Custom, Excise & Service Tax Tribunal
Cce, Allahabad vs M/S Petro Carbon Industries Ltd on 2 September, 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 : 04/08/2014. DATE OF DECISION : 02/09/2014. Excise Appeal No. 751 of 2005 (SM) [Arising out of the Order-in-Original No. MP (38/2002) 76 of 2003 dated 29/12/2003 passed by The Commissioner, Central Excise, Allahabad.] 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? CCE, Allahabad Appellant Versus M/s Petro Carbon Industries Ltd. Respondent
Appearance Shri Ranjan Khanna, Authorized Representative (DR) for the appellant.
Shri Bipin Garg, Advocate for the Respondent.
CORAM : Honble Shri Rakesh Kumar, Member (Technical) Final Order No. 53394/2014 Dated : 02/09/2014 Per. Rakesh Kumar :-
The facts leading to filing of this appeal by the Revenue are, in brief, as under.
1.1 The respondent are manufacturers of Calcined Petroleum Coke (CPC) falling under Tariff item heading 2713.12 of the Tariff. The raw material for the CPC is Raw Petroleum Coke (RPC) falling under Tariff sub-heading 2713.11. The manufacturing unit of the respondent was visited by the Jurisdictional Central Excise officers on 13/10/93 in course of which several enquiries were made. After indepth investigations the following discrepancies and irregularities were detected :-
(1) During the period from June, 1991 to October 1993 there was difference between the quantities mentioned in the invoices and the quantity mentioned in the corresponding weighment slips. The weighment slips showed higher quantity of the goods while the invoices were issued for lower quantity. From this it appeared that the respondent while paying duty on the lower quantity, had cleared higher quantity and, as such, there is clearance of certain quantity of CPC without payment of duty. From this, it appeared 27.527 M.T. of CPC had been cleared clandestinely without payment of duty during the period from June 1991 to October 1993 ;
(2) CPC is cleared in 50 kg. packs and sometimes in 100 kg. packs. For 50 kg. packs either jute bags are used or plastic bags are used and for this purpose a record of the purchase, consumption, wastage and closing balance of the jute bags and plastic bags is maintained separately. On scrutiny of consumption of the bags, it appeared that the consumption of bags during the period of dispute was much more than the bags which would have been consumed on the basis of the clearances recorded in the RG-1 register. The contention of the respondent that there was wastage of 6496 bags, 1740 bags had been used for packing of RPC and 1869 bags were available in the factory did not appear to be acceptable to the investigating officers. On this basis, the Department has alleged that the respondent have cleared 715.016 M.T. of CPC clandestinely without payment of duty ;
(3) There were some GRs showing dispatch of CPC in respect of which they were no GP-1s. The Department was of the view that in such cases, the goods had been cleared clandestinely without payment of duty and without issue of the gate passes. On this basis, duty on 36 M.T. of CPC had been demanded ;
(4) The records of the respondent showed clearance of 154 M.T. RPC to their sister unit M/s Carbon Petro Pvt. Ltd., Varanasi (CPPL). On enquiry it appeared that CPPL had manufactured carbon electrode paste from the material received from the respondent, but carbon electrode paste can be manufactured only from CPC and not from RPC. In this regard, Shri Akhilesh Kumar, Supervisor of CPPL in his statement dated 13/10/93 stated that carbon electrode paste could not be manufactured from RPC and that he has never seen RPC being received in the factory as his factory receives only the CPC which is used as a raw material. Shri M.M. Khan, Excise Incharge and Shri Chandrika Prasad Yadav of CPPL also reiterated the same facts. Since 154 M.T. of RPC had been cleared by the respondent by reversing the credit while the goods were actually CPC on which the duty at the applicable rate was payable on the sale price of the CPC, it appeared that there is short payment of duty ;
(5) The respondent during the period of dispute had cleared 145.1 M.T. of RPC in respect of which Modvat credit had been taken, as such, but had reversed only the Modvat credit taken on it while as per the provisions of Rule 9A (3A) of the Central Excise Rules, 1944 they were required to pay an amount equal to the duty payable on the RPC at the applicable rate on the date of clearance. The differential duty on this amount worked out to Rs. 1,16,659/-
1.2 In view of the above investigation, a show cause notice dated 20th February 1999 was issued to the respondent for demand of duty amounting to Rs. 21,28,868/- under proviso to Section 11A (1) of the Central Excise Act, 1944 and for imposition of penalty on the respondent company under Rule 173Q (1) (d) of the Central Excise Rules, 1944 and also for imposition of penalty under Rule 209A of the Central Excise Rules, 1944 on Shri Amitav Chaudhary, Director and Shri G.K. Rai, General Manager of the respondent company.
