Custom, Excise & Service Tax Tribunal
M/S Premier Alloys Ltd vs Cce, Lucknow on 11 December, 2014
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL West Block No. 2, R.K. Puram, New Delhi 110 066. Principal Bench, New Delhi COURT NO. III DATE OF HEARING : 13/08/2014. DATE OF DECISION : 11/12/2014. Excise Appeal No. 1942-1944 of 2008 (SM) [Arising out of the Order-in-Appeal No. 78&79/CE/LKO/2008 dated 30/05/2008 passed by The Commissioner (Appeals), Customs & Central Excise, Lucknow.] For Approval and signature : Honble Shri Rakesh Kumar, 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 would be released under Rule 27 of : the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? 3. Whether their Lordships wish to see the fair : copy of the order? 4. Whether order is to be circulated to the : Department Authorities? M/s Premier Alloys Ltd. ] Appellants Shri Ajay Kumar Jain, Director] Versus CCE, Lucknow Respondent
and vice-versa Appearance Shri Bipin Garg, Advocate for the appellant/respondent.
Shri Pramod Kumar, Authorized Representative (Jt. CDR) for the Respondent.
CORAM : Honble Shri Rakesh Kumar, Member (Technical) Final Order No. 54710-54712/2014 Dated : 11/12/2014 Per. Rakesh Kumar :-
The facts leading to filing of these appeals by M/s Premier Alloys Ltd., Shri Ajay Kumar Jain, Director of M/s Premier Alloys Ltd. and by the Revenue are, in brief, as under.
1.1 M/s Premier Alloys Ltd., B-54 & 55, UPSIDC Industrial Area, Malwan, District Fatehpur (U.P.) [hereinafter referred to as PAL) are manufacturers of MS Bars chargeable to Central Excise duty under sub-heading 7213.90. Shri Ajay Kumar Jain and Shri Naveen Jain are the Directors of PAL. M/s Kundan Castings Pvt. Ltd., Malwan [hereinafter referred to as KCPL], M/s Sigma Casting Pvt. Ltd., Malwan [hereinafter referred to as SCPL] and M/s Premier Ispat Ltd., Kanpur [hereinafter referred to as PIL] are group companies of PAL.
1.2 On receipt of an information that PAL are clearing the MS Bars manufactured by them clandestinely by removing the same under the invoices issued by various traders and that the goods so removed clandestinely are being transported to the consignees by certain transporters, the officers of Directorate General of Central Excise Intelligence on 15/07/02 searched (a) factory premises of PAL at Fatehpur (U.P.), (b) office premises of PAL at Plot No. 17, Fazalganj, Kanpur, (c) residential premises of the Directors Shri Ajay Kumar Jain and Shri Naveen Jain, (d) residential premises of a confidential employee Shri Kulbhushan Jain, (e) the premises of certain dealers M/s Subhash Agarwal, Shri Ram Bala Gupta, M/s B.D. Agnihotri & Sons and (f) the premises of transporters namely M/s Bhartiya Forwarding Agency, M/s Thakur Transport Company, M/s Pehalwan Transport Co., M/s M.P. Roadlines and M/s New Pooja Road Corporation.
1.3 In course of search of the factory premises, the stock of finished goods M.S. Bars and the raw material M.S. Ingots was checked. There was shortage of 146.24 M.T. in the stock of M.S. Bars involving Central Excise duty of Rs. 3,09,535/- and there was shortage of 67 M.T. of M.S. Ingots involving Cenvat credit of Rs. 1,04,977/-. Apart from this, no other incriminating document was found from the factory premises of PAL or its office premises.
