Custom, Excise & Service Tax Tribunal
M/S. Rhl Profiles Ltd vs C.C.E Kanpur on 25 March, 2015
IN THE CUSTOMS, EXCISE AND SERVICE TAX
APPELLATE TRIBUNAL, NEW DELHI
PRINCIPAL BENCH, COURT NO. III
Excise Appeal No. E/2770-2771/2007 -Ex[DB]
[Arising out of Order-In-Original No. 07/Commr.2007 dated: 25.05.2007 passed by Commissioner of Central Excise Kanpur]
For approval and signature:
Hon'ble Mr. Rakesh Kumar, Member (Technical)
Hon'ble 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?
M/s. RHL Profiles Ltd. ...Appellant
Sh. KK Somani
Vs.
C.C.E Kanpur Respondent
Appearance:
Sh. Rupesh Kumar, Advocate for the Appellants Mr. R K Grover, DR for the Respondent CORAM:
Hon'ble Mr. Rakesh Kumar, Member (Technical) Hon'ble Mr. S.K. Mohanty, Member (Judicial) Date of Hearing/decision.25.03.2015 FINAL ORDER NO. 51022-51023 /2015-Ex(Br) Per Rakesh Kumar (for the Bench):
M/s RHL Profiles Ltd., Magarwara, Unnao (UP) (hereinafter referred to as the appellant company) are engaged in manufacture of MS Bars, Rods and TORs chargeable to central excise duty under heading 72.14 of the central excise tariff. MS Bars, rods, and TORs are manufactured from MS Billets. Sh. KK Somani is the Managing Director of the appellant company. The factory premises of the appellant company were searched by the Jurisdictional Central Excise Officers on 19.03.2004 in presence of two punch witnesses, and at that time the stock taking of the raw material as well as finished goods was also conducted. While, in respect of the stock of raw material, shortage of 112.375 MT was found, in the stock of finished goods, shortage of 76.954 MT was found. The total duty/ cenvat credit involved on the raw material found short and finished goods found short was 2,47,446/-. For demand of duty on the cenvat credit availed raw material and finished goods found short, a separate show cause notice was issued which is not a subject matter of the appeal in this case. In course of search of the factory, a file containing 40 sheets was recovered which appeared to certain date-wise details regarding production for the month of June, 2003. This file was placed under seizure. On the same date, the residential premises of Sh. AK Maheshwari, who was the General Manager of the factory of the appellant company during period till May, 2003, was also searched and from his residential premises, 19 sheets, which appeared to be containing details regarding production of the appellant company for January, 2002 were recovered and the same were placed under seizure.
1.1 At that time the residential premises of Sh. KK Somani, Managing Director and his father, Sh. RK Somani was also searched and from their common residence cash of Rs. 8,30,000/- was placed under seizure. A separate Show Cause notice has been issued for confiscation of the cash along with the Show Cause Notice for duty/ cenvat credit demand on the inputs/ finished goods found short and the same as such is not the subject matter of the appeal in this case.
1.2 Inquiry was also conducted with Sh. AK Maheshwari, who was General Manager of the factory till his resignation in May 2003 and also with other employees of the appellant company - Sh. SS Trivedi, Manager and authorized signatory who succeeded Sh. AK Maheshwari, Sh. Vikram Singh Permar, Production Manager, Sh. Gopal Gupta and Sh. Sunil Mishra, helpers in the production Department. Subsequently, the inquiry was also conducted with Sk. KK Somani and his statement was recorded. After inquiry with SH. AK Maheshwari, Sh. KK Somani and other employees of the appellant company, the investigating officers were of the view that the 40 sheets seized from the factory premises of the appellant company and 19 sheets seized from the residential premises of Sh. AK Maheshwari contained date wise details of production of bars and rods during June 2002 and January 2003 respectively. The production as recorded in these sheets, pertaining to January 2002 and June 2003 was totalled up and after taking into account the production which was recorded in the RG-1 Register during these months, the balance production appeared to be the unaccounted production which appeared to have been cleared clandestinely without payment of duty. Accordingly, the investigating officers were of the view that production of MS Bars, rods and TORs totally weighing 2777.3 MT valued at Rs. 3,86,65,134/- during months of January 2002 and June 2003 has not been accounted for and had been cleared clandestinely, the duty involved on which is Rs. 61,86,420/-. After issue of the SCN, the matter was adjudicated by the Commissioner vide Order-in-original dated 25.05.2007, by which the Commissioner confirmed the duty demand of Rs. 50,05,014/- against the appellant company along with interest on it under section 11AB and while imposed penalty of equal amount on the appellant company under section 11AC, imposed penalty of Rs. 5 lakh on Sh. KK Somani, Managing Director of the appellant company under Rule 26 of the Central Excise Rules, 2001/2002 though, Sh. AK Maheshwari, Ex General Manager, had also been show caused for imposition of penalty, the penal proceedings against him was dropped. The duty demand was reduced from Rs. 61,86,420/- to Rs. 50,05,014/- on the ground that there were mistakes in calculation of the duty demand on the alleged excess production. Against this order of the Commissioner, these appeals have been filed.
