Customs, Excise and Gold Tribunal - Delhi
M.P. Agro (India) Industries Limited, ... vs Cce on 9 September, 2003
Equivalent citations: 2003(90)ECC303, 2003(158)ELT763(TRI-DEL)
ORDER P.S. Bajaj, Member (J)
1. The above captioned appeals have been filed by the Appellants against a common impugned Order-in-Original dated 20.10.2001 vide which the Commissioner had confirmed the duty demand of Rs. 52,25,447 with equal amount of penalty for the period, August 1997 to August 1999 against appellant Company and imposed penalties against the other Appellants as detailed therein.
2. The manufacturing premises of the Appellants No. 1 was visited on 19.3.99 by the Central Excise Officers. On checking of the stock of their finished excisable products as well as inputs used by them in the manufacture of finished products, excess stock of 3899,8 kgs of HDPE fabric, 37739 cement bags and 1550 kgs of wastage was detected and seized. On scrutiny of RG-1 and RG-23A Part I register, it was observed by the Officers that the production shown by the Appellants and recorded in the RG-1 register did not commensurate with and proportionate to the inputs/raw materials issued and that they had shown less production as against issuance of higher quantity of inputs. They had suppressed the actual production and removal of the same without payment of duty. The Officers recovered an inter office memo dated 23.1.99 issued by Shri Naveen Khandelwal, Chairman of the Appellants Company addressed to Shri Sunil Mehta, General Manager (Works) wherein he congratulated Shri Sunil Mehta and his staff for achieving the target of 16 lakhs bags per month. From that letter it was clear that this much bags were manufactured prior to 23.1.99 but the production shown in the RG-1 register was much less than that. The statements of Shri S. Venketa Giri, Excise Officer, Shri Umesh Singh, Assistant Production Manager, Shri Sunil Mehta and Shri Naveen Khandelwal, Chairman were recorded. But they could not explain about the abovesaid inter office memo regarding production of 16 lakhs bags. On completion of the enquiry, a show cause notice was issued to the Appellants proposing confirmation of duty and imposition of penalties. They, however, contested the correctness of the notice by alleging that they were manufacturing HDPE/PP Fertiliser/Cement Bags and Fabrics and they were liable to duty at the rate on 16% as their products were covered under Chapter 39 of CETA. They also alleged that the raw materials used in the manufacture of final products were HDPE, PP, LDPE, LLDPE Granula, Master Batch and PP Lamination Granuais. They denied the allegation of clandestine removal of the goods. They also alleged that the weighment was not properly done for the fertilizer/cement bags. The handling loss of the raw materials was not accounted for and the process loss was not taken into account by the Department while calculating the demand. They also claimed deduction of the thinner in the calculation of the duty. They, further, averred that subtraction of 7636 kgs of seized excisable goods, while calculating the duty had not been done and submitted on Chart of Production from August 1997 to August 2001 and claimed that the difference was only of 45024.54 kgs which according to them was due to handling/process loss. The Adjudicating Authority, however, did not accept the version of the appellants and pass the impugned Order.
3. The learned Advocate for the Appellants has reiterated in his arguments the above referred grounds which the Appellants had taken in reply to the show cause notice. According to him, if weighment of bags had been properly done and handling and process losses were taken into account and allowance of quantity of thiner and all the seized goods, was given, no duty would become payable by the appellants, He has also referred to the Chart of Production which was produced before the Adjudicating Authority, to further contend that there had been no suppression of production of final products by the appellants.
4. On the other hand, the learned SDR has reiterated the correctness of the impugned Order.
5. We have heard both the sides and gone through the record. We find from the records that the method adopted by the Department for the weighment of the bags was not in any manner faulty. They had taken into account the bale weighment charts. The average weighment was done by the Officers on actual basis and not on hypothetical basis of purchase orders, etc. The average weight of the fertilizer bags of 110.64 gms and cement bags of 68.67 gms arrived at by the Officers could not be in any manner said to be incorrect or faulty, especially when the correctness of thebale Weighment Charts was not contested/disputed at the time of weighment.
6. The plea of the appellants regarding taking into consideration handling/process losses had been rightly not acceptable by the Adjudicating Authority. We find that the appellants had been availing the benefit of the Modvat Credit and they never reversed any amount out the Modvat Credit due to handling and process losses. They even never informed the Department about these losses. Moreover, no handling loss could occur while dealing with the raw materials, received by the appellants for job work from the suppliers. Regarding the process loss, the stand of the appellants is not even legally tenable in view of the Chapter note of Plastics & Articles thereof under Chapter 39 of CETA. From that Chapter note, it is quite evident that there could not be any process loss. The weight of the final product plus the weight of wastage has to be equal to the total weight of inputs utilised in the manufacture of final product. Even from the details of the job work furnished by the Appellan ts, it was evident that total raw material received by them was equal to the total material despatched by them. Similarly, the plea of the appellants regarding non-inclusion of total quantity of thiner in the weight of final product had been rightly rejected by the Adjudicating Authority, because during the job work done by them, the weight of thiner was included in the total raw material received and exactly the same weight of final product was despatched by them.
