Customs, Excise and Gold Tribunal - Bangalore
India Tin Industries (P) Ltd. And Ors. vs Cce on 13 August, 1998
Equivalent citations: 1999(80)ECR371(TRI.-BANGALORE)
ORDER S.L. Peeran, Member (J)
1. These appeals arises from the order in original passed by the Collector of Central Excise, Bangalore, confirming the following:
(1) Confiscation of 43,339 numbers of tin containers valued at Rs. 1,94,855.40 found in excess under Rule 173Q(l)/226 of Central Excise Rules, 1944 and granting the appellants the option to redeem the same on payment of Rs. 20,000/-.
(2) Demanding duty of Rs. 710.99 on 1.214 tin containers valued at Rs. 3,554.97 found short under Rule 9(2) of Central Excise Rules read with Section 11A of the CE Act, 1944.
(3) Demanding duty of Rs. 9,87,416.28 as mentioned in Annexure D.8 and D.9 to the show cause notice under Rule 9(2) of the CE Rules, 1944 read with Section 11A of the CE Act, 1944.
(4) Imposing penalty of Rs. 3,00,000/- on the appellants under Rule 173Q(1) of CE Rules, 1944 and Rs. 10,000/- each on MD, GM and factory Manager of the appellants, under Rule 209A.
(5) Confiscating the plant and machinery of the appellants under Rule 173Q(2) of CE Rules, 1944 with option to redeem the same on payment of fine of Rs. 5,00,000/- under Section 34 CE Act, 1944.
2. The charge against the appellants was that on gathering intelligence by the Regional unit of the Directorate of Anti Evasion that the appellants had been indulging in large scale evasion of Central Excise duty on the metal containers falling under chapter 8312.12 and 80001.00 (sic) (earlier under TI No, 46 and TI No. 68) manufactured and marketed by them by resorting to undervaluation of their products. Based on the above information, the factory premises of the Company was searched by the officers of Anti evasion Bangalore on 11.7.1986. On verification of the stock and accounts, an excess stock of 43,339 numbers of tin containers valued at Rs. 1,94,855.40 in different varieties and a shortage of 1214 numbers of tin containers in some other varieties valued at Rs. 3,55,497 was noticed. The excess stock was seized under mahazar on 11.7.1996 and was handed over to the Company for safe custody under an undertaking. Certain records found to be of incriminating nature were also seized under the said mahazar.
3. Scrutiny of the records and the investigation conducted revealed that the company manufactured tin containers to the specifications and requirements of its customers as per contract entered into with the customers. Tin plates imported or bought locally are printed (for bodies of containers, lids/bottoms). The printed sheets are cut and containers manufactured in the factory of the company. Plain containers without printing are also manufactured. All printed containers are generally packed in corrugated cardboard and the plain containers are either bundled or packed in gunny bags for despatch. Investigation revealed that the company had removed tin containers under goods consignment note without payment of duty and without issue of Central Excise gate passes. Verification of the outward goods booking register of M/s. Venson Transports/goods consignment note brought to light that during the period from 30.11.1981 to 2.7.1985 the company has removed without payment of duty tin containers valued at Rs. 1,01,470.97 in 35 consignments to 19 customers.