1.4 From the premises of the dealer Shri Subhash Agarwal F/o Shri Vimal Agarawl, Proprietor, M/s V.K. Steel Traders, Kanpur, a few sales invoices of PAL, trading bills of traders and also the blank letter heads of M/s V.K. Steel Traders, Kanpur and M/s Prabhu Jyot Steel, Kanpur were found. Statement of Shri Subhash Agarwal was recorded on 17/07/03 under Section 14 of the Central Excise Act, 1944 wherein he stated that he used to arrange trading bills of the firms registered with Sales Tax Department for sale of MS Bars manufactured by PAL on commission, that for this purpose he used to arrange a meeting of the owners of the trading firms with the owners/directors of PAL, that he was responsible for ensuring that the goods cleared from PAL factory under trading bills of the traders reached the destination safely and without any problem for which he used to get a commission @ Rs. 35 per M.T. which subsequently was raised to Rs. 50/- per M.T. and this commission used to be shared by him with the concerned trading firms whose bills were being used for clearing the consignment of MS Bars from the factory of PAL, that instructions were received by him from PAL on telephone regarding the quantity of the MS Bars, the destination to which the same are to be dispatched and the consignees name which used to be mentioned in the trading bills and after the goods reached the consignee, the said bill used to be destroyed. On being asked about the blank bill books of Prabhujot Steel, Kanpur recovered from his premises, he stated that the bills book of M/s Prabhujot Steel, Kanpur were being used for clearance of the finished goods manufactured by Premier group of companies without payment of duty. He also stated that if any consignment cleared by PAL cleared was intercepted by Central excise, this incident was immediately conveyed by him to PAL and they immediately issued Central Excise invoice in favour of the trader whose bill was accompanying the said consignment and such Central Excise invoice was subsequently produced before the concerned officers of the Central Excise Department for release of the goods.
1.5 In course of search of the residential premises of Shri Kulbhushan Jain, the blank bill books of M/s Manoj Kumar Manish Kumar, Kanpur, M/s Prabhujot Steel, Kanpur, M/s Expert Agriculture Udyog, Kanpur and M/s Sunder Iron Manufacturers, Kanpur, all trading firms, were recovered. In course of his statements recorded on 15/07/02 and 18/7/03 under Section 14 of the Central Excise Act, 1944, he stated that he was one of the faithful employee of Shri Ajay Kumar Jain, Director of PAL and PIL and the bill books had been given to him by Shri Ajay Kumar Jain for safe keeping, that the loose slips recovered from residential premises are the documents under which consignments of MS Ingots were cleared by M/s Sigma Casting, a premier group company to PAL without payment of duty. He also stated that a total of 54 blank books of various trading firms recovered from his residential premises were being used for clandestine clearances of MS Bars and MS Ingots under the cover of traders invoices. Statement of Shri Ajay Kumar Jain was recorded again on 13/04/04 wherein he reiterated his statements dated 15/07/12 and 18/07/03.
1.6 From the documents recovered from the residential premises of Shri Subhash Agarwal and Shri Ajay Kumar Jain and their statements, it appeared that PAL as well as PIL and other Premier group companies were removing the finished goods manufactured by them under the cover of the invoices issued by the various traders and once the goods reached the consignees, these invoices were destroyed and in case any consignment was intercepted by the sales tax or central excise authorities, Shri Subhash Agarwal immediately informed the concerned persons of PAL/PIL and immediately an invoice was issued in the name of the trader whose invoice was being used for transportation of the clandestinely cleared goods.
1.7 Inquiry was conducted with the Proprietors of the five transport agencies whose premises had been searched in course of which each of them furnished certain documents.
1.8 Shri Jugal Kishore Bhartiya, Proprietor of M/s Bhartiya Transport Agency, Kanpur in his statement stated that he was booking the consignments of iron and steel items for transport, that in case of consignments of iron and steel products, the name of the consignor and consignee, place of the loading, name of the destination, weight and freight were not being mentioned on the GRs while booking the consignments, on the instruction of the mill owners as well as the buyers, but for their records they used to mention the name of the person who had come for booking, on the back of the office copy of the GR, that full truck sariya meant the steel bars weighting at least 12 M.T. loaded in the truck, that on the back of the office copy of GRs, wherever the name Girish Steel or BD Agnihotri or Bansi Steel appears, it indicates that the goods had been loaded from PAL. Shri Jugal Kishore Bhartiya on this basis identified the office copies of the GRs where the consignments had been loaded from the factory of PAL.
1.9 Shri Dhirender Singh, Proprietor of M/s M.P. Bihar Roadlines, Kanpur, in his statement recorded under Section 14 of the Central Excise Act, 1944 stated that he had transported the consignments of MS Bars manufactured by PAL, that PAL had directed him not to mention the names of the consignors or consignees, that they used to write the PA on the back of the office copy of the GRs pertaining to the consignments loaded from the factory of PAL and that the GRs, in which the names of the consignors are shown as M/s Vishwas Enterprises, Kanpur and M/s Daya Shanker Ravi Shanker, have been issued by his Transport company. On the basis of the marketing PA on the back of the office copies of GRs, he identified the GRs, where the consignments had been loaded from the factory premises of PAL.
