Custom, Excise & Service Tax Tribunal
Cce, Delhi-Iv vs Vijay Malleable Pvt.Ltd on 21 November, 2014
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL, NEW DELHI
COURT NO. III
SINGLE MEMBER BENCH
Appeal No. E/2930/2007
(Arising out of OIA No.86-CE/Appl/DLH-IV/2007 dt.23.8.2007 passed by the CCE(Appeals), Delhi-IV, Faridabad)
Date of Hearing: 04.06.2014
Date of Pronouncement: 21.11.2014
CCE, Delhi-IV Appellants
Vs.
Vijay Malleable Pvt.Ltd. Respondent
Appearance:
Shri Ranjan Khanna, DR for the Appellants None for the Respondent CORAM:
Hon'ble Mr. Manmohan Singh, Member (Technical) FINAL ORDER No.54482/2014 Per MANMOHAN SINGH:
The appellant have come up in appeal against the OIA No.86-CE/Appl/DLH-IV/2007 dt.23.8.2007 passed by the Commissioner (Appeals), Delhi-IV, Faridabad wherein Commissioner (Appeals) upheld Order-in-Original and rejected the appeal of the Revenue.
2. Revenue has come up in appeal before the Commissioner (Appeals) against the OIO No.19/RDN/ADC/2005 dt.11.11.2005 passed by the adjudicating authority wherein the adjudicating authority held that the goods which were cleared on private challans and returned back to the premises of the assessee, were duly accounted for by the assessee after job work and concluded that no confiscation was warranted and consequently mandatory penalty under section 11AC and interest under 11AB was not liable to be charged. However penalty of Rs.50,000/- was imposed on the assessee for their failure to follow the procedure. Penalty of Rs.25,000/- was also imposed on Shri Amar Nath, Director of the assessee under Rule 209A of Central Excise Rules, 1944.
3. Department challenged the order before Commissioner (Appeals) but Commissioner (Appeals) upheld the order of original adjudicating authority.
4. Revenue did not accept Commissioner (Appeals)s order as legal and proper and challenged it before Honble Tribunal referring the following.
(a) They referred to provisions of rule 57 F(6) (i) rule 57F(4), Rule 57F(6)(ii) ,57F(7), Rule 9(1), rule 53, rule 173F, rule 173G(4) indicating that goods cleared for job work have to be accompanied by proper job work challans. Goods have to be cleared for job work after debiting of amount of 10% of value of inputs/partially processed inputs. Of course, manufacturer was entitled to take credit on receipt of goods returned back to the factory. Since inputs/partially processed goods were not received, interest has also been proposed. Under the scheme of self removal, goods has to be cleared under due challans. But in the present case, goods have actually moved out of factory without the cover of proper Central Excise invoice under rule 52A. There is clear violation of substantive law. Clearance on simple papers/Private Challans cannot vest legality to such transactions. Consequently purported return under private challans does not prove that same goods have returned.
5. Besides this, while conducting a search of the party premises, unaccounted for goods were also recovered from the premises. In accordance with the provisions contained under Rule 53 of the Central Excise Rules, 1944, every manufacturer shall maintain a stock amount in such Form as the Commissioner may in any particular case or class of cases allow, and shall enter in such account daily. Which means that subsequent upon manufacture, goods were required to be entered in RG-I register. Besides this, even the movement of those goods, which were to be removed for further processing, refining etc. the same were to be accounted for on 57F(4) challans, prescribed under Notification No 28/96-CE (NT) dated 31.8.96 as amended by Notification No. 47/97-CE(NT) dated 1.9.97. By not doing so the party also contravened the provisions of the said Rules.
6. Shri Amar Nath, Director of the Company, in a statement under Section 14 of Central Excise Act, 194 admitted the lapse. In his statement dated 19.8.98 tendered under Section 14 of Central Excise Act, 1944, he stated that some inputs are sent to job workers for job work/machining. For sending goods outside the factory for job work, they did not maintain any records which could reflect quantity of inputs sent outside for job work. He further admitted that they also did not debit 10% of value of the goods sent for job work outside the factory as they did not issue challans under Rule 57F(4) of Central Excise Rules.
7. Further, it is brought on record that goods have been moved under private challan pointing mens-rea in whole accounting and job work procedure hence no authenticity could be attributed to such transactions.
8. Heard the appellants. On the other hand none appeared on behalf of respondents. I have gone through their submissions made before Commissioner (Appeals) and also took assistance from the learned DR to examine the whole issue.
