Customs, Excise and Gold Tribunal - Mumbai
Raj Petroleum Products vs Commissioner Of Central Excise on 17 December, 2004
Equivalent citations: 2005(100)ECC153, 2005(192)ELT806(TRI-MUMBAI)
ORDER S.S. Sekhon, Member (T)
1. M/s Raj Petroleum products Ltd. the appellant are assessed under Central Excise Act, 1944 at their factory in Mumbai herein after referred to RP-M for brevity), where they are engaged in the manufacture of petroleum specialty products falling under CETA 1985 tariff heading 2710.90 & 271010. In other factory of their own at Panoli Gujarat (referred herein after as RPP for brevity) they are also manufacturing the same goods.
2. RP-M and RP-P are availing Modvat cedit on inputs. The officers of Central Excise Preventive Mumbai, on 19.11.98 conducted checks at the Mumbai factory, ie RP-M and found that huge quantity of imported oil was received without any corresponding entry in Central Excise Record maintained by RP-M. They made inquiries, searches of RP-M, RP-P. Raj Lubricants (Madras), Raj Petroleum Agency Hyderabad premises were conducted, further inquires made and show cause notice dated 24.5.1999 was issued to
i) R.P_M
ii) Director of M/s Raj Petroleum Product Ltd.
iii) Shri Kalubai, & Shri D.R. Choth and employees of M/s Raj Petroleum Products Ltd 1.3 The Show Cause notice alleged the contravention of the provision of Central Excise Act/Rule, as below-
Nature of contravention Section/Rule contravened
i) Removal of excisable goods without
valid invoice Rule 52A/]73G(2)
ii) Non-accounting of manufacture
clearance of excisable Goods in RGl register Rule 53/173G(4)
iii) Non accounting of manufacture & clearance
of Excisable goods in the RT12 returns. Rule 54/173 G(3)
iv) Clearance of excisable goods without
determining & discharging Central Rule l73F/173G(l)
Excise duty.
v) Modvat Credit without physical receipt of inputs Rule 57A
vi)Availment of qty credit duty credit, incorrectly, Rule 57G(7) &a (8)
In statutory records RG23 Pt. I & II & demanded duty of Rs. 97,21,742/- on Clandestine Removal or excisable goods the period 1994-95, 1995-96, 1996-97,1997-98 & 1998-97 as detailed in Annexure A-7 to the notice & demand & recovery of Modvat Credit of Rs. 39,59,631.90/- availed at RPM, which was not eligible & consequent penalties & interest liabilities.
1.4 These appeals are consequent to an order as:- The Commissioner confirmed the duty demands of duty of Rs. 97,21,742/- as made, ordered the appropriation of Rs. 44 Lakks paid during the inquiries & the recovery of Modvat Credit of Rs. 39,59,6331/- along with interest. Imposed penalties under Rule 173Q, 571 (4) Section 11 AC & Rs. 50 lakh each under Rule 209A,on the Directors & did not find the employees liable for a penalty under Rule 209A 2.1 Commissioner has found clandestine removal on-
The Gate Register maintained by the security guards posted at the gate of the premises of 124. G.D-Ambekar Marg. Kalachowki, Mumbai 400 033 and in this premises duly registered factory of RP-M is located along with the godown cum office of JIT. Both the said companies being of same group, they have hired the services of Private Security Company for the purpose of security. These security companies provide security to their clients as per their requirements and follow the procedures required by their clients. In this case the Gate Register was the requirement of RP-M and hence the same was maintained by the security guards posted by such private security company. The Register shows the receipts & removals in & from the said premises. Further the procedure of maintaining this Gate Register was discontinued after the search was carried out in the premises of RP-M & JIT; which is stated by Shri. Haresh Narayan Singh, security guard. In his statement dated 4.5.99. it is obvious that the said Gate Register was maintained & later discontinued as per the instructions of RP-M; and therefore, cannot be stated that the same was maintained by the security agency/company. Similarly, the Lab Register is the document maintained by the staff RP-M working in the Laboratory i.e. Chemist. The said register through is not prescribed under the provision of the Act or the Rule, it is a private record showing the details of receipt, test & blending of Oil of RP-M and which facilities the working of RP-M. Such types of records are maintained in all the factories for the smooth working and to know the correct positions of the work being conducted at the material times. And though such records are not statutory, these are reliable records as far as receipts, production, & clearance are concerned Similarly the records of various Transporters which were seized from them and discrepancies were noticed, which lead to unearth clandestine removal, are also required to be relied upon documents. The concerned persons of the Transport companies/agencies in their statements recorded Under Section 14 of the Act, have confirmed the facts of transporting goods without valid cover of duty payments or without bills/challans and for which bills were not raised but only entries were made in their private records. For such activities Transporters were paid in cash. Hence these documents such as Gate Register. Lab Register and the records of the Transporters are taken as relied upon documents as these records are contemporary. And therefore, the contention of RP-M that these documents cannot be relied upon is non-sustainable. (i) RP-M has submitted that JIT is an independent partnership firm and have submitted various copies Registrations issued by Government Authorities, Municipal Corporation etc. It is also submitted that RP-M has no way concerned with clearances of JIT whether clandestine or otherwise. Further they were not able to correlate entries of Lab Register as alleged. They have stated that JIT had cleared some goods from their Mumbai-9 godown and these would not appear in the Gate Register.
