Custom, Excise & Service Tax Tribunal
M/S. Kavitha Chemicals vs Cce, Coimbatore on 16 April, 2008
IN THE CUSTOMS, EXCISE & SERVICE TAX
APPELLATE TRIBUNAL
SOUTH ZONAL BENCH AT CHENNAI
E/PD/357 to 361/2007 and E/545 to 549/2007
(Arising out of Order-in-Original No. 10/2007 (Commr.) dated 30.3.2007 passed by the Commissioner of Central Excise, Coimbatore)
For approval and signature:
Honble Mr. P. G. Chacko, Member (Judicial)
Honble Mr. P. Karthikeyan, Member (Technical)
1. Whether Press Reporters may be allowed to see 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 the Members wish to see the fair copy of the Order?
4. Whether Order is to be circulated to the Departmental authorities?
M/s. Kavitha Chemicals
Shri A. Sunderrajan
M/s. Aruna Soap Works
M/s. Tanushree Agencies
M/s. Tanushree Agencies Appellants
Vs.
CCE, Coimbatore Respondent
Appearance Shri S. Venkatachalam, Advocate for the Appellants Smt. R. Bhagya Devi, SDR, for the Respondent CORAM Honble Mr. P. G. Chacko, Member (J) Honble Mr. P. Karthikeyan, Member (T) Date of Hearing: 16.04.2008 Date of Decision: 16.04.2008 Stay Order Nos. ______________ Final Order No. ______________ Per P. G. CHACKO After examining the records and hearing both sides, we are of the view that the appeals have to be summarily disposed of at this stage. Accordingly, after dispensing with predeposit, we take up the appeals.
2. The appeals filed by M/s. Aruna Soap Works and M/s. Kavitha Chemicals are mainly against demands of duty, the one filed by the former having challenged a demand of duty on detergents for the period September 1998 to March 2003 and the one filed by the latter having challenged a demand of duty on acid slurry for the period July 1998 to March 2001. These parties have also challenged the penalties imposed on them. The remaining appeals are all against penalties imposed on the appellants under Rule 209A of the Central Excise Rules, 1944 and Rule 26 of the Central Excise Rules, 2001/2002. The relevant show-cause notice alleged that (a) M/s. Aruna Soap Works clandestinely manufactured detergents out of Linear Alkyl Benzene (LAB, for short) supplied by M/s. Tamilnadu Petro Products Pvt. Ltd. (M/s. TPL, for short) from their units at Pondicherry and Coimbatore during a part of the period of dispute; (b) they also did likewise by making use of acid slurry allegedly supplied by M/s. Kavitha Chemicals during another part of the period of dispute; (c) M/s. Kavitha Chemicals themselves had clandestinely manufactured, such as out of LAB and sulphuric acid procured from M/s. TPL and M/s. Tanushree Agencies respectively; (d) upto 31.3.2001 to the period of dispute, the clandestine manufacturer of detergents by M/s. Aruna Soap Works was out of acid slurry clandestinely supplied to them by M/s. Kavitha Chemicals after manufacturing it out of LAB and sulphuric acid allegedly supplied by M/s. TPL and M/s. Tanushree Agencies; (e) thereafter clandestine manufacturer of detergents by M/s. Aruna Soap Works was out of LAB and sulphuric acid directly procured from M/s. TPL and M/s. Tanushree Agencies respectively and that Shri A. Sundararajan [Power of Attorney-holder for M/s. Aruna Soap Works] had abetted the clandestine activities of M/s. Aruna Soap Works and (f) M/s. Tanushree Agencies had also abetted the clandestine activities of M/s. Kavitha Chemicals. These allegations were based inter alia on statements recorded by the investigating agency (DGCEI) from numerous persons including transporters, two letters submitted by M/s. TPL, Pondicherry as well as documents mentioned therein to the investigating agency. In their replies to the show-cause notice, M/s. Aruna Soap Works and M/s. Kavitha Chemicals, the chief contestants in this case, requested for permission to cross-examine 20 witnesses and 12 witnesses respectively. The 20 witnesses sought to be cross-examined by M/s. Aruna Soap Works included the 12 persons who were sought to be cross-examined by M/s. Kavitha Chemicals. Out of these 20, five witnesses were cross-examined on 28.12.2004, four were cross-examined on 15.12.2005, three on 15.12.2006 and one on 9.1.2007, as permitted by the adjudicating authority. Thus 13 witnesses were cross-examined in this case. On 15.3.2007, the date on which the case arose for hearing before the adjudicating authority, counsel for M/s. Aruna Soap Works requested for permission to cross-examine the remaining 7 witnesses also. On behalf of M/s. Kavitha Chemicals also, he wanted to cross-examine the remaining witnesses. These requests were not acceded to and the Commissioner proceeded to adjudicate the case. On behalf of M/s. Aruna Soap Works, the counsel had also requested for supply of certain relied upon documents which were not supplied along with the show-cause notice or thereafter. These documents included copies of the letters sent to the investigating agency by Ms. TPL, Pondicherry as also copies of the documents mentioned therein. The investigating agency informed the party that they proposed to rely on the letters only and not on any such documents in the show-cause notice. However, the adjudicating authority relied on these documents besides the statements given by those witnesses who were not allowed to be cross-examined. These are the main grievances raised before us today by counsel for M/s. Aruna Soap Works and M/s. Kavitha Chemicals. It is submitted that natural justice was denied to these parties by the adjudicating authority.
