Customs, Excise and Gold Tribunal - Mumbai
Mira Silk Mills And Suresh Chand Agarwal vs Commissioner Of Central Excise on 20 May, 2005
Equivalent citations: 2005(103)ECC290, 2005(190)ELT499(TRI-MUMBAI)
JUDGMENT Archana Wadhwa, J.
1. All the four appeals are being disposed of by a common order, though they arise out of two orders impugned before us. However, the issue involved in both the orders is identical and the matters were also heard together when identical submissions were advanced by the Ld. Advocate appearing for the appellants.
2. Vide impugned orders, the Commissioner of Central Excise, Mumbai has confirmed the demand of duty of Rs. 1,02,71,439 and Rs. 35,31,655.23 under Section 11A (2) of Central Excise Act, 1944 read with the proviso to Sub section (1) of Section 11A and Rule 9 (2) of Central Excise Rules, 1944 against M/s. Mira Silk Mills along with imposition of personal penalty of Rs. 1 crore and Rs. 35 lakhs under Rule 173Q(1) of Central Excise Rules, 1944. In addition, land, building, plant, machinery etc., belonging to the said appellants has been confiscated with an option to the appellants to redeem the same on payment of redemption fine of Rs. 15 lakhs in each case Penalty of Rs. 35 lakhs and Rs. 20 lakhs has been imposed upon Shri S.C. Agarwal, holder of power of attorney for the proprietor of M/s. Mira Silk Mills under the provisions of Rule 209A of the Central Excise Rules, 1944.
3. The present case has a chequered history. M/s. Mira Silk Mills is a proprietary concern of Mrs. Meera Agarwal, engaged in the processing of man made fabrics, which is situated at Dombivli. The said factory was visited by the Central Excise Officers on 22.11.85, who conducted various checks and verifications. From the scrutiny of the records maintained by the said unit, it was found that they were indulging in evasion of Central Excise duty by mis-declaring the processed fabrics as calendered fabrics. The appellant's records were taken into possession. Thereafter, enquiries were made from Maharashtra State Electricity Board, as regards the consumption of the electrical units by the said company. From the units so consumed, it was noticed that the consumption of electricity was not in consonance with the declaration made by the appellants. It may be mentioned here that calendering is a process of ironing the cloth, to give a smooth finish on both sides, which consume less electrical power.
4. On the other hand, processing of man made fabrics involved various processes, such as, stentering, dyeing printing, decatising, which are carried out with the help of machines, such as, stenter, boiler, thermo pack, decatising, jiggers, jet dyeing, etc., which consume considerably more power. The power consumption enquiries revealed that though the appellants had shown calendering process in respect of most of the fabrics but the electrical units consumed by them during the period in question i.e. from 1981 to 1985 strengthened the department's impression that it was the processing of the man made fabrics, which was being carried out in the appellant's factory.
5. As a consequence of the above, the revenue conducted investigations and recorded the statements of various persons. Brief and the relevant portions of the said statements have been incorporated by the Commissioner in his impugned order and are being re-produced below for ready reference.
"(i) Shri Kishore Laxman Lanke, an ex-employee of M/s. Mira stated that he joined them in the last week of November 82 and he was working as assistant of excise in-charge and looking after day to day Central Excise work. When he was working in M/s. Mira, all the machines used in the process of man-made fabrics were working.
(ii) Shri Subhashchandra Narayan Kulkarni, an ex-employee of M/s. Mira, in his statement inter alia stated that he joined M/s. Mira in the month of December 82 and left factory in April 1983. He was entrusted with the work of receiving grey fabrics and getting it measured. During his time about 10 to 15 thousand metres of grey man-made fabrics was received for processing per day. The grey fabric was received for bleaching, dyeing, printing and grey top dyed fabrics for calendaring.
(iii) Shri Pramod Kumar Pandey, an ex-employee of M/s. Mira in his statement recorded (in Hindi) on 24.12.85 inter alia stated that he started working in above factory from October 1980 and left in February 1983. He was working on the 'boiler'. From May 1981, he was dealing with transport work i.e delivery of goods from factory to the merchant manufactures. He further deposed that machines such as thermopack, 6 Jiggers, 1 Stenter containing 3 Chambers were in operation at the time of his joining the factory and work done in two shifts. Whenever he went to the factory, all the above machines were found to be in operation.