1.10 Similar inquiry was conducted with Shri Sabharaj Tiwari of M/s New Pooja Transport Company, Kanpur, Shri Diwakar Nath Pandey, Proprietor M/s Pehlwan Transport Company, Fatehpur and Shri Rakesh Kumar Singh, Proprietor M/s Thakur Transport Company, Unnao, who stated that on instructions of consignors and consignees they were not mentioning the names of the consignors and consignee, but they could identify the GRs where the consignments had been loaded from the factory of PAL and accordingly they identified the GRs which were taken over by the Investigating Officers.
1.11 In view of the statements made by Shri Subhash Agarwal and Shri Kulbhushan Jain, inquiry was made in respect of M/s Manoj Kumar Manish Kumar, Kanpur, M/s Prabhujot Steel, Kanpur, M/s Expert Agriculture Udyog, Kanpur and M/s Sunder Iron Manufacturers, Kanpur, and each of them stated that though they were registered with Sales Tax authorities and were dealing in steel items, they had never dealt with MS Bars but were engaged only in sale and purchase of steel sheets and as such they did not know Shri Kulbhushan Jain or Shri Subhash Agarwal.
1.12 On scrutiny of balance sheet of PAL for period from 2001-2002 it was found that they have shown receipt of Rs. 1,66, 92,918/- as service charges/sale commission/supervision charges from a number of firms/companies. Perusal of the vouchers recovered from the office of PAL revealed that they had received this amount from a number of firms/companies as service charge/sales commission. In order to verify the authenticity of these transactions, Inquiries were made with the companies/firms from whom PAL claimed to have received the said amount as commission. PAL have claimed to have received Rs. 1,05,58,874/- as commission from M/s Associated Strips Pvt. Ltd., Faridabad during 2001-2002, and have claimed to have received Rs. 77,31,871/- as commission from M/s Fabric India Pvt. Ltd., Meerut during the same year. Similarly a commission of Rs. 25,00,000/- was claimed to have been received during 2001-2002 from M/s Sandhya Textile for helping them in procuring orders from MTNL for supply of uniform fabrics. From inquiry with the officers of M/s Associated Strips Pvt. Ltd., Faridabad, M/s Fabric Pvt. Ltd., Meerut and M/s Sandhya Textiles, New Delhi it appeared that no service had been provided by PAL to these companies and only the documents had been generated by M/s Associated Strips Pvt. Ltd., M/s Fabric Pvt. Ltd. and M/s Sandhya Textile regarding payment of certain sums to PAL. It, therefore, appeared that PAL legalized the money received from the unaccounted sale of MS Bars cleared clandestinely without payment of Central Excise duty.
1.13 In view of the above investigation, a show cause notice dated 27/09/06 was issued to PAL and its Director Shri Ajay Kumar Jain for (a) recovery of Central Excise duty amounting to Rs. 3,09,535/- on 146.34 M.T. on MS Bars valued at Rs. 19,00,534/- found short at the time of officers visit to the factory and Cenvat credit of Rs. 1,04,542/- on 67.36 M.T. of MS Ingots MS Ingots found short at the time of officers visit to the factory, alongwith interest on this amount at the applicable rate under Section 11AB of Central Excise Act, 1944; (b) recovery of Central Excise duty amounting to Rs. 21,62,449/- on 1196.045 M.T. of MS Bars valued at Rs. 1,35,15,308/- alleged to have been removed without payment of duty as per the records of the transport companies, alongwith interest on this duty at the applicable rate under Section 11AB of Central Excise Act, 1944; (c) imposition of penalty on PAL under Section 11AC and (d) imposition of penalty on Shri Ajay Kumar Jain, Director, PAL under Rule 26 of the Central Excise Rules, 2001.
1.14 The above show cause notice was adjudicated by the Additional Commissioner vide order-in-original No. 10/ADC/SKP/ 07 dated 23/10/07 by which the duty/Cenvat credit demands, as mentioned above, were confirmed against PAL alongwith interest on it under Section 11AB and beside this, while penalty of Rs. 25,76,526/- was imposed on PAL under Section 11AC, penalty of Rs. 2,00,000/- was imposed on Shri Ajay Kumar Jain under Rule 26 of the Central Excise Rules, 2001/2002.