1.3 The show cause notice was adjudicated by the Commissioner, Central Excise, Allahabad vide order-in-original dated 31/10/2000 by which the Commissioner confirmed the entire demand in toto and beside this, while imposed penalty of Rs. 20,00,000/- on the respondent under Rule 173Q (1) penalty of Rs. 5,00,000/- each under Rule 209A was imposed on Shri Amitav Chaudhary and Shri G.K. Rai.
1.4 The respondent filed appeals to the Tribunal against the above order of the Commissioner and the Tribunal vide final order dated 06/12/07 remanded the matter to the Commissioner for denovo adjudication as per the directions given in the order. One of the directions given by the Tribunal was to permit cross-examination of Shri M.M. Khan and Shri A.K. Mishra whose statement had been relied upon in support of the allegation of clandestine removal of CPC by the respondent.
1.5 The matter was adjudicated denovo by the Commissioner of Central Excise vide order-in-original dated 29/12/03 by which the Commissioner confirmed the duty demand of Rs. 3,37,933/- on 154 M.T. of CPC alleged to have been cleared in the garb of RPC to CPPL and allowed adjustment of reversal of Rs. 1,59,584/- equal to the Modvat credit availed on RPC and accordingly he confirmed the net duty demand of Rs. 1,78,349/-. The remaining duty demands were dropped. He also imposed penalty of Rs. 1,00,000/- on the respondent company under Rule 173Q, but he dropped penal proceedings against Shri Shri Amitav Chaudhary, Director and Shri G.K. Rai, General Manager of the respondent company.
1.6 The above order of the Commissioner was examined by the Board for ascertaining its legality and propriety. The Board vide order No. 232-R/2004 dated 24/12/04 issued under Section 35E (1) of the Central Excise Act, 1944 directed the Commissioner to file an application before the Tribunal under Section 35E (4) ibid for correct determination of the points as mentioned in the order. In pursuance of the Boards order dated 24/12/04, the application was filed by the Commissioner under Section 35E (4) which has been treated as an appeal against the Commissioners order. In this appeal the Commissioners order dropping the duty demands on
(a) 27.527 M.T. of CPC based on difference between the weight mentioned in the invoices and the weight mentioned in the weighment slips ;
(b) 715.016 M.T. of CPC alleged to have been cleared clandestinely based on discrepancy between the quantity cleared as per entry made in the RG-1 register vis-`-vis the quantity alleged to have been cleared on the basis of the consumption of packing bags, and
(c) 145.1 M.T. of Modvat credit availed RPC cleared, as such and in respect of which according to the Department instead of the Modvat credit reversal, an amount equal to the duty leviable at the rate in force on the date of clearance was required to be paid, have been challenged. Beside this, the Commissioners order dropping the penal proceedings under Rule 209A of Central Excise Rules, 1944 on Shri Amitav Chaudhary, Director and Shri G.K. Rai, General Manager have also been challenged. However, the Commissioners order dropping the duty demand on 36 M.T. of CPC based on the GRs has not been challenged and, as such, has been accepted.
2. Heard both the sides.
3. Shri Ranjan Khanna, learned DR, assailed the impugned order by reiterating the grounds of appeal in the Revenues appeal with regard to the duty demand on 27.527 M.T. of CPC based on the difference between the invoice weight and the weight recorded in the weighment slips, he pleaded that the Commissioners findings that the difference could be on account of weight of the empty bags and that the difference is to the tune of 1% to 2% is incorrect, that the difference between the weight as mentioned in the invoices, and as mentioned in the corresponding weighment slips is to the extent of 4% to 5% which cannot be on account of weight of the empty bags. He also pointed out that during the period from June 1991 to October 1993 mainly the plastic bags has been used and very small quantity of jute bags had been used, therefore, the respondents plea that weight difference may be due to the jute bags absorbing the moisture would not be correct. He pointed out that in some cases the difference works out to even 54% which is not explained by the explanation given by the respondent. He, therefore, pleaded that the difference between the invoices quantity and the quantity mentioned in corresponding weighment slips, has been cleared clandestinely without payment of duty and the Commissioner has erred in accepting the respondents explanation and his order dropping the duty demand on this quantity is not correct. With regard to the duty demand on 715.016 M.T. of CPC, based on the discrepancies in the accounting of the bags, he reiterated the grounds of appeal in the Revenues appeal and pleaded that the explanation of the respondent that out of 37659 bags issued for packing during the period of dispute, 6496 bags had gone waste and 1740 bags had been used for packing of RPC is without any basis. He emphasized that the account of the consumption of bags has been manipulated by the respondent. He pointed out that as per the practice of maintaining account of bags adopted by the respondent, for each day, the respondent determined the closing balance of bags after deducting the number of bags wasted and the number of bags used for packing from the sum total of the opening balance of the bags and the bags purchased and therefore from the total number of bags issued, the number of bags claimed to have been wasted cannot be deducted once again. He, therefore, pleaded that the Commissioners order dropping the duty demand on 715.016 M.T. of CPC which is based on the discrepancies in the consumption of bags is not correct and that the Commissioner has wrongly accepted the respondents explanation which is based on the manipulations made in the bag account. With regard to the duty demand of Rs. 1,16,659/- dropped by the Commissioner in respect of clearance of 145.1 M.T. of Modvat credit availed RPC as such, he pleaded that in terms of Rule 9 A (3A) of the Central Excise Rules, 1944 at that time, at the time of clearance of modvated input, an amount equal to the duty payable on the input on its sale price at the rate of duty applicable on the date of clearance subject to the minimum of Modvat credit originally availed, was payable and, as such, the commission has failed to appreciate the provisions of Rule 9A (3A) of the Central Excise Rules. With regard to the imposition of penalty under Rule 209A of Central Excise Rules, 1944, on Shri G.K. Rai and Shri Amitav Chaudhary, Shri Khanna pleaded that both these persons are involved in evasion of duty and hence penalty should have been imposed on them under Rule 209A. He pleaded that both these persons not only had full knowledge, but were also directly involved in evasion of duty.
