Custom, Excise & Service Tax Tribunal
Bee Am Chemicals Ltd vs Commissioner Of Central Excise, Raigad on 13 May, 2014
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT NO. I Appeal No. E/2476, 2477, 2478 & 2479/2006 (Arising out of Order-in-Original No. 149/IDG (49)COMMR (ADJ)/RGD/05-06 dated 31.3.2006 passed by Commissioner (Adjudication) Central Excise, Mumbai.) For approval and signature: Honble Mr.S.S. Kang, Vice President Honble Mr. P.K. Jain, 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 :Yes 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?
========================================================== Bee Am Chemicals Ltd Lalit Kumar Nagpal Anil Kumar Nagpal Ashwin Pandya Appellants (Represented by: Mr. V. Sridharan, Senior Advocate with Mr. Gajendra Jain, Advocate) Vs Commissioner of Central Excise, Raigad Respondent (Represented by: Mr. Shobha Ram, Commissioner (AR)) CORAM:
Honble Mr.S.S. Kang, Vice President Honble Mr. P.K. Jain, Member (Technical) Date of Hearing : 22.01.2014 Date of Decision: 13.05.2014 ORDER NO..
Per: P.K. Jain
1. Appellants are engaged in the manufacture of solvents, namely, Beesol-7000 and Beesol-7100. The main input for the manufacture of the said solvent is Naphtha. The appellants procure Naphtha from various oil refineries. The case of the Revenue is that the appellants have fraudulently availed Modvat credit of duty paid on the Naphtha either without actual receipt of the same in the factory or without consuming the same for manufacture of solvent. Naphtha (which is used for adulteration of petrol, diesel etc) was illegally diverted and the appellants have manipulated their records to indicate that said Naphtha have been used in the manufacture of solvents, (which is essential condition to avail the credit). The allegation of diversion of Naphtha is based upon non-production of final product viz. solvents, which in turn is based upon three main evidences. The first evidence is that 22 out of 45, purported purchasers of solvent were found to be non-existent or of in existence they in their statements have said that they never purchased solvent from the appellant. Only in one case, purchaser has stated that he bought one consignment (against many consignments shown in the records). The second evidence is that number of bank accounts were opened in Mumbai/Navi Mumbai on behalf of purported existent and non-existent purchasers (who were located in different parts of the country) and large amounts of cash were deposited which in turn were transferred to appellants account as if receipt of sale amount of solvents. Third evidence is relating to transportation of solvents. Revenue has demanded an amount equivalent to the credit of duty taken on Naphtha for the entire period namely September 1998 to May 2001.
2. The case was adjudicated by the Commissioner who confirmed the entire demand of Rs. 12,38,49,639/- alongwith interest and equal penalty, a penalty of Rs. 20 lakhs was also imposed on Mr. Ashwin Pandya, a Director in the appellant company, Rs. 25 lakhs on Mr. Lalit Kumar Nagpal, Chairman, BSEL, Rs. 10 lakhs on Mr. Anil Kumar Nagpal, proprietor of M/s Meghraj Bulk Carriers.
3. The case was heard at length. The main contention of the learned counsel for the appellants is that it is incorrect to state that there were no manufacturing activity in the factory or no solvent was being manufactured in the factory. In support of his contention, the learned counsel produced various documents including the visit of the Central Excise officers, drawal of sample of the final product, issuance of the Show Cause Notice on classification issue and various other documents to prove that the factory was functional and Naphtha was received in the factory. The learned counsel also produced certain accounts, copy of the Annual Report etc to prove that the Naphtha was used in the factory. The learned counsel stated that Mr. Lalit Kumar Nagpal was not acting as Director during the relevant period, and hence penalty is not imposable. Another contention of the learned advocate was that the credit of duty paid on Naphtha has been used for clearance of final product, namely Beesols and in case Beesol was not manufactured and cleared, no duty was payable, debit made by the appellant should be treated as reversal of credit. The department cannot once again demand duty from them. In support of this contention, the learned advocate relied upon the following decisions:
(i) CCE vs Ajinkya Enterprises 2013 (294) ELT 303 (Bom);
(ii) Commissioner vs Creative Enterprises 2009 (235) ELT 785 (Guj), affirmed by Honble Supreme Court 2009 (243) ELT A 120 (SC);
(iii) J.K. Files & Tools Raymond Ltd vs CCE & C 2011 (273) ELT 280 (T);
(iv) Anutone Acoustics Ltd vs CCE 2013 (298) ELT 246 (T);
(v) Hind Motors Sales India Pvt Ltd Vs CCE 2013 TIOL-1232-CESTAT-MUM;
(vi) Deioners Speciality Chemicals (P) Ltd vs CCE 1997 (96) ELT 659 (T);
(vii) CCE vs Piramal Spinning & Weaving Mills Ltd 2002 (49) RLT 741 (T);
(viii) Singh Scrap Processors Ltd vs CCE 2002 (143) ELT 619 (T);
(ix) PSL Holding vs Commissioner of Central Excise, Rajkot 2003 (156) ELT 602;
(x) Systematic Steel Inds Ltd vs CCE 2005 (191) ELT 663;
(xi) Parakh Food Ltd vs CCE Final Order No.A-1589-1591/WZB/05/EB/C-II dated 10.11.2005;
(xii) CCE vs Narayan Polyplast 2005 (179) ELT 20 (SC);
(xiii) CCE vs Narmada Chematur Pharmaceuticals Ltd 2005 (179) ELT 276 (SC);
(xiv) Stumpp Scehule and Somappa Ltd vs CCE 2005 (69) RLT 786 (T);
(xv) Regal Crimptex Pvt Ltd vs CCE 2004 (167) ELT 324 (T);
(xvi) CCE vs M.P. Telelinks Ltd 2004 (178) ELT 167 (T);
(xvii) Silvassa Wooden Drums vs CCE 2005 (184) ELT 392 (T);
(xviii) Shivali Udyog (I) Ltd vs CCE 2006 (204) ELT 94 (T);
(xix) Creative Enterprises vs CCE 2004 (60) RLT 342 (CESTAT-Mum);
(xx) Ajay Metachem Pvt Ltd vs CCE 2006-TIOL-667-CESTAT-MUM;
(xxi) Orion Ropes Pvt Ltd vs CCE 2006-TIOL-391-CESTAT-MUM;
(xxii) Orbit Bearing (I) Pvt Ltd vs CCE 2006-TIOL-1637-CESTAT-MUM;
(xxiii) Jain Irrigation Systems Ltd vs CCE 2007-TIOL-1818-CESTAT-MUM;
(xxiv) Super Forgings & Steels Ltd vs CCE 2007 (217) ELT 559 (T);
(xxv) Crown Adhesives & Coatings vs CCE 2013 (296) ELT 57 (T).
