Custom, Excise & Service Tax Tribunal
M/S. Kusum Alloys Ltd vs Cc, Bangalore on 1 March, 2010
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
SOUTH ZONAL BENCH AT BANGALORE
Date of Hearing: 21/01/2010
Date of decision:..
Appeal No.C/557-561/08
(Arising out of Order-in-original No. 05/2008 dt. 28/3/2008
passed by CC, Bangalore )
For approval and signature:
Honble Mr. M.V.Ravindran, 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?
Yes
2.
Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
Yes
3.
Whether their Lordship wish to see the fair copy of the Order?
Seen
4.
Whether Order is to be circulated to the Departmental authorities?
Yes
M/s. Kusum Alloys Ltd.
Shri. Atma Ram Kejriwal
Shri. Vivek Kejriwal
Shri. Ashok Kejriwal
Kum. Prem Kejriwal
..Appellant(s)
Vs.
CC, Bangalore
..Respondent(s)
Appearance Mr.M.A.Narayana, Advocate for the appellants.
Mr.M.Vivekanandan, SDR for the Revenue.
Coram:
Honble Mr. M.V.Ravindran, Member(Judicial) Honble Mr. P.Karthikeyan, Member(Technical) FINAL ORDER No._______________________2009 Per P.Karthikeyan These appeals arise before us for the second time. Facts of the case briefly are, following investigation conducted by officers of DRI on receipt of intelligence, it transpired that M/s. Kusum Alloys Ltd., Bangalore (KAL for short) had imported MS scrap under Notification No.203/92-Cust. dt. 19/5/1992 and under Notification No.83/90-Cust. dt. 20/3/1990 also after it had closed down its manufacturing facility. On 28/5/1994, at the time of visit of the officers, the Managing Director of KAL Shri Atma Ram Kejriwal (ARK for short) estimated the stock of imported and indigenously procured scrap in stock which showed shortage in comparison to stock as per records. 681 MTs of MS scrap imported under DEEC scheme availing exemption under Notification No.203/92-Cus. dt. 19/5/1992 was gathered to have been cleared to a fictitious firm viz. M/s. Goodwill Enterprises, Bangalore (GWE) . Another quantity of 1029.60 MTs of MS scrap imported paying concessional rate of duty under Notification No.83/90-Cus. dt. 20/3/1990 was cleared to M/s. Unitility Alloys (P) Ltd. in the name of M/s. King Steels, M/s. Sagar Steels, etc. After due process, the Commissioner passed the impugned order confirming demand of following amounts towards inadmissible exemption availed under Notification No.203/92-Cus. and Notification No.83/90-Cus., ordering confiscation of the imported goods and imposition of penalties on persons concerned with diversion of the goods imported.
a. Demand of Rs.1,70,25,810/- being duty due on MS scrap imported under DEEC scheme and not qualified for the exemption as no finished products were manufactured and exported as required.
b. Demand of Rs.3,25,787/- being inadmissible benefit of Notification No.203/92- Cus availed at the time of import.
c. Demand of Rs.1,41,076/- being inadmissible concession availed under Notification No.83/90-Cus.
d. Confiscation of 681 MTs of scrap of value of Rs.32,34,750/- imported under DEEC u/s 111(o) of the Customs Act, 1962 (the Act) offering option to redeem them on payment of fine of Rs.8 lakhs.
e. Confiscation of 1029.60 MT of MS scrap valued Rs.46,09,746/- imported under Notification No.83/90-Cus. for the same being diverted and sold.
f. The Commissioner offered redemption of goods confiscated under Section 111(o) on payment of fine of Rs.10 lakhs.
g. Imposed penalty of Rs.60 lakhs on KAL u/s 112(a) of the Ac h. He also imposed penalty of Rs.40 lakhs on Shri Athmaram Kejriwal u/s 112(a) of the Act.
i. He imposed penalties of Rs.5 lakhs, Rs.15 lakhs and Rs.15 lakhs on respectively on Kumari Prem Kejriwal and S/Shri Vivek Kejriwal and Ashok Kejriwal u/s 112(a) of the Act.
