Custom, Excise & Service Tax Tribunal
Mr. Jagdish Agarwal vs Cce, Indore on 25 June, 2015
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL,
WEST BLOCK NO.II, R.K. PURAM, NEW DELHI-110066.
BENCH-DB
COURT-III
Excise Appeal No.E/2352 & 2353/2010-EX[DB]
[Arising out of Common Order-in-Original No.15/ COMMR/ C.Ex/ IND/ 2010 dated 05.05.201 0 passed by the Commissioner of Customs & Central Excise, Indore]
For approval and signature:
HONBLE MR. RAKESH KUMAR, MEMBER (TECHNICAL)
HONBLE MR. S.K. MOHANTY, MEMBER (JUDICIAL)
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 should 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 Departmental
authorities?
__________________________________________________
Satguru Cement Pvt. Ltd.
Mr. Jagdish Agarwal Appellant
Vs.
CCE, Indore, Respondent
Excise Appeal No.E/2995/2010-EX[DB] [Arising out of Common Order-in-Original No.15/ COMMR/ C.Ex/IND/ 2010 dated 05.05.2010 passed by the Commissioner of Customs & Central Excise, Indore] CCE, Indore, Appellant Vs. Satguru Cement Pvt. Ltd. Respondent Present for the Assessee : Shri.K.K.Anand, Advocate Ms. Surabhi Sinha, Advocate Present for the Revenue : Shri.M.S. Negi, DR Coram:HONBLE MR. RAKESH KUMAR, MEMBER (TECHNICAL) HONBLE MR.S.K. MOHANTY, MEMBER (JUDICIAL) Date of Hearing : 13/03/2015 Date of Pronouncement : 25/06/2015 FINAL ORDER NO. 52006-52008/2015 PER: S.K. MOHANTY
1. The facts giving rise to these three appeals are, in brief, as under:-
1.1 M/s. Satguru Cement P. Ltd., Zeerabad, Distt. Dhar (hereinafter referred to as the appellant company) are a Private Limited Company engaged in the manufacture of ordinary portland cement chargeable to central excise duty under the heading 2502.29 of the Tariff. Shri Jagdish Agarwal was the Director of the appellant company during the period of dispute. The period of dispute in these appeals is from 01.04.2001 to 26.10.2004. During this period the factory of the appellant company was not paying any duty and was not registered with the Central Excise Department, as it was availing full duty exemption.
1.2. On 27.10.2004 the Officers of Directorate General of Central Excise Intelligence, Ahmadabad on receipt of intelligence about duty evasion by the appellant company by under reporting its production of cement, searched the factory premises of the appellant company at Zeerabad, Dist. Dhar, Office premises of the appellant company at 11, 3rd Floor, Daba Bazar, Indore, residential premises of Shri.Jagdish Agarwal, Director of the appellant company in Indore and also the premises of certain traders M/s. Burhani Traders, Khandwa, M/s. Amolak Enterprises, Khandwa, M/s. Mahaveer Transport, Rajgarh (Dhar) and M/s.Arora Road Lines, Rajgarh (Dhar). In the course of search of the office premises of the appellant company at Dava Bazar, Indore certain documents were recovered which were resumed. One of the documents recovered was a ledger which contained details about sale of cement during the period from 01.04.2004 to 18.10.2004. The notebook seized from the office contained entries regarding sale of cement from 19.10.2004 to 27.10.2004. Statement of Shri Darmendra Goyal. Manager of the appellant company was recorded, wherein he stated that he was working in the office at Dava Bazar Indore, and that the documents at Sl. No.7, 13 and 14 of the Annexure to the Panchnama of the search of the office on 27.10.2004 are notebook, ledger and cashbook respectively of the appellant company, which was being maintained by him and contained party-wise details of the dispatch, sale and payment particulars of cement. Statement of Shri Charanjeet Singh Arora, Proprietor of M/s. Arora Road Lines, who were found to be providing transport to the appellant company during the period of dispute was recorded, wherein they confirmed having provided Trucks of other owners to the appellant. Similarly, another transporter M/s. Ashish Bhadari of M/s. Mahaveer Transport, Rajgarh (Dhar), also confirmed having provided Trucks to the appellant company. Further, statement of Shri Darmendra Goyal was recorded, wherein he was confronted with the ledger seized from the office premises of the appellant company at Indore and he explained the ledger entries and confirmed that the same pertained to the various transactions during the period from 01.04.2004 to 27.10.2004.
