Customs, Excise and Gold Tribunal - Delhi
Mr. Syed Zakishrati, Md & M/S. Zarafshan ... vs Commissioner Of Central Excise, Kanpur on 31 May, 2001
Equivalent citations: 2001(76)ECC708, 2002(148)ELT579(TRI-DEL)
ORDER
Krishna Kumar, Member (Judicial)
1. These are the appeals filed by the appellants against the Order-in-Original No.11/Commr/MF/2000 dated 4.2.2000 passed by Shri Kailash Sethi, Commissioner, Customs and Central Excise, Kanpur confirming (1) the demand of Rs.33 lakhs against M/s. Zarafshan Chemical Ltd. under Rule 9(2) of the Central Excise Rules, 1944 (for short "Rules") read with proviso to Section 11 A (1) of Central Excise Act, 1944 (for short "Act"): (2) imposing mandatory penalty of Rs.33 lakhs on the assessee under Section 11 (AC) of the Act since the duty had been evaded by suppression of facts. The assessee has also been directed to pay interest in terms of Section 11 AB of Act; (3) imposing penalty of Rs.1 lakh on the assessee under Rule 173Q of the Rules. (4) imposing a penalty of Rs.2 lakhs on Mr. Syed Zaki Ishrati, MD under Rule 209 (A) of the Rules; (5) imposing a penalty of Rs.1 lakh on Mr. Sharad Upadhyay, Accountant, under Rule 209 A of the Rules; and (6) imposing a penalty of Rs.1 lakh on Mr. Faiyaz Ahmed, Manager under Rule 209 A of the Rules and imposing a penalty of Rs.1 lakh on Mr. Parvej Alam Khan, Assistant Accountant, under Rule 209 A of the Rules.
2. Briefly the facts of the case are that the appellants are manufacturers of liquid gold since 1993. In manufacturing liquid gold, the following raw materials are used: (1) gold biscuits (2) essential oils and (3) rosin. According to the respondents, liquid gold falls under Chapter 32 (sub-heading 32.07) of the schedule to the Central Excise Tariff Act, 1985 (for short "Tariff Act") which according to the appellants is not correct because as per the HSN Explanatory Notes, Chapter 32 (sub-heading 32.07) would cover such solution or suspension which are made of metallic compounds and spirit of turpentine or other organic solution. As per the appellants in their case there are no metal compounds. Therefore, according to them the product manufactured by them could not fall under Chapter 32 (SH 32.07) of the Tariff Act. The appellants claim has been that the liquid gold could fall under Chapter 71. As per them the Central Government has classified "liquid gold" under Chapter 71 under Notification No. 117/94-Cus dated 27.4.94. This notification has been in existence till date. Apart from this, the jurisdictional High Court of Allahabad has interpretted the meaning of "article of gold" under the Defence of India Rules in the case of Ratan Lal Garg dated 7.3.68 held that "liquid gold is an article of gold and is fully covered by definition of article of gold as contained in the Defence of India Rules which definition is reproduced below:
'Article' means any article (other than ornaments) in a finished form made or manufactured from or containing gold and including parts of any broken article but does not include primary gold."
3. The above definition is pari materia to the definition of the expression 'article' as contained in the existing Central Excise Notification No. 54/95-CE dated 16.3.94 (Explanation (iii) to the Notification which is also reproduced as under:-
"'Article' in relation to gold shall mean anything (other than ornaments), in a finished form, made of, manufactured from or containing gold and includes any gold coin or broken gold, that is to say, gold in any unfinished or semi-finished form including ingots, bars, blocks, slabs, blades, shots, pellets, rods, sheets, foils, and wires".
Since the two definitions as quoted above are pari materia to each other and particularly when the judgement had been delivered by the jurisdictional High Court at Allahabad where under the office of both the appellants as well as that of respondents are located, the said judgement is binding on the Department in view of the law laid down by the Hon'ble Supreme Court in the case of M/s. East India Commercial Co. vs. UOI reported as 1983 (13) ELT 1342 (SC), more so when there has never been any contrary judgement given by any other High Court till date. The judgement of the Hon'ble Allahabad High Court would apply 'pro tanto' to the facts of this case as well as to the definition of 'articles' in relation to gold as contained in the Central Excise law which would mean that liquid gold manufactured by the appellants is non-dutiable being entitled to Exemption Notification No. 54/95-CE, dated 16.3.94.
