Custom, Excise & Service Tax Tribunal
Yes vs Represented By : Shri Paritosh Gupta, ... on 20 September, 2012
CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL, West Zonal Bench, Ahmedabad Appeal No. : E/1060 of 1991 Arising out of : OIO No. 11/Collector/1991 dated 13.5.1991 Passed by : Collector of Central Excise & Cus. Ahmedabad For approval and signature : Hon'ble Mr. M.V. Ravindran, Member (Judicial) Honble Mr. B.S.V. Murthy, 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? Yes 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 Appellant (s) : M/s. Shree Narayan Textile Mills Represented by : Shri Paritosh Gupta, Advocate Respondent (s) : Collector of Central Excise & Cus., Ahmedabad
Represented by : Shri P.N. Sarvaiya, A.R. CORAM :
Hon'ble Mr. M.V. Ravindran, Member (Judicial) Honble Mr. B.S.V. Murthy, Member (Technical) Date of Hearing : 20.09.2012 Date of Decision : 29.10.2012 ORDER No. _____________ /WZB/AHD/2012 Per : Mr. B.S.V. Murthy;
During the relevant time, the appellant firm M/s. Shri Narayan Textile Mills was undertaking processing of manmade fabrics on job work basis. They used to receive grey fabrics from various traders and undertake processing work on said fabrics as per the orders and dyeing and printing as per the design supplied by the traders. During the investigation taken up against some traders, it was found that the appellant had processed grey fabrics and cleared the same without payment of duty in contravention of the provisions of Act and Rules and consequently the proceedings were initiated against the appellant and Partner Shri Panchman Narayan, which culminated in confirmation of duty demand of Rs. 26,09,523.94 against the appellant and penalty of Rs. 5 Lakhs on the appellant and personal penalty of Rs. 2 Lakh on the partner. The order of the Commissioner was challenged before the Tribunal and Tribunal vide order dated 01.12.2000 dismissed the appeals filed. This order of the Tribunal was challenged by filing a writ petition before the Hon'ble High Court of Gujarat and the Hon'ble High Court vide order dated 22.2.2011 quashed the order of this Tribunal and remanded the matter back to the Tribunal to decide the matter afresh.
2. Before we proceed further, it would be appropriate to reproduce the observations of the Hon'ble High Court of Gujarat so that there is clarity in the scope of fresh consideration of the issue:-
9. On a plain reading of the findings recorded by the Tribunal, it is apparent that the only finding recorded by the Tribunal is that the facts brought in the case of M/s. Bal Krishan Textile (P) Ltd. are different from the facts of the case of the petitioners without even a whisper as to how the facts of the present case are different from the facts of the said case and as to what were the distinguishing features between the two cases. Thereafter, the Tribunal has merely held that the Department has made out a case in respect of the demand for additional duty for excise. The submissions advanced on behalf of the petitioners have not been dealt with by the Tribunal, nor have any reasons been assigned as to how the Department has been able to make out a case. The impugned order of the Tribunal is totally bereft of any reasons on the merits of the case and as such, in the light of the aforesaid decision of the Supreme Court, the same cannot be sustained.
10. For the foregoing reasons, the petition succeeds and is accordingly allowed to the following extent. The impugned order dated 01st December, 2000 passed by the Tribunal in Appeal No.E/1060/91-D is hereby quashed and set aside and the appeal is restored to the file of the Tribunal for deciding the same afresh in accordance with law after giving the respective parties an opportunity of hearing. Needless to state that the Tribunal shall deal with all the contentions raised on behalf of the petitioners and pass a reasoned order in respect thereof. Rule is made absolute accordingly with no order as to costs.
3. The facts in brief are as under :-
(i) The officers visited the factory of appellant M/s. Shree Narayan Textile Mills (Narayan Textiles) and trading units (a) M/s. Vipul Trader (b) M/s. Pooja Fashion and (3) M/s. Denish Textile on 22.6.1989.