4. Another contention of the learned advocate was that in case they have not manufactured these goods, then the duty paid by them was incorrect and that should be treated as reversal of credit. On a query by the Bench that the appellant should have filed a refund claim for payment of the said duty, the learned advocate said that such a proposition is incorrect and in support of this contention he relied upon the following case laws:
(i) CCE vs Andhra Pradesh Straw Board Mills 1991 (53) ELT 15 (T);
(ii) Jay Industries vs CCE 1984 (16) ELT 462 (T);
(iii) Hindustan Motors vs CCE 2008 (228) ELT 133 (T);
(iv) CCE vs National Fertilizers 1990 (48) ELT 562 (T).
5. Another contention of the learned counsel for the appellant was that the demand proposed under the provisions of Rule 57I of the Central Excise Rules which are not in existence on the date of issue of the Show Cause Notice and hence the demand is unsustainable. Another contention was that there was no specific clause permitting continuation of proceeding in the old Rule when the new Central Excise Rules came into force. The learned counsel further argued that Section 6 of the General Clauses Act is applicable to repeal of a Central Act and not applicable to omission or substitution of the Rules. Similarly Section 38A of the Central Excise Act, 1944 will not apply to the substitution of Rules. In view of this position Section 38A cannot be invoked. The learned counsel also placed reliance on the Honble Supreme Courts decision in the case of Roya Corporation (P) Ltd vs Director of Enforcement 1969 (2) SCC 451 and State of Maharashtra vs The Central Provinces Manganese Ores Co Ltd 1977 (1) SCC 643 and other case laws. The learned counsel relied upon the following case laws:
(i) Sunrise Structurals & Engg Ltd vs CCE 2004 (117) ECR 307;
(ii) Milton Polyplast India Pvt Ltd vs CCE 2006 (201) ELT 372 (T);
(iii) Polyset Plastics Ltd vs CCE 2006 (205) ELT 372 (T);
(iv) Dutta Metal Industries vs Commissioner 2007 (217) ELT 306 (T);
(v) Hindustan Petroleum Corporation vs CCE 2009 (243) ELT 104 (T);
(vi) Ispat Profiles India Ltd vs CCE 2007 (215) ELT 255 (T);
(vii) CCE vs National Leather Cloth Mfg Co 2009 (246) ELT 336 (T);
(viii) Wipro Ltd vs CCE 2001 (135) ELT 1337 (T);
(ix) Dow Chemical International Pvt Ltd vs Commissioner 2008 (226) ELT 146 (T);
(x) Birla Corporation Ltd vs CCE - 2008 (224) ELT 567 (T);
(xi) BASF India Ltd vs CCE 2010 (261) ELT 368 (T);
(xii) Tata Motors Ltd vs CCE 2007-TIOL-46-CESTAT-MUM;
(xiii) Surindra Engg Co Ltd vs Commissioner 2007 (210) ELT 287 (T);
6. The learned counsel also relied upon the Boards Circular dated 18.10.2000 reported in 2000 (41) RLT M-129.
7. As far as the various factual points made in the Show Cause Notice and the impugned order are concerned, there were not much of a refutal for the same. It was stated that the allegation that some of the buyers were not in existence or fictitious cannot automatically lead to the conclusion that Naphtha was not received and used in the manufacture of Beesols. Such allegations are factually incorrect as all buyers who have procured the finished products have specifically submitted undertaking regarding end use of Beesols. Such certificates of end use and also receipt of Beesols from the customers were submitted to IOCL and appellants have produced copy of such letters. In view of this position, it cannot be said that some of the buyers were not in existence or fictitious or that some of the buyers have not received the Beesols. It was also argued that the department has contacted various customers of the appellant to confirm purchase of Beesols during the relevant period and the customers include various traders who do not undertake any manufacturing activity and no further process was required by them and therefore, the such customers never applied for any central excise registration, which is not even required in law also. Further the department contacted certain customers who had shut their operation one or two years back as they were unable to follow stringent Solvent Order 2000 guidelines. In view of this position, the assumption and presumption that some buyers were not in existence or fictitious is factually incorrect and contrary to the documentary evidence. It was also stated that there is no suppression or misstatement with intent to evade duty and therefore the extended period of limitation is not invocable and hence the demand is entirely barred by limitation. The learned counsel also argued that imposition of penalty on individual is incorrect as no goods had been held liable to confiscation in the impugned order.
8. The learned Commissioner (AR), on the other hand, contended that Naphtha is a commodity which is widely used for adulteration of petrol and diesel. Naphtha is produced in the refinery and is not a commodity which is freely traded in India. In fact in view the adulteration problem the Government has issued Naphtha (Acquisition, Sale, Storage & Prevention of use in Automobiles) Order, 2000. Thus Naphtha cannot be sold, procured in open market and various procedures are prescribed for controlled movement. Naphtha is sold only for manufacturing activity by the refineries. It is keeping in view the misuse of Naphtha that even in respect of the solvent produced the procedure prescribed in The Solvent, Raffinate and Stop (Acquisition, Sale, Storage & Prevention of use in Automobiles) Order, 2000 is required to be followed.. It is in this background this case has to be seen.
9. In the present case, the appellants have fabricated a large number of documents so as to indicate that Naphtha procured was purportedly used in the manufacture of solvents and thereafter solvents have been sold. The learned Commissioner (AR) stated that in the present case the appellant did purchase Naphtha from the Refinery, and it was purported to have been used in the manufacturing activity in their factory but in reality the same was diverted into the illegal market. This is evident from the fact that the invoices of the final product were in the name of non existent customers purported to be located all through out the country or to certain persons without their knowledge or purchase order. Appellants after showing the sale of solvent to these non-existent customers themselves opened certain bank accounts in different branches in Mumbai/New Mumbai and operated those bank accounts in the name of such non existent firms. Purported customers located in Chennai, Bangalore etc were shown to have bank accounts in New Mumbai/Mumbai. Large cash amounts were deposited which were later transferred to appellants account. In order to cover up the aspect of transportation of final product the same was purported to be carried out through M/s Sai Bulk Carriers which was again controlled by Mr. Lalit Kumar Nagpal of the appellant company. Mr Lalit K Nagpal was named by every one and he was having the control of day to day working of the company and was also involved in transferring large amounts from one account to other. The learned Commissioner (AR) took us through the impugned order/Show Cause Notice which indicated in brief the results of investigation in respect of the 22 units who have purportedly purchased the final product i.e. Beesol from the appellant. The result of the investigations is as under:-
(i) Shiva Chemical, Gaziabad- UP, Result Did not exist at given address/name address of the proprietor was wrongly shown
(ii) Avon Petrochem, Belgaum - N0 such firm existed.
iii) Merad Chemicals, Rajasthan - No such firm existed
(iv) Sunflame Chemicals, UP - Unit existing but refused having purchased any material from M/s. Bee Am Chemicals.
