Custom, Excise & Service Tax Tribunal
Yes vs Represented By : Shri H D Dave (Adv.) on 28 February, 2014
CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL West Zonal Bench, Ahmedabad COURT Appeal No. : E/1053, 1054, 1055, 1056, 1057/2007-SM Arising out of : OIA No. 225 to 228/2007 (Ahd I) dt 17.6.2007 Passed by : The Commissioner (A), CE, Ahmedabad I For approval and signature : Mr. H.K. Thakur, Hon.ble Member (Technical) 1 Whether Press Reporter may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? No 2 Whether it should be released under Rule 27 of CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? Yes 3 Whether their Lordships wish to see the fair copy of the Order? Seen 4 Whether Order is to be circulated to the Departmental authorities? Yes Appellant (s) : M/s Karnavati Synthetics Ltd Shri Kailash Tarachand Agarwal Shri Gyansingh Pratapsingh Sisodia Shri Niranjan Rambabu Sabee Represented by : Shri H D Dave (Adv.) Respondent (s) : CCE., Ahmedabad I
Represented by : Shri J Nagori (AR) CORAM :
Mr. H.K. Thakur, Hon.ble Member (Technical) Date of Hearing : 21.02.2014 Date of Decision : 28.02.2014 ORDER No. A/10308-10312/2014 dtd 28.2.2014 Per : Mr. H.K. Thakur;
These appeals have been filed by the appellants against the OIA No. 225 to 228/2007 (Ahd I) dt 17.6.2007 passed by Commr (A) Ahmedabad by upholding the OIO No 05/Add.commr/2007 dated 17.1.2007 passed by the Adjudicating Authority.
2. Brief Facts of the case are that the main appellant M/s Karnavati Synthetics Ltd., 103 GIDC, Phase I, Vatva, Ahmedabad, was visited by the officers of the Central Excise (Prev.), Ahmedabad on 27.7.1993. During the course of stock verification a shortage of 96509 L.Mtrs of dyed/printed cotton fabrics of 18 lots was found when compared with the stock shown in the records maintained by the appellant. Shri K T Agarwal, Director of the main appellant admitted the shortages and paid Rs 61,220/- through PLA. Second unit of the main appellant situated at 105 GIDC, Vatva, Ahmedabad was also visited where a quantity of 7740 L mtrs of cotton fabrics valued at Rs 1,19,380/- was found and was admitted by Shri G P Sisodia, Authorised Signatory of the main appellant, to be received from the main appellant without any document and was to be returned to the main appellant after the specified processes. Appellant Shri N R Sabee is the General Manager of the main appellant.
3. Shri H D Dave (Adv.) appearing on behalf of the all the appellants made the Bench go through their reply dtd 2/3/1998 to the Show Cause Notice filed before the Adjudicating Authority and made the following submissions:
i) That shortage of 96509 L Mtrs of cotton fabrics on the basis of lot register, involving duty of Rs 61,220/- was as a result of improper stock taking done in the factory premises of the main appellant.
ii) That 7740 L/mtr of cotton fabrics seized in appellants unit at 105, GIDC, Vatva involving duty of Rs 4334.90 was accounted for in the lot register maintained by the main appellant and not properly showing the same in the records was only a procedural lapse on appellants part without any intention to evade payment of Central Excise duty .
iii) That Para 5.2 of the Show Cause Notice demanding a duty of Rs 2,85,691/-, is based on a Rotary Programme book maintained by the workers of processed man made fabrics (MMF). It was argued by the Learned Advocate that main appellant only processes cotton fabric and has not printed any man-made fabrics on which this duty is demanded. It was his case that for printing cotton fabrics pigment colours are required and printing MMF disperse dyes/colours are required. That main appellant has no machinery to process MMF using disperse dyes/colours and has also not purchased any disperse dyes/colour.
iv) That no trace of MMF was found in the factory premises of the main appellant on the date of stock taking.
v) That against some of the lots in the private records the words J was mentioned which actually meant that such lots were pertaining to M/s Jindal Synthetics and not to the main appellant.
vi) That demand of Rs 2,13,697/-, (1,76,230 L Mtrs), as per Annexure I to the Show Cause Notice, pertains to Man Made Fabrics of Polyester Viscose and Polyester Cotton Fabrics. That main appellant does not have any machinery to process MMF as per arguments made at (iii) above.