1.3. The statement of Shri Jagdish Agarwal, Director of the appellant company was recorded wherein he stated that the installed capacity of the cement plant was 200 M.T. per day and that the payments against sale of cements had been received by cheque as well as cash the details of which were entered in the ledger in the cash book seized from their office. As per the entries in the ledger for the period from 01.04.2004 to 18.10.2004, 2,35,910 bags (11795.MT) of cement valued at Rs.2,35,14,800/- had been cleared. Besides this, as per the entries in the note book seized from the office during the period from 19.10.2004 to 26.10.2004, 276 M.Ts. cement had been removed. Thus, total sale of cement during the period from 01.04.2004 to 26.10.2004 was 12071.5 M.Ts. The appellant thus, appeared to have crossed the exemption limit of rupees one Crore under exemption Notification No.8/03 CE on 14.06.2004 and accordingly the clearance after 14.06.2004 were liable for duty. The duty on the clearances in excess of the exemption limit was worked out as Rs.16,81,711/- which appeared to have evaded by the appellant.
1.4. During the period from April 2004 to September 2004 the total power consumption in the cement plant of the appellant company was 7,48,710. According to the Department, the production during the period from 01.04.2004 to 29.09.2004 was 10346.5 M.Ts. after excluding the opening balance of 372 M.Ts. as on 01.04.2004. On this basis the investigating officers calculated that power consumption for production of 1 M.T. of cement is 72.36. Applying this power consumption ratio to the period from April 2001 to March, 2004, Investigating Officers estimated the actual production of cement during each financial year 2001-02, 2002-03 and 2003-04 by dividing the power consumption in that financial year by 72.36. Since, during each of the three financial years the appellant had not paid any duty claming that value of their clearances were within the exemption limit of Rs.1.00 Crore, while the value of the production during each of these three years, as estimated by the Officers was much more than the exemption limit of Rs.1.00 Crore, it appeared that during each financial year from 2001-02 to 2003-04, the appellant company had evading the duty, the details of which are given in annexure 29 to the show cause notice. The duty demand of Rs.1,44,53, 850/- is on this basis.
1.5. After issue of show cause notice the matter was adjudicated by the Commissioner vide order in Original dated 30th June, 2006. The Commissioner by this order confirmed the duty demand of Rs. 16,57,293/- based on the entries in the ledger and note-book for the period 01.04.2004 to 26.10.2004. However, the Commissioner by this order, in respect of duty demand for the period from 01.04.2001 to 31.03.2004 based on the power consumption confirmed the duty demand of only Rs.3,79,648/- and dropped the balance amount of duty demand. An amount of Rs.5,00,000/- already paid by the appellant company during investigation was appropriated. Beside this, the Commissioner also demanded interest under section 11 AB on the above mentioned duty demand. While he imposed penalty of Rs.15,64,359/- on the appellant company under section 11AC, another penalty of Rs.1,00,000/- was imposed on Shri Jagdish Agarwal, Director of the appellant company under Rule 26 of the Central Excise Rules, 2002.
1.6. Against the above order dated 30.06.2006 both the appellant as well as Revenue filed appeals before the Tribunal. The appeals filed by the appellant company and its Director Shri Jagdish Agarwal and the appeal filed by the Revenue were disposed of by the Tribunal vide final order No.1258-1261/09-EX dated 27.11.2009 by which the matter was remanded to the Commissioner for denovo adjudication. The Tribunal directed the Commissioner to decide the matter afresh after granting reasonable opportunity of personal hearing.