(iv) Shri Rajan Verma, an ex-employee of M/s. Mira, in his statement dtd. 16.12.85 inter alia stated that he worked for above 5 years form 1976 at the residence of Shethji i.e. Shri, Suresh Chandra Agarwal. Afterwards from 1980, he worked in the factory on different machines. He had worked on Jigger, where the cloth is dyed, stentering machine on which the width of the fabrics is adjusted, beam dying on which the suiting cloth is dyed, and Decatising machine which is used for making the cloth smooth. He further added that during his time factory was working in two shifts and all the machines were in operation. After working for above 4 years, in the factory, he left services in April 1984."
6. The scrutiny of the records taken into possession by the department revealed the following facts, as recorded by the Commissioner in his impugned order.
(a) Calendering Inward Register for the period 12.11.82 to 15.11.82: -- This register gives names of the parties from whom the goods were received for processing such as special calendering, special felt calendering, special double calendering stiff, and date of receipt, date of delivery etc. In the entries dated 12.11.82, it is also mentioned that goods have been received against 'R' form. The entry corresponding to lot no. 5258 tallies with the 'R' Form particulars, which states that the goods have been exported out of Bombay for dyeing/printing. Therefore, the terminology used by M/s. Mira appeared to be misleading. Although the goods received on 'R' form were to be printed /dyed, the records maintained by them stated that goods would undergo process of calendaring, special double calendaring, calendering stiff and felt calendaring.
(b) Calendering Inward Register from 16.11.82 to 1.1.83: -- This register also gave the facts as stated above. It was observed that in the column "Programme" the entries had been tampered with. It was quite clear that whatever special calendaring or special felt calendaring was written the entries have been mutilated and then "calendered" was written afterwards.
(c) Calendering outward Register no. 4 for period 3.7.83 to 12.10.83: -- This register gave the name of the parties, to whom the goods corresponding to any specific lot had been delivered, after one of the processes mentioned such as calendaring, double calendaring special felt calendaring or special calendaring was carried out, and the charges recovered from the party. For example, at Serial No. 1 of this register, 1365.75 metres of suiting have been shown as undergone "Special Calendering" for which Rs. 3,687.52 have been recovered. Thus, the charges per linear meter amounted to Rs. 270. At serial number 27 Rs. 1,392.18 have been recovered for 1,113.75 metres of cloth (which had undergone process of calendaring) which amounted to Rs. 1.25 per linear metre. At serial no. 353, amount of Rs. 3,641.25 has been charged for 2913 metres of cloth which had undergone 'Special felt calendering' process. Similarly it was observed from all other entries, that the processing charges for calendaring, were always more than Rs. 1.00 per metre which were abnormal in comparison to rates prevailing in the trade.
(d) At serial no. 51 of Calendering Outward Register no. 1 for period 5.1.84 to 18.6.84, an amount of Rs. 3,008.75 had been charged for 2407 metres of shirting which had undergone precess of special felt. At serial no. 165, amount of Rs. 2,201.25 had been recovered for 1761 metres of cloth which had undergone process of "Double Felt".
(e) File at Sr. No. 43 of the records withdrawn by Central Excise Officers on 23.11.85 gave the processing charges charged by M/s. Mira from the merchant manufacturer. The page no. 17 dated 10.7.82, gave the price list i.e. the rate at which processing charges were charged from merchant manufacturers, depending upon the quality of suiting/shirting. At serial no. 1 to Page 17, the charges for bleaching, finishing and calendaring for top dyed shirting were shown as Rs. 1.35 per metre, whereas the charges for special calendering are Rs. 1.60. At serial no. 2, the charges for dyeing and finishing of 50 x 76 polyester shirting were Rs. 1.50 whereas the charges for special double calendaring were Rs. 1.75 per metre. At serial no. 14, charges for ex-whiter "Double Calendering" were Rs. 2.00 per metre.
It is interesting to note that charges for decatising curing, heat setting were given separately as RS. 0.25,0.10 & 0.35 per metre. However, nowhere the charges for calendaring were given. The same observation was made in respect of price list at page 53 effective from 5.11.83. From the above, it appeared that "Special Calendering" terminology is used where something more than calendaring (i.e. bleaching, finishing and calendaring) was done on the fabrics. Similarly, special double calendaring terminology covered something more than calendaring process (dying and finishing). Hence it appeared that goods which were shown to be cleared from factory after calendaring only were nothing but processed goods and hence chargeable to additional excise duty.
(f) In the instruction Book withdrawn by Central Excise Officers on 7.4.86, the instruction on page 6 dated 2.10.82 read "please inform the following parties that do not write any instruction of processing on their challans".