(ii) At M/s. Narayan Textile Mills on verification of stock of fabrics lying in the factory at various stages with the lot register maintained revealed the shortage of 18,484 L. Mtrs. Of M.M. Fabrics in respect of lot No. 30/100, 98, 99 and 103 which were found illicitly removed.
(iii) The processed fabrics 14,921.25 L. Mtrs folded and were ready for despatch on 20.6.89, recorded in RG-1 with pencil were seized under Panchnama on 22.6.89. Simultaneously, M/s. Shree Ram Folding works was visited on 22.6.89. The 18,027.50 L. Mtrs processed fabrics received by M/s. Shree Ram Folding Works were without payment of duty.
(iv) In M/s. Vipul Traders 33,465 L. Mtrs was found without any duty paying documents.
(v) In M/s. Pooja Fabrics processed fabrics of 3881 L. Mtrs and 2234 L. Mtrs was found without any duty paying documents.
(vi) Shri Pancham Narayan, partner of M/s. Narayan Textile Mills stated shortage of 18484 L. Mtrs has been removed from the Mills to Shri Narayanbhai of M/s. Vipul Traders without payment of duty and without preparing gate pass. They were raising invoice for job charges + excise duty. He admitted that 18027.50 L. Mtrs processed fabrics seized at Shri Ram Folding Works without payment of duty.
(vii) Shri Babulal alias Nanubhai R. Shah of M/s. Pinky Textile, stated that they sold grey polyester fabrics to various processors including Shri Narayan Textile Mills; the said sold goods duly processed by above processors were being received in his another trading firm M/s. Vipul Traders; that they had not filed declarations as required under Notification No. 305/77. Nearly 18000 L. Mtrs lying with Shri Ram Folding works belonged to him and received on 21.06.89 evening from M/s. Shree Narayan Textile duly processed without cover of Central Excise gate pass and without payment of Central Excise duty. M/s. Vipul, M/s. Jignesh Textiles belongs to him. Fabrics 33,465 L. Mtrs seized at his shop on 01.08.1989 were processed at M/s. Narayan Textiles without payment of duty. He also stated that his fabrics were processed by M/s. Narayan Textiles, M/s. Jag Fashion process and M/s. Jagdish Processors. 40% of there goods are processed by M/s. Narayan Textile.
(viii) Shri Prakash R. Shah, partner of M/s. Denish Textiles and prop. Of M/s. Pooja Fabrics stated that they received 2234 L. Mtrs received from M/s. Narayan Textile without payment of duty and as such, he was not having any duty paying documents.
(ix) During investigation, it was noticed that M/s. Denish Textiles and M/s. Pooja Fabrics had stated that 5,79,962 L. Mtrs of grey fabrics was sent for processing and the same were received by them after processing without accounting and without payment of duty.
(x) Both merchant traders and extensively referred to their own accounts and the same was meticulously verified by the officers.
4. It was submitted by the learned advocate on behalf of the appellant that Hon'ble High Court of Gujarat has directed the Tribunal to follow the decision in the case of M/s. Balkrishna Textile (P) Limited taking note of the fact that the issue is similar. He submits that this case is not different from the case M/s. Balkrishna Textiles and in that case also the very same traders were involved and the issue is also same.
5. This submission of the learned advocate was rejected and learned advocate thereafter argued the case. Learned advocate identified five issues for consideration which are detailed below s submitted by him in writing:-
Issue-A ? Demand has been raised on the basis of statement of Shri Babubhai Shah whereby an estimate of 40% of total fabrics obtained by M/s. Vipul is alleged to have been processed by the appellant.
? Finding Demand not raised on estimate basis but on specific quantities disclosed in the statement (internal pg. 30) ? Submissions Statement of Shri Babubhai does not disclose any specific quantity which has been processed by the appellant but only gives an estimate.