(v) Alok Enterprises, Nasik - Unit existed. The proprietor denied any purchase.
(vi) M/s Manu Paints & Chemicals - Unit existed but address appearing in bank account was fake.
(vii) M/s Decorative Paints Pvt Ltd, Mumbai - Firm existed but address given to bank was fake.
(viii) G K Chemicals, Tamil Nadu - The Unit was in existence. The buyer has accepted purchase of one consignment of Beesol-71 00 during the year 1999 - 2000.
(ix) Sherina Industries - Tamil Nadu - Unit was found in existence but they denied having any transaction with Bee Am Chemicals.
(x) Abindo Paints Chem Industries, Kolkatta - Address could not be located.
(xi) MIs. Venkateshwaran Solvent Extraction (P) Ltd, Pudukkottai - Unit in existence.
Two consignments of Beesol purchased from M/s. Bee Am Chemicals Ltd.
t xii) Kasturi Chemicals, Chennai - No such unit existed at the given address
(xiii) M/s. Chemical Industries, Bangalore - Unit located. Denied having purchased any material from the assessee.
(xiv) M/s Goa Polychem, Goa - Unit was located but was non-functional. (xv) M/s Asha Chemine Oil, Pondicherry - Unit was not found in existence. (xvi) M/s Balaji Paints & Chemicals, A P - No such unit existed at the given address. (xvii) M/s Sarathy Industries, Tamil Nadu - Unit not located. (xviii) M/s Agra Petro Chern, Tamil Nadu - Unit not located. (xix) M/s Deepak Chemicals, Madras - Unit not located. (xx) M/s Gem Petrochemicals, Karnataka - No such unit existed. (xxi) M/s Arasan Petrochemicals, Vallenkumara, Tamil Nadu - No such unit existed at the given address.
(xxii) Kothari Chemicals & Solvents, Shindkedy - Unit was found In existence. No transaction was acknowledged by them.
10. The learned Commissioner (AR) further stated that investigations also revealed that appellant had received payments from the following firms/companies which were floated on paper by one Mr. Arvind Hukkery at the instance of the appellant :-
(i) Asha Chemine Oil, Pondicherry
(ii) Abindo Paints Chem Industries, Kolkatta
(iii) Arasan Petrochemicals, Vallenkumara, Tamil Nadu
(iv) Balaji Paints & Chemicals, A.P.
(v) Gem Petrochemicals, Karnataka
(vi) Sabari Chem Industries, Kerala
(vii) Sarathy Industries, Tamil Nadu
(viii) Agna Petro Chem, Tamil Nadu
(ix) Avon Petrochem, Bengal
(x) Mevad Chemicals, Ranasthan
(xi) Mani Paints & Chemicals
(xii) Decorative Paints Pvt Ltd, Mumbai
(xiii) Shiva Chemical Industries
11. The learned Commissioner (AR) also drew our attention to the part of the Order-in-Original which indicates that the appellant could produce the ledger account only of few customers. There was no reason not to be able to produce ledger account of others, if transactions were genuine. It was also found that number of bank accounts were opened by Mr. Arvind Hukkery at the instance of Mr. Arvind Pandya, Director of the appellant firm. A large amount of cash was deposited in such accounts which were later on transferred to the appellant to given an impression that the transactions are genuine. The learned Commissioner (AR) also took us through the statements of various persons recorded during the investigations to prove that this was a preplanned modus operandi and no manufacturing in the factory took place and whole of Naphtha was diverted. Because of the illegal nature of use of Naphtha and illicit nature of such transactions and consequences both for appellant and purchasers of Naphtha, no evidence can be found in the records. The learned Commissioner (A.R.) also stated that the appellant in their appeal as also during the argument had not stated a single word about the opening of bank accounts, transferring of money on behalf of non existent firms. They have also not stated anything why the 22 firms (which are supposed to be located through the country) were found to be non existent or where found having denied they have purchased any Beesol. There was requirement from the refinery to get certificate from the end user of these purchasers that they have received the solvent i.e. Beesol. Appellants ensured sending of such letters, though bogus, even in the case of non existent firms, or the firms who have not purchased the solvent from appellant. In view of this position, there can be no doubt that the whole of Naphtha purchased on which input Cenvat credit was taken was diverted. Appellant have not produced the ledger account of all the buyers and the details so as to enable the department to come to a conclusion that certain quantity of Naphtha was used in the manufacture of Beesol, the solvent. The credit of inputs is allowed under the Central Excise Rules, on trust and suo motto basis on the assumption that manufacturer will receive the inputs, use in the manufacturing process and pay duty on the final product. In the present case, Naphtha, the input has not been received in the factory, or after receiving the same in the factory was diverted for illegal purposes and not used for the manufacturing process and therefore the credit availed by them is incorrect and fraudulent. Transport document available only proves that Naphtha was lifted from Refinery and nothing beyond that. As far as the appellants plea that the credit availed has been utilized for the clearance of the final product and thus in a way credit has been reversed, the learned Commissioner (AR) argued that this is an incorrect proposition in the facts and circumstances of the case as the invoices issued for the final product Beesol would have found their way into the trade and commerce and therefore some other manufacturer would have already availed the credit of the same. This in reality, the purported tax paid on the Beesol would have not come to the Government account but availed as credit by some other unit. Details of such unit cannot be known in the system. The input credit availed by them have been misused in the process and therefore the appellants are required to reverse the same.
12. We have carefully gone through various submissions made by the appellant as also various allegations made in the Show Cause Notice, the impugned order and the pleas made by the Revenue.