(ii) It is the fact in the instant notice JIT has been considered as an independent firm, however from various records and transactions it has been observed that RP-M has managed to clear the unaccounted goods in the name of JIT. The various records, such as Transporters documents. statements of recipients of such goods, support these clandestine removals. Records of Sanket Transport which shows deliveries of the goods to M/s Mahalaxmi Trades, Target Pharma, Unisar Chemicals, Lub-Link, Prince Agarbattis etc which were marked as 'X' for which no billing was made and the transporter was paid in cash. Though the entries of such deliveries were not deliveries were not available in statutory records of RP-M, they were available in the Gate Register.
(iii) Ravi Transport Company's documents also shows the deliveries of Spray Oil to various parties in Surat which were lifted from the premises of RP-M without valid cover of the duty payment. The parties of Surat who received such materials, such as Varan Chemicals, Dhiren Trading Company in their statements accepted the fact they have received these goods without any valid documents for which they had paid in cash to RP-M through Angadias. Shri Yogin Porecha, Director of RP-M, confirmed such cash receipts through private couriers to RP-M. The Octroi Payment receipts issued by Surat Municipality endorse the transport of materials though these sales do not appear in the records of RP-M, JIT the recipients. Similar is the case with Bombay Banglore Freight Carriers.
c) RP-M had received various consignments from different Calcutta parties billed in the name of Jalaram Trading Company. 338, Narsi Natha Street, Mumbai 400 009. This facts are evident from the Gate Register of RP-M and from the documents of Thakkar Transport. The inquiry with Central Excise, Caluria I Commissionerate revealed that the almost all but one were fictitious. Even the one existing firm M/s Tech Man Wax & Lub which sent the consignment was not accounted in the books of account of RP-M or JIT. It is also evident from the entries of Lab Register that RP-M had manufactured Transformer Oil. And were cleared on the bills of JIT as per the records of Sanket Transport. The purchase records of JIT do not show any purchase of Transformer Oil. But RP-M in their reply have merely stated that transport details through Sanket Transport are denied, and have not at all produced any supporting evidence for such denials. Further JIT had purchased 40 Tankers of Spray Oil from one Sagar Industries amounting to Rs. 72 lakhs (apprx). These purchases were not accounted with RP-M or JIT. but Gate Register showed the receipts of the materials and the Lab Register showed testing and using in the process of manufacture. RP-M has produced just one or two bills issued by Sagar Industries for entire 40 tankers purchase and for remaining quantities they have preferred to maintain silence. Such receipts of raw materials in un accounted way has been confirmed by the employees of RP-M; viz S/Shri Anil Lad, Production Supervisor and Kakubhai in their statements. Even the Directors of RP-M who are also Partners in JIT failed to explain such transactions in their statements as well as in reply to the questionnaire given to them.