Admittedly, no statutory or private documents or accounts maintained by M/s. Vipul to show that such quantities obtained from the appellant.
Statement of a co-accused and hence, not reliable unless positive and cogent evidence is brought on record to corroborate such statement.
Submission of Shri Babubhai/ M/s. Vipul during adjudication proceeding that the percentage was recorded by the officers even though the same were not acceptable to Shri Babubhai (internal pg. 20).
Issue B Demand has been raised on the shortage of 18,484 L. Mtrs. found during the search at the appellants premise.
? Submission The said goods were cleared by the appellant as per instructions of M/s. Vipul and the duty liability stands paid off by the appellant on the very next day when the said amount came to be disbursed by Shri Babubhai to them.
Issue C ? Demand has been raised on excess quantity of 14,921 L. Mtrs of processed fabric found in the premise of the appellant without any final entry in the RG-1 Register.
? Findings No explanation afforded during investigation or adjudication regarding the excess quantity of processed fabric found in the premise (Internal pg. 24).
The fabrics were ready for clearance and could have been cleared without payment of duty (Internal pg. 28).
Entry in the RG-1 register only with a pencil and no final entry made regarding the excess quantity.
? Submission Quantity of such fabric duly entered in the lot register as also the raw material account.
Only a temporary entry entered in the RG-1 register as the said lot of processed fabric was pending approval from the merchant manufacturer, upon which a final entry would have been made in the RG-1 register and goods would have been cleared only on payment of duty.
Issue D & E ? Demands are raised on quantities of processed fabric seized at the shop of M/s. Vipul and premise of M/s. Pooja Fabrics ? Submission The seized fabric did not bear the name of the process house as required under the provisions of the Textile Control Order The only evidence to draw link between the seized quantity of processed fabric and the appellant is the statement of a co-accused without any independent and corroborative evidence on record.
6. It was submitted that the demand in respect of issue A has been made on the basis of statement of Shri Babulal Shah, Proprietor of M/s. Vipul Traders. It was submitted that duty demanded cannot be sustained on the basis of approximate percentages and has to be on the basis of specific quantity. In the absence of said specific quantity, the demand cannot be sustained. In this case, during the visit of officers to M/s. Vipul Traders and M/s. Pinky Textiles owned by Shri Babulal Shah, there was excess quantity of fabrics which the proprietor admitted to have been received from Shri Narayan Textile Mills and said to have been received without payment of duty. Shri Babulal alias Nanubhai R. Shah of M/s. Pinky Textile, stated that they sold grey polyester fabrics to various processors including Shree Narayan Textile Mills; the said goods duly processed by above processors were being received in his another trading firm M/s. Vipul Traders; that they had not filed declarations as required under Notification No. 305/77. Nearly 18,000 L. Mtrs. Lying with Shri Ram Folding Works belonged to him and received on 21.06.89 evening from M/s. Shree Narayan Textile Mills duly processed without cover of Central Excise Gate Pass and without payment of Central Excise duty. M/s Vipul, M/s. Jignesh Textiles belongs to him. 33,465 L. Mtrs. Of fabrics seized at his shop on 01.8.89 were processed at M/s. Shree Narayan Textile Mills, M/s. Jag Fashion process and M/s. Jagdish processors. 40% of there goods are processed by M/s. Shree Narayan Textile Mills. It was submitted during the course of hearing that the fabrics seized by at the traders premises, the name of the appellants firm were not found, which is required to be put on every meter of fabric by a manufacturer and this was one of the grounds given by the learned advocate to support his submission that there is no evidence of illicit clearance. Further, it has to be noted that Shriram Folding Works who is working as a contractor and through whom all the fabrics were processed for Vipul Traders and Pinky Fabarics had clearly stated that he received all fabrics processed for Vipul Traders and Pinky Fabrics, without payment of duty. The statement of proprietor of Shriram Foldings, Proprietor of Vipul Traders coupled with excess stock found in the premises of Vipul Traders and Pinky Fabrics and also the excess stock found in the premises of appellant, would show that appellant was following a practice of clearing the goods without payment of duty. The next question is, whether the approximation made by Shri Babulal Shah can be accepted for the purpose of quantification of duty. It is to be noted that this quantity was worked out by the trader based on his own bills and invoices under which the goods were sold by him and not on the basis of imagination. Another important fact that is to be taken note of is that in the case of Shri Prakash Shah, another trader and partner of M/s. Denish Textile and Pooja Fabrics, the exact quantity was worked out based on records and details given by him. Both the traders exclusively referred to their own accounts and this was verified by the officers also. Therefore, it has to be noted that the entire demand was not based on estimates and even the estimate is of the person who admittedly did not maintain proper accounts and therefore, based on his knowledge of his business, arrived at the quantity supplied by the appellant. It has to be noted that the appellant did not seek cross-examination of merchant manufacturer/ traders. The statements of traders have not been withdrawn till now.