13. At the outset, one interesting fact that we observe in the whole case is the total silence on the part of the appellants about the financial transactions unearthed by the Revenue. No comments have been made why the bank accounts were opened in Mumbai/Navi Mumbai for the purported buyers in different parts of the country (mostly non existent). How a huge amount were deposited in cash and thereafter transferred to the appellant as payments towards the Beesol, their final product.
14. Another interesting aspect that was unearthed by investigation is in respect of 22 customers who have purported to have purchased Beesol indicated either such customers are non existent or they have not purchased Beesol or any other solvent from the appellant at all baring two cases wherein the customers have stated that they have purchased one and in second case two consignments from the appellant as against large number of consignments purported to have been sold to them. We find no meaningful explanation has been given by them, except saying that the said units might have closed down or some of them being traders have stopped the business or taking central excise registration was not essential. The details found during investigation and confronted to appellant are required to be refuted on the basis of solid evidence by the appellant. In the absence of any such refutal, the allegations made by the revenue about the non existence or non purchase by these 22 units have to be upheld.
15. We also note that during the arguments, the learned Advocate for the appellants main contentions were either technical or legal in nature (which will be discussed in subsequent paras). Learned advocate, however, produced large number of documents to indicate that the appellant had factory and solvents were being manufactured and the central excise department recognized this fact, for example, during the relevant period, Central Excise officials have drawn samples of Beesol and sent to the Chemical Laboratory as there was classification dispute. Appellants have also produced correspondence from various Technical authorities and other Government organization, which only prove that there was factory and solvent could be produced therein. From the various documents produced by the appellant it cannot be said that there was no manufacturing facility in the appellants factory. Revenue has not claimed that appellant did not have a factory. From the documents produced, it appears that some manufacturing activity relating to production of Beesol might have taken place during the relevant period. However, on the other hand, the evidence gathered by the Revenue clearly indicates that the records maintained by the appellants were not truthful and were fabricated on large scale, sales shown to 22 parties were all fabricated and in the absence of any plausible explanation from appellant, this only proves that the Beesol was not manufactured, atleast to the extent that was purported to have been supplied to these 22 customers. We also note that the solvent is purported to be transported through M/s Sai Bulk Carriers again firm controlled by the appellant. Inquiries with owners of tankers etc only goes against appellant. Obviously the transport documents relating to solvents were also fabricated/manipulated.
16. From the demand notice/Show Cause Notice it is not clear what has happened in the case of remaining buyers/purchasers of Beesols. It appears there were 23 other purchasers. Whether investigations could be done with these 23 purchasers and results thereof are not forthcoming. If the results obtained were positive, i.e. they have purchased Beesols from appellant as per the quantities shown in the records then the appellant would be required to be given the benefit of credit of duty paid in respect of the Naphtha used in the manufacture of Beesols sold to these buyers.
17. We have considered various technical/legal submissions made by the learned advocate for the appellant. The first contention raised is that the Cenvat credit was used by them in the clearance of the final product and therefore in a way they have already reversed the Cenvat Credit and therefore the Revenue cannot ask the same again as held in catena of judgments which were listed in para 3 above.
18. We have gone through the relevant law as well as these case laws (we are also party in some of these cases). As per the law, availment and/or eligibility of taking the credit is different from utilization of the credit. Thus utilization of credit does not imply reversal of credit on inputs. In all the case laws cited by the learned counsel for the appellant, the issues were relating to whether the activities carried out by the parties amounted to manufacture or not. In almost all these cases the parties were of the view that their activity amounted to manufacturer and therefore they have taken the credit and thereafter paid the duty on their processed finished goods. There was no dispute or allegation about receipt of the inputs or the diversion of inputs or non supply of the final product to the buyers or existence of buyers. If a particular activity did not amount to manufacture, then it was case of inputs cleared as such, and duty paid on such processed inputs was deemed to be reversal of credit. It is under such circumstances that this Tribunal have been taking a view that payment of duty on the final product amounts to reversal of credit taken. For example, if a unit was cutting and slitting HR coils etc and was selling the same to certain customers it was assumed by the unit that this activity (cutting and slitting) amounts to manufacture but either this Tribunal or the Honble Courts have later on held that such activity does not amount to manufacture. In such situation Revenue was demanding amount equal to the credit taken. Since the coils after cutting and slitting were being supplied to specific customers, the same would have been supplied by the manufacturer as input cleared as such on reversal of credit and in view of this position, this Tribunal has been taking the said view. The present case is not of this type. Here customers are non-existent, unknown and so called manufacturing is bogus, and transaction are fraudulent.
19. In the case of Ajinkya Enterprise (supra) which was upheld by the Honble Bombay High Court this Tribunal has taken the view that cutting and slitting of HR coils into sheets or strips does not amount to manufacture and under the circumstances as explained earlier, the Tribunal has taken the view that the credit availed was incorrect but it was used for payment of slitted sheets, coils which amounts to reversal of the credit. Similar is the position in the case of Commissioner vs Creative Enterprises (supra) relied upon by the learned counsel for the appellant. In the case of J.K. Files & Tools Raymonds Ltd (supra) the situation was almost similar as here assessee appellant was carrying out the process of softening of alloy rod of steel etc which was considered as not amounting to manufacture. In the case of Anutone Acoustics Ltd (supra) the appellants were undertaking cutting to size the acoustics panels which was held to be non manufacture by the Revenue and in those circumstances this Tribunal has taken the view that payment of the duty on the final products amount to reversal of the credit on inputs. Similarly in the case of Hino Motor Sales India (supra) the activity of the appellant were considered as non manufacturing. However, Cenvat credit availed by the appellant on the chassis was utilized by them at the time of clearance of the chassis (though slightly processed). It is in these circumstances that the Tribunal has taken the view that payment of the duty at the time of clearances of chassis amounts to reversal of the credit taken on input chassis. We do no find any relevance of the case of Deioners Speciality Chemicals (supra). We have also gone through the remaining judgments quoted by the learned counsel for the appellants and all are on the above line and we do not find that any of the said judgments help the case of the appellant and we decline to discuss the rest of the judgments cited by the learned counsel for the appellants on this issue. We would have appreciated that Ld counsel would have cited few judgments and where facts somewhere near to the present case.
