enough to cast doubts on the existence of the Price lists and therefore the same, in our view, cannot be relied upon without independent corroboration. Further following the decision of the Hon'ble Supreme Court in Andaman Timber Industries v. Commissioner of C. Ex., Kolkata- II [2017 (50) S.T.R. 93 (S.C.)] we are of the view that the statements cannot form sole basis of confirming the allegation of undervaluation in absence of cross examination. Having held as above, we are of the view that the price list and statements cannot be relied upon without being supported by direct evidence showing under valuation and receipt of cash as alleged and consequently it cannot be conclusively proved that the Appellant had received any amount in cash as alleged in the show cause 15 | P a g e E/11942/2019-DB notice. Be that as it may, the demand confirmed against the Appellant in any event is required to be set aside as the activity carried out at daman factory did not amount to manufacture.
4.18 Learned Advocate appearing on behalf of the Appellant further assailed the impugned order on the ground of delay. He has placed strong reliance on the decisions of Hon'ble Bombay High court in the case of Premier Limited (supra) which has been upheld by the Hon'ble Supreme Court. It is his submission that the Adjudicating Authority has wrongly held that the delay in passing the impugned order is because of the Appellant and drew our attention to a chart forming part of his written submission to state that there was no delay on the part of the Appellants. Admittedly in the present case a show cause notice was issued on 12.01.1999 and the same was adjudicated by the impugned order dated 05.02.2019 i.e. more than 20 years later. In between in first round of litigation an OIO was passed on 11.09.2000 which was set aside by this Tribunal in May 2001 when the matter was remanded for de novo adjudication. Though the Remand Order was passed in 2001, de novo hearing was held after 2 years viz., on 12.06.2003. In between the Appellant vide letter dated 19.09.2001 sought cross examination in compliance of directions given in the remand order. Thereafter, in 2003, the Appellant in response to Personal hearing notices appeared before the adjudicating authority on 22.07.2003 and filed submissions on 26.07.2003. No order was passed either on the Appellant's plea for cross-examination or deciding the matter finally. Thereafter we note that the matter was sent to Call Book in the year 09.12.2004 and retrieved 14 years later in the year 2018. The reason to keep the matter in call book was to await the decision of the Hon'ble Supreme court in the case of Rajpurohit GMP (supra) which itself was delivered in 2008. There is no explanation as to why the matter was kept pending for over 10 years thereafter. We have gone through Plethora of decisions cited by the learned advocate on Delay in Adjudication and reproduce the findings of the Hon'ble Bombay High court in Premier Limited (supra) which has been upheld by the Hon'ble Supreme Court:
9. Though Mr. Bangur is aware of these judgments, he would submit that the facts in this case are somewhat distinct. It is the assessee who is to be blamed for keeping the proceedings pending. The Revenue had made every attempt to adjudicate them, but for want of co-operation from the assessee. We must outline the difference between the power that the authorities possess and which has to be 16 | P a g e E/11942/2019-DB exercised coupled with a duty. Just as there is power to issue any Show Cause Notice, equally there is a duty to adjudicate it promptly. If one is interested in protecting the revenue and to subserve the larger public interest, then, expediency demands that once a Show Cause Notice is issued and duly served, reasonable opportunity has to be afforded to the assessee to reply to the same and/or to submit his/her explanation on merits. If such an opportunity is availed of by the assessee and he/she duly inspects the record, then, the Revenue cannot be said to be acting unreasonably if it directs the assessee to get ready and argue the case. The Revenue would be justified in granting reasonable accommodation, but liberal adjournments do not serve any purpose but would rather defeat the public interest. The Revenue must understand that just as it is anxious to recover public money, the assessee is equally keen to face the consequences of legal proceedings. They do not wish to keep the proceedings lingering for they would want to concentrate on their business and not legal proceedings. It is a waste of their time as well. If an adjudication order is passed with reasonable expediency, even the assessees would arrange their affairs and in the event they are aggrieved, they would avail of the further remedies.
Therefore, this is a power coupled with a duty and which the Revenue officials must realise. The earlier it is the better it would be for all concerned.