1.7. In denovo adjudication proceedings, the matter was decided by the Commissioner vide order in original No.15/COMMR/CEX/IND-2010 dated 5/5/2010. By this order with regard to the duty demand of Rs.16,57,293/- based on the entries in the note-book and ledger book seized from the Office for the period from 01.04.2004 to 27.10.2004, the Commissioner confirmed the same under proviso to section 11A (1) of the Central Excise Act, 1944. However, with regard to the duty demand of Rs.1,44,53,850/- for the period from 01.04.2001 to 31.03.2004, which was based on the estimated production of cement during this period based on the power consumption norm of 72.36 unit per M.T., the Commissioner holding that the power consumption norm should be 155 Units per M.T. and not 72.36 unit per M.T. confirmed the demand of only Rs.26,12,951/- and dropped the rest of the demand of Rs.1,18,40,899/-. Thus, he confirmed the total duty demand of Rs.42,94,662/- alongwith interest on it under section 11AB. He also imposed penalty of equal amount on the appellant company under section 11AC and penalty of Rs.1,00,000/- on Shri Jagdish Agarwal, Director under rule 26 of the Central Excise Rules, 2002. Against this order of the Commissioner both the appellant company and its Director Shri Jagdish Agarwal as well as the Revenue are in appeal.
2. Heard both the sides.
3. Shri K.K. Anand, Advocate, the ld. Counsel for the appellant pleaded that in respect of duty demand for the period from 01.04.2001 to 31.03.2004 based on the estimated production, which, in turn, is based on the power consumption norm of 72.36 Units per M.T. the Commissioner has gone beyond the scope of the show cause notice holding that during that period the appellant had also used electricity generated by the D.G. Set, that there is no basis for allegation that during the period from 01.04.2001 to 31.03.2004, in addition to the electricity purchased from the electricity board, the appellant had also used electricity generated by their DG set, that the Commissioner has wrongly arrived at the power consumption norm of 155 units per M.T., that prior to denovo adjudication proceedings the department after remand of the matter by the Tribunal, had appointed the Centre of Energy Studies & Research, Distt. Dhar, Madhya Pradesh for conducting a study regarding power consumption in respect of the cement plant of the appellant company; that the Officer of the Centre of Energy Studies & Research had visited the cement plant of the appellant company alongwith the Jurisdictional Range Superintendent Shri Surender Singh and the Sector Officer Shri Sunil Gawatha on 09.03.2010, that as per the report given by the Centre of Energy Studies & Research, the power consumption in the appellants cement plant is 212.39 units per M.T.; that earlier on 23.02.2006 Shri Prakash Chandra Jain, a Chartered Engineer, had visited the appellant factory and according to his study, the power consumption was 228 Units per M.T. and subsequently, on 07.03.2006 another Chartered Engineer Shri. K.M.Thompre had visited the appellants unit and according to his study the power consumption was 231.39 Units per M.T., that the power consumption norm of 212 units per M.T. determined by the Centre of Energy Studies & Research is in accordance with the power consumption norm in respect of the appellant cement plant determined earlier by two other Chartered Engineers; that when the Department itself had appointed Centre of Energy Studies & Research to study the power consumption in the appellants cement plant and that Institute determined the power consumption as 212 Units per M.T., there was absolutely no justification for the Commissioner to discard the report of the Centre of Energy Studies & Research and arbitrarily adopt the power consumption norm of 155 units per M.T. on the basis of alleged use of DG set for power generation; that as on 01.04.2004 the opening balance of cement as recorded in the appellant companys production records was 372 M.Ts. and production of cement during the period from 01.04.2004 to September, 2004 was much less M.Ts., that the Department has wrongly taken the sale figures of 10,718 M.T. during the period from 01.04.2004 to 30.09.2004 as the production figure, which is totally wrong, as the cement sold during this period was also that cement which has been produced during the period prior to 01.04.2004; and, therefore, the ratio of 72.36 units per M.T. alleged by the Department based on this calculation is totally wrong; that it is well settled law that merely on the basis of alleged power consumption norm duty demand cannot be confirmed; and in this regard he relies upon the judgment of the Tribunal in the case of R.A. Castings Pvt. Ltd. vs. CCE, Meerut-I reported in 2009 (237) ELT 674 (Tri.Del.), which has been affirmed by the Allahabad High Court vide judgment reported in 2011 (269) ELT 337 (All.) and the judgment of Allahabad High Court has further been affirmed by the Apex Court reported in 2011 (269) ELT A108 (SC) and that same view has been taken by the Tribunal in its order dated 20th March, 2012 in the case of CCE, Indore vs. Venus Alloys Pvt. Ltd. It was, therefore, pleaded by Shri Anand that duty demand of Rs.26,12,951/- for the period from 01.04.2001 to 30th March, 2004 is not sustainable at all. He, however, did not seriously contest the duty demand of Rs.16,57,293/- for the period from 01.04.2004 to 26.10.2004, which was based on the entries in the ledger- book and note-book seized from the office of the appellant company. He also pleaded that there is no justification for imposition of penalty on Shri Jagdish Agarwal under Rule 26 of the Central Excise Rules, 2002.