2. Heard both the sides.
3. Sh. Rupesh Kumar, Ld. Counsel, appearing for the appellant, pleaded that the basis of the duty demand are 40 sheets recovered from the factory premises and 19 sheets recovered from the residential premises of Sh. AK Maheshwari Ex. GM of the appellant company, coupled with the statement of Sh. AK Maheshwari and other persons, that other than this, there is absolutely no evidence in support of the allegation of unaccounted manufacture and its clandestine clearance by the appellant company during the months of January 2002 and June 2003, that the appellant company does not has the capacity to manufacture the quantity which is alleged to have been produced during January 2002 and June 2003, that no credibility can be attached to the so called production sheets as is clear from the cross examination of Sh. Gopal Gupta and Sh. Sunil Mishra, the helpers in the production Department, these sheets have been prepared by them in their own hand writing on the instructions of Sh. AK Maheshwari, that Sh. AK Maheshwari had a number of disputes with the appellant company, as a result of which he had stopped coming to the factory since October, 2002 and in May 2003 he had submitted his resignation which had been accepted, that he filed cases against the appellant company before the Labour Commissioner, Special CJM, Kanpur, Labour Court, Lucknow, Civil Judge (SD) Kanpur, etc., that the so called production sheets are the documents which were got fabricated by Sh. AK Maheshwari and do not represent the production, that as is clear from the cross examination of Sh. Sunil Mishra and Sh. Gopal Gupta, they had not put the dates in the sheets, that the dates had been put by somebody else and this fact is clear from the manner of writing of the date and the manner of writing of the other entries, that initially the 40 sheets which, as per the punchnama, were recovered from the factory, had not been found and when the officers were leaving the factory, one of them received a call from Sh. AK Maheshwari and only on the receipt of the call, that the officers entered into the factory again and at that stage only, the file containing 40 sheets was recovered, that this shows that the search had been conducted at the instance of Sh. AK Maheshwari and it is Sh. AK Maheshwari who has got these documents fabricated and had placed the same at a place which was known to him only, that for this reason only the appellant had sought cross examination of the punch witnesses which was not allowed, that as is clear from the cross examination of Sh. Inderjeet Roy, production manager, the factory was maintaining plant reports, which are prepared on two hourly basis and on the basis of which the production is recorded in the RG-1 register, that this fact itself shows that the production sheets recovered from the factory premises and from the residential premises of Sh. AK Maheshwari had been got fabricated at the instance of Sh. Maheshwari and the same do not represent the actual production of the factory during January 2002 and June 2003, that though the Department also relies upon the alleged shortage in the stock of cenvat credit availed raw material and finished goods, and though the Commissioner (Appeals) has upheld the duty demand based on the alleged shortage and also confiscation of the cash, on appeal being filed to Tribunal against the order of the Commissioner (Appeals), the Commissioner (Appeals) order has been set aside vide Tribunals final order no. 144-145/2013-SM dated 22.02.2012, that in this case when there is doubt about the genuineness of the private records recovered from the factory and residential premises of Sh. A K Maheshwari, duty demand based on the same is not sustainable, more so, when there is no other evidence in support of the Departments allegation regarding unaccounted production and its clandestine removal, that in this regard, he relies upon the Tribunals judgement in the case of TM Industries vs CCE reported in 1993 (68) ELT 807 Trib., that there is also discrepancy in the production sheets inasmuch as in a number of production sheets, the production has been recorded for overlapping time period, that for example in the production sheets of 16.03.2003, the starting time of the factory in one sheet is shown as 12O clock in the midnight to 8 AM in the morning, in other sheet, the time is shown from 8AM to 5 PM in the evening and in the third sheet again the time is shown from 7 AM in the morning to 5 PM in the evening, and thus, the timing of the second and third sheet of the same date has overlapped, that similar mistakes are there in other sheets also, that these mistakes cause doubts about the genuineness of the production sheets and that in view of this, the impugned order confirming the duty demands based on these production sheets and imposing penalty on the company as well as Managing Director is not sustainable.
4. SH. RK Grover, the Ld DR, defended the impugned order by reiterating the findings of the Commissioner and emphasized that the production sheets bear the signatures of Sh. Sunil Mishra and Sh. Gopal Gupta who were the supervisors in the production department, that the allegation that the production sheets had been fabricated by these two persons on the instructions of Sh. AK Maheshwari who had grievance against the appellant company is difficult to believe, as Sh. AK Maheshwari was coming to the factory till October 2002 and therefore, while the production sheet for January 2002 had been prepared when he was in the employment of the appellant company, the production sheets of June 2003 had been prepared at the time when Sh. AK Maheshwari had left the job and at that time Sh. Gopal Gupta and Sh. Sunil Mishra were not under obligation to obey his directions and therefore, it cannot be said that all the production sheets had been prepared by Sh. Sunil Mishra and Sh. Gopal Gupta under the pressure of Sh. AK Maheshwari, that Sh. Sunil Mishra and Sh. Gopal Gupta have not retracted their statements, that Sh. SS Trivedi, in his statement, has accepted the entries in these sheets as the production records and this statement of Sh. SS Trivedi has also not been retracted, that the provisions of section 36A of the Central Excise Act, 1944 would be applicable to the production sheets recovered from the factory premises and, therefore, there would be a presumption about the truth of their contents and burden of proving that the entries in this sheets do not represent the actual production on those dates would be on the assessee, and that in view of the above submissions, there is no infirmity in the impugned order.
