Custom, Excise & Service Tax Tribunal
Bright Brothers Pvt. Ltd vs Cce, Delhi-Iii on 13 February, 2015
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL R.K. PURAM, WEST BLOCK NO. II, NEW DELHI-110066 COURT NO. III Date of Hearing: 13/2/2015 Appeal No. E/1447/2006-EX [DB] Bright Brothers Pvt. Ltd. Appellant Vs. CCE, Delhi-III Respondent
[Arising out of order-in-appeal no. 43/GRM/GGN/2006 dated 31.01.2006 passed by CCE, Delhi-III]
1. Whether Press Reporter 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?
Appearance: Sh. B.L. Narsimhan, Advocate, ld. Counsel for the appellant Sh. M.S. Negi, ld. DR for the respondent Coram: Honble Shri Rakesh Kumar, Member (Technical) Honble Sh. S.K. Mohanty, Member (Judicial) FINAL ORDER NO. 50726/2015 Per: Rakesh Kumar The facts leading to filing of this appeal are, in brief, as under:
1.1 Appellant are manufacturers of plastic automobile components for Maruti Udyog Limited. The raw material for the plastic auto components is plastic granules. The factory of the appellant was visited by the Jurisdictional Central Excise Officers on 4/2/2003. At that time, the stock of the finished products as well as inputs was checked. There was shortage of certain types of plastic granules valued at Rs. 10.87 lakh and there was excess stock of certain other types of inputs valued at Rs. 14.35 lakh. Similarly, in the stock of finished goods, there was shortage of certain type of components valued at Rs. 13.57 lakh and there was excess stock of other type of components valued at Rs. 8.27 lakh. The excess stock of inputs as well as finished goods was placed under seizure. With regard to the shortage of finished products, they paid the excise duty of Rs. 1,32,537/-. They also paid the CENVAT Credit involved in respect of the shortage of the plastic granules valued at Rs. 10.87 lakh.
1.2. In view of the shortage of CENVAT Credit availed inputs the officers initiated inquiries in respect of consumption of inputs. For this purpose, they asked the concerned officials of the appellant company to give information about the weight of different plastic automobile parts being manufactured by them and this information was furnished. Officers, on this basis, estimated the consumption of the raw material - plastic granules, used in the manufacture of plastic auto parts. Besides this, the officers also determined the weight of each component. On the basis of comparison between the weight of different automobile parts determined on the basis of actual availment and the weight of those components in terms of information furnished by the appellant, the officers were of the view that the consumption of raw material has been inflated and the extra raw material has been removed clandestinely without reversal of the CENVAT Credit.
1.3. It was also found that the appellant were using the moulds and dies supplied by M/s. Maruti Udyog Limited for manufacture of the plastic components for them. The moulds and dies had initially been imported by MUL under EPCG Scheme without payment of duty. However, subsequently, since MUL could not meet the export obligation, they paid the basic custom duty as well as additional customs duty on the imported moulds and dies. The appellant had earlier amortized only the value of the moulds and dies, but subsequently when MUL paid the basic customs duty and additional customs duty on the imported moulds and dies and issued an invoice to the appellant, based on this invoice of MUL, the appellant amortized the amount of basic customs duty along with interest also and they took the CENVAT Credit of the additional custom duty. The differential duty payable on the amortized amount of the basic custom duty plus interest was Rs. 3,07,354/- which on being pointed out by the department was paid.
1.4 It is in view of the above, that after issue of show cause notice, the Jurisdictional Additional Commissioner vide order-in-original dated 24/8/2004 confirmed the duty demand of Rs. 3,91,270/- in respect of the shortage of finished goods and inputs, duty demand of Rs. 25,14,220/- in respect of the alleged clearance on CENVAT Credit availed inputs as such without reversal of the CENVAT Credit and duty demand of Rs. 3,07,354/- on the amortized amount of the element of basic custom duty and interest. Besides this, the Additional Commissioner also demanded interest on the above mentioned duty/CENVAT Credit demands under section 11AB and imposed penalty of equal amount on them. While, the excess stock of raw material was not confiscated, the excess stock of the finished goods was ordered to be confiscated with option to be redeemed on payment of redemption fine. Penalty of Rs. 50,000/- was also imposed under Rule 25 of the Central Excise Rules for non-accountal of the finished goods.