10. The second aspect which requires elaboration is, if the understanding of the Revenue is that it has to wait endlessly for the assessee to appear and make submissions, it is not the assessee's right to delay the matter. There is no vested right in prolonging the proceedings and none can claim that the law permits this course. Adjournments may be sought frequently but they are not to be granted liberally. That gives impression that the Revenue is not interested in proceeding with the matter, or rather has a vested interest in assisting the assessee. In the case of Sangram Singh v. Election Tribunal, Kotah and Another, reported in AIR 1955 SC 425, the Hon'ble Supreme Court was required to explain as to what is an ex parte order.
11. Therefore, once the assessee is given sufficient opportunity to remain present, to argue his case, either by himself or with the assistance of an Advocate, then, the Revenue would be justified, if the assessee is prolonging the matter and deliberately, to pass orders in his absence. These orders can be then passed on merits and none can complain that he was not aware of or was denied the opportunity to defend himself. The principles of natural justice are not codified. They only contemplate that opportunity to defend has to be granted in the event an adverse order having civil consequences has to be passed. Therefore, the quasi-judicial authorities should realise that they need not be friendly or liberal with the assessee and to such an extent as would give an opportunity to the assessee to complain that the Show Cause Notice having been issued decades back, it cannot be adjudicated.
4.19 It is clear from the above findings that the revenue cannot be expected and infact should not be expected to endlessly wait for an assessee to co-operate with the adjudication proceedings before passing its order. The findings of the adjudicating authority to not rely the said decision on the ground that it was due to the negligence of the Appellant by losing the show cause notice and documents and seeking copies thereof and not appearing for hearing fixed and not attending cross 17 | P a g e E/11942/2019-DB examination of witness appears to be contrary to the facts recorded in the impugned order and as highlighted above. In any event the findings of the adjudicating authority are negated in the decision of Premier Limited (supra) reproduced above. In any event an assessee cannot be faulted or his actions cannot be termed as negligence if he seeks copies of SCN/relied upon documents when the matter is not adjudicated for 20 years. Similarly, the adjournments sought by the Appellant was due to non-availability of witnesses for cross examination. Even now the matter was ultimately adjudicated at the request of the Appellant.
5. Given the above facts and circumstances, the case laws relied upon by the Appellant are prima facie applicable to the facts of the present case. However, we have already set aside the impugned order by holding that the activity of cutting/ slitting/ printing of PVC Sheet carried out at Daman unit did not amount to manufacture and the evidence relied upon by the department in show cause notice is not conclusive to prove receipt of cash and or charge of undervaluation against the Appellant.
6. On the issue of limitation also we find considerable force in the submission of the Appellant that the facts were within the knowledge of the revenue inasmuch as the 19 notices issued to Thane unit for the period 1992 to 1999 were dropped on the basis of the report of the Daman Commissionerate to the effect that duty at Rs. 3 Per Kg is discharged on printing activity. It is not open for the revenue to claim ignorance of facts when the Thane unit was earlier issued an SCNs for undervaluation and the proposal of the Revenue was to include the value of printing charges in the assessable value of the plain PVC Sheets manufactured at Thane. The period in the present case is covered in the period for which 19 notices were issued to Thane. It is also a matter of fact that the demand raised in the said 19 show cause notices was ultimately set aside by this Tribunal vide order dated 10.04.2014 reported in 2014 (307) ELT 314 (Tri- Mum). The said decision of the Tribunal has been accepted by the revenue. In view thereof since the facts were within the knowledge of the department, extended period of limitation cannot be invoked in view of law laid down by Hon'ble Supreme Court in Nizam Sugar Factory v. Collector -- 2006 (197) E.L.T. 465 (S.C). Further the issue as to whether activity of carrying out printing on plain PVC sheets amounts to manufacture was litigated over the years and ultimately settled by the Supreme Court in favour of the 18 | P a g e E/11942/2019-DB assessee in the case of Caprihans (supra). The allegations made in the show cause notice on the basis of receipt of cash towards printing charges by the Appellant is not supported by any corroborative evidence. Keeping the overall facts in mind we are of the view that extended period of limitation cannot be invoked in the facts of the circumstances of the present case.
7. Based on the above findings, the impugned order is set aside both on merits and limitation the appeal is allowed with consequential relief if any.
(Pronounced in the open court on 17.10.2019) (RAMESH NAIR) MEMBER (JUDICIAL) (RAJU) MEMBER (TECHNICAL) Neha