Lot no. 4659 - M/s. P.K. Textiles Lot no. 4660 - -- do -- Lot no. 4663 - M/s. Sanjay Silk Mills Lot no. 4664 - M/s. Rajmal Mohanraj Lot no. 4668 - M/s. Ganesh Textiles Industries
It appeared that the above parties sent their goods for processing i.e. bleaching dying and printing. The above lots have been stated to be only special calendared or special double calendared as evident from calendaring outward register covering lot no. 4499 to 5247 (from 20.9.82 to 11.11.82)
(i) On page 5, instructions given to manager dated 30.9.82 read "Today also we have received the following party's challans that they mentioned the instructions in their challan as per our principle that instructions should not be written in the challan". It appeared that this was a deliberate attempt on the part of M/s Mira to suppress the facts from the department. Although the goods were processed but they were shown as cleared after calendering only.
(ii) The instruction on Page no. 9 dated 3.10.82 states that "We have not received the dyeing, printing programme from the following parties". Some of the names were:
Lot Nos. Name of the party 4695 to 4699 M/s. Mukesh Textiles 4700 M/s. T.K. Silk Mills
For the above lots, they had shown, in their calendering inward register for the period from 20.9.82 to 11.11.82 (page 157), that the goods had come for special calendering only. Therefore, prima facie it appeared that these goods were dyed and printed.
From these instructions, it appeared that they were directing the parties to give the dyeing and printing programme separately just to put the same off the record.
(g) Two files i.e. (1) Monthly yearly report file no. 2 for the period November 1981 to October 1982 and (2) Monthly statement file from November 1982 to October 1983 were withdrawn by Central Excise Officers on 7.4.86. The data regarding the consumption of chemicals, on monthly basis were tabulated in Annexure A-2 to show cause notice. It was observed that during the months of July 82, December 82, March 83, May 1983, the quantity of processed goods manufactured is 78638.40,1188,7447 and 6603 sq. meters respectively, whereas the calendared goods manufactured is 606031, 538603, 610376 and 671258 sq. meters respectively.
The amount spend on chemicals for the above months is Rs. 4,71,769, Rs. 3,58,287, Rs. 4,35,203 and Rs. 3,75,302 respectively. Interestingly the amount of Rs. 3,58,287 was spent on 1188 meters (for July 82) which appeared unbelievable. Therefore, it was concluded that the amount of Rs. 3,58,287 was spent on total quantity of calendared + processed goods i.e. 539791 sq. meters. That gave a proper explanation of the amount spent on fabrics cleared, which comes to 70 paise per meter, a reasonable and acceptable estimate. Therefore, from the amount spent on chemicals, it became obvious that the goods, which were cleared as only calendared goods, were cleared after processing".
7. Statement of Shri S.C. Agarwal, husband and power of attorney holder of Proprietress Mrs. Meera Agarwal was also recorded on 6.3.86.
8. It was also seen that the appellant was availing "R" forms facility as per Rule 7 of Bombay Municipal Corporation exemption from Octroi Rules, 1966. As per the said facility, the trade was allowed to export goods from Greater Bombay and re-import the same to the Greater Bombay for the purposes of processing, without payment of Octroi. Inasmuch as the appellant's factory was situated at Dombivali, they were availing the said facility for bringing grey man made fabrics from Bombay and after processing the same in the factory, for sending it back to Bombay. At the time of crossing the goods at the Octroi Naka the same are inspected by the Octroi Inspector, who after satisfying himself about the correctness of the particulars allows the goods to pass through. To strengthen their case, department made enquiries from Additional Assessor and Collector (Octroi), Bombay, who vide his letter dated 21.2.86 informed that the appellants had been granted facility under Rules 7 and 8 of the exemption Rules for export of goods from Bombay for the purposes of processing the same. For the said purpose, the appellants had also made deposits as required under the rules. The revenue also seized such "R" forms and took details of the various dates when the goods were brought from Bombay and were sent back after processing and the quantity and variety of grey fabrics, etc.
9. On the basis of the above evidence, show cause notice was issued to the appellants alleging that they were clearing processed man made fabrics under the garb of calendared fabrics and thus evading duty. Accordingly, notice proposed confirmation of duty against them as also imposition of penalties. The said notice issued on 2.5.86 was adjudicated upon by the Commissioner vide his order dated 19.9.88. The said order was challenged by the appellants by way of filing a writ petition before the Hon'ble High Court, on the ground that the copies of the some of the documents were not served upon the appellants. Appreciating the said plea of the appellants, the Hon'ble High Court set aside the order of the Commissioner and directed the revenue to do fresh adjudication after serving the copies of the relied upon documents.