9. I have gone through the grounds of appeals taken by the revenue and facts on record. It is facts on record that movement of goods have taken place on the authority of private challans. These are not prescribed challans. No such movement is allowed under prescribed laws and procedures. Just because a verification report has been furnished by the jurisdiction authority, it cannot legalise a illegal act. How it could be ensured that goods on private challans only went to so called job worker and were not clandestinely diverted to some other parties. How a report can be given regarding receipt of goods back to factory on the basis of same private challans. It is well settled law that if there was laid down procedure for movement of exempt goods, any other mode cannot regularise exemption. If this type of violation of procedure is regularised then no assessee will follow the statutory rules which are binding and regulatory in nature.
10. Further it has been admitted by the respondents that no duty was paid or reversed towards removals for job works in contravention or erstwhile rule 57 F(6) (ii). It is also admitted fact that no records were maintained in respect of good sent for job work manifesting a thin line of distinction between goods removed clandestinely and goods cleared for job work.
11. On Verification of records/goods in the factory, unaccounted goods were also found which were not entered in statutory records.
12. Following rules indicate violations.
(i) Rule 57F(i) of Central Excise Rules, 1944 prescribes that the inputs in respect of which MODVAT credit has been taken may be utilized in the manufacture of final product;
(ii) Rule 57F (2) prescribes that the inputs may also be removed from the factory for home consumption or for export after intimating the Assistant Commissioner in writing (now without intimating to the Assistant Commissioner);
(iii) Rule 57F (3) prescribed that all removal of inputs for home consumption shall be made-
(a) on payment of duty equal to the amount of credit availed in respect of such inputs and
(b) under the cover of invoice under Rule 52A;
Rule 57F (4) prescribed that inputs can also be removed as such or after they have been partially processed to a place outside the factory under the cover of a challan specified in this behalf for the purposes of test, repair, refining, reconditioning or carrying out any other operation necessary for the manufacture of final product and return the same to his factory within a period of sixty days (now 180 days w.e.f. 2.6.98) may allow in this behalf for further use in the manufacture of the final product or removing after payment of duty for home consumption or removing the same without payment of duty for export under bond;
(iv) Rule 57F (5) stares that the waste, if any, arising in the course of any operation shall be returned to the factory of the manufacturer of the final product;
(v) Rule 57 F (6) (i) prescribes that where a manufacturer removes the inputs as such or in the partially processed form to a place outside his factory for the purposes specified under Rule 57 F(4), the manufacturer shall do so only after debiting an amount equal to ten percent of the value of such inputs or as the case may be, the partially processed inputs declared by him on the challans under which such inputs or partially processed inputs are cleared;
(vi) Rule 57F(6) (ii) states that the debit shall be made in the account maintained under Sub-Rule (7) of Rule 57G or the account current maintained under rule 9 or Sub-Rules (i) of rule 173 G;
(vii) Rule 57F(7) states that notwithstanding anything contained in Rule 57 A, the manufacturer shall be eligible to take credit of an amount debited under sub-rule (6) of Rule 57 (F) when the inputs or partially processed inputs are received back in full in his factory in the account maintained under sub-rule (7) of Rule 57 G;
(viii) Rule 9(1) of Central Excise Rules, 1944 provides that no excisable goods shall be removed from any place where they are produced, cured or manufactured until the excise duty leviable thereon has been paid at such place and in such manner as is prescribed in the rules;
(ix) Rules 52 A of Central Excise Rules, 1944, provides that no excisable goods shall be delivered from a factory or a warehouse except under an invoice signed by the owner of the factory or his authorized agent;
(x) Rule 53 of Central Excise Rules 1944, provides that every manufacturer shall maintain a stock account in such form as the Commissioner may in particular case or class of cases allow and shall enter in such account, daily description or goods, opening balance, quantity manufactured, quantity deposited in the store room, quantity removed, payment of duty etc;
(xi) Rule 57A of Central Excise Rules, 1944 provides that credit of duty paid on inputs used in or in elation to the manufacture of final product directly or indirectly may be availed subject to proper observation or Notifications issued thereunder;
(xii) Whereas, Rule 57G of Central Excise Rules, 1944 provides that every manufacturer intending to take credit of duty paid on inputs shall file a declaration with the jurisdictional Assistant Commissioner. He will maintain an account current in form RG-23A Part-I/II in respect of inputs received and duty payable on final product, an account current with adequate balance to cover the duty of excise payable on the final product cleared at any time under Rule 57G(7) of the rules ibid. The manufacturer of final product shall submit within 5 days after close of each month to the jurisdictional Superintendent, Central Excise, a monthly return indicating the details of inputs received and shall submit duty paying documents with extract of Part-I and II;
(xiii) Rule 173 F Central Excise Rules, 1944 provides that the assessee is to determine the duty due on the goods and to remove them on payment thereof;
(xiv) Rule 173 G (4) provides that every assesses shall maintain such accounts, as the Commissioner may from time to time require (or permit, subject to such condition as may be specified by him) of the production, manufacture, storage, delivery or disposal of the goods, including the material received for or consumed in the manufacture of excisable or other goods, the goods and material in stock with him and duty determined and paid by him.