4. It appeared that the appellants cleared tin containers over and above the quantity shown in the Central Excise gate passes without payment of duty during the period 15.7.1981 to 30.11.1981. A quantity of 8,100 containers valued at Rs. 20,136.80 had been so cleared without payment of duty. The company had also removed components of tin containers like lids/bottoms and tops falling under TI 68/Chapter 8001.00 without payment of duty and without observing Central Excise formalities. A quantity of 2,21,970 numbers of components valued at Rs. 25,152.75 in 24 consignments to different customers were found removed without gate passes and without payment of duty. The company had sent tin containers valued at Rs. 1,80,403.20 as replacement to M/s. Hindustan Vegetable Oil Corporation Ltd., (M/s. HVOC for short), Madras without payment of duty and without information to the Central Excise department. The company had been removing containers without payment of duty and without Central Excise gate passes and the officers found a shortage of 1,214 numbers of containers valued at Rs. 3,554,97 on 11.7.1986
5. The Officers seized the excess number of tin containers valued at Rs. 1,94,855.40 noticed on 11.7.1986 as the same had not been accounted for in RG-1 register and other production documents. It was further found that the company had been filing price lists and they had declared in the price lists that price included the packing charges. In the contracts it had been mentioned as packed in corrugated cardboard boxes, but in practice the company was not including the cost of tin containers for the purpose of payment of duty. They had suppressed the details and misdeclared to the department as could be seen from the gate passes issued from 11.7.1981 to 11.7.1986 that an amount of Rs. 44,34,806.29 being the value of cartons utilised for packing and clearance of tin containers was not included for calculating the assessable value of tin containers.
6. It was also found that the company was also collecting the difference in value whenever there was price escalation or change in the price with retrospective effect. Such differential value had been collected' by raising debit notes in letter form by the Company on M/s. HVOC to the extent of Rs. 12,47,564.15. They also raised debit notes for freight charges/packing and forwarding charges in favour of M/s. Ganesh Flour Mills, Bangalore. The charges so raised was Rs. 2,33,353.77 against the actual freight charges incurred by the Company for an amount of Rs. 51,525/-. Hence the excess amount for which debit notes were raised forms part of the assessable value and duty has not been paid on it. The company had been using plastic caps and liners for manufacture of certain type of tin containers supplied to M/s. Faruk Anwar & Co. without including the CDS': of such plastic caps and liners in the price of tin containers declared by them and therefore, duty due has not been paid on the cost of such materials. They had raised debit notes separately for the value of plastic caps and liners and recovered such amounts and the amount collected on this account is Rs. 36,527.09.
7. It was further noticed that the Company has sold to M/s. Vysya Bank Ltd., 'Balvikas' boxes fitted with plastic lock, keys and legs. They had not included the value of such plastic locks, keys and legs in the assessable value of the Balvikas boxes. Since the boxes were incomplete without these components and the company fits these components to the boxes before clearance from the factory, the value of such items should have been included in the assessable value of such boxes. But they had been raising debit notes for the cost of such plastic components and also cost of labour for fitting the same. Such extra collection made by the company is to the tune of Rs. 44,084.57. Such removals were verified and the goods consignment notes of M/s. Venson Transport other Transport Companies with the record of the appellants, disclosed that the company had removed 27,201 numbers of tin containers valued at Rs. 1,01,470.97 during the period from 30.11.1981 to 2.7.1985 and 2,21,970 numbers of components of tin containers valued at Rs. 25,152.75 without payment of duty. It was also noticed that 8,100 numbers of tin containers valued at Rs. 20,136.80 had been removed over and above the quantity mentioned in the Central Excise gate pass. Manager of Venson Transport Company in his letter dated 27.10.1998 (sic) addressed to the MD of the appellants stated that they had been regularly receiving consignments sent from the appellants without any transport documents. Shri Srinivasan Proprietor of M/s. Venson Transport Company in his statement dated 6.8.1986 submitted that there were instances when the appellants company sent excess consignments than what was shown in the documents sent with the consignments and they have reminded them to rectify the lapses. Shri Sunderaraj, factory manager of the appellants in his statement dated 6.8.1986 admitted that tin containers had been on occasions transported without the documents like gate passes and despatch advice. Likewise Shri G.P. Srinivasan, clerk of the appellants had also stated in his statement dated 18.12.1986 some containers and components of containers have been cleared without gate passes and without payment of duty. Shri Rajagopal, General Manager of the appellants in his statement dated 20.12.1986 admitted that he verified the goods consignment notes, booking register of the transport companies and miscellaneous despatch advice of the company and found that some of the tin containers were cleared without gate passes and without payment of duty. He also confirmed the particulars furnished by Shri G.P. Srinivasan with regard to clearance of tin containers and components of tin containers without payment of duty vide his statement dated 27.12.1986. In view of this it was found that the appellants company had removed 35,301 numbers of tin containers valued at Rs. 1,21,607.77 and 2,21,970 numbers of components of tin containers valued at Rs. 25,152.75 without payment of duty during the period from 30.11.1981 to 2.7.1985.
