Custom, Excise & Service Tax Tribunal
Morakhia Metals & Alloys Pvt Ltd vs C.C.E. & S.T.-Ahmedabad-Iii on 21 July, 2015
CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL, West Zonal Bench, Ahmedabad ^^^ Appeal No. : E/1592/2009-SM, E/1593/2009-SM [ Arising out of OIA-303-304/2009-AHD-III-KCG/CE/COMMR-A- Dated 21/08/2009 Passed by by Commissioner of Central Excise AHMEDABAD-III] Morakhia Metals & Alloys Pvt Ltd : Appellant(s) Shrenik A Morakhia Vs C.C.E. & S.T.-Ahmedabad-iii : Respondent (s)
Represented by :
Appellant(s) : Shri P.P. Jadeja (Consultant) Respondent (s) : Shri L. Patra (Authorised Representative) For approval and signature :
Mr. P.M. Saleem, 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?
No 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 CORAM :
Mr. P.M. Saleem, Honble Member (Technical) Date of Hearing / Decision : 21/07/2015 ORDER No. Per : Mr. P.M. Saleem, The facts of the case are same in the two appeals before us and hence they are taken up together and disposed of by this common order. The brief facts of the case are as follows:-
1.1) The appellants are engaged in the manufacture of Copper Pipes, Bars, Flats, Sections, Strips etc. falling under Chapter 74 of the schedule to the Central Excise Tariff Act, 1985 and are having the facilities for carrying out processes such as melting, extrusion, drawing, drilling, turning, pickling, straightening, cutting etc. 1.2) On the basis of an information gathered by the DGCEI indicating that the appellants are engaged in large-scale evasion of Central Excise duty and fraudulent availment of Cenvat Credit involving huge Government Revenue, a search of the factory and office premises of the appellants were conducted on 05/01/2007 and 06/01/2007. The records and documents which appeared relevant for further investigation of the case were resumed from these premises.
1.3) During the physical verification of the stock of finished goods lying in the factory premises of the said company under the subject panchnama, it was observed that 29714 kgs. of various types of articles of copper in fully finished and ready-to-dispatch condition valued at Rs. 99,43,450/- were lying unaccounted in the statutory records. By not accounting for these goods the appellants was attempting to remove them without payment of Central Excise duty and hence the said goods were placed under seizure.
2. Subsequently the Show Cause Notice was issued on 29/06/2007 which was Adjudicated by Additional Commissioner by the order Dated 18/12/2008 which was upheld by the Commissioner (Appeals) by Order-in-Appeal Dated 24/08/2009 with certain modification (reduction) of Final Penalty. The Assessee is before us against the said order of Commissioner (Appeals).
3. Heard both sides. The learned Consultant for the appellants submits that the goods found in stock by the officers in the factory premises during their visit on 05/01/2006 and 06/01/2007 had not reached the finishing stages and required further operations and testing etc to reach the finish stage. Further he submits that therefore there was no requirement to enter the stock in RG-1 Register and hence there is no violation of the provisions of Central Excise Act for Rules. He drew attention to the Certificate of Chartered Engineer Dated 30/07/2007, the relevent portion of which is reproduced below:-
Above Products, require following operations to make them Final Products.
Cutting (cut to size), sampling, Hydro test, Inspection etc. as per job requirements.
We hereby certify that without above operations on Copper bus bars, Flats and Tubes are defined as Goods in Process and not Final Marketable Products. They are also not Finished Goods without above mentioned operations which would vary from job to job and as per Clients requirements for third party inspection etc. Above certificate is issued in best Engg. Practice and without prejudice to anyone.
4. The learned Consultant also submits that there is no other evidence to show any clandestine clearance or any other irregularities. He also submitted that the following Case Laws in his favour:-
(i) Supreme Industries Ltd. Vs. CESTAT, New Delhi [2007(214) E.L.T. 187 (M.P.)]
(ii) CCE, Lucknow Vs. B.M.W. Steels Ltd. [2011 (272) E.L.T. 315(Tri-Del)]
(iii) Namo Alloys Pvt. Ltd. Vs. CCE, Faridabad [2013(295) E.L.T. 319(Tri-Del)]
(iv) CCE, Kanpur Vs. Trela Footwear Exports (P) Ltd. [2013(295) E.L.T. 316 (Tri-Del)]
(v) M.B. Laminators Vs. CCE, Daman [2013(289) E.L.T. 497(Tri-
Ahmd)]
(vi) CCE, Jaipur Vs. Karnawat International Pvt. Ltd. [2015(316) E.L.T. 172 (Tri-Del)]
(vii) CCE, Lucknow Vs. Shubh Metals [2015(318) E.L.T. 282 (Tri-
Del)]
5. The learned Authorised Representative on the contrary submits that the goods were already finished and ready for export. He further submits that the appellants had not raised the issue of further operations nor testing at the time of investigation and it was only raised at the stage of first Adjudication. He also relied upon the decision of this Honble Tribunal in the case of Nissan Copper Pvt. Ltd. Vs. Commissioner of Central Excise(Appeal) [2014 (313) E.L.T. 449 (Tri-Ahmd)].