1.5 On appeal being filed to Commissioner (appeals) against this order, the Commissioner (appeals) vide order-in-appeal dated 31/1/2006 upheld the Additional Commissioners order in toto.
1.6. Against the above order of the Commissioner (appeals), this appeal has been filed.
2. Heard both the sides.
3. Sh. B.L. Narsimhan, Advocate, the ld. Counsel for the appellant, pleaded that so far as the duty demand of Rs. 3,07,354/- on the account of amortization of the basic custom duty and interest in respect of the moulds and dies is concerned, he is not contesting the duty demand and the same has already been paid. He, however, pleaded that there was no intention to evade this duty and hence, no penalty is imposable as the Tribunal in its final order no. A/56358-56359/2013-EX [DB] dated 1/5/2013 in the case of Mark Auto Industries Ltd. Vs. CCE, Delhi-III and M/s. Rasandhik Engineering Industries, who are also the vendors of MUL, and who had also received the moulds and dies imported by MUL under EPCG Scheme, has held that while the differential duty on the account of amortization of the quantum of basic custom duty paid by MUL on the moulds and dies would be payable, no penalty would be imposable, as there was no intention on the part of the vendors to evade the duty; that the ratio of this judgment of the tribunal is squarely applicable to the facts of this case; that duty demand of Rs. 25,14,220/- which is based on the weight of difference between the weight of components indicated by the appellants employees in response to the officers enquiry and the actual weight, that merely on this basis, the department cannot presume that the consumption of raw material was inflated; that though the impugned order refers to the weight of the components being mentioned in the RT-12 Returns, RT-12 Returns does not mention the weight of the component and simply mentions the number; that just because some employee of the appellant company indicated the weight of different components, that information cannot be treated as 100 per cent correct and on that basis, the appellant cannot be accused of inflating the consumption of raw material; that in any case, the difference between the actual weight of the component and the alleged weight of the component is 1.27 per cent of the total purchases of raw material during the last five years; that therefore, they duty demand of Rs. 25,14,220/- is not sustainable; that as regards, the alleged shortage of raw materials valued at Rs. 10.87 lakh and alleged excess of raw material valued at Rs. 14.35 lakh, the officers at the time of their visit to the factory on 4/2/2003 had compared the stock of the raw material with the account of raw material maintained in the computer as on 31/3/2003, that as at that time, the stock account of raw materials maintained on the computer was up to 31/3/2003 and on the account of the concerned person being on leave, the receipt and consumption of raw material on first, second and third February, 2003 had not been entered, the shortages and excess in respect of the raw material are not real shortages and excess and hence, the duty demand of Rs. 1,74,015/- in respect of the alleged shortage of raw material is not sustainable and that as regards the alleged shortage of the finished product, he is not disputing the same.
4. Sh. M.S. Negi, the ld. DR, defended the impugned order by reiterating the findings of the Commissioner (appeals) and pleaded that in respect of the shortage and excess in the stock of the inputs, at the time of officers visit to the factory, it was never mentioned that the stock of the raw material maintained on the computer is updated up to 31/1/2003 only. He also pleaded that the weight of the various components is also indicated in the RT-12 Returns, and it is the employee of the appellant company who by written statement had informed the department about the weight of the different components. With regard to the short payment of duty of Rs. 3,07,354/- in respect of the amortization of the basic custom duty and interest he pleaded that this duty would not have been paid if the short payment had not been pointed out and therefore, penalty on the appellant has to be imposed.