d) From above paragraphs it is clear that RP-M has clandestine removed the finished goods in guise of clearances by J1T.RP-M also received the raw materials in the name of JIT and also in the name of fictitious firm i.e. Jalaram Trading Company. It is proved that RP-M had used the money received from various recipients of clandestinely removed goods, towards purchase of raw materials, which were not accounted and used in the production. Hence it is appropriate to club the clearances of JIT which were not accounted in their books as well in the gate Register and the clearances which were made without bills for which Octroi details were gathered with RP-M, because RP-M has taken the advantage of independent status of JIT to clear the finished goods manufactured by them and removed clandestinely. The Hon'ble Supreme Court in the matter of Gajanan Fabrics Distributors v. CCE, Pune-1997 (92) ELT 451 (SC), observed that......." The principal factor that leads us to this conclusion is the findings of the Collector, upheld by the Tribunal, that the seven units which are appellants before us 'are only a corporate facade although registered with various authorities with camouflage their actual identity and there by avail of exemption which, otherwise, would be in admissable to them' ......." This observation of the Apex Court fairly & squarely applies in the instant case. Hence the proviso to Section 11A (1) has been correctly invoked in the instant matter as the suppression of fact, wilful misstatement & malafide intentions to evade the Central Excise Duties are established. And the duty of Rs. 97,21,742/- demanded from RP-M under the said proviso is required to be confirmed.
e) The total duty so demanded is brought out in Annexure A-7 to the notice. Annexure A-1 consist details of sales through invoices of JIT for the period 1994-95 to 1998-99. Annexure A-2 shows details of sales by JIT to Surat Paries through Ravi Transport for the said period. And Annexure A-4 shows details of clandestine removals through other Transporters i.e. other than A-2. As the duty demand is confirmed, the amount of Rs. 44,00,000/- paid by RP-M vides PLA E.Nos. 434/31.3.99 & 1/20.5.99 is also required to be appropriated.
2.2 Commissioner found Modvat ineligibility on "Enough evidences in the Registers as well as corroborative nature have been made out in the notice. In respect of consignments of raw materials from Panama, the Managing Director of Panama Shri Amir Ali E. Rayani has confirmed the facts that he had given only Invoices to Shri Yogin Porecha. Director, RP-M, and who in turn handed over the acknowledgements. Shri Anil Lad.. Production Supervisor of RP-M in his statement had accepted the receipts on invoices of panama though the goods in actual were never received in the premises of RP-M. Similarly, the consignments from IPCL were actually received at RP-P, Gujrat, but billing was made to RP-M and the staff of RP-M has acknowledged the challans. The staff of RP-P Shri Chintan Sonara has confirmed these facts in his statement. The documents seized at HRL, also indicates this transactions. During the period of 3.8.96 to 19.11.98, RP-M had availed credit of 133 tankers of materials of IPCL, but as per the records of HRL, only 13 tankers were delivered to RP-M and even these were not entered in the Gate Registers. In reply to this allegations RP-M has only submitted the statement showing the Credit of duty availed RP-M & RP-P and no other submissions, which appears that they have nothing to say against the allegation. Hence, the Modvat credit of Rs. 39,59,631/-wrongly availed by RP-M is required to be recovered under Rule 571(1) of the Central Excise Rule, 1944. The details of Modvat misuse are shown in Annexure A-7 to the notice. Annexure A-5 shows the details of wrong availment of Modvat Credit on the goods of Panama and Annexure A-6 of IPCL for the period 1994-95 to 1998-99 2.3 After hearing both sides and considering the facts it is found. The present appeal involves the following two questions:
A ) Whether the Order confirming the duty demand on account of alleged clandestine removal as contained in annexure- A-1 to A4 of the show cause notice is correct?.
B) Whether the modvat credit availed by the Appellants is to be disallowed as per Annexure-A-5 and A-6 of the Show Cause Notice?
C) Whether interest & penalties as arrived can be upheld.
2.4 It is found-
(A) (i) This demand is split-up into 3 parts. The first part of the demand is based on the Amiexure-Al1 of the Show Cause. Notice. Which is a list of invoices of sales by (JIT which is a partnership firm. The said trading firm i.e. JIT also has an Office in the same compound with common gate where the factory of the Appellants, namely, M/'s. Raj Petroleum Products Ltd. (RPM) is also situate.