vii) That duty of Rs 28,042/-, as detailed in Annexure II to the Show Cause Notice, is demanded on the cotton fabrics cleared at Nil rate of duty under Notification No. 253/82 for hand dyed and hand screen printed fabrics. That allegation of the Revenue is based only on the statement of Shri Somabhai C Patel, Dyeing Master of the appellant. It was his case that Production Programme Register is only a printing programme to the workers and all these lot numbers were duly reflected in appellants lot registers and hence correctly cleared under Notfn. No. 253/82 at Nil rate of duty. That in cross examination of Shri Patel, it came out that this Production Programme Register contained the entries of M/s Jindal Synthetics also.
viii) That amount of Rs 1,40,364/-, demanded as per Para 7 of the Show Cause Notice with respect to 2,40,766/- L Mtrs of cotton fabrics, is based on the presumption that the benefit of Nil rate under Notfn. No. 253/82 was not available to the main appellant. That no evidence has been adduced by the Revenue to the extent that the above quantity was subjected to hand bleaching and that the employees maintaining the processing records maintain the same for all the units of the group. That all the lots tallied with the lot register maintained which should be taken as an authentic proof that the processes declared undertaken by the appellant were correct. That the names of the recipients of these fabrics were available on record and no investigation was done to approach the recipients of goods whether the fabrics received by them was hand dyes/hand screen printed or not.
ix) That duty amounts of Rs 75,240.50 and Rs 37,661.25, as per annexure V to the Show Cause Notice has been demanded on the basis of a Roller Printing Register maintained by the workers. That this demand has been made on the basis of the statement of Shri Virender Mohan, Printing Supervisor of the appellant without recording as to for what purpose the said register was maintained. That demand of Rs 37,664.25 is pertaining to MMF for which main appellant has no facility as contended earlier. That this register is maintained by the workers for paying them the remuneration and one lot could be printed for more than once to get the desired print. Hence it was his case that roller printing register will never show actual quantity of cotton fabrics printed on the rotary printing machine.
x) That duty demand of Rs 93,942/- on 1,58,733 L Mtrs of fabrics, is based on sample register withdrawn from the factory premises of M/s Jindal Synthetics. That against several entries word J is mentioned before lot number which indicates that these fabrics were processed at the premises of M/s Jindal Synthetics. It was his case that all the lots shown to have been processed in Sample Register can not be considered to be the fabrics manufactured by the main appellant.
xi) That an amount of Rs 2,90,734.40 as per Annexure VII to the Show Cause Notice, has been confirmed on the grounds that benefit of Notfn. No 253/82 is not applicable. The reasoning given by the Revenue is that fabrics of 40 width could be printed on hand printing tables of the main appellant. That Revenues argument is that the fabrics, for which benefit of Notfn No. 253/82 was claimed, were more than 40, therefore, the same were machine printed by the main appellant. It is the case of appellant that they had hand screen printing tables upto 66 on which fabrics of width 55 to 58 can be processed. Further, that width of hand screen printed fabrics could be increased by 2 more on a on stenter without disturbing the print. It was also appellants case that no enquiry was done with the recipient parties of these fabrics to know whether hand screen printing or machine printing was done on the fabrics received by them.
xii) That duty demand of Rs 2290/- pertaining Annexure (viii) of the Show Cause Notice, has been confirmed on the ground that these fabrics were not hand screen printed/hand dyed but were actually bleached. It was the case of the appellant that no enquiry was done from the recipient of these goods to know as to whether they received the hand dyed/hand screen printed fabrics or bleached fabrics.
xiii) That cross examination record of the witnesses was not considered by lower authorities.
xiv) That case of clandestine removal has to be established on the basis of direct physical positive and sufficient circumstantial evidences and not simply on the basis of few note books or private records. Ld. Adv. relied upon the following case laws :
a) Oudh Sugar Mills vs UOI and Others [1978 ELT (J172)]
b) Ebenzer Rubber vs CCE [1986(26)ELT 997(Tribunal)]
c) Pratibha Silk Mills Surat vs CCE Vadodara [1989(39)ELT 118(T)]
d) Associated Cylinder Industries vs CCE [1990(48)ELT 460(T)]
e) Leather Chemical & Industries Ltd vs CCE, Calcutta [1989(15)ELT 451(T)]
f) Krishna & Co vs CCE Jaipur [1998(97)ELT 74(T)]
g) Kahmir Vanaspati vs CCE [1989(39)ELT 655(T)]
xv) That in view of the above submissions the Show Cause Notice miserably fail and accordingly no penalty is required to be imposed upon any of the appellants.