7. We also find that the appellants claimed to have consumed 11,134 kgs of fabrics for packing purposes but their claim had been rightly not accepted by the Adjudicating Authority. They never informed about this fact to the Department, even no entry in this regard was made by them in the statutory records. They also did rot pay the duty/reverse the Modvat Credit for this purpose. In fact, they wanted to take advantage on their own fault by not maintaining the record for captive consumption properly. Their record showed that they had no balance of fabrics after 13.8.98. Whatever fabrics, was manufactured till 13.8.98, they consumed the same in the manufacture of cement/fertilizers bags, during the period 1.8.98 to 13.8.98. After corsidering these facts, the duty liability on account of clandestine removal of the goods by the appellants, was specified in the show cause notice and had been confirmed by the Adjudicating Authority.
8. The argument of the learned Counsel that there is no direct evidence on records to prove clandestine removal of the goods by the appellants without payment of duty, cannot be accepted, keeping in view the facts and circumstances of the case. True that the initial burden to prove the clandestine removal of the goods by a manufacturer, is on the Department. But this burden can be discharged by the Department by bringing on record all the facts and circumstances from which an irresistable conclusion can be drawn that there had been clandestine manufacture as well as removal of the goods by the manufacturer. In this context, reference may be made to the ratio of the law laid down by the Apex Court in Collector of Customs, Madras v. D. Bhoorman, 1983 (13) ELT 1546 wherein it has been so observed. In the instant case overwhelming circumstantial evidence had been brought on record by the Department to substantiate the allegations, of clandestine manufacture and removal of the goods by the appellants. We find from the record that whenever the Officers of Central Excise visited the factory premises of the appellants, excess stock of bags/fabrics was found. Oh 28.7.98, 5993.06 kgs of fabric and 1103 fertilizer bags were found in excess. Similarly, on 17.8.98, 5000 fertilizer bags were found in excess of the recorded balance and again on 19.3.99, excess stock of 3899.8 kgs fabric, 37739 cement bags and 1550 kgs of wastage, were found. This circumstance is enough to adversely reflect on the working of the appellants.
9. Besides this, the appellants had been doing the job work for other customers from time to time. The raw material received from 21,4.99 to 26.8.99 by them was 129430 kgs and total material despatched by them was also of the same weight. But strangely enough, the comprehensive chart of raw material and final product produced by mem for the period, August 1997 to August 2001, showed that from September 1999 onwards the total raw material issued was much less than the production of finished products. This ploy appears tc be enacted deliberately by the appellants to justify the huge difference of raw materials and finished products for the previous period in the guise of work in progress. For example, in the month of September 1498, total raw material issued was 52,608 kgs and the total actual production shown was 1,42,128 kgs. It means 89,520 Kgs of excess production, was shown in the chart. The plea of the appellants based on the comprehensive chart that there was no excess production had been rightly not accepted by the Adjudicating Authority. Till August 1999, the average issue of raw material was quite high, for example, from April 1999 to August 1999, the average weight of raw material issued was 1,4-6,962.2 kgs every month. No explanation had been offered as to why the necessity of issuing such a huge quantity of raw materials arose. Rather, it can be safely inferred that it was so done with a view to evade payment of duty by manufacturing unaccounted bags and fabrics, in a clandestine manner. This fact also finds corroboration from the fact that excess quantity of the raw materials/finished goods were found in the factory premises of the Appellants, as detailed above, on several occasions. Similarly, from September 99 to August 2001, the average issue of raw materials came down to 39,795.52 kgs per month while average production during this period was 47,926.24 kgs per month as is evident from the chart furnished by them. This shows that the production of finished goods was over and above issue of raw materials. The theory of work in progress put forth by the Appellants to explain the above referred circumstances and facts, had been rightly rejected by the Adjudicating Authority.
9. Apart from this, the issuance of inter-office memo dated 21.3.99 by Shri Naveen Khandeiwal, Chairman of the appellants company to Shri Sunil Mehta, General Manager (Works) remain undisputed. The perusal of this memo shows that the Chairman congratulated Shri Sunil Mehta and his staff for achieving production of 16 lakhs bags per month. This production had never been shown in the statutory record. The correctness of the letter had not been disputed by Shri Naveen Khandeiwal as well as Shri Sunil Mehta in their respective statements. This circumstance goes long way coupled with other facts and circumstances detailed above, to prove that there had been unaccounted production and removal of the goods in clandestine manner, by the Appellants during the period in question without payment of duty.
10. The role of other two appellants in the clandestine manufacture and removal of the goods without payment of duty, by the appellants company had been fully discussed by the Adjudicating Authority in the impugned Order. We also find from the records that they all had been actively involved alongwith the appellants company in the illegal activity of clandestine production and removal of the goods without payment of duty. Therefore, they had rightly been penalised under Rule 209A of the Rules.
11. In view of the discussion made above, the impugned Order confirming the duty demands on the basis of three show cause notices dated 1.10.99, 7.1.2000 and 13.4.2000 with equal amount of penalty on the appellants company and also imposing penalties under Rule 209A of the Rules on'other appellants, is perfectly valid and the same is upheld. The appeals of the Appellants are accordingly dismissed being without merits.