4. Several show cause notices were issued to the appellants and the period in dispute is from March, 1994 to August, 1994. The raid was conducted on the factory premises of the appellants on 10.8.94 followed by detailed investigation and recording of various statements by the Departmental officers. The Commissioner was sent an interim reply by the appellants vide letter dated 21.7.99 in which numerous submissions were made. When the hearing was fixed, the Commissioner was requested to adjourn the hearing since a similar matter was pending decision before the Hon'ble Tribunal. The Commissioner conceding to the request of the appellant adjourned the matter. However, to the utter surprise of the appellants, they received the impugned order on 17.2.2000 passed ex-parte by the Commissioner even without prior informing the appellants of his decision to proceed ex-parte. In the impugned order, the Commissioner rejected all the contentions made by the appellants and confirmed the penalty and the demand of duty raised on the appellants. As per the appellants the entire demand is barred by limitation. It is based on three statements which are not supported by any queries from four ferozabad parties whose names appear in the loose chits. The retracted statements of S/Shri Faiz Ahmed, Shoaib Khan and S.B. Upadhyaya on affidavits, have not been taken into consideration. The request made by the appellants for cross-examination of Shri S.B. Upadhyaya and Shri Shoaib Khan was not heeded to. There was no linking by corroboration of seven chits. A team of officers headed by Superintendent, Central Excise, Agra on an intelligence, while conducting the transit checks at Agra Ferozabad Road on 10.8.94 intercepted a Jeep bearing Registration No. UP 80 F/2060 loaded with Branded Ceramic Colours called liquid gold in trade parlance and additives falling under Chapter sub-heading 3207.90 and 3814.00 of Tariff Act respectively, manufactured and cleared by the appellants. The said jeep was being driven by Shri Shaukat Ali and were being accompanied by Shri Sharad B. Upadhyia and Shri Parvez Alam Khan who on demand by the officers could not produce any valid Bill/invoice/transport document to cover the said consignment of the excisable goods being transported through the said intercepted jeep. Shri Parvez Alam Kahn, Assistant Accountant of Ferozabad Sales Depot produced two slips. The officers, therefore, on the reasonable grounds that the 85 phials of Goldan Oriole brand Ceramic colour and 18 phials of additives totally valued at Rs.1,55,690/- were being transported in a manner other than as provided under the Act and Rules and were liable to confiscation, seized the said excisable goods under the provisions of Section 110 of Customs Act, 1962 and the jeep valued at Rs.2,25,000/- under a Recovery Memo dated 10.8.94. Under the follow up action, the team of officers visited the factory premises and the Sales Depot situated at Agra and at Ferozabad on 10.8.94 and 11.8.94 respectively. The officers also effected the seizure of the said excisable goods at both the premises. The show cause notice for the seizures effected in Transit, Factory premises and at Sales Depot were issued separately and seizure cases were decided by the Department. The Commissioner (Appeals) Central Excise Allahabad in his Order-in-Appeal held that the excisable goods being manufactured by the appellants were classifiable under Chapter sub-heading 3207 and not under Chapter 71 as article of gold and also the brand name of another person who was not entitled to exemption and as such the party was not entitled to the exemption under Notification No. 1/98 and accordingly rejected the cross-objection filed by the party at Allahabad. The raid conducted at the factory premises on 10.8.94 also resulted in the seizure of contraband four gold biscuits and sixteen pieces of foreign origin gold biscuits weighing 1681.500 gm total valued at 7.71,273/- and separate show cause notices were issued by the Revenue.
5. As per the Department, the extended period of five years is invokable in the present case inasmuch as the appellant had not paid the Central Excise duty by supressing their production and were engaged in the manufacture and clearance of excisable goods using a brand name owned by another person, they were intending to evade the Central Excise duty leviable thereon.
6. The appellants contention is that the entire proceedings were barred by limitation. Since the show cause notice were issued after more than four years despite the completion of investigation and also despite the Department having full knowledge of allegation. The case has been adjudicated in peacemeal manner. The retraction of statements given by Shri Faraz Khan Ahmad, Mohammed Shoaib Khan and S.B. Upadhyaya have not been considered. No corroborative evidence apart from the statement of employees of appellant is available to assess the case for the Department. The seven chits have not been verified from the handwriting expert and it is not known from where they have been recovered by the Department. Since they did not contain the vehicle number, it is not clear whether they belonged to the assessee or to some other party. Three different figures of the value of the clandestine clearances have been given in the Show cause notice which show that the Department is itself unsure of the figures.
7. The Department has justified the demand of duty and the imposition of penalty for the following reasons:-
(1) That the final product ceramic colours manufactured by the assessee fall under Chapter 32 and not under Chapter 71 and for this reason these final products are not exempted from duty.
(2) The brand name 'Golden Oriole' used by the assessee does not belong to them and for this reason the benefit of concessional duty under SSI exemption is not admissible.
It is not correct to say that there has been peacemeal adjudication because the so called show cause notice relating to different issues, the provision of Section 11 A(1) of the Act confer the powers on the Department to raise demand on duty after fiver years and as such looking to the period of dispute which is from March, 1994 to August, 1994, it may be seen the show cause notice was issued on 1.4.99 which is very much within the period of five years.
8. As regards the retraction of the statements given by Mr. Faiyaz Ahmad, Mr. Shoaib Khan and S.B. Upadhyaya, ld. Counsel of the appellant has contended that the affidavits have been given by these three persons retracting from the statements given by them and as such their statements cannot be relied upon in the present case whereas the Department has contended that no retraction affidavit given by these persons is available on their case records and as such they cannot be deemed to be available in the records for the purpose of present case. The Commissioner of Central Excise, Kanpur in the impugned order while dealing with the issue No. 5 has stated that if the assessee wishes, it can present the evidence relating to the other cases before the appropriate adjudicating or appellate authorities dealing with the relevant cases. As regards the issue of not being sure of the value of the clandestine clearance, the Commissioner of Central Excise, Kanpur has clearly stated while dealing issue No.6 that Department is actually quite sure of the clandestine clearances which is Rs.1.6 crore and this figure of Rs.1.6 crore is specifically mentioned in the show cause notice on the basis of which duty of Rs.33 lakhs has been demanded. Ld. Counsel for the appellants has clearly contended that the Department's case is only on the basis of statements of employees of the appellants and no corroborative evidence is available with the Department. The seven chits which show the clandestine clearances have not been corrorborated.
9. From the above, it will appear that there are may facts involved in the case which are required to be properly appreciated / adjudicated upon and finding of fact recorded thereon by the authorities below and which cannot be done by the Tribunal in the appellate stage. Moreover, the order appealed against is an exparte order. Therefore, keeping in view the facts of the case, we find it reasonable that in the interest of justice, the case may be remanded to the authorities below for proper appreciation of facts in the case. We order accordingly.