20. One of the contentions of learned advocate for the appellant was that since Revenue is of the view that no Beesols were cleared, if so appellant is not required to pay duty and hence it is to be treated as reversal of credit and the appellant cannot be asked to file refund claim for refund of the said duty. We think the learned advocate has tried to oversimplify the complex scheme of excise administration. In the present scheme of excise laws, credit on goods can be taken based upon invoices issued by manufacturer or trader or importer. Thus whatever duty is indicated in the invoice (whether or not paid or payable by the person issuing the invoice) is available as credit to other person (of course, it is assumed that goods have also been received by that person). For example, based upon the invoices issued by the appellant credit of tax can be passed on other manufacturer (directly or through a dealer). Thus duty paid at the time of clearance of Beesols cannot be treated as reversal of credit. The learned counsel for the appellant has quoted four case laws as detailed in para 4. We have gone through the four judgments. We find none of them is of any relevance in the facts and circumstances of the present case. In the present case, the appellants though they have not manufactured Beesol but issued invoices of the Beesol. Such invoices would have gone into the trade and commerce and some other person would have taken the credit of the same, and therefore the four cases mentioned by the learned counsel for the appellant are not applicable in the present case. In the case of Andhra Pradesh Straw Board Mills (supra), the manufacturer was manufacturing single ply straw board which was captively used for manufacturing multiple straw board which does not amount to manufacture and in view of this position the tribunal took a view that the appellant need not pay duty at both the stages. The facts in this case are totally different. In the present case the Revenues contention is relating to non manufacturing of Beesol. Another case law quoted is Jay Industries (supra). In the said case certain goods were imported and cleared from Bombay Customs House which were classified under particular heading and duty was paid accordingly. Manufacturing unit took the Proforma Credit of the duty so paid. Later on the department, based upon the decision elsewhere stated that CVD payable is less and therefore the Proforma Credit that can be allowed would be on the lower side. It is in that context that a plea was made by Revenue that the appellant could claim refund for the differential duty from the Bombay Custom House and take lower amount of Proforma Credit at the manufacturing unit. It is in this context that the Tribunal took a view that since the assessment at the Bombay Custom House has not been challenged and is final, Proforma Credit has to be given on the actual duty paid and there is no need to claim refund for differential duty. Similarly in the case of Hindustan Motors the appellant has claimed refund which directly infringed on valuation of goods as reduction was sought from assessable value. In that context this Tribunal has held that the appellants have filed the RT12 Returns and the assessments are already finalized which were not challenged by the appellant and therefore they cannot file the refund claim at this stage. In the case of National Fertilizers Ltd (supra) the classification of Ammonia Nitrate was changed with effect from 10.2.1987. For earlier period the appellant was taking Modvat Credit and paying duty on the final product and that with the change in classification they were not required to pay duty and it is in that context that the Tribunal has taken a view that Modvat Credit already availed cannot be disallowed. We note that the present case is a case of fraud wherein the appellants have issued invoices indicating purported sale of Beesol to various customers. On investigation, these customers were found to be non existent or not have purchased the goods. We also note that the invoices have been issued and these invoices entitled various traders and customers to pass on credit of such tax paid. Under the circumstances the appellants contention is rejected. Payment of duty on Beesol cannot be considered as reversal of credit on Naphtha.
21. Another contention of the appellant is that the period involved in the present case is September 1998 to May 2000 while the Show Cause Notice was issued in 2003-04 and at the time of issuance of the said Show Cause Notice, the earlier Central Excise Rules were replaced by new Central Excise Rules, 2002 and Cenvat Credit Rules, 2002 and the department cannot issue the Show Cause Notice in 2003-04 invoking earlier rule viz. Rule 57I.
22. The contention of the learned Advocate for the appellant is that in the absence of a saving clause Rule 57I cannot be invoked after the Modvat provisions have been substituted by the Cenvat provisions and in support of the above contention the learned advocate has quoted a large number of judgments as detailed in para 5 above.
23. We have considered the submissions. It would be appropriate to see the history of changes in the Modvat/Cenvat Scheme. Modvat Scheme was introduced in 1986 by introduction of Rule 57A onwards under the Central Excise Rules. That Scheme had undergone a number of changes particularly enlarging the scope of the Scheme. In 1994 the Scheme was extended to the capital goods also by introduction of Rule 57Q onwards. In 2000 the name of the Scheme was changed from Modvat to Cenvat even though the basic concept that excise is tax on manufacture continued to be part of the Act. The changes were mainly in nomenclature rather than much of substance. However in 2000, the Rules relating to Modvat were redrafted and instead of earlier Rules 57A onwards these were replaced by Rule 57AA onwards. The changes are mainly cosmetic in nature. For example, the credit of inputs and capital goods were merged into one rule which was earlier covered by two rules. However the broad scheme continued to be the same. In 2001 the Government decided to bring new Central Excise Rules as the earlier Rules were framed in 1944 and Central Excise procedures & administration had undergone a lot of simplification and large number of rules in Central Excise Rules, 1944 had became redundant and were not in tune with the Scheme of administration. Accordingly Central Excise Rules, 2001 were brought in. At that point of time it was also decided to bring in separate rules for Cenvat credit instead of this being part of Central Excise Rules.
24. Though there have been changes in the draft or the language of the Rules but as far as the dispute in the present case is concerned, there has been no change in the content from 1986 onwards. The dispute in the present case is that the input on which credit is being taken should be used in the manufacture of final goods which are dutiable. Further in the event of not using the inputs in the manufacture of dutiable final products for whatever reason the credit alongwith interest is required to be paid back to the Government penalty for misuse of facility/trust. The above proposition were covered under different rules at different point of time. In the present case when the irregularities were done the relevant rule was Rule 57I/57AH of the Central Excise Rules, 1944. However, when the Show Cause Notice was issued separate set of Cenvat Credit Rules has come into existence and it became Cenvat Credit Rules. Thus there was no period when the credit of inputs were not allowed and inputs were not to be used in the manufacture of taxable final product and there was no change in the law (except the Rule number or language of the Rule) for the recovery of credit on inputs which were not used in the manufacturing process was concerned.
25. Upto 1977 there used to be Rules 10 and 10A for recovery of short levy or refund erroneously paid. These rules were replaced by new Rule 10 and thereafter in 1980 by Section 11A of the Central Excise Act, 1944. A dispute has arisen whether the Government can recover the duty under the old rules which had ceased to exist in view of General Clause Act Section 6. There were varying decisions of different High Courts and the matter went up to Supreme Court.