10. During the course of de novo proceedings, as a result of Hon'ble High Court's directions, the appellants submitted that their entire records were destroyed in fire and hence all the documents including the copy of the show cause notice be supplied to them afresh. On 16.11.94, they were again supplied with the copies of the show cause notice along with annexures, statements, panchanama, etc. As regards the remaining records, they were directed to inspect the same. However, as recorded by the Commissioner in his impugned order a number of opportunities were afforded to the appellants to inspect the said records but they always asked for another date to do so. Ultimately, records were inspected by Shri S.C. Agarwal and his authorized representative on 30.12.94 and on 6.1.95. Copies of the said records were also taken by them. However, in stead of submitting reply to the show cause notice they again reiterated that the original documents were not supplied to them for inspection and verification. The department, however, informed the appellants that whatever records were available have already been inspected by them and they should file the reply and appear for personal hearing. Inasmuch as the appellants neither filed any reply nor appeared for hearing, the matter was re-adjudicated by the Commissioner vide his order dated 26.4.95 confirming the demand of duty and imposing penalties. On an appeal against the said order, the Tribunal observed that some of the documents were reported to have been lost and the department can produce secondary evidence for establishing their case, in which case they should produce the records of Octroi and Electricity department. With these directions, matter was once again remanded to the Commissioner. During the course of re-adjudication, the appellants were directed to appear before the Commissioner and various persons were also called for examination/cross-examination. It is seen that the appellants did not avail the opportunity of examining/cross-examining the various persons as directed by the Tribunal. The matter was once again decided ex-parte by the Commissioner vide his order dated 23.10.98.
11. On an appeal against the above order, the Tribunal again set aside the matter and remanded the same to the Commissioner for re-adjudication after giving reasonable opportunity of being heard to the appellants.
12. It is seen that before passing the present order, the Commissioner called upon the appellants to appear before him so as to discuss and find out a solution as regards the availability of the documents and the other evidences. The appellants did not appear. However, the department proceeded for identification and certification of documents which were required as secondary evidence. All such documents, which were sought to be relied upon were got certified from the various officers, deponents/witnesses. These certified documents were served upon the appellants vide letter dated 6.9.2000 with directions to file detailed reply to the notice. It was also intimated that if they want to cross-examine any of the witness that should intimate the department. However, the appellants neither asked for cross-examination nor filed any reply to the notice but contended that inasmuch as the period of two months given by the department, especially for re-adjudicating the case was over, the Commissioner was debarred from adjudicating the same. The revenue has, however taken extension of the said period.
13. Inasmuch as the appellant was not co-operating in spite of having given an undertaking before the Tribunal, while seeking remand of the matter, the Commissioner proceeded ahead with the adjudication and passed the impugned order.
14. Shri K.K. Shroff, Ld. Advocate appearing for the appellants agitated the matter only on the principles of violation of natural justice taking us through the various orders of the High Court as also of the Tribunal vide which the matters were remanded. Ld. Advocate emphasized that the Commissioner has not followed the directions of the Tribunal in supplying them the original documents and has thus again contravened the principles of natural justice. On being queried as to whether the documents, original of which have not been supplied, have been relied upon by the Commissioner or not, Ld. Advocate fairly agreed that the said documents have not been relied upon. As regards the electricity bills and "R" forms, Ld. Advocate submits that the originals have not been shown to them and it is only certified copies of the same which have been given to them, in which case relevance cannot be placed upon the same. No arguments were advanced as regards the merits of the case.
15. Countering the arguments, Ld. DR appearing for the revenue submits that while remanding the matter, the Tribunal has clearly observed that the revenue is at liberty to lead secondary evidence. During the course of de novo adjudication the department has got all the documents certified from the officers, deponents or witnesses. In these circumstances, the appellants cannot contend that the directions of the Tribunal were not complied with. He submits that the matter having been remanded three to four times earlier and admittedly the original documents having been lost and destroyed and it is not only impracticable but impossible for the department to produce the said documents, any further remand at this stage, as contended by the appellants is neither warranted nor justified. Our attention was also drawn to the Hon'ble Supreme Court's decision in the case of Sanghi Textile Processors (P) Ltd. v. CCE, 1993 (65) ELT 357 (SC), which has been taken note of by the Commissioner, wherein both the sides were advised to take a reasonable and pragmatic solution in identifying essential documents inasmuch as the case involved voluminous documents.