2. KAL, the assessee, Kumari Prem Kejriwal and S/Shri Athmaram Kejriwal, Ashok Kejriwal and Vivek Kejriwal (the appellants) have assailed the impugned order on various grounds seeking to vacate the order of confiscation and the penalties imposed on the appellants. KAL does not challenge the duty liability confirmed against it. The appeal filed by KAL is limited to challenging the finding of clandestine clearance of imported scrap, import of re-rollable scrap in the guise of melting scrap and the finding of shortage in stock contained in the impugned order. KAL advanced the following grounds:-
a. Revenue has not established the finding that it had imported re-rollable scrap in the guise of melting scrap and clandestinely sold it in the market.
b. The authorities had arrived at shortage in stock on 28/5/1994 when they visited the factory of the appellant without physically ascertaining the same.
c. The stock of inputs was ascertained up to fraction of a MT on visual assessment. This was not practical nor reliable.
d. Finding of clandestine clearance of imported scrap was based on surmises and conjectures without evidence.
e. The impugned order was passed relying on evidences obtained from witnesses who were not allowed to be cross examined by the appellants.
f. The finding of clearance of imported scrap to fictitious firms like M/s. Goodwill Enterprises etc. was not based on any evidence. The so called fictitious firms had bank accounts which had been operated.
g. The assessee had only failed to fulfill export obligation, which was required under the Notification, owing to reasons beyond its control.
h. Provisions of Section 111(o) were not attracted in the facts of the case and no penalty was imposable under Section 112(a) of the Act. They relied upon the following case laws:-
(i) Maruthi Udyog Ltd. Vs. CC, Kandla [2001(132) ELT 340(T)]
(ii) Fal Industires Vs. CC, Chennai [2003(159) ELT 215]
(iii) Touch Stone Mining Vs. CC [2004(163) ELT 398(Del.)]
(iv) Meirs Pharma (India) Pvt. Ltd. Vs. CC, Chennai [2004(167) ELT 53] KAL sought waiver of demand of Rs.1,41,076/-, vacation of orders of fine of Rs.18 lakhs and penalty of Rs.16 lakhs. Other appellants seek to vacate the personal penalties on similar grounds.
3. During hearing the ld. Counsel for the appellants submitted that it was impossible to ascertain the stock of MS scrap claimed to have been ascertained by visual examination by Shri. Athmaram Kejriwal at the time of visit of officers on 28/5/1994. The stock was ascertained up to fraction of a MT. This itself showed that the stock ascertained was not reliable and correct. There was no proposal in the show cause notice to confiscate the goods under Section 111(o) of the Act. Order of confiscation of goods, which were not available, was not sustainable in law. Therefore, the order of fine was bad in law. All the penalties were imposed invoking Section 112(a) of the Act. These penalties were not sustainable as there was no allegation of their having rendered any imported goods liable for confiscation. The ld. Counsel reiterated that the challenge was limited to orders of confiscation, fine and penalties.
4. Ld. SDR submitted that the goods imported availing exemption under Customs Notification No.203/92 and 83/90 had been cleared clandestinely instead of putting them to use for production of export goods and exporting them. The goods were liable for confiscation for the importers failure to fulfill the conditions of each notification, subject to which exemption was allowed at the time of their import under the two notifications. Therefore, the penalties were rightly ordered.
5. We have carefully considered the facts of the case and rival submissions. We find that the Commissioner ordered confiscation of 681 MTs of scrap imported under DEEC scheme and 1029.60 MTs of scrap imported availing exemption in terms of Notification No.83/90 Cus under Section 111(o) of the Act. We find that these orders of confiscation were passed in respect of goods which were not available with the assessee or with the Department. These goods were held to have been cleared on sale. In the circumstances, the order of confiscation in respect of these goods is not sustainable in law. Therefore, redemption fine of Rs.8 lakhs and Rs.10 lakhs ordered in respect of these goods are also bad in law. These orders are vacated.
