Custom, Excise & Service Tax Tribunal
M/S. Servo Packaging Ltd vs Commissioner Of Central Excise, ... on 4 February, 2016
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
SOUTH ZONAL BENCH, CHENNAI
E/42574/2013
[Arising out of Order-in-Appeal No.23/2013 (P),dated03.12.2013 passed by the Commissioner of Central Excise(Appeals), Chennai]
M/s. SERVO PACKAGING LTD.
APPELLANT
Versus
COMMISSIONER OF CENTRAL EXCISE, PUDUCHERRY
RESPONDENT
Appearance:
For the Appellant Shri V. Ravindran, Adv.
For the Respondent Shri B. Balamurugan, AC (AR) CORAM:
Honble Shri D.N. Panda, Judicial Member Date of hearing/decision 04-02-2016 FINAL ORDER NO.
It is the submission on behalf of the appellant that there was search made into premises of Unit - I and Unit II of the appellanton 15th and 16th July, 2008. There were two show-cause notices dated 02.09.2010 and 23.06.2011 issued to it to explain on the outcome of the search. The first show-cause notice dated 02.09.2010proposed a demand of Rs.12,60,211 on the allegation that the raw materials of Unit I were transferred to Unit II and Cenvat credit thereon was taken without the input being utilised in manufacture of dutiable goods, for which, Revenue has suffered loss. However considering the defence plea and evidence the demand proposed by the said so cause notice was reduced to Rs.7,60,135/-.
2.1 The second show-cause notice dated 23.06.11was issued making allegation that the Unit - II had cleared certain raw materials to Unit I, availingCenvat credit and such credit was wrongly utilisedwithout suchinput being used in manufacture by that Unit. That made the exchequer to suffer revenue loss. Accordingly, thatshow-cause notice gave rise to the adjudication proceeding resulting in disallowance of Cenvat credit of Rs.341,61,490/-followed by other consequence of law. However learned Adjudicating Authority examining the defence plea as well as the allegation in the show-cause notice reduced the demand to Rs.1,61,490/-.
3.1 It was submittedby the learned counsel for the appellant that the allegation of no use of the raw material to manufacture finished goods is baseless. The first show-cause notice proposing the demand was based on a presumption of shortage of raw materials found in the course of physical examination of stock. With such allegationsearchparty seized computers of the appellant where the accounts of Unit I was maintained. Theyalso took copy of the hard disk for their action.Physical verification of stock at that unit was carriedout in dark. They recorded stock figures erroneously and hurriedly.Appellant immediately protested against such action of the Authority and outcome of theinventory taken was objected.Necessary communication to that effect was also sentto the authorities on 28.07.2008 [copies of which are available at pages 133 138 of the appeal folder].
3.2 Appellant explained that the documents seized are in possession of the department and the contents thereofalthough is verifiable with the outcome of the computer record to establish whether there is stock discrepancy, the authority failed to make verification.
3.3 Further plea of the appellant was that all the pleading of appellant made at all timeswere not at all examined by lower authority. Appellant in para 11 (8) of his reply to show-cause notice [copy available at pages 93-126 of the appeal folder] made specific plea for stock reconciliation. But injusticewas caused to the appellant due to inaction ofthe authority.If that Authority re-examines the pleadings of the appellants detailed in reply to the show-cause notice and most particularly para 31.1 thereof, the controversy can be resolved. The demand was superfluously raised in the adjudication disregarding the defence plea and meritof the case on record. The appellant explained that under no circumstance demand shall exceedRs.1,61,490/- because there was no clandestine removal of either finished goods or raw material at all and no evidence was adduced by Revenue against appellant to prove such allegation.
3.4 The ultimate prayer of the appellant was that if the matter goes back to the learned Adjudicating Authority to re-examine theoutcome of the computer records with the defence pleadings, entire controversy would be resolved.Therefore that Authority without being guided by the order of the Commissioner (Appeals) who acted in excess of his authority, if applies his mindindependently and carry out the directions of Tribunal, if any, that may be issued disposing this appeal, the controversy shall come to an end.
4.1 On the other hand, Revenues submission is that when the Adjudicating Authority failed to examine the allegationsin the first show-cause notice dated 02.09.2010,giving riseto the demand of Rs.12,60,211/-but reducedthe same to Rs.7,60,135/-,learned appellate authority intervend properly to raisethe balance demand evaluating the evidence gathered, result of physical stock taking, outcome notebook seized and oral and documentary evidence gathered in the course of search.So also 36 number of loose slips found in the course of searchwere examined.Para 6 of his order demonstrates that the stock discrepancy warranted enhancementof demand due to proper allegationmade in the show-cause notice based on evidence.Considering Revenue was prejudiced, he ordered partial remand of the matter.
