Custom, Excise & Service Tax Tribunal
M/S. Personna Cosmetics vs Commissioner Of Central Excise & S.T., ... on 20 March, 2015
CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL, West Zonal Bench, Ahmedabad Appeal No. : E/55,56/2011 (Arising out of OIA-SKSS/220-221/VAPI/2010 dated 30.09.2010, Passed by Commissioner (Appeals) Central Excise, & S.T., Vapi ) 1. M/s. Personna Cosmetics : Appellant (s) 2. Shri Hakim Thanawala VERSUS Commissioner of Central Excise & S.T., Vapi : Respondent (s)
Represented by :
For Appellant (s) : Shri R.K. Jain, Advocate For Respondent (s) : Shri L. Tendupatra, Authorised Representative For approval and signature :
Mr. P.K. Das, Hon'ble Member (Judicial) 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.K. Das, Hon'ble Member (Judicial) Date of Hearing : 10.02.2015 Date of Decision : 20.03.2015 ORDER No. A/10261-10262/2015 Dated 20.03.2015 Per : Mr. P.K. Das;
These appeals are arising out of a common order and therefore, both are taken up together for disposal.
2. The relevant facts of the case, in brief, are that the Appellant No.1 (M/s. Pesonna Cosmetics), a partnership firm, engaged in the manufacture of Toothpaste, Shampoo and Shaving Cream etc., classifiable under Chapter 33 of the schedule to the Central Excise Tariff Act, 1985. On 6th/ 7th March 2007, the Central Excise officer of HQrs (Preventive) visited the factory premises of the Appellant No.1 and prepared a stock verification report in the presence of two independent panchas and Appellant No.2, claimed as Director of Appellant No.1. It was recorded shortage of finished goods involving Central Excise duty of Rs. 7,63,190/-. The said Central Excise officers also recorded the statement of Appellant No.2 on 07.3.2007.
3. A show cause notice dated 02.6.2009 was issued proposing demand of duty alongwith interest and imposition of penalty on the Appellant No.1 and to impose penalty on the Appellant No.2. The adjudicating authority confirmed the demand of duty of Rs. 7,63,190/- alongwith interest and also imposed penalty of equal amount of duty on the Appellant No.1. It has also imposed penalty of Rs. 2,50,000/- on the Appellant No.2, as Director of the Appellant No.1, under Rule 26 of the Central Excise Rules, 2002. It has also confiscated the goods removed clandestinely and imposed Redemption Fine of Rs. 50,000/- on the Appellant No.1. The Commissioner (Appeals) modified the adjudication order to the extent the redemption fine was set-aside.
4. Learned Advocate for the appellants submits that there was no shortage of finished goods and no stock verification was conducted. He submits that the entire proceeding was initiated on the basis of statement of Appellant No.2, who claimed to be a Director of the appellant firm. It is submitted that Appellant No.1 is a partnership firm and registered with the Central Excise authorities. There cannot be Director in a partnership firm. Appellant No.2 claimed as Director of the appellant firm, who has no relation with Appellant No.1 and therefore statement of Appellant No.2 cannot be the basis for the demand of duty. He submits that no statement was recorded of the partner and the employees of the appellant firm. He drew attention to the relevant portion of the Panchnama, partnership deed and reply to the show cause notice.
5. On the other hand, the learned Authorised Representative for the Revenue reiterated the findings of the Commissioner (Appeals). He submits that the stock verification was conducted on 07th March 2007 in the presence of the production Incharge of the appellant firm and Appellant No.2 who claimed as Director of the appellant No.1. No dispute was raised by Appellant No.1 during investigation. In reply to the show cause notice, dated 23.2.2010, the appellant informed that Shri Hakim Thanawala has no connection with the Appellant firm. Hence, the stand taken by the appellant can not be accepted.
6. After hearing both sides and on perusal of the records, I find that Appellant No.1 is a registered partnership firm by a partnership deed dated 21.08.1998. The appellant firm is registered with the Central Excise authorities being registration No. AADFP 7217 RXM 001. It is seen from the Panchnama dated 07.02.2007 that the Central Excise officers of the HQrs (Preventive) unit, on 06.2.2007, at around 1430Hrs entered into the premises of Appellant No.1 and requested the panchas to witness the proceedings which they agreed to. The Panchas along with Central Excise officers came to the main gate of the appellant firm and asked the security person posted at the main gate of the said unit to call the responsible person from inside. After sometime one person came from the factory who introduced himself as Shri Hakim Thanawala (Appellant No.2) Director of the said unit. The Central Excise officers alongwith panchas and Shri Hakim Thanawala entered into the premises of the Appellant No.1 and conducted the stock verification. The statement dated 07.3.2007 of Shri Hakim Thanawala was recorded by the Central Excise officers. He admitted that the shortage of the finished goods were clandestinely removed from the factory. Copy of the Panchnama was handed over to Shri Hakim Thanawala.