1.15 PAL and its Director Shri Anil Kumar Jain filed appeals against the above order of the Additional Commissioner to Commissioner (Appeals). The Commissioner (Appeals) vide order-in-appeal dated 30/05/08 confirmed the duty demand of (a) Rs. 3,09,535/- on shortage of 146.24 M.T. of MS Bars and Cenvat credit demand of Rs. 1,04,542/- on shortage of 67.36 M.T. of MS Ingots Cenvat credit availed MS Ingots and (b) duty demand of Rs. 8,35,865/- on 462.27 M.T. of MS Bars held to have been cleared clandestinely and transported under 39 GRs (38 GRs of M/s Pehalwan Transport Co. and one GR of M/s New Pooja Transport) alongwith interest thereon under Section 11AB ; but dropped the duty demand of Rs. 10,97,160/- based on the GRs of M/s Thakur Transport Co., and 27 GRs of M/s Pehalwan Transport Co., and remanded the duty demand based on the GRs of M/s MP Bihar Road Lines and M/s New Bhartiya Forwarding Agency to the Additional Commissioner for denovo adjudication. Accordingly, the penalty on PAL under Section 11AC was reduced to Rs. 12,49,987/- and penalty on Shri Ajay Kumar Jain, Director PAL was also reduced to Rs. 1,25,000/-.
1.16 Against the above order of the Commissioner (Appeals) while PAL and Shri Ajay Kumar Jain have filed the appeals No. E/1943/08 and E/1944/08, the Department has filed appeal No. E/1942/08 against the part of the Commissioner (Appeals) by which he dropped part of the duty demand.
2. Heard both the sides.
3. Shri Bipin Garg, Advocate, the learned Counsel for the appellants made the following submissions (1) The Departments case against the appellant is based on the allegation that the appellant company PAL, a manufacturer of MS Bars, were clearing their goods clandestinely without payment of duty and without issue of invoices under the cover of the invoices issued by some traders and in this regard the necessary arrangements for procuring the traders invoices and arranging the transport were being made by Shri Kulbhushan Jain and Shri Subhash Agarwal. But no documents indicating clandestine removal have been recovered from the premises of PAL or its Directors and in the factory of PAL, except for shortage of Cenvat credit availed ingots and the shortage of MS Bars, which are not real shortages, no other irregularity was found. Merely on the basis of some records recovered from the residential premises of Shri Kulbhushan Jain and Shri Subhash Agarwal, wherein the appellant company nowhere figures and merely on the basis of their statements and the statement of the proprietors of certain transport companies duty liability cannot be fasten on to the appellant company. As such, the departments allegation of duty evasion against the appellant company is based on assumptions and presumptions, which have no legal basis.
(2) Shri Kulbhushan Jain whose statement are relied upon had at the first available opportunity retracted his statements made to the DGCEI Investigating Officers and the appellants specifically requested the Adjudicating Authority to get the retraction verified from the office of the Assistant Director, but neither the Additional Commissioner nor the Commissioner (Appeals) considered the said submission. In fact, the appellant company has nothing to do with Shri Kulbhushan Joshi.
(3) The GRs issued by the transport companies which are being linked to the appellant company also mentioned the consignees, but no statement of any buyers/consignees shown in the GRs has been recorded.
(4) When the entire case of the Department alleging duty evasion against the appellant company is based on certain private documents recovered from third party premises of Shri Kulbhushan Jain, Shri Subhash Agarwal, Shri B.D. Agnihotri, M/s Manoj Kumar Manish Kumar and the transport companies, the documents recovered from them could not be relied upon by the Department without permitting their cross examination. The cross examination these persons had been specifically requested but same was denied without any justification. Tribunal in the cases of Milton Polyplast vs. CCE, Thane II reported in 2006 (201) E.L.T. 372 (Tri. Mumbai), Saraswati Rubber Works (P) Ltd. vs. CCE, Gurgaon reported in 2006 (205) E.L.T. 993 (Tri. Del.) and Chandan Tubes & Metals Pvt. Ltd. vs. CC, Vapi reported in 2006 (193) E.L.T. 48 (Tri. Mumbai) has held that the cross examination of the person whose statements have been relied upon has to be allowed if the same had been requested and denial of cross examination would result in denial of natural justice.