6. Coming to the penalty imposed on the assessee, it is submitted that the intention to evade duty is not proved. Clandestine sale is not proved even by preponderance of probability. Ostensibly, this was only a case where the export obligation was not fulfilled and the reason for non-fulfillment was neither intentional nor deliberate. Thus the provisions of section 111(o) of the Customs Act, 1962 were not invokable in the facts and circumstances of the case and consequently no penalty was imposable as held by the Honble Tribunal in the following case laws :-
(a) Maruthi Udyog Ltd. Vs. Commissioner of Customs, Kandla [2001 (132) E.L.T. 340 (Tri.-Mumbai)]
(b) Fal Industries Ltd. Vs. Commissioner of Customs, Chennai [2003 (159) E.L.T. 215 (Tri.-Chennai)]
(c) Touch Stone Mining Vs. Commissioner of Customs, New Delhi [2004 (163) E.L.T. 398 (Tri.-Del.)]
(d) Meirs Pharma (India) Pvt. Ltd. Vs. Commissioner of Customs, Chennai [2004 (167) E.L.T. 53 (Tri. Chennai)]
7. During hearing the learned Counsel for the appellants submitted the appeals sought to vacate only the penalties imposed. There was no proposal in the show cause notice to confiscate the impugned goods or any finding in the impugned order that the appellants had rendered the goods liable for confiscation under Section 111(o) of the Act. When export obligation was not fulfilled and the importer paid exemption availed (at the time of import), liability to confiscation under Section 111(o) of the Act and penalty did not survive. They relied on case laws cited in support of this plea. They also relied on the Tribunal decision in the case of Nazareth Metal Vs. Commissioner of C. Ex., Mumbai [2006 (205) E.L.T. 998 (Tri. Mumbai)] to buttress their claim that shortage of goods detected on the basis of visual examination could not be valid basis for demand. The decision of the Tribunal in the case of Malwa Cotton Spinning Mills Ltd. Vs. C.C.E, Chandigarh [2003 (155) E.L.T. 161 (Tri. Del.)] is also cited to support the same plea.
8. We find that there is no dispute that the goods involved had been imported availing exemption subject to production of specified finished goods and export thereof. In view of the failure to fulfill the above condition, the impugned goods are liable for confiscation under Section 111(o) of the Act. In the show cause notice it was averred as follows :-
(i) 681 tonnes of materials imported under DEEC scheme which were cleared in the name of M/s GWE and 1029.60 MT of material imported claiming concessional rate of duty under Notification No. 83/90 dated 20.3.90 which were cleared to M/s Utility Alloys (P) Ltd., in the name of M/s King Steel, Sagar Steels etc., are liable to confiscation under Section 111(o) of the Customs Act, 1962. However, the material is not available for confiscation.
(ii) M/s KAL, Bangalore are liable to penalty under Section 112 (a) (ii) of the Customs Act, 1962 for the above said offences.
(iii) Shri ARK who created the fictitious unit viz., M/s GWE and cleared the material imported under DEEC scheme before discharge of export obligation and cleared the material imported in the name of King Steel, Sagar Steel etc. by misusing the benefit of Notification 83/90 dated 20.3.90 as amended, is liable to penalty under Section 112(a) (ii) of the Customs Act, 1962.
(iv) Shri Vivek Kejriwal and Ashok Kejriwal, sons of Shri ARK and Kum. Prem Kejriwal, daughter of Shri ARK who aided and abetted Shri ARK in commission of the offence are liable to penalty under Section 112 (a) (ii) of the Customs Act, 1962.
There is a detailed account of the transactions engaged in by KAL and ARK including diversion of imported scrap and the failure of KAL to fulfill export obligation required as per Notification No. 203/92 dated 19.5.92 and 83/90 dated 20.3.90 in the show cause notice. As regards the penalty imposed on the assessee, we find that show cause notice contained averment that the goods were liable to confiscation under Section 111(o) of the Act with reasons therefore, tentatively found at that stage. The assessee was asked to show cause as to why penalty should not be imposed under Section 112(a) (ii) of the Act.
8.1 We find that the provisions requiring issue of show cause notice have been enacted in the Act to ensure that no failure in observing principles of natural justice arise in the adjudication proceedings under the Act and that the affected parties are afforded adequate hearing. In the instant case, we cannot hold that the proposals to penalize the assessee were made in the show cause notice in a vacuum. Such proposals followed the liability to confiscation of the goods imported for violation of provisions of notifications tentatively found in the notice. After narrating the offending transactions engaged in by KAL and others, the show cause notice stated that the goods involved were liable for confiscation. This is followed immediately by the proposal to penalize the assessee under section 112(a)(ii) of the Act.