4. Shri Bipin Garg, Advocate, the learned Counsel for the respondent, defended the impugned order by reiterating the findings of the Commissioner.
4.1 With regard to the duty demand of Rs. 27.527 M.T. of CPC based on the difference between the quantity mentioned in the invoices and the quantity mentioned in the respective weighment slips, he pleaded that the difference could be on account of weight of the empty bags. He also pleaded that there is no evidence of any amount being received by the respondent from their customers over and above the invoice price and accordingly merely on the basis of difference between the invoice weight and weight mentioned in the weighment slips the duty demand on the difference cannot be confirmed.
4.2 With regard to the duty demand on 715.016 M.T. of CPC based on the alleged discrepancies in the amount of consumption of packing bags, he pleaded that out of 37,659 bags of 50 kg. issued during the period of dispute 1869 bags were available at the time of officers visit and while 6496 bags had gone waste, 1740 bags had been used for packing of RPC and accordingly, he pleaded that the consumption of bags is in accordance with the production recorded in the RG-1 register and, as such, there is no discrepancy. He emphasized that in course of filing of bags, there would also be wastage and this wastage cannot be ignored and similarly when it is a fact that RPC as such had been cleared on reversal of Modvat credit, the same would be required to be packed in bags for which certain number of bags would be consumed. He, therefore, pleaded that the Commissioner has correctly dropped the duty demand on 715.016 M.T. of CPC.
4.3 As regards the demand of differential duty on 145.1 M.T. of modvated RPC cleared as such he pleaded that in respect of the modvated goods cleared as such, only the Modvat credit originally taken was required to be reversed and the duty on the sale value of the goods at the rate in force on the date of clearance was not required to be paid and in this regard he relied upon Larger Bench judgment of the Tribunal in the case of CCE, Vadodara vs. Asia Brown Boveri Ltd. reported in 2000 (120) E.L.T. 228 (Tribunal LB). He, therefore, pleaded that there is no infirmity in the Commissioners order dropping the differential duty demand of Rs. 1,16,659/- on the clearances of modvated RPC as such.
4.4 With regard to the imposition of penalty on Shri Amitav Chaudhary, Director and Shri G.K. Rai, General Manager of the respondent company, he pleaded that there is absolutely no evidence to show that they were involved in transporting, removing, depositing, keeping concealing, selling or purchasing or in any other manner dealing with the excisable goods while knowing that the same are liable for confiscation and, hence, the provisions of Rule 209A of the Central Excise Rules, 1944 are not attracted.
4.5 He accordingly pleaded that in view of the above submissions, there is no infirmity in the impugned order.
5. I have considered the submissions from both the sides and perused the records.
6. The first point of dispute is regarding the demand of duty on alleged clandestine clearances of 27.527 M.T. of the CPC. This demand is based on the difference between the weight of the goods mentioned in the invoices and the weight shown in the corresponding weighment slips. The Commissioners finding is that the difference is 1% to 2% and the same may be on account of weight of the packing material and also that there is no evidence of the appellant having received any amount over and above in the invoice amount in cash. The Departments contention is that the average difference is not 1% to 2% but is much higher 4% to 5% since during the period of dispute i.e. during period from May 1992 to December 1992, the quantity of jute bags used were negligible 2450 bags as against 35203 plastic bags used, there is no possibility of the weight increase on account of absorption of moisture by the jute bags which are hydroscopic in nature. As mentioned in para 6.2.2 of the Boards review order in some cases, the difference works out to 17.2%, 54% and 34.8% which is not possible. It is seen that the points raised in para 6.2.2 of the Departments review order have not been examined by the Commissioner. Therefore, in my view on this point the matter has to be remanded to the Commissioner for denovo adjudication.