26. In 2000, the Honble Supreme Court in the case of Kolhapur Canesugar Works Ltd vs UOI 2000 (119) ELT 257 (SC) had taken a view that Section 6 of the General Clauses Act is not applicable to the rules framed under any of the Central Act and in absence of any provision either in Act or new rule or notification saving the earlier rules for the pending proceedings it was not possible to continue with the same proceedings. In this context the Honble Supreme Court has observed as under:
35.For the reasons set? forth above we do not accept the view taken in Saurashtra Cement and Chemical Industries Ltd. (supra), in Falcon Tyres Ltd. (supra) and the other decisions taking similar view. It is not correct to say that in considering the question of maintainability of pending proceedings initiated under a particular provision of the rule after the said provision was omitted the Court is not to look for a provision in the newly added rule for continuing the pending proceedings. It is also not correct to say that the test is whether there is any provision in the rules to the effect that pending proceedings will lapse on omission of the rule under which the notice was issued. It is our considered view that in such a case the Court is to look to the provisions in the rule which has been introduced after omission of the previous rule to determine whether a pending proceeding will continue or lapse. If there is a provision therein that pending proceedings shall continue and be disposed of under the old rule as if the rule has not been deleted or omitted then such a proceeding will continue. If the case is covered by Section 6 of the General Clauses Act or there is a pari materia provision in the statute under which the rule has been framed in that case also the pending proceeding will not be affected by omission of the rule. In the absence of any such provision in the statute or in the rule the pending proceedings would lapse on the rule under which the notice was issued or proceeding was initiated being deleted/omitted. It is relevant to note here that in the present case the question of divesting the Revenue of a vested right does not arise since no order directing refund of the amount had been passed on the date when Rule 10 was omitted.
38.The position is well known that at common law,? the normal effect of repealing a statute or deleting a provision is to obliterate it from the statute book as completely as if it had never been passed, and the statute must be considered as a law that never existed. To this rule, an exception is engrafted by the provisions of Section 6(1). If a provision of a statute is unconditionally omitted without a saving clause in favour of pending proceedings, all actions must stop where the omission finds them, and if final relief has not been granted before the omission goes into effect, it cannot be granted afterwards. Savings of the nature contained in Section 6 or in special Acts may modify the position. Thus the operation of repeal or deletion as to the future and the past largely depends on the savings applicable. In a case where a particular provision in a statute is omitted and in its place another provision dealing with the same contingency is introduced without a saving clause in favour of pending proceedings then it can be reasonably inferred that the intention of the legislature is that the pending proceeding shall not continue but a fresh proceeding for the same purpose may be initiated under the new provision.
40.The further question that arises for? consideration in this connection is whether the Notification No. 267/77, dated 6-8-1977 by which Rule 10 was deleted contained any provision for continuance of the proceedings already initiated and whether Act 25 of 78 which introduced Section 11A of the Central Excise Act, adopted the legal device of creating a fiction by virtue of which a proceeding under Rule 10 could be deemed to be a proceeding under Section 11A of the Act. If such was the position then it could be argued that the proceeding initiated when old Rule 10 was in force could be continued on the strength of the clause of the notification by which the said Rule was omitted and substituted by a new Rule which in turn was substituted by Section 11A of the Act.
27. Thus in essence the Honble Supreme Court was of the view that either the new Rule itself should say that pending proceedings will continue or there should be some other provision in law validating the proceedings under the old rules to continue. In 2000 and 2001 the new Rules replaced the Modvat/Cenvat Scheme and similar pleas were raised in respect of pending cases relating to Modvat/Cenvat Scheme. CBEC in October 2010, therefore, issue the following instructions:
CENVAT/Modvat credit - effect of repeal of Modvat Rules on introduction of CENVAT Rules in Budget-2000 - proceedings under Modvat Rules to be kept pending till legislation of saving clause Attention of departmental officers is invited to the judgement of the five Judge Constitution Bench of the Hon'ble Supreme Court in the matter of Kolhapur Cane Sugar Works Ltd. and others V s. Union of India & Others which has put at rest the dispute regarding continuance of the proceedings under the erstwhile Rule 10 and Rule lOA of the Central Excise Rules subsequent to its repeal/omission. In the said judgement, the Hon 'ble Supreme Court consider its earlier judgement in the case of Rayala Corporation Pvt. Ltd. 1969 (2) SCC. 412 wherein it was held as under:-
'Section 6 of the General Clauses Act only applies to repeals and not to omission and applies when the repeat is of a Central Act or Regulation and not of a Rule' (Para 17) and reaffirmed its views and held that the protection available under Section 6 of the General Clauses Act, 1897 is not available in cases where rules made by the Government are repeated/omitted. As a result when a rule is repealed or substituted or omitted, any investigation or legal proceedings including adjudication proceedings initiated by issuance of a show cause notice during the time when the rule was enforced cannot continue on such repeal/substitution or omission.
In the Budget-2000, the duties of excise under the Central Excise Act, 1944 has been amended to read as CENVAT and consequent thereof the rules governing the provisions relating to MODVAT under the Central Excise Rules, 1944 were also amended to read as CENVAT Rules. In the context of the Supreme Court judgement cited above proceedings if any initiated under the old MODVAT rules for recovery and/or for imposition of penalty cannot continue after the amendment. The matter was examined and an opinion was obtained from the Law Ministry as to the feasibility of amending the provisions of Section 6 of the General Clauses Act retrospectively to include the rules also. It has been advised by the Law Ministry that any amendment to General to General Clauses Act shall only be prospective and retrospective amendment is not possible. Further to overcome the difficulty to continue the proceedings initiated under the erstwhile MODVAT rules, it has been advised to validate the action initiated by the Department through a separate legislation.
In order to continue the proceedings in such demands/show cause notice pending adjudication the Government is considering to promulgate appropriate legislation for validating the action taken under the erstwhile MODVAT rules.
It is therefore advised not to finalise any proceedings in matters relating to recovery and imposition of penalty under the erstwhile MODVAT rules that are pending till such time an appropriate legislation to validate the action is enacted.