9. We find that in the decision in the case of Jagson International Ltd. Vs. Commissioner of Customs, Chennai [2006 (199) E.L.T. 553 (tri. Del.)], the Tribunal held as under :-
10.3 There was a specific allegation made in the show cause? notice that the goods had been cleared without payment of duty and were liable for confiscation. It appears that the provisions of Section 111(d) were referred to in the show cause notice in the context of requirement of a valid licence, because, initially the appellant had not produced the licence as was required in respect of second hand capital goods which were more than seven years old under Para 28 of the EXIM Policy 1992-97. The show cause notice, however, clearly referred to the suit No. 481/93 and to the fact that the goods were removed without payment of duty. The removal of goods without payment of duty entailing confiscation was a sufficient averment in the show cause notice so as to bring in the provisions of Section 111(j) of the Act. Mere non-mention of the statutory provision, namely, 111(j) could not be fatal in the present case where the allegations were specifically made to the effect that the rig was cleared by the appellant without payment of duty which was required to be done in the context of the provisions of Section 47 of the said Act by paying duty, if any, as assessed by the proper officer. Mere non-mention of the provision of law would not invalidate the action where the requisite ingredients of the provision are set out in the show cause notice. 9.1. In Mercedez-Benz India Pvt. Ltd. Vs. CCE, Pune-1 [2009 (171) ECR 0149 (Tri. Mumbai)], wherein the Commissioner had confirmed the demand resorting to Rule 6 of Central Excise Valuation [Determination of Price of Excisable Goods) Rules, 2000, without invoking the said rule in the show cause notice, the Tribunal upheld the decision of the Commissioner, inter-alia, observing as under :-
6.3. . We also find that there are several decisions of the Supreme Court holding that merely because of wrong Rule or wrong Section is quoted, the proceedings do not get vitiated. In case of Fortune Impex 2004 (167) ELT A134 (S.C.), the Honble Court had considered the case where the provision of section 18 (1) of Foreign Exchange Regulation Act, 1973 was mentioned, but relevant provisions of Customs Act applicable had not been mentioned. The Honble Court held that since the provisions of FERA, 1973 have been mentioned and all allegations and charges against the appellant were mentioned in clear terms in the show cause notice, the proceedings do not get vitiated. In this case also, it is not the argument of the appellant that facts have not been clearly mentioned and real ground has not been brought out. . From the above observations of the Tribunal, we find that the assessee had been put on notice before their liability to penalty were found in the impugned order. However, as regards the respective offending transactions of the appellants, we find as follows :-
10. In 1997, KAL had sought time from the adjudicating authority to complete export as required. Till date, admittedly, KAL have not made any progress towards completing export obligation. There is no claim that KAL still has the impugned scrap. Therefore the liability of these goods to confiscation under Section 111(o) of the Act is established as was averred in the notice . There is no dispute that KAL had failed to fulfill condition of Notification Nos. 203/92 dated 19/5/92 and 83/90 dated 20/3/90 and thereby rendered the goods liable for confiscation under Section 111(o) of the Act. Therefore, KAL is liable for penalty under Section 112(a) (ii) of the Act as ordered.
10.1. Shri Vivek Kajriwal, son of Shri ARK is the Managing Director of M/s Utility Alloys (P) Ltd., Coimbatore. Though there was no instance of his being directly involved in the misdoing of KAL and he had acted on directions of his father, there were instances where in he had given instruction for KAL as per statements of transporters and had also dealt with Smt. Ophelia Rajendran who for official purposes was the proprietrix of M/s Goodwill Enterprises. Hence he was held liable for penalty under Section 112 (a) (ii) of the Act, 1962 for abetting the offence. We find that the offending transactions found though not in detail by the Commissioner are based on statements of transporters and Smt.Ophilia Rajendran whose cross examination he had not allowed. Therefore, we hold that the charge against this noticee is not proved.