7. The duty demand on 715.016 M.T. of CPC alleged to have been cleared during May 1992 to June 1993 period without payment of duty is based on the discrepancies in the issue of packing bags. According to the Department during period from May 1992 to December 1992, a total of 37,659 bags of 50 kg. capacity were issued in which 1909.5 M.T. of CPC was packed and cleared, while as per the RG-1 register only 1376 M.T. of CPC was recorded as cleared. However, the explanation of the appellant is that during the above period 37659 bags of 50 kg. capacity and 266 bags of 100 kg. capacity had been issued out of which while all the 266 bags of 100 kg. were used in packing CPC, only 26988 bags of 50 kg. were used for packing CPC and while 1740 bags of 50 kg. were used in packing of RPC which had been cleared as such, 6496 bags had been damaged and have been shown as waste in the pack account register. Beside this, it is pleaded that 1869 bags were lying on the production floor. The Commissioner being satisfied with the respondents explanation has dropped the demand. However, the Departments contention as explained in para 6.3 of the review order is that in the day-to-day account of the consumption of packing bags was being maintained by the respondent and in it they were mentioning the closing balance of bags after deducting the number of bags issued for packing and number of bags gone waste from the sum total of the opening balance and the bags purchased and that there is clear manipulation in the account of the packing bags and as such their plea regarding 6496 bags becoming waste is not acceptable. It is seen that the Commissioner in his findings on this issue has not discussed the evidence on record in this regard as discussed in para 6.3 of the review order and he has come to an abrupt finding that the Departments allegation regarding clandestine clearance of 715.016 M.T. of CPC during period from May 1992 to June 1993 based on the consumption of packing bags is not acceptable. Therefore, this decision of the Commissioner also has to be set aside and the matter has to be remanded to the Commissioner for denovo adjudication.
8. The other finding of the Commissioner which had been challenged by the Revenue is the demand of differential duty in respect of clearances of 145.1 M.T. of RPC as such. In respect of this quantity of RPC, the respondent had taken Modvat credit and the same had been cleared as such. According to the Revenue, in terms of the provisions of Rule 9A (3A) of the Central Excise Rules, 1944, which were in force at the material time, in such cases of clearance of Modvat credit availed input as such, an amounts equal to the duty payable on the input at the rate of duty inforce on the date of clearance was required to be paid subject to the minimum of the credit originally taken. However, I find that there was similar provision in Rule 57F (1) (ii) of the Central Excise Rules, 1944 and interpreting the provisions of this Rule Larger Bench of the Tribunal in the case of CCE, Vadodara vs. Asia Brown Boveri Ltd. (supra) has held when modvated inputs are cleared as such, only an amount equal to the Modvat credit originally taken was required to be paid. In view of this, the Commissioners finding on this point is correct.
9. As regards the question of penalty under Rule 209A of Central Excise Rules, 1944 on Shri Amitav Chaudhary, Director and Shri G.K. Rai, General Manager of the respondent company, while the Commissioner has dropped the penal proceedings against these two persons, the Department is of the view that these persons were accountable and responsible to the respondent company at the time when evasion took place and the evasion involving the respondent company and their sister unit would not be possible without the direct involvement of thee two persons and, therefore, the Commissioner has wrongly dropped the proceedings against them. The question of imposition of penalty on them under Rule 209A of Central Excise Rules would arise only if the duty demand based on difference between the invoice quantity and the quantity mentioned in the weighment slip and the duty demand based on the discrepancies in the ground of bags is upheld. Therefore this issue has also to be remanded to the Adjudicating Authority.
10. In view of the above discussion, while the impugned order in respect of dropping of the duty demand on clearance of 145.1 M.T. of RPC as such is upheld, the same dropping the duty demand on -
(a) 27.527 M.T. of CPC alleged to have been cleared clandestinely without payment of duty and which is based on the difference between the quantity mentioned in the GR-1s/invoices vis-`-vis the quantity mentioned in the corresponding weighment slips ;
(b) the duty demand on 715.016 M.T. of CPC alleged to have been cleared clandestinely without payment of duty and which is based on the discrepancies in the consumption of the packing bags account ; and
(c) dropping of the penalty under Rule 209A of Central Excise Rules, 1944 on Shri Amitav Chaudhary, Director and Shri G.K. Rai, General Manager of the respondent company, is set aside and the matter is remanded to the Commissioner for denovo adjudication in respect of the above three points.
11. The Revenues appeal is accordingly partly allowed.
(Pronounced in open court on 02/09/2014.) (Rakesh Kumar) Member (Technical) PK ??
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