7. The apex court in the case of Commissioner of Sales Tax, Madhya Pradesh vs. Esufali HM Abdul Ali, reported in AIR/1973/SC/2266, considered a case where sales tax officers had made a best judgment assessment. In that case, during search operations, a bill book used for 19 days and not accounted for sales tax purpose was recovered. Based on this bill book, Sales Tax Officers worked out tax by applying the sales as per the bill book and calculating the possible sales without tax for 365 days and demanded sales tax on sich sales. The Hon'ble Court observed as in such a situation, it was not possible for the sales tax officers to find out precisely the turnover suppressed. It was only the estimate made for the suppressed turnover on the basis of details before him. So long as the estimate made by him is not arbitrary and have nexus with the fact discovered, the same cannot be questioned. The apex court also observed that assessee cannot be permitted to take authority from the illegal acts.
8. The decision of the apex court are squarely applicable to the facts of this case. In this case, the estimate has been made by the purchaser based on his records and based on the sales bills maintained by him and is supported by excess stock recovery, statement of folding contractor and another trader who also had received the fabrics without payment of duty.
9. At this stage, it is also necessary to see whether the facts in Bal Krishan Textiles were similar to this case. In the case of M/s. Bal Krishan Textiles, Shri Babulal Shah was not concerned and it was Shri P.R. Shah whose firms had sent fabrics for processing. Further, the contractor of Shriram Folding was also not involved since in that case folding work was not undertaken by him. Some of the observations of the Commissioner which are relevant have been considered which would show that the facts in the case of M/s. Balkrishna Textile which led to dropping of proceeding are entirely different viz-a-viz the facts in the present case. Another important factor to be taken note of is that Commissioner who passed the order in the case of Balkrishna Textiles was the same Commissioner who passed the order in the case of appellants also. The Commissioner took note of the fact that, at the time of visit of officers on 22.6.1989 to M/s. Pooja Fabrics, the goods found in the premises was that of M/s. Narayan Textile Mills and in the Panchnama, Shri Babulal Shah had stated that he used to get mainly the processing done from M/s. Narayan Textiles and from other processing houses he received very less. He has taken note of the fact that the fabrics seized from the premises of M/s. Pooja Fabrics and M/s. Denish Textiles as per Panchnama dated 22.6.1989 and 01.8.1989 were clearly not processed in the factory of M/s. Balkrishna Textiles Pvt. Limited. Taking note of the facts relating to the folding, the Commissioner observed that in case of some other process houses through whom Shri Prakash R. Shah was also getting his fabrics processed, searches in the folders premises had left positive and direct evidence of clearance of processed fabrics from the processors to the folder works without payment of duty. No such evidence was unearthed by the departmental officers in respect of fabrics processed by M/s. Balkrishna Textiles.