(ii) The sales of petroleum speciality oils by JIT under invoices mentioned in Annexuie-Al1 to the notice have been treated as the goods allegedly manufactured and removed without payment of duty by RPM. Annexure -A1 to the notice can not be relied for the following reasons:
(iii) The Commissioner has held JIT to be an independent entity and this finding of facts have not been challenged. JIT is not a party to the show cause notice and therefore RPM cannot be called upon to explain & be responsible for such 3rd party documents clearances etc. Any allegation about non-maintenance or improper maintenance or improper maintenance of correct accounts by JIT cannot lead to the conclusion that RPM manufactured and removed these goods without payment of duty.
(iv) The allegations that RPM manufactured and removed goods without payment of duty in the garb of trading activity of JIT is sought to be supported by two private records. These are as under
a) Register (l) Lab Register.
V As regards, the gate register, the same is maintained by an employee of the Security Agency as per statement of Harish N. Singh (relied upon). It is a record maintained, by third party, does not belong to RPM, this gate register is common for all receipts and discharges of goods from and at 124, G.D. Ambedkar Marg, the common compound area in which premises the existence of two independent entities conducting business has been established, ipso facto cannot lead to a conclusion that all removals shown therein are of goods of proprietary interest of RPM. Reliance in this connection, placed on the statutory registrations of JIT with different authorities in respect of Compound at 124, G.D. Ambedkar Marg, rent receipts. Bank record and insurance company policy to show that JIT was actually conducting business and/or operating out of 124 G.D Ambedkar Marg (were extensively relied upon in reply to show cause notice. Nothing is on record, why the said clearances as taken from Gate Register could not be of JIT & are necessarily of RPM, would be a presumption & assumption. Submission that all goods received at or discharged from common Gate of Compound at 124 G.D. Ambedkar Marg, cannot be attributed to RPM. Therefore demand as made can not be upheld. Transaction of genuine trading transactions therefore relating to JIT and removed would shield RP-M from payment of exise duty. It is surprising why JIT not given a notice & examined by the department. Further the said Gate register, is available only for period January 98 to Nov 98. The same cannot be made the basis for allegation for entire period of demand in the Show Cause Notice.
vi) As regards the lab register, it has been exhibited before us, shows samples drawn from various tankers/consignments, to have been tested at the laboratory of RPM. It also shows that samples of various oils that have been mixed/blended together and the technical specifications of these samples have been recorded in the lab register. The lab register also records samples of third parties which are received and tested in the lab of RPM. That itself would be sufficient to shatter the base & it to be a ground, to assume mat all the samples tested represent the quantity manufactured by RPM, & sold in the name of JIT without payment of excise duty. As is the case tried to be made. This register is not proved to be exclusive production test records of RP-M products. Manufacture of the excisable goods by RPM cannot be based relying upon this register
vii) RPM has in the reply to the show cause notice brought out the discrepancies in Annexure-Al. to the show cause notice. A/c accepted & Bonafide and genuine transactions of RPM as well as JIT have also not been recorded in the Gate Register. There are other sales of JIT over and above the sales shown in Annexure-A1 of identical/similar goods which are not being challenged. Reasons to select a few of them & ascribe the same to unaccounted production of RPM cannot be assumed.
viii) When, JIT has been purchasing raw materials with the address at 124 G.D. Ambedkar Marg & its independent existence is not under challenge, it is a trading concern and the activities of JIT are totally independent it has to be held that all receipts removals from gate of premiers as 124, GD Amdedkar Marg; Mumbai had nothing to do with quantum of manufacture of or & receipt disposal or goods of RPM
ix) The notice seeks & subjects to rely on the statements of the 3 Directors of RPM along with the statements of the Production Supervisor (Anil Lad) and Chemists (Prakash Suryavanshi) as also the Manager (Dungar C. Chothani alias Kakubhai). These statements cannot be read in isolation and when read in the context of the Gate Register and Lab Register as found above are not relevant for establishing clandestine removal. Force is found in this submission. As the documentary evidence does not establish clandestine removal, the oral statements based thereon, which travel beyond the documentary evidence have to be viewed with suspicion and in the event of a conflict, the documentary evidence should prevail; thereby when documentary evidence does not establish clandestine removal, the statements based thereon cannot prove see R.P. Industries v. Collector, 1996 (82) ELT 129. Besides, these statements are qualified and conditional. The statements have to be read together and as a whole are not in port & pieces, when so read, the statements do not establish clandestine removal.
x) The second part of the demand related to & on the documents seized from the premised of transporters as at Annexure-A2 to A4 of the notices. This Tribunal in the following cases held that transporters records are not relevant to prove clandestine removal.