(Departmental Instruction No. 18/GL-18/2000 GIMF (DR)s F.No. 275/126/2000-CX.8A dated 18.10.2000)
28. Keeping in view the Honble Supreme Courts decision, the Government in the Budget 2001 through Finance Bill/Act introduced Section 38A and also validation section. This Section is pari material to Section 6 of the General Clauses Act but for Rules, Notification, Order etc. The relevant provisions are as under:
38A. Where any rule, notification or order made or issued under this Act or any notification or order issued under such rule, is amended, repealed, superseded or rescinded, then, unless a different intention appears, such amendment, repeal, supersession or rescinding shall not
(a) revive anything not in force or existing at the time at which the amendment, repeal, supersession or rescinding takes effect; or
(b) affect the previous operation of any rule, notification or order so amended, repealed, superseded or rescinded or anything duly done or suffered thereunder; or
(c) affect any right, privilege, obligation or liability acquired, accrued or incurred under any rule, notification or order so amended, repealed, superseded or rescinded; or
(d) affect any penalty, forfeiture or punishment incurred in respect of any offence committed under or in violation of any rule, notification or order so amended, repealed, superseded or rescinded; or
(e) affect any investigation, legal proceeding or remedy in respect of any such right, privilege, obligation, liability, penalty, forfeiture or punishment as aforesaid, and any such investigation, legal proceeding or remedy may be instituted, continued or enforced and any such penalty, forfeiture or punishment may be imposed as if the rule, notification or order, as the case may be, had not been amended, repealed, superseded or rescinded..
126. Any action taken or anything done or omitted to be done or purporting to have been taken or done or omitted to be done under any rule, notification, or order made or issued under the Central Excise Act, or any notification or order issued under such rule at any time during the period commencing on and from the 28th day of February, 1944 and ending with the day, the Finance Bill, 2001 receives the assent of the President shall be deemed to be and to always have been, for all purposes, as validly and effectively taken or done or omitted to be done as if the amendment made by section 125 of the Finance Act, 2001 had been in force at all material times and, accordingly, notwithstanding anything contained in any judgment, decree or order of any court, tribunal or other authority,
(a) any action taken or anything done or omitted to be done, during the said period in respect of any excisable goods under any of such rule, notification or order, shall be deemed to be and shall be deemed to always have been, as validly taken or done or omitted to be done as if the amendment made by section 125 of the Finance Act, 2001 had been in force at all material times;
(b) no suit or other proceedings shall be maintained or continued in any court, tribunal or other authority for any action taken or anything done or omitted to be done, in respect of any excisable goods under any of such rule, notification or order, and no enforcement shall be made by any court, of any decree or order relating to such action taken or anything done or omitted to be done as if the amendment made by section 125 of the Finance Act, 2001 had been in force at all material times;
(c) recovery shall be made of all such amounts of duty or interest or penalty or fine or credit of duty in respect of inputs or capital goods or other charges which have not been collected or, as the case may be, which have been refunded, as if the amendment made by section 125 of the Finance Act, 2001 had been in force at all material times.
Explanation.-For the removal of doubts, it is hereby declared that no act or omission on the part of any person shall be punishable as an offence which would not have been so punishable if this section had not come into force.
29. Further the Notes of Clauses while introducing the said Finance Bill read as under:-
Clause 125 seeks to insert a new section 38A in the Central Excise Act so as to make provisions with retrospective effect to save any rule, notification or order made or issued under the Central Excise Act which were later on amended, repealed, superseded or rescinded. This has become necessary as in some judicial pronouncements it has been held that section 6 of the General Clauses Act is not applicable in respect of subordinate legislation.
Clause 126 proposes to validate certain action taken under the various rules, notifications, orders etc. under the Central Excise Act. This has become necessary in order to validate certain action affected by certain judicial pronouncements.
30. It would thus be seen that the lacuna pointed out by the Honble Supreme Court in the case of Kolhapur Canesugar Works Ltd (supra) were plugged by the amending provisions vide Finance Act, 2001.
31. When the Modvat was replaced by Cenvat and the changes were made in the Modvat/Cenvat Credit Rules number of times, litigants started taking the plea that demands under the old provisions will not survive in view of the Honble Supreme Courts decision in the case of Kolhapur Canesugar Works Ltd. There were different judgments of this Tribunal on this issue and the matter was referred to the Larger Bench in the case of Kisan Sahkari Chini Mills Ltd. The Larger Bench heard the matter. However, by that time newly introduced Section 38A of the Central Excise Act had come into force and thus during the hearing both parties have agreed that in view of the new provisions the issue no more survives. The Tribunal considering the submissions as also examining the provisions of Section 38A answered the question referred to them in the affirmative. The relevant para of the Larger Bench decision in the case of Kisan Sahkari Chini Mills Ltd vs CCE 2001 (131) ELT 370 (Tri-LB) are as under:
The issue referred to the Larger Bench is as regards the continuation of the Modvat cases after the repeal of Modvat Rules on 1-4-2000 without any saving provision. Para 7 of the Referral Bench Order is mentioned below :-
7. At present, the Central Excise Act under which the erstwhile Modvat Rules had been made does not contain any provision saving any actions initiated under Rule 57U of the said Rules. Though Section 125 of the Finance Bill, 2001 seeks to introduce such a provision in the Central Excise Act and Section 126 seeks to introduce in the Act provisions for revalidating, inter alia, actions taken under the said Rule 57U after 31-3-2000, neither of the two sections has become law hitherto. Contextually, I also note that the above provisions of the Finance Bill, 2001 were not before the SRB when it passed order in Wipro (supra).
2. When the matter came up for hearing, both the sides duly represented by Shri Bipin Garg, learned Advocate and Shri Rajeev Tandon, learned SDR agreed that the Finance Bill, 2001 has become the Finance Act, 2001 on 11-5-2001. As per Section 131 of the Act, a new Section 38A has been introduced with the provision that the same shall be deemed to have been inserted on or from 28th day of February, 1944. The effect of insertion of the said section is to the effect that repeal of Modvat provisions w.e.f. 1-4-2000 will not affect the previous operation of the rules and the right, privilege, obligation or liability acquired, accrued or incurred or incurred under the said repealed rules. For better appreciation the said section is reproduced below:-
38A. Where any rule, notification or order made or issued under this Act or any notification or order issued under such rule, is amended, repealed, superseded or rescinded, then, unless a different intention appears, such amendment, repeal, supersession or rescinding shall not
(a) revive anything not in force or existing at the time at which the amendment, repeal, supersession or rescinding takes effect; or
(b) affect the previous operation of any rule, notification or order so amended, repealed, superseded or rescinded or anything duly done or suffered thereunder; or
(c) affect any right, privilege, obligation or liability acquired, accrued or incurred under any rule, notification or order so amended, repealed, superseded or rescinded; or
(d) affect any penalty, forfeiture or punishment incurred in respect of any offence committed under or in violation of any rule, notification or order so amended, repealed, superseded or rescinded; or
(e) affect any investigation, legal proceeding or remedy in respect of any such right, privilege, obligation, liability, penalty, forfeiture or punishment as aforesaid, and any such investigation, legal proceeding or remedy may be instituted, continued or enforced and any such penalty, forfeiture or punishment may be imposed as if the rule, notification or order, as the case may be, had not been amended, repealed, superseded or rescinded.