(5) The Commissioner (Appeals) has upheld the duty demand of Rs. 8,12,325/- on 449.25 M.T. of MS Bars which had been transported under 38 GRs issued by M/s Phelwan Transport Company. These GRs do not pertain to the appellant company, as in these GRs neither the name of the consignor nor the name of the consignee was properly mentioned and there were also interpolation, as other than the regular handwritings of the GRs in dispute, the word premier had been interpolated in a different handwriting. Therefore, confirmation of duty demand of Rs. 8,12,325/- on the basis of these 38 GRs of M/s Pehlwan Transport Company is without any basis. Similarly GR No. 911 for 13.02 MTs of MS Bars issued by M/s New Pooja Transport Company, does not pertain to PAL.
(6) As regards the duty demand of Rs. 10,97,160/- which has been set aside by the Commissioner (Appeals) and where the Revenue is in appeal, the Departments case is much weaker and for this reason only the Commissioner (Appeals) had dropped the demand as either the GRs on which the demand is based could not be linked to the appellant company or there was evidence in form of Central excise invoices showing that the goods had been cleared on payment of duty.
(7) As regards alleged shortage of 146.24 M.T. of MS Bars and MS Ingots, these shortages were not real shortage as the entire activity of physical stock verification was done by taking average weight and as per the settled position of law, the duty demand cannot be made on the basis of shortages determined without physical weighment of the goods. In this regard reliance is placed on the Tribunals judgments in the cases of Bhushan Strip Limited vs. CCE, Ghaziabad reported in 2005 (179) E.L.T. 419 (Tri. Del.), Dulichand Silk Mills (P) Ltd. vs. CCE, Hyderabad reported in 2001 (133) E.L.T. 468 (Tri. Chennai) and Shiva Steel Rolling Mills vs. CCE, Kolkata II reported in 2005 (186) E.L.T. 326 (Tri. Kolkata).
3.1 In view of the above submissions, it was pleaded that the impugned order passed by the Commissioner (Appeals) is not sustainable and also there is no merit in the appeal filed by the Revenue against the part of the Commissioner (Appeals)s order by which he has dropped the part of the duty demand.
4. Shri Pramod Kumar, the learned Jt. CDR, defended the impugned order confirmed duty demand of Rs. 8,35,865/- by reiterating the findings of the Commissioner (Appeals) and also assailed the part of the Commissioner (Appeals)s order by which the duty demand of Rs. 10,97,160/- had been dropped alongwith penalty of equal amount by reiterating the grounds of appeal. With regard shortage of the finished goods and Cenvat credit availed MS Ingots, he pleaded that the stock taking had been conducted in presence of the appellants employee who at that time had expressed full satisfaction with the method of weighment. He, therefore, pleaded that having accepted the method of weighment, the appellant at the stage of adjudication and appeal cannot question the method of stock taking and plead that the shortage are not the real shortages. He also pleaded that the average weight per ingots and average weight per bar had been determined by actual weighment and thereafter by multiplying the average weight per ingots/average weight per bar by the number of MS Ingots/MS Bars, the weight of the MS Ingots and MS Bars had been determined and that there is nothing wrong in this method of weighment. With regard to the allegation of clandestine removal of MS Bars under the cover of the invoices issued by the traders, he pleaded that in this regard the statements of Shri Subhash Agarwal and Shri Kulbhushan Jain are very clear and in these statements they have clearly stated that PAL were clearing the MS Bars without payment of duty under the invoices issued by certain traders namely M/s Manoj Kumar Manish Kumar, Kanpur, M/s Prabhujot Steel, Kanpur, M/s Expert Agriculture Udyog, Kanpur and M/s Sunder Iron Manufacturers, Kanpur etc. and that the recovery of blank invoice books of these traders from their residential premises is a clear evidence in this regard. He also pointed out to the statements of the proprietors of the transport companies M/s Bhartiya Forwarding Agency, M/s Thakur Transport Company, M/s Pehalwan Transport Co., M/s M.P. Roadlines and M/s New Pooja Road Corporation, all of whom have stated that they had loaded the consignments of MS Bars from the factory premises of PAL and had also identified the GRs pertaining to PAL and since in respect of these GRs, there are no invoices, it is clear that the consignments loaded by these transporters from the factory of PAL had been cleared clandestinely without payment of duty. He, therefore, pleaded that there is no infirmity in the order passed by the Commissioner (Appeals), confirming duty demand of Rs. 12,49,947/-. He, however, pleaded that the impugned order dropping the demand of Rs. 10,97,160/- is not correct and that in this regard the Commissioner (Appeals)s order may be set aside and the order passed by the original Adjudicating Authority may be restored.