16. Ld. DR strongly contested that the appellants are only delaying the proceedings with ulterior motive and they are not interested in advancing any arguments on merits. The revenue has placed on records sufficient evidence to show that the appellants were indulging in clandestine removal.
17. After considering the submissions made by both sides, we agree with the Ld. DR that the matter having already been remanded a number of times, no further purpose is going to be served by remanding the same once again after a gap of 20 years. Admittedly, the original copies of the electricity bills and "R" forms are not available with the revenue. However, we find that the details of the same have been got verified and certified by the revenue from the respective officers. From page 118 and 119 of the paper book, we find that the units of the electricity consumed by M/s. Mira Silk Mills for the period June 1981 to December 1985 have been disclosed along with a certification by the Superintending Engineer (USK) MSEB, Kalyan which is to the effect--"with reference to letter No. F. No. V/Adj/15(221) (SCN) 354/86/B-III/15466 dated 11.12.91 Consumption from June 81 to December 85 as shown above, are verified from the original HT bills. The consumption for the period June 81 to August 81 corrected as per bills. The consumption from September 81 to December 85 are correct."
18. There is no challenge to the said consumption of electricity units by the appellants in which case it has to be concluded that they have accepted the said consumption. Merely because the original month-wise bills are not available, the said consumption cannot be ignored. The units consumed during the particular months have been verified and certified by the concerned officer and, as such, in our view constitute a valid evidence. Similarly, we find that all the "R" form details have been disclosed to the appellants by way of a statement which was checked and verified and certified by the Additional Assessor and Collector (Octroi) Bombay/Panvel Highway. The appellants during the course of their arguments have not denied the existence of the said "R" forms and have not disputed the facts of their having executed the same. The only arguments was that the original "R" forms was not shown to them. In our views, the said fact by itself is not sufficient to exclude the said evidence from consideration especially when the details have been verified and certified by the concerned officer.
19. Similarly, we find that the Commissioner has also relied upon the internal records maintained by the appellants, for example, calendering inward register and outward register and the other records and has rightly come to a conclusion that processing was being mis-declared as calendering. In para 27 of his order, the Commissioner has also discussed about the price structure, which has established beyond doubt that the goods were being mis-declared as calendared whereas the actual processing was being undertaken by them.
20. A reference has also been made by the Commissioner to the instruction dated 2.10.82 appeared at page 6 of the instructions book, which are the following effect.
"(a) Please inform following parties that do not write any instruction of processing on their challans". Under this instruction certain lot numbers of fabrics and name of parties are shown. These lots were cleared as special calendared or special double calendared.
(b) On page 5, instruction dated 30.9.82 reads as "Today also we have received the following party's challan that they mentioned the instructions in their challans as per our principle that instructions should not be written in the challan".
Identical instructions have also been found on the other pages of the said book. These facts along with other evidences as discussed above leads to the inevitable conclusion that the actual activity being undertaken by the appellants was processing and not calendering of the fabrics.
21. In para 31 the Commissioner has also discussed about the consumption of the chemicals, in detail and has concluded that huge amount spent for procurement of chemicals, which are not required for calendering purpose itself show that processing was being undertaken. The chemicals were only required for processes like bleaching, dyeing, printing, stentering, etc., and the appellants have not been able to give any satisfactory explanation for consumption of such high quantum of chemicals, when they were doing, according to them, only calendering.
22. Reference has also been made to the statements of various persons, which clearly corroborate the details contained in the "R" forms and the other registers, along with electricity consumption. As such, we are of the view that there is ample evidence on records to prove the allegations against the said appellants having already held that principles of natural justice was adhered to by the adjudicating authority as far as possible and practicable. In the facts and circumstances of the case, we hold that the appreciation of evidence on record establishes the clandestine removal of processed fabrics under the garb of calender fabrics. As such, duty has been rightly confirmed against them. We uphold the same. However, in the facts and circumstances of the case, penalty amount in the case of Mira Silk Mills is reduced from Rs. 1 crore to Rs. 35 lakhs in Appeal No. E/656/O1/Mum and from Rs. 35 lakhs to Rs. 15 lakhs in Appeal No. E/658/01 /Mum. Penalty on Shri S.C. Agarwal is reduced from Rs. 35 lakhs to Rs. 15 lakhs in Appeal No. E/656/Ol/Mum and Rs. 20 lakhs to Rs. 10 lakhs in Appeal No. E/658/01/Mum. Confiscation of plant, machinery, etc. is however set aside in both the cases.
23. But for the above modification in the quantification of penalties, the appeals are otherwise rejected.