A Durga Trading Co v. Commissioner [2002 (US) ELT 979] B Brims Products v. Commissioner of Central Excise [2001 (130) ELT 719] C Raj Sundeep Co. Gian Singh v. Collector of Central Excise & Customs [1999 (31) RLT 324] Is the submission made before us In absence of any material to the contrary, the same view has to upheld In CCE v. Dashmesh [ 2001 (130) ELT 658] this Tribunal has held that octroi receipt cannot the basis for alleging clandestine removal. The records obtained form Surat Municipal Corporation are therefore found to be not useful to establish the charges on stand alone basis.
(XI) The buyers in respect of some of the consignments mentioned in Annexure-A2, namely, Dhiren J. Shah dated 20/2/99 and Lakhani dated 20/2/99 accept that the goods were purchased from JIT. The transporters records, lorry receipts also show that the same were consigned in the name of JIT; the same position also appears in respect of the other transporters such as M/s. Thaldiar Transport and M/s. Sanket Transport where the records are distinctly maintained for independent transactions of JIT , which admitted & as found has nothing to do with RPM.( refer invoice of Sanket and LRs. of Ravi Transport) In the case of Bombay Bangalore Transport Co.. the department has in paragraph 14 on page 45 of the SCN. accepted that all clearances of RPM are legitimate. It was therefore, submitted that apart from the fact that such transporters record cannot be relied to establish clandestine removal, On facts also, the records cannot be linked to the production to be of RPM, much less assume a production and removal of goods without payment of duly by RPM. as alleged. The statements of Dhiren Shah on a close scrutiny does not reveal any link with the appellant RP-M or their Directors, the statement indicates a dealing with RP-P at the worst. Shah has not stated to have dealt with any person at Mumbai of RP-M. The statement of Lakhani indicates payment by cash through angadia, however no further independent confirmation of that has not shown to us. This statement relied upon indicates that payment is made in the name of M/s Raj Petroleum Mumbai & the same is confirmed by Yogin Surinder Ashar. However, the relevant para of the statement starts with the sentence "We also purchase materials for J.I. Trader Mumbai on cash basis, without any billing. These goods are received under cover of fake Bills..." How the deponent has concluded and made out the Bills i.e invoices to be "fake" is not form coming in the statement nor the reasons why is the next sentence the deponent records " payment of purchase from J.I Traders are made in cash though". The payments are made in the name of Raj Petrolium Mumbai & I receive telephonic confirmation of receipt by cash from Shri Yogin or Shri Surendra Ashar of Raj Petroleum..." No further explanations are. on record indicating any clarification to have been cought from this willing witness, as to why he made cash payments in name of Raj Petroleum for Cash Bill supply by & on Bills of J.I.T ? how he placed the orders on J.I. Traders abinitio & why he destroyed the bills when liabilities & LR receipt did exist. Similarly no corroboration of the dispatches, invoices & receipt of cash in the accounts of JIT Traders not to be existing or existing is on record. The above & the tone & the tenor of the statements as recorded. indicates its unreliable nature. The same does not enthuse confidence to indicate that goods manufactured at RP-M premises traveled, as & in guise that of JIT or that they were non duty paid & were based on the lorry receipts/other documents or as deposed in the relied (B) Denial of credit by the adjudicator has been arrived on the grounds-
a) 1) Documents are billed in the name of RP-M and received at Mumbai.
i) Challans acknowledge by RP-M -for suppliers of IPCL.
ii) Out of 133 tankers of IPCL products for which credit was availed by RPM only 13 tankers were delivered to RP-m but not entered in Gate Register.
iii) RP-M in reply only gave statements showing the credit of duty availed by RP-M & RP-P & nothing else.