5. I have considered the submissions made by both the sides and also pursued the records. The appellant company M/s Premium Alloys Ltd., Kanpur manufactures mild steel bars (seria) from MS ingots. Shri Ajay Kumar Jain is one of the Directors and Shri Navin Jain is another Director. There are other group companies, namely, M/s. Premium Ispat Ltd., Kanpur, M/s. Sigma Castings Ltd., Malwan and M/s. Kundan Castings Pvt. Ltd., Malwa, some of whom manufacture MS ingots. These appeals are in respect of a case of duty evasion booked against PAL. The allegation against the appellant company is that they were clearing MS bars in a clandestine manner without payment of duty and without of issuing of invoice and they were doing so by adopting a modus operandi under which with the assistance of a dealer and one of their employees, they were procuring the bills of some traders and were clearing the MS bars under the invoices of the traders and if any such consignment was intercepted by the Central Excise Department or Sales Tax Department, the appellant company used to be immediately informed by the persons who were arranging the unaccounted sale and transport and immediately the appellant company used to issue central excise invoice in the name of the dealer under whose trading invoice, the goods had been cleared.
6. The total duty demand confirmed against the appellant company by Order-in-Original passed by the Addl. Commissioner is Rs.25,76,526/-. Out of this demand, demand of Rs.1,04,542/- is CENVAT credit demand in respect of shortage of 67 MT of CENVAT credit availed on MS ingots detected by the officers in the course of stock taking at the time of visit of appellant company factory on 15/07/2002. The other duty demand of Rs.3,09,535/- is in respect of shortage of 146.240 MT of MS bars detected by the officers during stock taking on 15.07.2002. Thus, the total duty/CENVAT credit demand on account of shortages of CENVAT credit availed MS ingots and shortage of finished goods MS bars detected during stock taking at the time of the officers visit is Rs.4,14,077/-. The remaining duty demand of Rs.21,62,449/- is in respect of 1,196.042 MT of MS bars alleged to have been cleared by the appellant company during the period from September, 2001 to July, 2002. This duty demand is based on the allegation that this quantity was cleared under the trading invoices issued by various traders, namely, M/s. Manoj Kumar Manish Kumar, Kanpur, M/s. Prabhujot Steels, Kanpur, M/s. Expert Agriculture Udyog, Kanpur, M/s. Sunder Iron Manufacturers, Kanpur, M/s. Balaji Trading Corporation, Kanpur, etc. The quantification of this duty demand is based on the GRs issued by five transporters, namely, M/s. Thakur Transport Co.; M/s. New Pooja Transport Co.; M/s. Pehalwan Transport, Fatehpur; M/s. MP Bihar Road Lines and M/s. New Bhartiya Forwarding Agency, Kanpur. The quantity alleged to have been transported by these transporters and the duty involved is as under:-
Sl. No. Name of the Transporter Quantity alleged to have been transported Duty involved (In Rs.)
1.
M/s. Thakur Transport 204.000 MT.
3,68,832.00
2. M/s. New Pooja Transport Co.
65.520 MT.
(5 GRs) 1,13,036.00
3. M/s. Pehalwan Transport Co.
801.525 MT (65 GRs) 14,49,157.00
4. M/s. MP Bihar Road Lines Transport 104.000 MT.
1,88,032.00
5. M/s. New Bhartiya Forwarding Agency 24.000 MT 43,392.00 While original adjudicating authority has confirmed the entire duty demand and CENVAT credit demand totalling Rs.25,76,526/- along with interest and has imposed penalty of equal amount of duty demand on the appellant company under Section 11AC of the Act and penalty of Rs.2,50,000/- on Shri Ajay Kumar Jain, Director of the appellant company, the Commissioner (Appeals) has:-
(a) Upheld the CENVAT credit demand of Rs.1,04,542/- in respect of alleged shortage of 67 MT of MS ingots and duty demand of Rs.3,09,535/- in respect of shortage of MS bar of 146.240 MT ;
(b) Has remanded the duty demand of Rs.2,31,424/- based on the GRs issued by M/s. MP Bihar Road Lines and M/s. New Bhartiya Forwarding Agency to the original adjudicating authority as this demand was adjudicated without giving opportunity to them to submit their defence reply;
(c) Has confirmed the duty demand of Rs.23,540/- based on one GR M/s. New Pooja Transport and duty demand of Rs.8,12,325/- based on 38 GRs of M/s. Pehalwan Transport, Fatehpur for 449.295 MT of MS bars and thus has confirmed the total duty demand of Rs.8,35,865/- in respect of 38 GRs of M/s. Pehalwan Transport and one GR of M/s. New Pooja Transport Co;
(d) Has set aside the duty demand of Rs. 10,97,160/- in respect of four GRs of M/s. New Pooja Transport, Kanpur, 27 GRs of M/s. Pehalwan Transport, Fatehpur and all the GRs issued by M/s.Thakur Transport Co. and
(e) Has remanded the duty demand of Rs. 2,31,424/- based on the GRs of M/s M.P. Bihar Road Lines, Kanpur and M/s New Bhartiya Forwaridng Agency, Kanpur to the original Adjudicating Authority for denovo adjudication.