10. From the above, it can be seen that the evidences relating to case against the appellant and its partners are very different from the one against M/s. Balkrishna Textiles and this is what led to dropping of proceedings against M/s. Balkrishna Textiles. Moreover, in the order in the case of M/s. Balkrishna Textiles, the investigation relating to M/s. Narayan Textiles also gets covered in the discussion and some of the differences are taken note of. This would also show that adjudicating authority was clearly aware of the facts in both the cases and was clear in his mind and as explained above it becomes clear to us also that both the case are entirely different even though involving many common personalities.
11. As regards the submission that statement of co-accused cannot be relied upon, it is to be stated that it is not merely a statement that has been relied upon in this case and there are many other independent evidences which are already discussed. Further in the case of Ganesh M. Verma vs. Collector of Customs (P) Mumbai 2001 (137) ELT 628 (Tri. Kol.), it was held that tin the case of smuggling statement of one accomplice corroborating another is admissible evidence. In the case of Kollatra Abbas Haji vs. GOI 1984 (15) ELT 129 (Kerala) the Honble High Court has held that in quasi judicial proceedings evidence of co-accused has evidentiary value.
12. It was also submitted by the learned counsel that Shri Babulal Shah had stated during the adjudication proceedings that percentage was recorded by the officer even though the same was not acceptable to him. However, we find that this is only a statement made during the reply to show cause notice and personal hearing and there is no retraction of the statement by Shri Babulal Shah at any stage and a mere statement that the percentage was not acceptable without explaining any reasons or ground for the same would only be an after thought.
13. Coming to the issue B, it was submitted that the duty was not paid because the appellant had not received the amount from Shri Babulal and on very next day the duty was paid. Excise duty is required to be paid at the time of clearance and receipt of consideration from the customer has no relationship whatsoever. If the appellant had not received the money appellant had lien on the fabrics as per law and should have utilised the same. If he chooses to violate the law and supplied goods, he has to take the consequences for removing the goods without payment of duty.
14. As regards the Issue C, it was submitted that there was entry in the Lot Register which would make it clear that the goods could not have been cleared without payment of duty. It was also submitted that the fact that there was temporary entry and there were entries in raw material register and lot register, would show bonafides of the assessee. It was the submission of the learned counsel that the lot of processed fabrics was pending approval from the merchant manufacturer. In any case, if the lot was not approved by the manufacturer, the same need not have been entered into any register.
15. As regards the Issue D & E, the defence was that the seized fabrics did not bear the name of the process house as required under the provisions of Textile Control Order. We have already seen the way appellants have followed the law as regards Central Excise law and Procedure. It is the submission of the learned advocate that appellants were strict in following the provisions of Textile Control Order but not the Central Excise law, but we do not find any support for this submission from the records.
16. The observations made above would clearly show that the case of the Revenue is based upon documentary evidences, seizure of fabrics, statement of folding contractor and the traders, discrepancies in the accounts maintained by the assessee. We have examined both the orders relating to M/s. Balkrishna Textiles and the appellant and also the evidences in both the cases and submissions made by both sides to come to the conclusion that appellants case has no merit.
17. At this stage, we have to take note of the fact that additional submissions were made by the learned counsel regarding penalty and confiscation of the goods. However, we notice that penalty and confiscation of the goods were set-aside in Para 15 of order of the Tribunal which reads as under:-
15. Insofar as the imposition of penalty and confiscation of goods is concerned, we note that the Honble High Court of Delhi in the case of Pioneer Silk Mills vs. Union of India held that the penalty provisions under the Central Excise Rules should not be extended to the Additional duty of Excise (Goods of Special Importance) Act, 1957. In this view of the matter, we set-aside the order confiscating the goods and imposing the penalty. The appeals are disposed of in the above terms. Therefore, only duty demand against the appellant is sustainable and we sustain the same.
18. Both the appeals are disposed of in above terms.
(Pronounced in the Court on 29.10.2012)
(M.V. Ravindran) (B.S.V. Murthy)
Member (Judicial) Member (Technical)
.KL
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