10.2. Kumari Prem Kejriwal, daughter of Shri ARK had involved herself in the affairs of M/s KAL and M/s Goodwill Enterprises by maintaining separate accounts on the computer for transactions relating to M/s Goodwill Enterprises. She was authorized to sign cheques, look after administrative matters and also to attend miscellaneous jobs. Hence she became liable for penalty under Section 112 (a) (ii) of the Act for abetting the offence. We find that the offending transactions leading to the finding of the charge against this noticee are not discussed in the order by the Commissioner. She is found to have assisted her father in maintaining accounts using her knowledge of computer. Her informed complicity in any fraud is not established. Moreover no reliable evidence is cited by the Commissioner to find the charge. Therefore we hold that the charge against this noticee is not proved.
10.3. Shri Ashok Kejriwal, son of ARK had actually involved himself in purchase of blank invoices for the diversion of imported goods, and also in other matters related to functioning of KAL, as is evident from the statements of the transport company, proprietors and statements of proprietors of M/s King Steel, M/s Bee Ess Trading Corporation etc. In the case of this appellant, his involvement in purchase of blank invoices to cover transport of diverted scrap is established by evidence. Shri.Prakash M. Shah of M/s King Steel admitted selling 100 invoices to KAL and stood by the statement during cross examination on 12.3.97. Hence Shri Ashok Kejriwal has to be held to have committed certain offence of abetting violation of conditions of notifications involved.
10.4. As regards Shri Athmaram Kejriwal, penalty under Section 112(a)(ii) was proposed in the show cause notice as follows:-
Shri Athmaram Kejriwal who created the fictitious unit Viz., M/s. GWE and cleared the material imported under DEEC scheme before discharge of export obligation and cleared the material imported in the name of King Steel, Sagar Steel etc. by misusing the benefit of Notification No.83/90 dated 20/3/1990 as amended, is liable to penalty under Section 112(a)(ii) of the Customs Act, 1962.
11. We find that, though the liability to penalty of KAL for rendering the impugned goods liable for confiscation is obvious from the notice, Shri Athmaram Kejriwal or other appellants cannot be held to have been put on notice as regards their liability to penalty on the same ground. As regards these appellants, charges were found against them and they were found liable for penalty under Section 112(a)(ii) for various offences discussed in the show cause notice. ARK was tentatively found to have committed certain offence in the notice extracted above and others abetted that offence. Therefore, we hold that penalties were imposed on them without putting them on notice as to their liability for their having rendered the impugned goods liable for confiscation under Section 111 of the Act. Accordingly, we set aside the penalties imposed on them.
12. We find that the case law in cases of Maruthi Udyog Vs. CC, Kandla [2001 (132) ELT 340 (T)]; Fal Industries Vs. CC, Chennai [2003 (159) ELT 215]; Touch Stone Mining Vs. CC [2004 (163) ELT 398 (Del.)] and Meirs Pharma (India) Pvt. Ltd. Vs. CC, Chennai [2004 (167) ELT 53] relied on by the appellants dealt with the cases where the appellants had failed to fulfill the export obligation but discharged the duty liability. Their failure to fulfill the export obligation also had occurred despite sincere efforts put in by the appellants. The facts of the subject case are different. Not only the main appellant failed to fulfill the export obligation but also failed to discharge duty liability towards exports made in 1992-93 till date.
12.1. As regards shortage ascertained on visual examination, the case laws cited to support the plea that shortage in stock cannot be validly ascertained on the basis of visual estimation. However, there are other evidence to indicate that the appellants had sold imported scrap in the name of Goodwill Enterprises which was also corroborated by witnesses. Shri Anil Kumar Jain endorsed that goods shown as loaded from GWE had actually been taken from KAL. It is also not in dispute that the appellants had purchased blank invoices to cover illegal removal of the impugned goods intended to be consumed in the manufacture of products to be exported. Therefore KAL had not approached the authorities come with clean hands unlike in the case of assessees involved in the case laws cited. Therefore, these case laws do not come to the aid of the appellants. In the circumstances, the penalty imposed on KAL is held to be sustainable.
13. Accordingly, we allow the appeal filed by M/s. Kusum Alloys Ltd. in part as above. Other appeals are allowed.
(Pronounced in the court on )
(P. Karthikeyan) (M. V. Ravindran)
Member (Technical) Member (Judicial)
Nr
15