4. Shri J Nagori (AR) appearing on behalf of the Revenue defended the orders passed by the Adjudicating Authority and the First Appellate Authority. He made the Bench go through Para 3.2 and 3.3 of the OIO dt 17/1/2007 and Para 9(i), (ii) to (vi) of OIA dtd 31/5/2007 passed by the First Appellate Authority. Ld AR strongly argued that cross examination of the witnesses undertaken was only an after thought after tutoring the witness under expert legal advice and that such witness were only employees of the appellant. That no retraction of the statements were made by the concerned persons till filing of reply to the Show Cause Notice on 2/3/1998, nearly 4= years after the visit by the officers on 27/7/93. That both the OIO and OIA passed by the lower authorities are well reasoned and appeals filed by the appellants should be rejected.
5. Heard both sides and perused the case records. The issue raised by the Revenue in these proceedings is that main appellant has indulged in clandestine manufacture and clearance of cotton/manmade fabrics resulting into following demands :
(i) Duty demand of Rs 61,220/- with respect to shortage found on the date of visit [Para 3(i) above]
(ii) Duty demand of Rs 4334.90 on 7740 L Mtrs of cotton fabrics found and seized in second unit of the appellant [Para 3(ii) above]
(iii) Duty demand on processing of man made fabrics (MMF) :
Rs 2,85,691.00 Para 3(iii) above Rs 2,13,697.00 Para 3(vi) above Rs 37,644.25 Para 3(ix) above
(iv) Duty demand by denying the benefit of Notfn No. 253/82.
Rs 28,042.00 Para 3(vii) above Rs 1,40,364.00 Para 3(viii) above Rs 75,240.50 Para 3(ix) above Rs 2,90,734.40 Para 3(xi) above Rs 2,290.00 Para 3(xii) above
(v) Duty demand of Rs 93,942/- on 1,58,733 L Mtrs of fabrics based on a sample register withdrawn from the factory premises of M/s Jindal Synthetics - Para 3(x).
5.1 The short levy and clandestine removal of goods has been worked out by the Revenue on the basis of certain registers/private records maintained by the appellants and their employees. Shortages found in the stock taking of the main appellant and seizure of a consignment of 7740 L Mtrs of cotton fabrics, involving duty of Rs 4,334.90, of the main appellant found in the second unit of the appellant which were not accounted for. The calculation methodology of findings out shortages adopted, by the investigation, was initially admitted by all the appellant and their employees. Even duty demand calculated with respect to shortages (Rs 61,220/-) was paid by the main appellant. However, during the cross examination of the relied upon witnesses in the adjudication proceedings appellants tried to make out a case that the private records relied upon by the Revenue actually represented the total manufacturing activity of all the units and these records do not represent the manufacturing done entirely in the factory of main appellant. The defence made by the appellants has been considered to be an after thought and has been brushed aside by the lower authorities. The evidence like shortage of 96509 L mtrs cotton fabrics (Involving duty of Rs 61,220/-), seizure of 7740 L Mtrs of cotton fabrics (Involving of Rs 4334.90) of the main appellant found in the second unit and the statements of all those who were associated with the manufacturing activity of the main appellant create a very strong suspicion that the appellant is involved in clandestine manufacturing and removal of fabrics. Above evidence are sufficient to hold that main appellant has carried out manufacturing and clandestine removal of 96509 L Mtrs and 7740 L Mtrs of cotton fabrics involving central excise duty of Rs 61,220/- Rs 4,334.90 respectively. Accordingly, demands of Rs 61,220/- and Rs 4,334.90 and confiscation of 7740 L Mtrs of fabrics seized on 27/7/93 and imposition of redemption fine of Rs 25,000/- are also justified.
