Custom, Excise & Service Tax Tribunal
Central Cables Ltd vs Commissioner Of Central Excise, Nagpur on 12 January, 2011
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT No. I APPEAL No.E/3446 & 3479/03 (Arising out of Order-in-Appeal No.RK/147/NGP-1/03 dated 19/08/2003 passed by Commissioner of Central Excise & Customs (Appeals), Nagpur) For approval and signature: Honble Mr. Ashok Jindal, Member (Judicial) Honble Mr. P.R. Chandrasekharan, Member (Technical) ======================================================
1. Whether Press Reporters may be allowed to see : No the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the :
CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
3. Whether Their Lordships wish to see the fair copy : Seen of the Order?
4. Whether Order is to be circulated to the Departmental : Yes authorities?
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Central Cables Ltd., Appellant
Vs.
Commissioner of Central Excise, Nagpur Respondent
Appearance:
Shri.Bharat Raichandani, Advocate for appellant
Shri.V.K. Singh, SDR, for respondent
CORAM:
Honble Mr. Ashok Jindal, Member (Judicial)
Honble Mr. P.R.Chandrasekharan, Member (Technical)
Date of Hearing : 11 & 12/01/2011
Date of Decision : 12/01/2011
ORDER NO
Per: Ashok Jindal
1. The appellants are in appeal against the orders passed by the lower authorities confirming the demand, interest and penalties on shortages of inputs and finished goods.
2. The brief facts of the case are that on 28/29.01.1999 a stock staking was conducted in the factory premises of the appellants by the Central Excise Officers i.e. raw material, waste and scrap of wires, cables and finished goods (wires and cables). At the time of taking stocks, they found shortages of raw material and finished goods. A panchnama was drawn thereafter some investigations were conducted. Finally, a show-cause notice was issued alleging that the shortages occurred are due to the fact that the noticee failed to adopt the prescribed procedure in such manner, as he is required to do and also failed to offer any plausible explanation for the discrepancies noticed by the officers proposing the demand of duty and on shortages of raw material and finished goods and also proposing for levying the penalty under Section 11AC. The adjudicating authority confirmed the demand along with penalty, the same was appealed before the Commissioner (Appeals), who also upheld the order-in-original. Aggrieved from the said order, the appellants are before us.
3. On behalf of the appellants Shri Bharat Raichandani, Ld. Advocate appeared and submitted that the appellants are the manufacturers of wires and cables and procured orders from the public sector undertakings like, Maharashtra State Electricity Board, NTPC, etc. and after procuring purchase orders, they used to make tailor made goods as per the requirements of the purchaser and on every meter length of the cable, the name of the purchaser is embossed showing the proprietary interest on the finished goods of the purchaser. He fairly agreed that the appellant was not maintaining the accounts of their raw material and finished goods properly as due to holidays on 26 & 27th January 1999, the clearances made by the appellant prior to that period were not properly entered in the statutory records. Moreover, the inputs, which were gone in work in progress were also not debited in the statutory accounts. He further submitted that there is no allegation against the appellant that they have removed the goods clandestinely and no corroborative evidence to that effect has been brought by the department on record. Moreover, in reply to the show-cause notice, the appellant explained each and every shortages of inputs as well as finished goods to the authorities concerned, the same were taken on record but not considered at all. If a reconciliation statement was made by the concerned authorities, no shortages could be found. The allegation against the appellant is that they could not explain the shortages during the course of search cannot be termed as these shortages have been admitted by the appellant or their authorised representatives. He further submitted that after manufacturing the finished goods, the appellant has to call their purchaser for testing of the specifications of the goods and after duly tested, they are to be cleared to the prescribed buyers. If the lower authorities would have considered the submissions of the appellant in reply to their show-cause notice, no demand could be raised against the appellant. He also submitted that despite their request, no cross examination of the panchas was allowed to them to know how the stock taking was done as one of the purchasers is the owner of the atta chakki and the other one was the labourer, who might not know how to measure the raw material or the finished goods of the industry in which the appellants were dealing.
4. In support of his contention made here-in-above, he also relies on the case laws in the case of Ranasaria Polypack Pvt Ltd., Vs. CCE, Ahmedabad, reported in 2009 (247) ELT 700 (Tri.-Ahmd). He also relied on Arya Abhushan Bhandar Vs. UOI, reported in 2002 (143) ELT 25 (SC) and CCE Vs.Omkar Textile Mills Pvt Ltd., reported in 2010 (259) ELT 687 (Guj.).