3. Yet another submission made by counsel today is that the investigations in this case were initiated by DGCEI on the basis of the results of parallel investigations made by Sales Tax authorities into alleged clandestine sales of detergents by M/s. Aruna Soap Works and into clandestine purchase of LAB by M/s. Kavitha Chemicals. It is submitted that the documents on the basis of which the sales tax authorities booked cases against M/s. Aruna Soap Works and M/s. Kavitha Chemicals have also been relied upon by the Commissioner in the impugned order. Counsel further submits that M/s. Kavitha Chemicals have since won appeal against the sales tax assessment order relating to the impugned proceedings. Counsel has also placed on record a copy of the order passed by the Appellate Assistant Commissioner of Sales Tax for the period 1999 2000 in respect of M/s. Kavitha Chemicals. It is submitted that this appellate order has since become final and binding also. Admittedly, this document was not available to the Commissioner. It is submitted by counsel that this and similar documents for a major part of the period of dispute would go a long way to disprove the case of DGCEI accepted by the Commissioner in the impugned order. We have heard learned SDR also, who has reiterated the findings of the Commissioner.
4. After considering the submissions, we are convinced of the fact that natural justice was denied to M/s. Kavitha Chemicals and M/s. Aruna Soap Works in this case. It appears from the impugned order that learned Commissioner relied not only on statements given by witnesses cross-examined before him but also on statements given by witnesses who were not allowed by him to be cross-examined despite specific requests in writing given by the parties and their counsel. The Commissioner has stated in his order that the counsel for M/s. Aruna Soap Works and M/s. Kavitha Chemicals orally submitted that he did not want to cross-examine the remaining witnesses. The same counsel has denied this before us today. It has been pointed out that the parties themselves had requested for cross-examination of the witnesses in their letter submitted to the Commissioner on 15.3.2007. We find that this letter has been referred to in the impugned order. Perhaps, the contents of this letter were not fully appreciated. We find that the statements given by those witnesses who were not allowed to be cross-examined have been relied upon in the order of adjudication. Further, it is particularly noteworthy that these witnesses include one Shri R. Venkatavarathan, a functionary of M/s. TPL, Pondicherry, who had written the letters in question to the investigating agency and furnished certain documents as annexures thereto. It is the specific case of the appellants that a full text of any of these letters was not given to them or any of the documents mentioned in the letters was also not supplied to them. It has been submitted by counsel that a major part of the demand of duty raised on M/s. Aruna Soap Works is based on the missing documents. These submissions have not been successfully contested. In the circumstances, we have no option but to remand the case to the Commissioner for fresh adjudication in accordance with law and the principles of natural justice. This option will of course be applicable to the other appellants who are aggrieved by imposition of penalties, also, inasmuch as their penal liability, if any, would necessarily depend on the penal liability, if any, of M/s. Aruna Soap Works and M/s. Kavitha Chemicals. This is because the charge against these parties, who are challenging the penalties only, is that, they abetted the offence committed by the main parties. In the aforesaid circumstances, we set aside the impugned order and allow all these appeals by way of remand. Learned Commissioner is directed to supply to M/s. Aruna Soap Works and M/s. Kavitha Chemicals copies of all those documents which are yet to be supplied to them. He is also directed to favourably consider their request to cross-examine all those witnesses whose statements are sought to be relied upon. For this purpose a reasonable opportunity should be granted. Needless to say that after this exercise, learned Commissioner should give all the parties a reasonable opportunity of being heard. As we have already noted, the sales tax appellate orders now available to the main parties were not available to learned Commissioner at the time of the impugned adjudication. As it appears that these documents can also have a bearing on the case, learned Commissioner shall also give the parties concerned a reasonable opportunity of adducing evidence in support of their respective case.
(Dictated and pronounced in open court)
(P. KARTHIKEYAN) (P.G. CHACKO)
Member (T) Member (J)
Rex
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