3.1. With regard to the Revenues appeal, he pleaded that the same is without any merit, as it is well settled law that merely on the basis of assuming power consumption norm duty demand cannot be confirmed against an assessee.
4. Shri M.S. Negi, the ld. Departmental Representative, while defending the Commissioners order confirming the duty demand of Rs.16,53,293 for the period from 01.04.2004 to 26.10.2004, and also defending the Commissioners order with regard to confirmation of duty demand of Rs.26,12,951/- for the period from April, 2001 to March, 2004 based on the power consumption assailed the part of the order dropping the duty demand of Rs.1,18,40,899/- and in this regard, he reiterated the grounds of appeal in the Revenues appeal. He pleaded that in respect of the period from 01.04.2001 to 31.03.2004 there were evidences of the transporter which showed that the appellant were indulging in clandestine removal; and, therefore, the Investigating Officers had correctly determined the actual production for this period on the basis of power consumption norm of 72.36 units per M.T. He also pointed out the statement of Shri Akhil Surve, Manager (Production) of the appellant company who had accepted the power consumption of 72 Units per M.T. Shri Negi, therefore, pleaded that in respect of the period from 1st April 2001 to 31.03.2004, the entire duty demand as made in the show cause notice should have been confirmed as for this period the power consumption norm of 72.36 units per M.T. has been correctly determined by the Investigating Officers.
5. We have considered the submissions from both the sides and perused the records. The duty demand of Rs.16,57,293/- for the period from 01.04.2004 to 26.10.2004 is based on the entries in ledger and a note-book seized under a panchnama on 27.10.2004 from the office of the appellant company at Dava Bazar, Indore. The ledger-book contained details regarding sales of cement for the period from 01.04.2004 to 19.10.2004 and according to these entries during this period, the appellant company had removed a total of 235910 bags (11795.5 M.T.) of cement. As per the entries in the notebook seized from the same office of the appellant company during the period from 19.10.2004 to 26.10.2004, another 276 M.Ts. of cement had been cleared. Thus, during the period from 01.04.2010 to 26.10.2004 total cement cleared was 12071.5 M.Ts. However, during the financial year 2004-05 when they were availing of SSI exemption under Notification No.6/2003-CE dated 01.03.2003, only the clearances upto repees one crore in a financial year were fully exempt from duty and they were required to pay duty after crossing the threshold limit of rupees one crore. The threshold limit of rupees one crore had been crossed by the appellant on 14.06.2004 and by 14.06.2004 the appellant had manufactured and cleared 5442.33 M.Ts. of cement of valued at Rs.1,00,00,000/-. Therefore, the clearances beyond this limit would be eligible for duty. The entries in the ledger book and note book have not been seriously disputed by the appellant as in fact entries in the note book and ledger had been explained by Shri Dharmender Goyal in his statement dated 27.10.2004 and 20.01.2005. Accordingly, we hold that duty has been correctly demanded on the value of clearances during 2004-05 which are beyond rupees one crore and, accordingly, the duty demand of Rs.16,57,293/- which is on the value of cement cleared beyond rupees one crore has to be upheld. In fact, this duty demand has not even been seriously contested by the appellant.