6.1 The duty demand / CENVAT credit demand upheld by him is Rs.12,49,942/- along with interest and equal penalty under section 11AC on M/s. Premium Alloys Ltd. and penalty under Rule 26 of Central Excise Rules on Shri AK Jain against which, the appellant company and its Director have filed appeals. The Revenue is in appeal against setting aside of the duty demand of Rs. 10,97,160/-.
7. Coming to duty / CENVAT credit demand of Rs.4,14,077/-, this demand is in respect of shortage of 67 MT of MS ingots and 146.240 MT of MS bars detected at the time of officers visit to the factory on 15.07.2002 when the physical stock taking of inputs (MS ingots) and finished products (MS bars) was done. There is no dispute that this stock taking was conducted in the presence of Mr. Anil Kumar Tripathi, Supervisor of the appellant company and the quantity of the MS ingots and MS bars was detected by determining the average weight per ingot and average weight of different types of MS bars by actual weighment and by multiplying the average weight by the total number of MS ingots/MS bars. There is no dispute that at the time of stock taking, Shri Anil Kumar Tripathi did not express any dissatisfaction with the manner of determination of the weight and on the contrary accepted the fact of shortage. The appellants plea is that these shortages are not real shortages, as the same have been determined only on average basis and not by physical weighment of entire stock of MS ingots and MS bars. I do not accept this plea, as it is not the plea of the appellant that the weight of MS ingots and MS bars had been determined by eye estimation without any weighment whatsoever. Some of the MS ingots were weighed and their average weight had been determined and thereafter the total weight of MS ingots was determined. In the same manner, the weight of MS bars had been determined on the basis of average weight of each type of MS bars. In my view, there is not much scope for error in determination of weight of MS Ingots and MS Bars in this manner and therefore it is difficult to accept that the shortage of 67.360 MT. of MS ingots and 146.240 MT of MS bars are not real shortages. Therefore, the impugned order upholding the CENVAT demand of Rs.1,04,542/- in respect of shortage of 67.360 MS ingot and duty demand of Rs.3,09,535/- in respect of 146.240 MT. of MS bars is upheld.
8. Coming to the confirmation of duty demand of Rs.8,35,865/- based on 38 GRs of Pehalwan Transport and one GR of New Pooja Transport, the basis of confirmation of this demand is that the goods covered under these GRs had been loaded from the factory of the appellant company and this is based on the statements of the transporters as well as the statements of Shri. Kulbhushan Jain, a person who is alleged to have been a confidential employee of the appellant company and Shri Subhash Agarwal of M/s. VK Steels, a dealer. The appellant had sought cross-examination of the transporters as well as of Shri Subhash Aggarwal and Shri Kulbhushan Jain, but the same was not allowed, even though Shri Kulbhushan Jain had retracted his statement. In terms of Section 9D (1) of Central Excise Act, 1994, a statement made and signed by a person before a central excise officer of a gazetted rank during the course of any enquiry or proceedings under this Act, shall be relevant for the purpose of proving in any prosecution for an offence under this Act, the truth of the facts which it contains, when the person who made this statement is examined as a witness in the case before the court and the court is of the opinion that having regard to the circumstance of the case, the statement should be admitted in the interests of justice. The only situation in which the statement of the person can be accepted by the court without his examination is when the person, who made the statement is dead or cannot be found or incapable of giving evidence or is kept out of the way by the adverse party or whose presence cannot be obtained without an amount of delay or expense, which under the circumstances, the court considers unreasonable. In terms of sub-section (2) of 9D, the provisions of sub-section (1) shall, so far as may be, apply in relation to any proceeding under this Act other than the prosecution proceeding before a court. Thus, the provisions of sub-section(1) of 9D are, as far as possible, applicable to adjudication proceedings also and, therefore, when relying upon the statement of a person recorded under section 14 of Central Excise Act, 1944, some duty is demanded from an assessee or penalty is sought to be imposed on him, in the course