Customs, Excise and Gold Tribunal - Delhi
Super Steel Mfg. Co. (P) Ltd. vs Commissioner Of Central Excise on 25 October, 2002
Equivalent citations: 2003(85)ECC178, 2003(152)ELT166(TRI-DEL)
ORDER P.S. Bajaj, Member (J)
1. This order will dispose of the above captioned 3 appeals.
2. Appeal No. E/446/02-A has been preferred against the impugned order-in-original dated 31-8-2001/17-9-2001 vide which duty demand of Rs. 11, 26,487/- with penalty of Rs. 75,000/- and redemption fine of Rs. 10,000/- had been affirmed against the Company, appellant No. 1 by the Commissioner of Central Excise for the period 1-4-94 to 24-8-94, while the other two appeals E/61 and 63/02-A have been filed against the common Order-in-Original dated 31-8-2001/17-9-2001 vide which duty demand had been confirmed against the Company, appellant No. 1 for the period 1-4-94 to 22-7-96, Modvat credit had also been disallowed to it, and penalty had been imposed on the appellants No. 1 and 2, by the Commissioner, as detailed in the order itself.
3. The facts giving rise to these appeals may briefly be stated as under :
4. The appellant No. 1 is a Company engaged in the manufacture of Kerosene Wick Stoves (Brand Nutan) under the Licence granted by the Indian Oil Corporation, as per the specifications furnished to it under the agreement dated 24-6-88 by the said Oil Corporation. The Company as per the conditions of the agreement could not clear parts of the stove as such for home consumption. The stoves were exempt from duty during the disputed period as per the Notification 181/88, dated 13-5-88 from the payment of Central Excise duty. Even the burners were also exempt vide Notification No. 41/94-C.E., dated 1-3-94. However, duty was payable during the disputed period on the parts of the stoves @ 15% adv. On 25-8-94, Central Excise Officers visited the factory premises of appellant No. 1 and seized certain goods lying therein and also recorded statements of representatives of the Company. The Company initially did not pay any amount on the parts cap-tively consumed by them in the manufacture of the stoves under the belief that the parts were not dutiable. But after the visit of the officers of the Central Excise on 25-8-94, the company started paying duty under protest on the ground that the parts being specially designed for kerosene wick stove, 'Nutan' could not be used in any other stove and were not marketable. Thereafter, on the direction of the Superintendent of Central Excise, Indore vide letter dated 25-3-96, the company submitted costing of the parts, duly certified by the Chartered Accountant. Later on, the Cost Accountant M/s. K.G. Mantri & Co. did costing of the parts of the stoves manufactured by the appellant company and the report of the same was submitted to the Department. The Central Excise officers again visited the factory on 11-12-96 and resumed certain records. On completion of the investigations, two show cause notices were issued to the appellant company, one dated 21-2-95 out of which appeal No. E/446/02-A has arisen and the second dated 12-8-97 which had culminated in the passing of the impugned order under appeal in appeal Nos. E/61 and 63/02-A, vide which demand has been confirmed against the company and penalty has also been imposed on its Managing Director, appellant No. 2, by the Commissioner (Adjudication).
5. The appellants contested both those notices by denying the allegations of clandestine removal of the goods, under-valuation of the goods and also inadmissibility of the Modvat credit to them. They also contested the seizure of the goods from the factory premises of the Company.
6. The adjudicating authority, however, did not accept the contentions of the appellants and the authority confirmed the duty demand and imposed penalty, besides redemption fine, in show cause notice dated 21-2-95 (subject matter of appeal E/446/02-A) vide order dated 31-8-2001/17-9-2001. The adjudicating authority also confirmed duty and penalty in show cause notice dated 12-8-97 vide order dated 31-8-2001/17-9-2001 (subject matter of appeals E/61 & 63/02-A)
7. We have heard both sides and gone through the records.
Appeal No. E/446/02-A :
In this appeal, it has not been disputed that the appellants were liable to pay the duty on the parts manufactured by them in the factory and then captively used in the manufacture of the stoves during the period in dispute. But they did not pay appropriate duty during that period amounting to Rs. 11,26,487/-. Therefore, duty demand of this amount has been rightly affirmed by the adjudicating authority against the appellants.