6. The other duty demand raised in the show cause notice is Rs.1,44,53,850/- for the period from 1st April 2001 to 31st March, 2003, out of which the Commissioner in the impugned order has upheld the duty demand of only Rs.26,12,951/- and has dropped the remaining demand of Rs.1,18,40,899/- the Revenues appeal is against dropping of the duty demand of Rs.1,18,40,899/-.
6.1 The duty demand of Rs.1,44,53,850/- for the period 01.04.2001 to 31.03.2004 is based on the allegation that the appellant have under reported their production for this period and the under reported production has been cleared clandestinely without payment of duty. For this purpose Investigating officers estimated the actual production for the period from 01.04.2001 to 31.03.2004 by dividing the power consumption during this period by 72.36 as, according, to investigating officers in the appellants cement plant 72.36 units of electricity is required for production of 1 M.T. of cement.
6.2. The basis for the power consumption norm of 72.36 Units per M.T. is that during the period from 01.04.2004 to 29.09.2004, the production in the cement plant of the appellant company was 10346.5 M.Ts. and their power consumption during the same period was 748710 Units and, accordingly, by dividing 748710 by 10346.5 the Officers have come to the power consumption norm of 72.36 units of electricity per M.T. of cement produced. The contention of the appellant, however, is that during the period 01.04.2004 to 29.09.2004 the production of cement was much less and that the investigating officers have taken the quantity of clearance of cement during this period as the quantity of production of this period. which is not correct, as the quantity of clearances including the unaccounted clearances could be of the period prior to 01.04.2004. It is also the plea of the appellants that after remand of this matter by the Tribunal to the Commissioner for denovo adjudication, the Department had got a study of their cement plant conducted by the Centre of Energy studies and research and the concerned officer of the Centre of Energy Studies and Research had visited the appellant cement plant along with Range Superintendent Surender Singh and the Centre Officer Shri Sunil Gawathe and Centre of energy studies and research after conducting the required study had submitted a report dated 16.03.2010 that the power consumption in their unit is 212 units per M.T. It is also pleaded that during February, 2006 and March, 2006, two Chartered Engineers, Shri. Prakash Chandra Jain and Shri K.M. Tompre had visited the appellants units and while Shri Prakash Chandra Jain had given opinion that power consumption norm in their unit is 228 Unit per M.T. Shri K.M.Tompre has given report that the power consumption norm in their cement plant is 231 units per M.T. Thus, it has been pleaded that the power consumption norm determined by the Centre of Energy Studies and Research 212 M.T is comparable with the power consumption norm determined by the other two Chartered Engineers; and, therefore, the Department cannot discard this evidence of the experts and arbitrarily adopt the norm of 72.36 units. It has also been pleaded that the Commissioner has arbitrarily fixed the norm as 155 unit per M.T. on the assumption that electricity had also been generated during the period of dispute by the generating sets.
6.3 The basis of determining power consumption ratio of 72.36 units per M.T. is explained in para 9 of the show cause notice. Para 9 (i) gives the month-wise figures of power consumption from April 2004 to September 2004 and mentions total power consumption as 7,48,710. Para 9 (ii) mentions that on going through the clearance of cement shown on page 1 to 9 of the Ledger, Shri Surve has stated that during period 01.04.2004 to 29.09.2004, the production of cement was 10718.5 M.Ts. and after deducting the opening balance of 372 M.T. as on 01.04. 2004 the actual production during 01.04.2004 to 29.09.2004 would be 10346.5 (10718.5 - 372). The figure of 72.36 arrived at by dividing 748710 by 10346.5. In our view this calculation suffers from a serious mistake as the ledger entries are about the sale of the cement. Thus, the figure of 10718.5 M.T. for the period from 01.04.2004 to 29.09.2004 is the figure of sale of cement during this period and not of production. It cannot be assumed that 10718.5 M.Ts. cement sold during this period had necessarily been produced during the same period, as the cement sold during this period could be out of the stock manufactured during the period prior to 01.04.2004 also.