13. From the above provisions, it clearly came out that detailed procedure has been laid for job work or clearance of inputs/ partially processed inputs, reversal of credit on clearance and availment of credit on receipt back of goods to the factory. Admittedly these procedures have not been followed and further no duty has been paid/reversed by the respondents towards removals for job works in contravention of rule 57F(6) (1). There is clear admittance by the Director of the company that they have not followed the procedure and removals have effected without following laid down procedure, it is evident that benefit of job work could not be extended only based on verification report of Assistant Commissioner that goods have come back to the factory, knowingly well that private Challans have been used and no records have been maintained. In absence of maintains of records in the factory, and non-intimation to the Central Excise authorities no co-relation was possible. Total value of goods cleared by the party during the period from 1996 to 1998 without following the procedure under modvat rules comes to Rs.85,07,881/-. In view of the above, I find force in the contention of Revenue that on the value of castings amounting to Rs.85,07,881/-, no credit could be allowed. Further violation relating to non-reversal of 10% of value of goods purportedly sent outside factory for job work on private challans is also manifested.
14. Regarding demand of duty on clearance of castings without following job work procedure, I do not find force in revenues appeal as they have already accepted that all goods have came back. Once revenue itself is satisfied, no question of demanding duty arises. Of course, for violation of job work procedure and non-reversal of 10% of the value, penal provisions are attracted. However I do not agree with revenue for imposition to equal penalty considering that appellants were not aware about correct procedures. No mens-rea has been imputed manifesting their intention to defraud the revenue knowingly, thus equivalent penalty is not justifiable. From the facts as brought on record it is observed that a very casual approach has been adopted by the appellant. Accordingly, I consider that penalty has to be imposed on appellants to ensure that the legal provisions are not ignored rendering these provisions as redundant. Ends of justice shall be met if Commissioner (Appeal)s order is modified and penalty of Rs.2,00,000 (Rupees two lakhs only) is imposed on the appellants.
15. Regarding other issue of dropping demand and not imposing any fine and penalty on seized goods, I find that non-recording of goods in excise records has been manifested and admitted by the partner. For non-accountal, no lenient view could be taken. Goods were rightly liable for confiscation and redemption fine and penalty imposable. Commissioner (Appeals) was not right in dropping demands and penalties on this account. Departmental appeal is liable to be accepted.
16. Regarding imposition of penalty on Shri Amar Nath, I also find that Shri Amar Nath, Director of the appellant has admitted his involvement in non-following of procedures and also non-maintaince of records required under Rule 209A of Central Excise Rules, 1944. Facts as has come on record clearly manifest the role of the director which requires imposition of penalty on Shri Amar Nath. I agree with the revenue that penalty of Rs.25,000/-(Rupees twenty five thousand only) was not commensurate with his act of involvement in non-following of laid down procedures. Accordingly I hold that personal penalty of Rs.1,00,000/- (Rupees one lakh only) is justified on Shri Amar Nath, Director.
20. Keeping in mind totality of facts and findings above, departmental appeal is partly accepted. However order of Commissioner (Appeals) dropping the demand of Rs.12,76,182/- (Rupees twelve lakh seventy six thousand one hundred eighty two only) is confirmed. Penalty of Rs.2,00,000/-) (Rupees two lakh only) is imposed on appellant. Penalty is also enhanced to Rs.1,00,000/- (Rupees one lakh only) on the Director of the Company. Commissioner (Appeals)s Order ordering drop of demand and penalties on account of seizures and non-imposition of redemption fine is set aside and Order-in-Original on this account is restored.
21. Ordered accordingly.
(Pronounced in the open court on 21.11.2014)
(Manmohan Singh) Member (Technical)
K. Gupta
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