8. Learned Counsel has mainly contested that Modvat credit available to the appellants on those parts had not been allowed by the adjudicating authority, while in the earlier order dated 22-12-97 before remand of the case by the Tribunal to the adjudicating authority, Modvat credit was allowed to them. The adjudicating authority in the impugned order, according to the Counsel has not referred to the Modvat credit claim of the appellants. The Modvat credit earlier allowed by the adjudicating authority, should be allowed to the appellants. We have gone through the record and in our view, the contention of the learned Counsel deserves to be accepted. The perusal of the record shows that the adjudicating authority vide order dated 22-12-97, while confirming the duty demand of this very amount of Rs. 11,26,487/-also allowed the Modvat credit to the appellants. That order was no doubt challenged by the appellants before the Tribunal, but only on the ground that the parts were not marketable and as such no duty could be charged in respect thereof. The Revenue in that appeal before the Tribunal did not contest the Modvat credit claim of the appellants. The Tribunal remanded the matter to the adjudicating authority for determining the marketability aspect of the goods as well as imposition of penalties and interest on the appellants. That order was passed by the Tribunal on 4-9-2000. After the remand, the adjudicating authority had decided the question of marketability of the goods against the appellants and confirmed the duty, besides imposing penalty and the interest. But no order in respect of the Modvat credit claim of the appellants had been passed as is evident from the perusal of the impugned order. Even otherwise, Modvat credit once allowed by the adjudicating authority could not be disallowed after the remand of the case by the Tribunal, as the remand was for limited purposes as detailed above. Therefore, the appellants are entitled to the Modvat credit as per the law/rules. They are liable to pay , duty after getting due allowance/adjustment of the Modvat credit as per the law/rules admissible to them.
9. - Keeping in view the facts and circumstances of the case, we find that the penalty imposed is on the higher side. We reduce the penalty amount to Rs. 20,000/- as duty would stand substantially decreased after the adjustment of the Modvat credit claim available to the appellants. However, the redemption fine imposed of Rs. 10,000/- is not exhorbitant and we maintain the same.
10. This takes us to the other two Appeal Nos. E/61 and 63/02-A. We find that under different heads, the duty demand has been confirmed on the appellants. The first head is of valuation, second of the clandestine removal, while the third of the scrap. Modvat credit had also been disallowed by the adjudicating authority.
11. Under the heading valuation, the duty demand of Rs. 44,78,777/- has been affirmed by the adjudicating authority on the appellants. The assessable value of one set of dutiable parts of the stove had been arrived at after deducting the value of bought out parts, burner and administrative and selling expenses and profit (50% of the total expenses incurred) from the selling price of the parts. While comparing the selling price of the stove declared, on verification of the balance sheet, the price declared had been found by the adjudicating authority, to be on the lower side. On verification of the balance sheet, it had also been found by the authority that the appellants deducted administrative and selling expenses wrongly and those expenses were also shown higher than the actual expenses incurred.
But we find that the appellants had submitted two reports for working the valuation/dutiable stove parts manufactured and captively used by them in the production of the final products (stoves). One report was prepared by the Chartered Accountant and the other by the Cost Accountant, M/s. K.G. Mantri & Co. No doubt there was a difference in the price worked out by the CA and the Cost Accountant reports and this fact was not denied by the Cost Accountant also. But the adjudicating authority should have accepted the Cost Accountant's report wherein the assessable value shown was on a higher side, than the one worked out by the CA, especially when no evidence to contradict or falsify the report of the Cost Accountant had been brought on record by the Department. The differential duty according to the report of the Cost Accountant, comes to Rs. 10,96,298/- as per the details given by him in the report (referred to pages 172 to 175). Therefore, duty amount to that extent could only be affirmed against the appellants and not more than that.
12. The appellants in their reply to the show cause notice, no doubt had averred that the price of the stoves for distributors was fixed at Rs. 148/-while for the dealers Rs. 153/- per stove. But this circumstance did not affect the assessable value of the parts captively used by the appellants in the manufacture of the stoves. The stoves were exempt from payment of Central Excise duty and as such, the difference in price of Rs. 5/- per stove supplied to the distributors and to the dealers, could not be made the basis for working out the assessable value of the parts. The appellants also used some bought out parts in the tanks at the time of assembly of the complete stoves, and as such, the value of those parts could not be included in the assessable value, in view of the ratio of the law laid down in Texspin Engg. and Manufacturing Works v. CCE - 1999 (80) ECR 149 (T) and Shriram Bearings Ltd. v. CCE -1997 (91) E.L.T. 255 (S.C.) = 1998 (79) ECR 913 (S.C.). The report of the Cost Accountant, who was even summoned and examined during the adjudication proceedings, could not be ignored on the ground that it did not tally in every respect with the Certificate issued by the Chartered Accountant. His report wherein the differential duty payable by the appellants had been worked out to Rs. 10,96,298/- deserves to be accepted especially when no evidence to contradict the same has been brought on record by the Department. Therefore, the duty payable under the head 'valuation' comes to Rs. 10,96,298/- only and not Rs. 44,78,877/- as confirmed by the adjudicating authority.
We accordingly confirm that much duty (Rs. 10,96,298/-) on the appellants for the period in question.