6.4. The question then arise is as to what is the correct power consumption ratio. We find that in this regard the department itself had got a study conducted through the Centre of Energy Studies & Research in March, 2010 and an Officer of this Institute after visiting the Unit alongwith the Jurisdictional Range Superintendent and Range Inspector had given a report dated 16.03.2010 that their power consumption is around 212 Unit per M.T. This power consumption ratio compares favourably with the power consumption ratio determined by two other Chartered Engineers Shri K.M. Tompre and Shri Prakash Chander Jain. When the Department itself had appointed the Centre of Energy Studies and Research for carrying out a survey of the appellants cement plant and determining their power consumption ratio and when the Institute has submitted a report mentioning their power consumption as 212 unit per M.T. it is totally incorrect for the Commissioner to discard this opinion of an expert and arrive at his own power consumption norm of 155 units by assuming that during the period from 01.04.2001 to 31.03.2004 the appellant had also used electricity generated by the DG sets for which we do not find any evidence. In fact, the Department itself in its appeal against Commissioners order disputes the Commissioners findings regarding generation of electricity from D.G. sets.
6.5. The revenue in its appeal mainly questions the Commissioners findings regarding the power consumption norm being 155 Units per M.T. But there is nothing in revenues appeal to explain as to how the power consumption norm of 72.36 unit per M.T. determined by the investigating officer is correct, when the study conducted by Centre of Energy Studies & Research on the Departments request revealed that the power consumption of the plant is 212 unit per M.T., which compares favourably with the power consumption norm determined by two other Chartered Engineers, Shri Prakash Chandra Jain and Shri K.M. Tampre. The Revenues appeal also mentions that the Commissioner has failed to appreciate the fact that the assessees premises were searched once again by the DGCI on 30th March, 2007 and during the course of investigation at that time also, on comparison of power consumption and the actual production during January 2007 to March, 2007, the power consumption ratio was found to be 74 unit per M.T. which is close to the figure arrived at 72.36 Unit per M.T. However, it has not been explained in the Revenues appeal as to on what basis the ratio of 74 Units per M.T. had been determined. It is well settled law that merely on the basis of power consumption norm and that too when there are serious doubts about its correctness, duty demand cannot be confirmed against an assessee, when there is no other corroborative evidence of unaccounted purchase of raw-material and clearance of unaccounted production. In view of this, we hold that the duty demand for the period from 01.04.2001 to 31.03.2003 based on the power consumption norm is not sustainable and, accordingly, the Commissioners order confirming duty demand of Rs.26,12,951/- for the period from 01.04.2001 to 31.03.2004 has to be set aside.
7. In view of the above discussion, while the duty demand of Rs.26,12,951/- for the period of 01.04.2001 to 31.03.2004 alongwith interest and equivalent penalty is set aside, the duty demand of Rs.16,57,293/- for the period from 01.04.2004 to 27.10.2004 alongwith interest and equivalent penalty under section 11AC is upheld.
8. As regards penalty under Rule 26 of the Central Excise Rules 2002 on Shri Jagdish Agarwal, Director of the appellant company, the same is reduced to Rs.10,000/- as the duty demand itself has been reduced from Rs.42,94,662/- to Rs.16,57,293/-.
9. Thus appeals filed by the appellant company and its Director Shri Jagdish Agarwal are partly allowed. As regards the appeal filed by the Revenue, the same is dismissed.
[Pronounced in the open Court on 25.06.2015].
(S.K.MOHANTY) (RAKESH KUMAR)
MEMBER (JUDICIAL) MEMBER (TECHNICAL)
Anita
??
??
??
??
17