Customs, Excise and Gold Tribunal - Bangalore
Electronic Control Corporation vs Commissioner Of C. Ex. on 27 July, 2005
ORDER T.K. Jayaraman, Member (T)
1. This is an appeal against the Order-in-Appeal No. 309/2002-CE., dated 14.5.2002, passed by the Commissioner of Central Excise (Appeals), Cochin. In the impugned order, the Commissioner (Appeals) demanded duty amount of Rs. 4,71,377/- holding that the appellants manufactured and cleared the goods without payment of duty clandestinely. Penalty under Section 11AC to the tune of Rs. 76,420/- was imposed apart from penalty of Rs. 25,000/- under Rule 173Q. The goods seized were confiscated but the appellants were given an option to if redeem the same on payment of a fine of Rs. 2,000/-. The appellants strongly challenge the impugned order.
2. Shri K. Parameswaran, learned Advocate appeared for the appellants and Shri Ganesh Havanur, SDR appeared for the Revenue.
3. The learned Advocate advanced the following arguments:
(1) The production of electronic chokes has been arrived at essentially based on only one raw material namely, Ballast covers (which is the cheapest component) by ignoring other essential components such as transformer, etc. Even the purchase price of the said Ballast covers is only around Rs. 2 to 5 each which is much less when compared with the sale price taken of Rs. 165 per choke.
(2) All the clearances were made under serially numbered invoices and in fact no missing serial numbers of the invoices have been pointed out.
(3) The statements given by the employees and others have been read totally out of context without any corroborative evidence or material to substantiate their allegations.
(4) It is assumed that each emergency lamps in fact needs two batteries. This fact has been ignored by the adjudicating and the appellate authorities.
(5) Except in the year 1995-96, the purchase value of raw materials was much lower than Rs. 30 lakhs.
(6) The charge of clandestine removal has not been established with the evidence of use of electricity, receipt of sale consideration, source of procurement of raw material, receipt of sale proceeds, etc. (7) The average production is arrived at by only taking the production for few days and without establishing with any other corroborative evidence. The cost of raw materials and components constituted 75% of the sale value and even if this basis is adopted still the clearance value will not exceed the SSI exemption limit. The amounts drawn from the Bank accounts with SBI were meant for different purposes. It has been assumed that the entire amount has been used for purchase of raw materials. This assumption is unwarranted when the sale proprietrix furnished evidence to show that the amount has been drawn for different activities like purchase of shed, machinery, personal purposes, payment of salaries, servicing of chokes, etc. (8) The other documentary evidence furnished such as Sales Tax Returns, Income-tax Returns, Service Income, material lying at Kozhikode Unit, etc. have all been totally omitted to be taken into account thereby resulting in demanding duty based on assumption and presumption.
(9) The allegations of payment made in cash of one transaction with Krishna Electronics on 13.7.1996 is also factually incorrect and is only an assumption as explained in detail. It was actually a withdrawal of cash of Rs. 25,000/- out of which Rs. 10,000/- was paid and balance Rs. 15,000/- was again remitted in the bank. The position has not been appreciated at all and is only the solitary instance relied upon for the entire period of show cause notice.
(10) There is no evidence for purchase of raw materials in cash to substantiate sales having been made in cash which was not accounted in the books.
(11) The value adopted is erroneous (i.e. Rs. 160/- per choke and Rs. 1,500/- for emergency light). The values are on the higher side.
(12) The charge of clandestine removal has not been proved with any corroborative evidence in the form of receipt of raw materials or sale of final products to different buyers in clandestine manner.
(13) Since there was no suppression of production or clearance or any wilful misstatement with intention to evade duty, invocation of extended period cannot be sustained.
(14) The proceedings initiated for Kozhikode Unit has been dropped by issue of the Order-in-Original dated 6.8.98 and thus initiation of parallel proceedings subsequently by issuing show cause notice dated 19.2.99 based on the same set of investigation and facts cannot be sustained in law at all. Reliance is placed on the decision of the Tribunal in the case of Shalimar Chemical Industries v. C.C.E. as well as decision rendered in the case of Neyveli Lignite Corporation Ltd. v. C.C.E. . Further he relied on several decisions including the following:
(a) Hilton Tobaccos Ltd. v. C.C.E. .
(b) Sapthagiri Cements Pvt. Ltd. v. C.C.E. .
4. The learned SDR reiterated the points in the Order-in-Original and the Order-in-Appeal.
5. We have gone through the records of the case carefully. The appellants an SSI Unit manufactured electronic chokes, emergency lights, etc. The main allegation against them is that they manufactured and cleared the goods clandestinely without payment of duty. In arriving at the clandestine production of chokes, the adjudicating authority has taken into account the number of Ballast covers purchased during the relevant period. He has assumed that for each choke one ballast cover is needed. Therefore, the number of chokes produced is equal to the number of ballast covers purchased. The appellants contend that all the ballast covers purchased are not used in the same year as the ballast covers are used for repair, replacement, etc. Being a low value item, the defective ones are not taken into use. Hence the appellants strongly challenge the assumption made by the Revenue that the number of ballast covers is equal to the number of chokes purchased. Ballast cover is only one raw material. On the basis of just one raw material, it is very difficult to sustain clandestine production and removal. On the basis of withdrawal of the amounts from SB1, the Revenue has come to the conclusion that the entire amount must have been used in the purchase of raw materials. The withdrawal of the amount, according to the Revenue, strengthens their case that the goods were purchased for clandestine removal. It is very difficult to agree with this contention of the Revenue. The appellants contended that the proprietrix of the appellants unit withdrew money for various purposes and evidence produced in this connection was ignored by the lower authorities. In our view the adjudicating authority and the appellate authority have not brought out any other evidence unearthed by the investigation. There is no evidence for excess purchase of other raw materials. There is no evidence of buyers receiving the clandestinely cleared goods. There is also no evidence of excess electricity consumption. Moreover, the Revenue started investigation in 1997. On the basis of investigations, the Revenue proceeded against the appellant's unit at Kozhikode and the adjudicating authority in his order dated 6.8.98 dropped the proceedings. On the same set of facts, another show cause notice was issued to the appellants on 19.2.99 alleging clandestine production. There is also no evidence for suppression of facts with an intention to evade Central Excise duty. Hence, longer period is also not invokable. The appellants themselves have produced the Income-tax Returns, Sales Tax Returns, etc. to the Department. No parallel set of invoices have been unearthed. The Revenue has gone only by assumptions and presumptions. In our view, investigation have not brought out clearance of goods clandestinely. In these circumstances, the Order-in-Original and Order-in-Appeal cannot be sustained and therefore, the appeal is allowed with consequential relief. All the case laws relied on by the appellants are applicable to the present case.
(Pronounced in the Court on 27-7-2005)