13. Under the head 'clandestine removal', the duty demand of Rs. 46,93,871/- had been raised. This charge has been framed on the basis of the quantity of the raw materials i.e. CR sheets and asbestos sheets, purchased by the appellants for use in the manufacture of the parts of the stoves. These sheets were found to be short in the factory but on that basis alone, no inference about the clandestine removal of the stoves or the inputs prepared therefrom, could be raised against the appellants, keeping in view the ratio of the law laid down in Rishi Packers v. CCE - 1999 (33) RLT 445 (T).
We find that no evidence had been produced by the Department to prove clandestine removal of the parts of the stoves as such or stoves in which those parts were used by the appellants, during the disputed period. The plea of the appellants that there was a wastage while using the sheets, had not been taken note of by the adjudicating authority. They had given details of the sales of the asbestos scrap in their reply (referred at pages 311-315). But those had also been not considered. Their intimation to the Superintendent/Assistant Commissioner regarding destruction of asbestos sheets on account of fire which broke out in their factory, had also been ignored without any justification. The Cost Accountant in his Certificate had certified the correct position after taking into account the factual position. The mere entries, in the resumed registers which were allegedly maintained by the Supervisor and labourers could not be relied upon without corroborative evidence from any other tangible evidence, in view of the ratio of the law laid down by the Tribunal in CCE, Meerut v. Raman Ispat (P) Ltd. - 2000 (121) E.L.T. 46, Beco Industries Ltd. v. CCE - 2000 (121) E.L.T. 650, Deepak Tandon v. CCE - 2000 (126) E.L.T. 1079 and Sharma Chemicals v CCE - 2001 (130) E.L.T. 271 (T-Kol.). The charge of clandestine removal of the parts/of the stoves, in our view, does not stand substantiated from any tangible evidence. It may also be added that the appellants were not even authorised by the IOC under whose Licence they were manufacturing stoves, to clear the parts of the stoves as such. They were only authorised to manufacture stoves and not the parts for marketability. Even if it is assumed that the parts of the stoves were marketable as observed by the adjudicating authority, after the remand of the matter by the Tribunal, that did not lead to any conclusion that the appellants had marketed the parts, for want of any evidence to substantiate the same. Therefore, duty demand as detailed above, confirmed under this head, by the adjudicating authority is set aside.
14. Similarly, under the third head of sale of scrap during the disputed period, the appellants had been saddled with the duty demand of Rs. 47,270/-. They are alleged to have sold the scrap of Rs. 5,37,921/- while the duty was paid by them by valuing it at Rs. 1,75,519/-. But as per the plea of the appellants the total value of Rs. 5,37,921/- included the value of scrap sold on which no Modvat credit was taken by them and also the value of the sale of the scrap of asbestos sheets. But these facts had been ignored by the adjudicating authority. The value of the scrap shown in the balance sheet by the appellants was also inclusive of sales tax and this fact too has been ignored.
We find that the differential duty on the sale of scrap had been affirmed against the appellants without any tangible evidence and the same is set aside.
15. We find that Modvat credit of Rs. 21,79,404/- on the inputs used in the burners had been disallowed to the appellants, while the demand of Rs. 5,39,932/- on the burners itself had been dropped by the adjudicating authority being exempt from duty. When the duty on the burners which had been dropped comes to only Rs. 5,39,932/-, it is difficult to accept that Modvat credit disallowable to the appellants was of Rs. 21,79,404/-. The appellants had submitted that they used both types of materials one on which Modvat credit was taken by them and the other on which it was not taken. The details of the inputs, viz. CR sheets had been placed on record by them (referred to pages 306-309) and according to these details, amount of Modvat credit recoverable from them comes to only Rs. 3,74,697/-. The correctness of the details had not been questioned by the adjudicating authority. He has not even recorded any findings/observations in respect thereof. Therefore, we confirm the recovery of Modvat credit of Rs. 3,74,697/- only, from the appellants.
16. On the appellant No. 1 Company, a penalty of Rs. 10 lakhs has been imposed under Rule 173Q. But keeping in view the facts and circumstances and the duty and the Modvat credit recoverable from the Company as discussed above, we reduce the penalty to Rs. 1 lakh.
17. The adjudicating authority has also imposed penalty of Rs. 10 lakhs on appellant No. 2, Managing Director of the Company. But taking into consideration the facts and circumstances referred to above, the penalty on appellant No. 2 is reduced to Rs. 25,000/-.
18. In the light of the discussions made above, the impugned orders in all the three appeals are accordingly modified. All the appeals of the appellants, in the above discussed terms, stand disposed of. The cross objections of the Revenue also accordingly stand disposed of.