7. A show cause notice dated 02.6.2009 was issued proposing demand of Central Excise duty of Rs. 7,63,190/- alongwith interest leviable on the clandestine removal of finished excisable goods i.e. Toothpaste. It has also proposed imposition of penalty on the appellants. In reply to the show cause notice, by letter dated 23.2.2010 the appellant stated that Shri Hakim Thanawala has not concern with the Appellant No.1 and also not having any position in their factory named M/s. Personna Cosmetics. He is merely a relative to the partners of Appellant No.1. It is also stated that Shri Hakim Thanawala is an employee of M/s. K.M. Enterprises, situated in the same compound. M/s. Personna Cosmetics is a partnership concern and not a Limited or Private Limited concern and therefore, the claim of Shri Hakim Thanawala being a Director of appellant firm does not arise. Shri Hakim Thanawala is never a Director of the Appellant No.1 and in a partnership firm, there cannot be any Director, as it is governed by the partners. Therefore, the entire demand of duty on the shortage of the finished goods, based on the statement of Shri Hakim Thanawala, cannot be sustained. It is further contended that there was no stock taking conducted in their factory as evident in the alleged stock taking report, insofar as the concerned Central Excise officers had not given the details of the stock verification in the report. It is further contended that the factory was remained closed since 2007, the power supply was disconnected since long for non-payment of the electricity of the bills.
8. By the impugned order, the Commissioner (Appeals) observed that the Panchnama drawn on 07.3.2007 and copy of the same was given to them and the appellants in their reply dated 23.2.2010 defended the case that Shri Hakim Thanawala is not connected with the appellant firm. It is observed that Shri Hakim Thanawala may not be a Director of the unit but he was looking after the affairs of the unit and the Panchnama was drawn in his presence and therefore, the Panchnama as well as his statement is a valid document for the instant proceeding. It is also observed that Shri Hakim Thanawala as well as Shri Mihir Aruka, production Incharge of the appellant firm were present at the time of physical verification on 06.3.2007. Neither the appellant unit nor the partner of the appellant firm has filed any objection against the Panchnama before the competent authority within a reasonable time.
9. I find that the demand of duty on shortage of finished goods was confirmed on the basis of the statement of Shri Hakim Thanawala. The appellant No.1 had taken stand that Shri Hakim Thanawala is not concerned with the appellant firm. It seen from the show cause notice that Central Excise officers visited the appellants premises on the basis of intelligence and thereafter how they accepted Shri Hakim Thanawala as Director of the Company when the appellant firm is registered with the Central Excise authorities as partnership firm. It is strange that the Central Excise officers visited the premises of the assessee and conducted stock verification and recorded the statement without verifying the identity of a person. There is no material available on record to establish that Shri Hakim Thanawala has any connection with the appellant firm. It is well settled by a series of decisions of the Tribunal that onus lies with the Revenue to establish the clandestine removal of the goods. In the present case, it is the responsibility of the Revenue to identify the person while recording the statement. It is seen that no statement of any employee of the appellant firm was recorded. The Central Excise officers visited the premises of the appellant firm on 06.3.2007 and show cause notice was issued on 02.6.2009 and no verification was conducted or otherwise. Thus, the demand of duty on the basis of the stock statement and statement of a person, who has no relation with the Appellant firm, can not be sustained.
10. The Tribunal in the case of Vikram Cement (P) Limited vs. CCE, Kanpur 2012 (286) ELT 615 (Tri. Del.) held that in the absence of any other evidence, the sole statement of the Director cannot establish the case of clandestine removal of the goods and burden to prove is on Revenue and it is required to be discharged effectively. The decision of the Tribunal in the case of Vikram Cement (P) Limited was upheld by the Honble Allahabad High Court as reported 2014 (303) ELT A82 (All.). The Honble High Court of Punjab & Haryana in the case of CCE, Chandigarh-1 vs. Laxmi Engineering Works 2010 (254) ELT 205 (P&H), dismissed the appeal filed by the Revenue and held that even if some record recovered during raid and corroborated by some supportable evidence for attempt of clandestine production and removal, necessary to have some positive evidence of clandestine production and removal.
11. Learned Authorised Representative for the Revenue relied upon various decisions which are not applicable in the facts and circumstances of this case, are as under:-
(i) Ureka Polymers Limited vs. CCE, New Delhi 2001 (127) ELT 618 (Tri. Del.) : It was found that production slips maintained for 15 days showing higher production on some dates than those recorded in RG-1 register and vice-versa, evidenced by statement of their suppliers and entries in their registers, note book and ledgers. Statements were recorded over a period of time of various persons including the assessee where they have admitted the clandestine removal of the goods.
(ii) In the case of Surjeet Singh Chhabra vs. UOI 1997 (89) ELT 646 (SC) : The issue involved is as to the petitioner is entitled to cross-examine the pancha witnesses and seizing officers for the goods seized in contravention of the FERA and Customs Act and that the opportunity has not been given.
(iii) In the case of CCE, Madras vs. Systems & Components Pvt. Limited 2004 (165) ELT 136 (SC) The assessee was admitting the use of goods for Water Chilling Plant and not disputing the nature of such goods and therefore, the department was not required to prove use of such goods.
12. In view of the above discussions, I find that the demand of duty alongwith interest and penalty on the Appellant No.1 (M/s. Personna Cosmetics) can not be sustained. But, the Appellant No. 2 (Shri Hakim Thanawala) had given a misleading statement to the Central Excise officers and therefore, penalty is warranted. However, considering the fact that Appellant No. 2 (Shri Hakim Thanawala) is an employee of another unit and therefore, the penalty is reduced to Rs. 25,000/- (Rupees twenty five thousand only). Hence, the impugned order is modified to the extent the demand of duty alongwith interest and penalty on the Appellant No.1 (M/s. Personna Cosmetics) are set-aside and the appeal filed by the Appellant No.1 is allowed. The penalty imposed on the Appellant No. 2 (Shri Hakim Thanawala) is upheld and it is reduced to Rs. 25,000/- (Rupees twenty five thousand only).
(Pronounced in the Court on 20.03.2015) (P.K. Das) Member (Judicial) ..KL 8