of proceedings for adjudication of the duty demand and penalty, his cross-examination has to be allowed, more so, when the same has been specifically requested. Taking into consideration the provisions of section 9D (2), of Central Excise Act, 1994, Honble High Court of Delhi in the case of J&K Cigarettes Vs. Collector of Central Excise [2009 (242) ELT 189 (Del.)] and Honble High Court of Allahabad in the case of CCE, Allahabad Vs. Govind Mills [2013 (294) ELT 361 (All.)] have held that cross-examination of a person whose statement is being relied upon in support of some allegation against an assessee has to be allowed, except when the person is dead or cannot be found or is incapable of giving evidence or is kept out of way by the adverse party or whose presence cannot be obtained without amount of delay or expense which is unreasonable and in such situation, a specific order in this regard is to be passed after hearing the assessee. Same view has been taken by Honble High Court of Delhi in the case of Basudev Garg Vs. CC [2013 (294) ELT 353 (Del.)] with regard to section 138B of Customs Act, 1962, which is in pari meteria with the provision of section 9D of Central Excise Act, 1944. Since in this case, the cross-examination of Shri Kulbhushan Jain and Shri Subhash Agarwal and also of the proprietors of the transport companies, whose statement have been relied upon was not allowed, the impugned order confirming duty demand based on their statement would not be sustainable. Moreover, other than the statements of Shri Kulbhushan Jain and Shri Subhash Agarwal and the proprietors of the transport companies, there is no other evidence linking the GRs issued by M/s. Pehalwan Transport and M/s. New Pooja Transport with the appellant company. Therefore, I hold that the impugned order upholding the confirmation of duty demand of Rs.8,35,865/- based on 38 GRs issued by transport companies and one GR issued by New Pooja Transport is not sustainable and has to be set aside.
9. As regards the Revenues appeal against setting aside of the duty demand by Commissioner (Appeals), which is based on the GRs of M/s. Thakur Transport, M/s. New Pooja Transport Co. (4 GRs) and M/s. Pehalwan Transport Co. (27 GRs), it is seen that so far as the demand of Rs.3,68,832/- based on the GRs issued by M/s. Thakur Transport is concerned, it has rightly been observed by Commissioner (Appeals) that neither consignors name nor consignees name are mentioned or even the quantity transported is not mentioned and the demand is bound on the presumption. In view of this, I agree with the finding of Commissioner (Appeals) that these GRs can not be linked to appellant company and the duty demand based on the same cannot be confirmed.
9.1. As regards the duty demand of Rs. 89,496/- based on four GRs issued by M/s. New Pooja Transport and duty demand of Rs. 6,38,832/- based on 27 GRs issued by M/s. Pehalwan Transport Co., in these cases, Commissioner (Appeals) has dropped the demand on the ground that the appellant company had produced invoices showing the payment of duty and the particulars of the invoices, the names of the consignees and the consignors, the quantity transported, vehicle number etc. tally with these particulars in the GRs. I am, therefore, of the view that the ground on which the duty demand based on these GRs has been dropped is absolutely correct as such, there is no infirmity in the same.
9.2 In view of the above discussion, there is no merit in the Revenues appeal.
10. In view of the above discussions, the appeal filed by Revenue is dismissed.
10.1 So far as the appeal filed by the appellant company is concerned, while the duty / CENVAT credit demand of Rs.4,14,077/-, along with interest and equal amount of penalty is upheld, the impugned order upholding the confirmation of duty demand of Rs.8,35,865/- along with interest and equal amount of penalty is set aside. The appeal filed by the appellant company is, thus, partly allowed.
10.2 As regards, the appeal filed by Shri Ajay Kumar Jain, Director, PAL, against the penalty under Rule 26 of the Central Excise Rules, 2002 imposed on him, since there is no evidence to show that Shri AK Jain was involved in removing, selling, transporting or dealing in any of the manner with any excisable goods, which he knew or had reason to believe, were liable for confiscation, penalty, on him is not imposable. The penalty on Shri AK Jain is, therefore, set aside and the Appeal filed by him is allowed.
(Pronounced in open court on 11/12/2014.) (Rakesh Kumar) Member (Technical) PK ??
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