b) And it is found that it is not alleged or found that total credit availed by M/s Raj Petroleum (P) Ltd, the corporate entity is in excess & inputs received were short following the settled law in the case of M/s Bhor Industries 2000 (122) ELT 790, credit cannot be denied on the grounds of findings as arrived in the impugned order which has not considered the plea of Rule 57 F movement & or Rule 57J stipulates. In this connection we also rely on the decisions of CEAT Ltd 2003 (159) E.L.T. 885 and Ventron Chemicals Ltd 2001 (129) E.L.T. 445
c) Admittedly, inputs were received at the other unit belonging to RPM at Panoli ie RP-P. This unit is also engaged in the manufacture of similar goods and is paying excise duty. That unit had paid excise duty during the relevant period. In these circumstances, whether credit availed by Mumbai unit or the Panoli, both of which belong to the tame company, i.e Raj Petroleum Products (P) Ltd.. is merely a procedural lapse, and revenue neutral is defense plea. RPM should not be denied to credit availed at the Mumbai unit for inputs received there. For the inputs received and consumed at the Panoli unit, credit would be eligible. If the duty paying documents, in the name of Bombay office i.e RP-M are endorsed to RP-P following Larsen & Toubro Ltd (1994 (72) ELT 948 & catene of decision following the said decision. It is also an admitted finding of fact that for all the documents for which credit was availed at `RPM only part of the goods were received the other goods were received at RP-P.
d) submissions made that while the show cause notice was issued in the present case on 24.05.1999, interalia, seeking to modvat credit reversion under Rule 571& that Rule did not exists on the date when the impugned Order was passed by the Commissioner on 12.09.2000. Held by the Honorable Tribunal in Sun Ruse Structural and (Final Order No. A/711 to 722/WZB/04/C-II dated 27.08.2004) wherein following judgements of the Honourable Supreme Court in Kolhapur Canesugar Works Ltd. v. Union of India [2001 (119) ELT 257 (S.C)] it was held that due to substitution of 57A to 574, 5A to 7V, 57AA to 57KK modvat Rules, no demand is sustainable under Rule 571, as arrived at under the impugned order, if on the date of passing of the Order, that Rule did not exist as it was also not saved by the provisions of Section 38A of the Act Similarly Penal Provision under Rules 571 (4) cannot be upheld.
C) The penalties imposed Under Section 11 AC are liable to be set aside, as no demands for duty and disallowance of the modvat credit is sustainable. Consequently, interest Under Section 11AB and Rule 571(5) is also not payable.
D) Penalty under Rule 173Q (i) in the impugned order is arrived at on the following grounds-
"26............However looking into the version contraventions of the Rules with an interest to evade Central Excise Duties, which is proved in the matter, the penalty under Rule 173Q would be more appropriate, though this penal clause has not been invoked in the notice. To impose penalty under the Rule which is not invoked, but required to be imposed looking into the gravity of the contraventions, such like wise is taken by the Hon'ble Tribunal in the case of Silkon Silk Mills v. Commissioner of Customs 1997 (89) ELT 151 (T) & in the case of Borivli Horiery Mills v. CCE 1991 (56) ELT 76 (T). Hence RP-M is liable for penalty under Rule 173 Q (1) of the Rule for the period prior to 28.9.1996."
This relevant reasons for imposing the penalty under Rule 175Q (1) cannot be upheld in the facts of this case as no evasion of duty is being upheld as also since both these cases relied upon by the adjudicator relate to penalty under the Customs Act 1962. In case of Silkon Mills the ratio was penalty could be imposed for minor contravention Under Section 117 of Customs Act 1962 could be imposed when penalty provision of major contravention Under Section 114 were invoked. In the case of Borivili Horiery Mills the ratio was Non mention of Sub section (d) of Section 112 of Customs Act 1962 will not vitiate penalty imposed as sufficient material existed in the notice. In the present case the notice was and findings on material are, as per the adjudicator, to invoke, penalty under Rule 9,52A & 226 which have lesser penalty than Rule 173Q (1). There is no specific findings of there being sufficient material to justify penalty under Rule 173Q(1)- The finding of the Commissioner imposing the penalty under Rule 173Q(1) therefore on facts & in law following the decision relied cannot be upheld.
E) There is no finding of any goods liable to confiscation & or being upheld as liable to confiscation. Penalty under Rule 209A therefore cannot called for and or upheld.
3.1 In view of the findings, the orders are to be set aside & appeals allowed with consequential relief.
3.2 Ordered accordingly.
3.3 Appeal allowed accordingly.
(Pronounced in Court on 17.12.2004)