5.2 However, it has to be seen whether the above circumstantial evidences, alongwith certain private records maintained by the appellants, are sufficient to hold the remaining duty demands and to establish the clandestine activities of the main appellant. So far as manufacturing of manmade fabrics by the main appellant, mentioned in Para 5(iii) is concerned, it has been argued that main appellant does not have the facility for manufacturing of man made fabrics (MMF). It is observed from Para 1 of the OIO passed by the Adjudicating Authority that main appellant is engaged in the processing of cotton fabrics but investigation, inter-alia, alleges that MMF of Chapter 54/55 of Central Excise Tariff Act 1985 was also manufactured by the appellant. There was no stock of either grey or finished man made fabric found in the factory premises of the main appellant nor any such MMF was seized elsewhere. No cash was seized in these proceedings indicating purchase/sale of grey/finished man made fabrics allegedly manufactured and cleared by the main appellant. There is no indication of any additional purchase of raw materials required for processing of the man made fabrics by the main appellant. Under the circumstances simply on the basis of few statements and private records of the appellants, it can not be held that the main appellant was carrying out the manufacture of man made fabrics, which was agitated by the appellants throughout the proceedings before the Adjudicating Authority of the appellate authority. Confirmation of demands, mentioned in Para 5(iii) by the lower authorities does not survive.
5.3 Lower authorities have confirmed demands of Rs 5,36,670/90 as indicated in Para 5(iv) above on the ground that benefit of NIL rate of duty under Notfn No. 253/82 has been wrongly availed as these fabrics were presumably have been subjected to dutiable processes and not exempted processes. It has been rightly contested by the main appellant that addresses of those buyers, who got the fabrics after undertaking exempted processes, were exiting in the records of the main appellant. Investigation could have recorded the statements of some of the recipients of these goods to know whether the fabrics they received have undergone exempted processes or dutiable processes. Even some samples of the fabrics so processed could have been available with the recipient for further testing. In the absence of any such verification done with respect to the duly recorded transactions, the processes indicated in the records of the appellant can not be faulted with on presumptions and suspicion. It has been a settled proposition of law, as per the case laws relied upon by the appellants and many recent judgments, that demands can not be confirmed against a manufacturer simply on the basis of few confessional statements and some note books/private records maintained by the workers/employees of a manufacturer. Accordingly, demands mentioned in Para 5(iv) above, does not survive against the main appellant.
5.4 A demand of Rs 93,942/-, as indicated in Para 5(v) above, has been confirmed against the appellant on the basis of a sample registrar found in the premises of M/s Jindal Synthetics. It is strange that Revenue is conveniently considering a record available in the premises of M/s Jindal Synthetics to be the one pertaining to the main appellant but does not want to accept that those records, found in factory premises of the main appellant, could also contain the entries of M/s Jindal Synthetics. Further no investigation seems to have been done at the end of the recipients to know the nature of these fabrics supplied. Any such follow up could have made the factual position very clear whether the fabrics were obtained from the main appellant or M/s Jindal Synthetics. Based on these observations, it cannot be held that duty calculated, as per a sample register found in the premises of M/s Jindal Synthetics, was pertaining to fabrics clandestinely manufactured and cleared by the main appellant.
6. In the light of the above observations, appeal of the main appellant with respect to duty amounts, indicated in Para 5(iii), (iv) and (v) above, is allowed with consequential relief, if any. Appeal filed by the main appellant with respect to duty demands indicated in Para 5(i) and (ii) above, is rejected and accordingly, OIO dated 17/1/2007 of the Adjudicating Authority at Para 3.7 (ii), (iii), (vi) and (vii) is upheld. Looking to the quantum of demands confirmed following penalties against the appellant shown against each, under Rule 173Q/209A of the erstwhile Central Excise Rules 1944, as applicable, will be appropriate:
(a) M/s Karnavati Synthetic Ltd 103, GIDC, Vatva Rs 30,000/-
(b) Shri K T Agarwal, Director Rs 10,000/-
(c) Shri G P Sisodia Excise Incharge & Authorised Signatory Rs 10,000/-
(d) Shri N R Sabee, General Manager Rs 10,000/-
7. Appeal allowed to the extent indicated herein above.
(Pronounced in the Court on 28.2.2014) (H.K. Thakur) Member (Technical) Swami ??
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