4.2 Revenue further submitted that appellant had not adduced any evidence to prove use of the raw material in manufacture or sale thereofpaying duty.The raw materials were transferred from one Unit to another unauthorisedly, and thereafter that vanished. Therefore proper demand was raised by Commissioner (Appeals).
5.1 Revenue further says that so far as the second aspect of demand of Rs.1,61,490/-arising out of SCN dated 23.06.2011 is concerned, learned appellate authority thoroughly examined every allegation and noticed that the raw material were transferred from one unit to anotherclandestinely removing the same for which appellant was liable to adjudication consequences.
5.2 It was explained by Revenue that the plea of the appellant that stock taking was done in dark isfalsewhen there was threadbare examination of the evidence made. Similarly, when the notebook seized in the course of search along with oral evidence demonstrated that the appellant removed the goods without using that in its manufacture,its pleasare devoid of merit. Adjudicating authority having granted undesired relief to the appellant for no good reason,remand of the appealpartly by Commissioner (Appeals) for good reason is Justified which need not be interfered.
5.3Lastly Revenue prayed that in view of the materials gathered against appellant and the questionablemodus operandi followed by it there should not be any interference to the appellate order.
6. Heard both sides and perused the records.
7.1No doubt, there were three contributing factors to the adjudication.The first is the outcome of the inventory made in the course of search to both the premises on 15th and 16thJuly, 2008. There is a material on record to show that the appellant challenged inventory taken on that dayon the ground that was taken in darkness due to no power supply.There appears a communication dated 28.07.2008 of the appellant in that regard objecting to the act of search party. That is on record.Therefore thatdeserves consideration. Causing enquiry with the Electricity Authority about power supply during that period, ifthe authority findstheplea of no power supply on the date of inventory is truthful and inventory was taken in dark,he shall examine whether the manner of inventory taken has suffered from any legal infirmity to redress grievance of the appellant on reconciliation of stock figure.
7.2 Secondly,the authority shall examine whether inventory data maintained in the computer is reliable and if so, that shall be reconciled with the physical inventory of stockfigure. The discrepancy, if any, arising out of such reconciliationshall be explained by the appellant. On hearing the appellant on that count, the authority shall pass appropriate order.
7.3 Thirdly,so far as the oral evidence and documentary evidences are concerned, those are certainly the evidence properly gathered in the course of search and can be utilised in the adjudication subject to opportunity of rebuttal.The notebook, which was discovered in the course of search if found to be relevant, the authority has power to make use of the contents thereof andconsidering defence plea shall adjudicate the matter.
7.4 The materials proposed to be utilised in readjudication proposed by this order, shall be confronted to the appellant for defence.The loose slips gathered in the cause of search should be examined and evidentiaryvalue thereof evaluated for the purpose of use in the adjudication. Defence if any on that aspect shall also be considered by adjudicating Authority.The appellant is entitled to the confrontation of every material sought to be used against it during hearing and the defence led by the appellant shall be thoroughly examined to ass a reasoned and speaking order.
8. On the basis of aforesaid discussions, learned Adjudicating authority shall first deal with the outcome of the physical inventory,and outcome of the hard disk of the computer. Secondly,the outcome of the loose slips shall be examined in detail to arrive at the proper duty demand if any, to serve the interest of justice. Thirdly, he shall examine the contents of the notebook and evaluate the evidence thereofto arrive at the duty demand, if any. It may so happen that all the three materials and evidence may corroborate with each other.That aspect may be specifically dealt.
9. It may be stated that Revenue is not required to lay evidence with mathematical precision.Preponderance of probability comes to itsrescue.It may use primary, corroborative and probable evidence to examine the allegations and considering defence plea shall determine dutiability if any. Therefore, the authority shall independently apply his mind without being guided by the appellate finding of lower appellate authoritywho made partial remand of the matter.
10. So far as the second show-cause notice is concerned, if that is different from the first show-cause notice, the authority shall properly deal with that independently or in combination with the first show-cause notice. He has to clearly bring out the status of each show-cause notice and allegation made therein dealt thoroughly in his reasoned and speaking order.
11. In the light of the above, the matter is remanded to Adjudicating Authority with the aforesaid observations and directions to pass a reasoned and speaking order granting reasonable opportunity of hearing to the appellant in the course of re-adjudication.
(Dictated and pronounced in open court) (D.N. PANDA) JUDICIAL MEMBER ksr 05-02-2016 DRAFT Remarks I II III Date of dictation 04.02.2016 Draft Order - Date of typing 05.02.2016 Fair Order Typing 5.02.2016 Date of number and date of dispatch 25.02.2016 9 E/42574/2013