5. We have considered the submissions from both the sides and perused the records. The case of the Department against the appellant company is based on 40 sheets recovered from the factory premises and 19 sheets recovered from the residential premise of Sh. AK Maheshwari, Ex GM of the Appellant Company and the Departments allegation is that these production sheets contained date wise details regarding production of their finished goods during January 2002 and June 2003. Though, the Department also relies upon the shortage in the stock of finished goods as well as cenvat credit availed raw material found at the time of search of the factory premises on 19.03.2004 and also recovery of Cash of Rs. 8,30,000/- from the residential premises of Sh. KK Somani, it is seen that the order regarding confiscation of cash and confirmation of duty demand based on the shortage of the inputs and finished goods has been set aside by the Tribunal and, thus, the only evidence in support of the Departments allegation of unaccounted manufacture and its clandestine removal, which still remains, is the 40 sheets recovered from the factory premises and 19 sheets recovered from the residential premises of Sh. AK Maheshwari. In this regard, there is no dispute about the fact that Sh. AK Maheshwari who was General Manager in the appellant company till May 2003 and in fact had stopped coming to the factory since, October 2002 had some disputes with the appellant company. The appellants plea is that these production sheets had been got fabricated by Sh. AK Maheshwari through Sh. Sunil Mishra and Sh. Gopal Gupta and that he had certain grievances against the appellant company and also there are certain glaring mistakes in these sheets, inasmuch as, in a number of sheets, the timings of the shifts are overlapping and therefore, no credibility should be attached to these sheets. The Departments contention on the other hand, is that these sheets had been prepared by Sh. Sunil Mishra and Sh. Gopal Gupta who were the supervisors in the production department, and that these sheets represent the actual production on the respective dates, and that since, from October 2002, Sh. AK Maheswari was not coming to the factory, in respect of the production sheets of May 2003, no doubt can be raised about their genuineness, as during that period Sh. Sunil Mishra and Sh. Gopal Gupta were under no obligation to obey the direction of Sh. AK Maheswari.
7. Under section 36 A of the Central Excise Act, 1944 where any document is produced by any person or has been seized from the custody or control of any person, under this act or under any other law and such document is tendered by the prosecution in evidence against him or against him and any other person who is jointly prosecuted with him, the court shall, unless the contrary is proved by such person, presume the truth of the contents of such documents and admit the document in evidence. In our view, the provisions of section 36A would be applicable in respect of 40 sheets recovered from the factory since, these sheets have admittedly been prepared by Sh. Sunil Mishra and Gopal Gupta, the person working in production department of the appellant company and this fact has been accepted by them. Therefore, if the appellant pleads that the entries in these production sheets do not pertain to the production of the factory on the respective dates, the burden of proving this would be on them for which no evidence has been produced. Though, the appellant plead that Sh. AK Maheshwari had certain grievances against the appellant company and the production sheets had been prepared on his instruction, this plea would not be valid in respect of the production sheets pertaining to June 2003, when Sh. AK Maheshwari was not working with the appellant company.
7.1 However, the provisions of section 36A would not be applicable to the 19 sheets recovered from the residential premises of Sh. AK Maheshwari, and in respect of those sheets, the burden would be on Department to prove that the same pertain to the appellant company but no concrete evidence in this regard has been produced.
7.2 In view of this, we hold that it is only the production recorded in the 40 sheets recovered from the factory premises of the appellant company which can be taken into account for determining the actual production of the appellant company on the respective dates. Accordingly, the duty demand has to be re-quantified based on the 40 production sheets recovered from the appellant company.
7.3 However, since in a number of such sheets there is overlapping of the timings of the shifts, the benefit in this regard has to be given to the appellant.
8. Accordingly, the impugned order is set aside and the matter is remanded to the Commissioner for de novo adjudication for re-quantification of the duty demand on the above basis and keeping in view our observations in this order. The penalty imposable on the appellant company under section 11AC and penalty imposable on Sh. KK Somani, Managing Director, under Rule 26 of the Central Excise Rules, 2002, would be in proportion to duty demand which is ultimately confirmed. The appeals stand disposed of as above.
(Dictated and pronounced in open court) (Rakesh Kumar) Member (Technical) (S.K. Mohanty) Member(Judicial) Neha Page | 1