3. In view of the foregoing the question referred to the Larger Bench has to be answered in the affirmative. The appeals relating to Modvat and pending before the Tribunal are required to be disposed of on merits. Accordingly, we send the matter back to the regular Bench for hearing of the appeal.
32. Thus the issue was put to rest. However, the issue was again raked up in bunch of cases which were heard by Mumbai Bench of this Tribunal in the case of Sunrise Structural and Engineering Ltd (supra) and this Tribunal did not follow the Larger Bench decision for two reasons. The first reason stated was that the decision is based upon the concession granted by both sides and the second reason quoted was that the Honble Supreme Courts decision in the case of Kolhapur Canesugar Works Ltd was not pointed out to the Larger Bench. With great respect to the said Bench we are unable to agree with both the contentions. There were no concessions granted by the appellant in the case of Kisan Sahkari Chini Mills Ltd. The concessions are normally granted in facts and not on the point of law. In any case the matter was referred to the Larger Bench for a decision on a point of law and not deciding a particular case. The second reason mentioned was that the decision in the case of Kolhapur Canesugar Works Ltd was not brought to the notice of the Larger Bench. As enumerated earlier, Section 38A was introduced only to plug the legal loopholes pointed out by the Honble Supreme Court in the case of Kolhapur Canesugar Works Ltd. We also note that it is not that the Honble Supreme Court stated that there can be no action once a particular rule is substituted or amended. All that the Honble Supreme Court has said is that there has to be a provision in the law to continue proceedings under the old Rules. The Honble Supreme Court gone even to the extent of holding that even while amending the rules the new rules can state so. We are also of the view that if for any reason the said Bench was of the view that the Larger Bench decision required reconsideration, the matter should have been referred back to the Larger Bench for consideration of the point and for having an authoritative answer to the point of law, rather than ignoring the Larger Bench decision. We have gone through the Larger Bench decision and we do not see any reason whatsoever to depart from the decision of the Larger Bench in the case of Kisan Sahkari Chini Mills Ltd. We also note that in a number of cases various Benches of the Tribunal have been following the Larger Bench decision. For example:
(i) Emco Ltd vs Commr of C.Ex, Mumbai II reported in 2010 (262) ELT 875 (Tri-Mum);
(ii) Philips India Ltd vs CCE, Vadodara- reported in 2010 (201) ELT 482 (Tri-Ahmd).
33. The learned advocate for the appellant has quoted a number of judgments of this Tribunal which have followed the decision of the Tribunal in the case of Sunrise Structural Engg Ltd. For the reasons stated earlier, we are of the view that in view of the Larger Bench decision, these decisions cannot be followed and in our view is not a good law. Incidentally, we are informed, Revenue has filed appeal against the decision in the case of Sunrise which is pending in Honble Bombay High Court.
34. In the result, the appellants contention that the Show Cause Notice has invoked the old rule and therefore demand cannot be sustained is rejected.
35. Under the Central Excise Rules at the relevant time and as per the Scheme of the Cenvat/Modvat Credit a manufacturing unit is and was allowed to take credit of duty paid suo motto on the assumption that the appellants have procured those duty paid goods, received the same in his factory and will be using the same for the production of final dutiable products. In the present case, from the investigation it is very clear that the appellants have not used either the whole or part of the Naphtha procured duty free. Naphtha purported to have been used in the manufacture of Beesol and purported to have been sold to 22 customers was definitely not used but diverted. But how much Naphtha has been diverted is not clearly coming out as the appellant did not co-operate in the investigation did not produce ledger account of all the parties so as to enable the Revenue to check up from the banks the money trail. In the circumstances, we are of the view that the ends of justice would be met by (i) disallowing the credit of Naphtha taken which is estimated (based upon input/output ratio) to have been used in the manufacture of Beesols the solvents purported to be sold to the 22 buyers (excluding the few consignments of two of such buyers who have admitted to have purchased one or two consignments); (ii) in respect of the remaining customers, appellants may be given last chance to produce all the invoices as also transport documents and ledger accounts detailing the banking transaction to enable verification of money trail. Revenue may verify these details about the correctness and authenticity and based upon such verification allow the credit of Naphtha taken on the estimated quantity which have been used in the manufacturing of the Beesol. Needless to say that appellant will produce all the relevant documents without further delay as the case is very old and in any case within three months from the date of receipt of the order. Revenue would expeditiously complete the verification process and thereafter decide the liability. We note that during arguments appellants have produced electricity, purchase bills and bank statements to prove their points. It should therefore be possible to produce similar documents for sale of final products in respect of all the customers. We may make it clear in the event of failure on the part of appellant to produce the said details either complete or in part, Revenue will be at liberty to assume that that part of Beesol is not produced and the credit in respect of Naphtha so used will be required to be confirmed/recovered from the appellants. Needless to say before confirming the liability, Revenue will hear the appellant and inform about the proposed action.
36. Another contention of Ld Advocate was that demand has been made by invoking the extended period of limitation which cannot be invoked as the appellants were registered and filing all the documents/returns. As discussed at length, this is a clear cut case of fraud & suppression of facts with intention to evade duty and we hold that extended period is correctly invoked.
37. Regarding penalties, we find that investigations as also impugned order clearly bring out the role of S/Shri Ashwin Pandya, Lalit Kumar Nagpal and Anil Kumar Nagpal and we have no hesitation in holding that penalty is imposable. The fact that Shri Lalit Kumar Nagpal became Director from a particular date will not make any difference as he was controlling the affairs and was mastermind behind the diversion of Naphtha through the period. However since we are remitting the matter for redetermining the duty liability, Commissioner may redetermine the quantum of penalty.
38. The duty liability has to be recomputed in terms of the directions given by us above and penalties on all the appellants will have to be re-determined accordingly.
39. The appeals are disposed of in above terms.
(Pronounced in Court on 13.05.2014.) (S.S. Kang) Vice President (P.K. Jain) Member (Technical) rk 38