5. On the other hand, the Ld. DR submitted that the stock taking was done in the presence of the authorised representative of the appellants and who was not able to explain the shortages found during the course of stock taking and it is on record that certain shortages were found during the course of stock taking. Hence, the department is not required to bring the corroborative evidence on record for clandestine removal of the goods. He further submitted that the show-cause notice has been issued to the appellants in September 99 and the stock taking was done on 28/29.01.99 and the appellants did not explain the shortages during that period and after obtaining the legal advise they filed their replies saying that there was no shortages during the course of search. In fact during the course of search, specific queries were made to the authorised representatives, who failed to reply to the same, hence the impugned orders are sustainable. In support of his contention, he also relied on certain case laws viz., CCE, Aurangabad Vs. Greaves Cotton Ltd., reported in 2008 (225) ELT 198 (Bom), Goodrich Fairwell Exports Vs. CC (Imports) Nhava Sheva, reported in 2010 (252) ELT 428 (Tri.Mum), CCE, Madras Vs. Systems and Components Pvt Ltd., reported in 2004 (165) ELT 136 (SC), Alagappa Cements Pvt Ltd., Vs. CESTAT Chennai reported in 2010-TIOL-770-HC-Mad-Cx. And Maxworth Plywood Pvt Ltd., Vs. CCE, Vishakapattanam, reported in 2010 (250) ELT 407 (Tri-Bang).
6. Heard both sides.
7. On careful examination of the submissions made by both sides, we find that in this case a stock taking was done at the premises of the appellants on 28/29.01.1999, wherein it was an admitted fact that the inputs, which were gone into process were not recorded in the panchnama, which is the basic fact not reflected in the show-cause notice also neither any of the authorities below has considered the same. It is also on record that some inputs were gone into manufacturing, the day when the stock taking was done on inputs. If any inputs has been found short, the same has to be examined whether that inputs has gone into the process for manufacturing or not, which was not done by the department. It is also on record that the appellants have issued certain invoices of finished goods on 25.01.99 and earlier also, which were not recorded in their RG-1 register. In fact the clearances made against these impugned invoices were also not considered by the authorities below while alleging shortages of finished goods. Moreover, the appellant has been able to produce on record, the explanation to the shortages found during the course of investigation. No consideration to these explanations was given by the authorities below and the only allegation made in the show-cause notice is that the appellants have not recorded their inputs and finished goods in the manner prescribed under the law. In that event the case laws cited by the Ld. DR are to be examined in detail. In the case of Greaves Cotton Ltd., (supra), the facts are not similar to this case in fact in that case the Cost Accountant of the assessee has found shortages of raw material during the physical verification of the inventory, which is not in this case. Hence, the case law is not relevant in this case. The decision in the case of Goodrich Fairwell Exports (supra) is also of no help to the DR as the facts of the said case is also totally irrelevant to the facts of the impugned case. The reliance in the case of Systems and Components Pvt Ltd., wherein it was held that what is admitted need not to be proved. It is also not relevant to the facts of the case as the appellant has given a detailed reply to the show-cause notice and given reconciliation statement of the shortages found during the course of stock taking. Moreover, certain facts like non-recording of the inputs, which were gone in process of manufacture and the invoices issued before the date of stock taking were not entered in the statutory records are matter of records and they are the admitted facts, which have not been considered by the lower authorities. In fact, this reliance by the Ld. DR makes the appellants case more stronger. The reliance in the case of Alagappa Cements Pvt Ltd., (supra) is also no help to the DR as in that case after explanation given by the assessee, the demand was reduced but in this case the explanation given by the appellants were not considered by the lower authorities saying that these explanations are after thought. The case of Maxworth Plywood Pvt Ltd., (supra) is also no help to the department as in that case also it was found that the assessee was unable to justify the shortages, but that is not in this case. Moreover, the case law cited by the Ld. Advocate is more relevant to this case in the case of Ranasaria Polypack Pvt Ltd. (supra), wherein this Tribunal has held that clandestine removal cannot be based upon merely shortages without any other reliable evidence on record.
8. In this case we find that the inputs gone into process of manufacture were not taken into account while stock taking. Moreover, the clearance made against the invoices prior to the date of stock taking, which were not entered in the statutory records were not considered by the lower authorities and merely held that it is an after thought. In fact these things were in records at the time of stock taking but the appellants have also not admitted the shortages but they failed to explain the reasons of shortages during the course of investigation. But in reply to the show-cause notice they have given all the information along with reconciliation statement, which are relevant in adjudicating the case. In the absence of proper explanation and without corroborative evidence of removal of the goods from the factory premises of the appellants, the demand is not sustainable. Moreover, the show-cause notice also alleged that the appellants are not maintaining the statutory records in the manner prescribed under the law. In that event, the clandestine removal cannot be alleged. As it is an admitted fact that the appellants are not maintaining their records as prescribed under the law, they are liable to be penalized under Rule 27 of the Central Excise Rules, 2002. Accordingly, for non-maintenance of statutory accounts properly by the appellants, the penalty under Rule 27 of the Central Excise Rules, 2002 is confirmed to the tune of Rs.5,000/-, otherwise the appeals of the appellants are allowed as discussed here-in-above.
(Pronounced in Court) (P.R. Chandrasekharan) Member (Technical) (Ashok Jindal) Member (Judicial) pj 1 2