5. We have considered the submissions from the both sides and perused the records.
6. As regards the short payment of duty demand of Rs. 3,07,354/- on the ground of amortization of the basic custom duty plus interest paid in respect of the moulds and dies, the duty demand is not disputed by the appellant, hence, the same is confirmed along with interest. However, as regards, the penalty for the short payment, the Tribunal in the case of Mark Auto Industries Ltd. Vs. Delhi-III and Rasandhik Engineering Industries Vs. CC Delhi-III final order no. A/56358-56359/2013-EX [DB] dated 1/5/2013 where the identical issue and identical facts are involved has held that penalty would not be imposable on the vendors. Following this judgment of the Tribunal, we hold that the penalty of Rs. 3,07,354/- imposed on the appellant is not sustainable. Thus, while the duty demand of Rs. 3,07,354/- along with interest is upheld, the penalty of same amount is set aside.
7. As regards the duty demand of Rs. 25,14,220/- it is based on the allegation that the appellant have inflated their raw material consumption/plastic granules and the excess consumption of CENVAT Credit availed plastic granules has actually been cleared without reversal of the credit. This allegation is based on the weight of the various plastic components as determined by the actual availment and the weight of the same component as intimated by the officials of the appellant company, as per their knowledge. In our view, just on the basis of the weight intimated by the appellants officials and the actual availemnt of the component, it cannot be presumed that the appellant have inflated the consumption of raw material and have cleared the alleged excess consumption without reversal of the credit. More so, when the difference between the ascertained weight of the component and the weight indicated by the companies officials is less than 1.5 per cent of the total raw material purchased during last five years. Moreover, we also find that though the impugned order mentions that weight of the component is recorded in the RT-12 Returns, on going through the returns, we find that it is not so as RT-12 returns mention only the number of the different types of the components manufactured and cleared and not their weight. The duty demand of Rs. 25,14,220/- is therefore, not sustainable and has to be set aside along with penalty.
8. As regards, the duty demand of Rs. 1,74,015/- in respect of the alleged shortage of plastic granules valued at Rs. 10.87 lakh, it is seen that this shortage has been determined on 4/2/2003 by comparing the stock of the granules actually found with the stock of granules as maintained on the computer. But it is seen that at that time, the record of the raw material maintained in the computer was only up to 31/1/2003 and therefore the stock of the raw material as on 4/2/2003 could not be compared with the stock account of the same raw material as on 31/1/2003 and for this purpose, the stock of the raw material maintained in the computer should have been updated. Since the stock of the raw material actually found as on 4/2/2003 had been compared with the stock of the same raw material maintained in the computer as on 31/3/2003, in our view, the shortage of inputs valued at Rs. 10.87 lakh cannot be said to be real shortage and hence the duty demand of Rs. 1,74,015/- has to be set aside with equivalent penalty.
9. As regards the shortage of stock in the finished goods involving duty of Rs. 2,17,255/-, the same is not disputed and hence the same is upheld along with interest and penalty. However, since the entire duty had been paid much before the issue of show cause notice, in accordance with the judgment of Honble High Court of Delhi in the case of K.P Pouches Pvt. Ltd. Vs. Union of India reported in 2008 (228) ELT 31 DEL, the penalty is reduced to 25%.
10. As regards the confiscation of unaccounted finished goods, since the same is not disputed, it is upheld. The redemption fine, however, is reduced to rupees one lakh. However, the penalty of Rs. 50,000/- imposed on the appellant company for non-accountal of the finished goods and raw material, is set aside.
11. In view of the above discussion, the following order is passed:
11.1. While the duty demand of Rs. 3,07,354/- is upheld along with interest and penalty of the same amount is set aside. 11.2. Duty demand of Rs. 25,14,220/- is set aside along with interest and penalty of equal amount. 11.3. The duty demand of Rs. 1,74,015/- in respect of the alleged shortage of CENVAT Credit availed plastic granules is set aside along with penalty. 11.4. The duty demand of Rs. 2,17,255/- in respect of the shortage of finished products is upheld along with interest and penalty under section 11AC is reduced to 25%. 11.5 While the confiscation of excess stock of finished goods is upheld, the redemption fine of Rs. 2,50,000/- is reduced to Rs. 1 lakh.
12. The appeal stands disposed off as above.
(Rakesh Kumar) S.K. Mohanty
Member (Technical) Member (Judicial)
RITU