6. A perusal of the records show that the DGCEI Officers visited the factory premises on 05/01/2007 and 06/01/2007. It is mentioned in the SCN that During the physical verification of the stock of finished goods lying in the factory premises of the said company under the subject panchnama, it was observed that 29714 kgs. Of various types of articles of copper in fully finished and ready-to-dispatch condition valued at Rs. 99,43,450/- were lying unaccounted in the statutory records. On being asked, Shri Bharatbhai Dahyabhai Gajjar and Shri Shrinik Ashok Morakhia could not give any explanation regarding the unaccounted excess stock. These goods were fully finished and were ready to dispatch. By not accounting for these goods M/s Morakhia was attempting to remove them without payment of Central Excise duty. Thus, it appears that M/s Morakhia is engaged in large-scale illicit manufacture of goods and is evading Central Excise duty on such goods by not accounting them and hence the said goods were placed under seizure under panchnama dated 05/06.01/2007 under the reasonable belief that the same were manufactured for their clandestine clearance, without payment of appropriate Central Excise duty and hence appeared liable to confiscation.
7. It is observed that there is no evidence to support the allegation of intention to clear the goods clandestinely. In the statements recorded by the officers at the time of their visit, there is no admission of intention to clear the goods in a clandestine manner. The decision of this Honble Tribunal in the case of Nissan Copper Pvt. Ltd. relied upon by the learned Authorised Representative cannot be relied upon as the facts of the said case are different from the present matter. In that case, there was no further process or testing required to finish the goods. There were also other irregularities/evidences to support clandestine removal.
8. It is observed that High Court of Madhya Pradesh in the case of Supreme Industries Ltd. Vs. C.E.S.T.A.T., New Delhi [2007 (214) E.L.T. 187 (M.P.)] has held as follows:-
9.In the cases relied upon by Shri Sharma, learned counsel for the respondents, the factual aspects are some what different. In the case of Natco Pharma Ltd. v. Commissioner of Central Excise, Hyderabad, 2001 (136) E.L.T. 282, the goods were found without entry in the RG-I register after all the tests were conducted and it was in fully packed condition ready for transportation. Similarly in other cases stock found were completely ready for despatch and in most of the cases intention to evade duty was apparent. In the present case, except for finding that the goods were lying in the factory, there is neither any material to show that there was intention to evade duty, on the contrary, the evidence that has come on record only indicates that the goods were not subjected to quality control test and they were kept on hold, they were to be cleared by the quality control department and only thereafter were to be sent to the packing department after the quality control test was concluded. In such circumstances, the revenue, in the present case has not acted in a reasonable manner in the matter of enforcing the penal clause against the petitioner. Enforcement of penal clause has to be done subject to strict proof of intention to evade payment of duty. In the present case, neither intention to evade duty is established nor is there any material to establish the same and on the contrary the explanation of the petitioners and the fact that the material was not subjected to quality control test has been totally ignored. Merely because in the statement, the Commercial Manager of the petitioners has stated that the goods were manufactured that by itself cannot be a ground for holding that the goods were ready for despatch to the customer. The learned Tribunal incorrectly applied the principles laid down by the Bombay High Court in the case of Kirloskar Brothers v. Union of India [1988 (34) E.L.T. 30 (Bom.) = 2002 (83) ECC 497 (Bom.)] as the facts of that case and the present case are entirely different. In the case of Kirloskar Brothers (supra) intention to remove the air conditioners, and in fact, the removal of air conditioners were established. In the present case, stock was lying in the factory kept on hold which was to be subjected to quality control test. As such, in the facts and circumstances of the present case, I am of the considered view that the assessing authority has incorrectly applied Rule 173-Q of the Rules by ignoring the facts that are available on record, so also the principles indicated in the trade notices referred to hereinabove issued by the Chandigarh Collectorate and the Hyderabad Collectorate in the matter of reaching of RG-I stage for similar items. Considering the totality of the facts and circumstances of the case, I am of the considered view that the action taken against the petitioners and the impugned orders passed by the assessing authority, Annexure P/7 dated 9th February, 2000, Annexure P/10 dated 8th May, 2000 passed by the appellate authority, Annexure P/11 dated 28th March, 2003 and Annexure P/13 dated 29th April, 2004 passed by the Tribunal are clearly unsustainable and are hereby quashed.
10.Accordingly, petition stands allowed and disposed of without any order so as to cost.
9. This Honble Tribunal has held in the case of M.B. Laminators (Supra), that unaccounted goods found packed and ready for dispatch in factory premises does not by itself constitute sufficient evidence to show that the goods are meant for clandestine clearance. The same view has been taken by this Honble Tribunal in the recent judgements in the cases of Karnawat International Pvt. Ltd., and Shubh Metals (Supra).
10. In view of the above analysis, it is held that there is no sufficient evidence in the present case to establish intention to remove goods in a clandestine manner and to evade duty. Hence, the OIO and the impugned OIA are set aside. Consequently, redemption fine and penalty are also set aside.
11. Both the appeals are allowed as per the above terms.
(Dictated and pronounced in the Court) (P.M. Saleem) Member (Judicial) Abhishek ??
??
??
??
6