8. On the basis of the investigation and enquiry the appellants were issued with show cause notice dated 29.12.1986 alleging contravention of various rules and demanding duty which was ultimately confirmed as noted above. The appellants filed detailed reply. After detailed hearing the Collector passed a detailed speaking order dealing with each of the aspects raised in the show cause notice including the analyses of evidence and did not find any plausible explanation to give them any relief in the matter. The Collector has analysed the entire statement of several persons including admissions and scrutinised the entire records seized and analysed the evidence on record to confirm the allegations in the show cause notice. Detailed submissions made by the Counsel has been noted including the points raised by him in his written submission. The reply given by the learned DR is also noted by us. On consideration of the submissions we proceeded on the basis of the charges levelled in the show cause notice and the replies made out on each of the points and give our findings.
9. The first charge is pertaining to shortage of 1214 tin containers valued at Rs. 3554.97 and confirming duty of Rs. 710.79 and excess of 43339 tin containers valued at Rs. 1,94,855.40 on which redemption fine of Rs. 20.000/- has been levied. The learned Counsel did not press about this issue very seriously but only contended that this was as a result of absence of the dealing staff and hence the same could not be reflected in the records. He contended that there was no clandestine removal and the said tin containers are still lying in the factory. These tin containers were for specific customers with names etc but the same could not be sold. There was no intention to evade payment of duty. On this ground we have considered the submissions and have also perused the findings given by the Collector. We notice that the Collector has relied upon enormous clear admissions made by the Factory Manager Shri G.N. Sundarajan, Shri A. Rajagopal, General Manager, Shri N. Prakash, Despatch assistant, Shri Anantharajan, Accounts Assistant, Shri G.P. Srinivasan, Clerk and assistant Store keeper. All of them have admitted about their laches and lapses and have given detailed statements about each of the offence including undertaking to pay the amount. Shri G.N. Sundararaj, admitted in his statement that neither the ac-counts tally with the production report nor in the RG-1 register. He has also admitted it as a lapse on his part. He has given reason for this lapse which was to the effect that the Assistant dealing with the Central Excise matter was on leave and the incharge was not well conversant with the matter. Details have also been recorded in the mahazar which has been signed by the said Sundararaj, Factory Manager. In view of this admission, the conclusion arrived at by the Collector that the subsequent defence raised is flimsy and cannot be accepted, is required to be accepted and confirmed. The Collector has given finding that the appellants are a long standing licensee and well conversant in trade and has knowledge about the Central Excise matters and therefore, cannot shift the blame on the dealing assistant. Therefore, he noted that it is obligatory and mandatory on their part to make alternative arrangements in the absence of dealing assistant and at any cost flouting Central Excise procedure cannot be countenanced. He has also noted the defence taken in the reply that the goods which were damaged were stored in the factory premises were not taken by the officers at the time of stock verification cannot be accepted because at the instance of stock verification, the responsible officers of the company should have made known the investigating officers the fact of storage of damaged goods and should have justified the stock position prevailing with them. He has also noted that the defence subsequently put forth were an afterthought. He has noted that the stock has been verified with the daily production report and the RG-1 register and the reason for discrepancy in the stock had been recorded in the mahazar dated 11.7.1986, but contrary defence has been raised by the Company. The Collector has rejected the same. We note that the aspect pertaining to this has been admitted by the factory manager Shri G.N. Sundaramjan, and the details had been found only on verification and the defence raised after a lapse of long time. Therefore, the Collector's finding that the same is an afterthought and flimsy is required to be accepted and hence we confirm this portion of the order. We also confirm the finding arrived at pertaining to shortages found during stock verification.
10. The Collector has noted that the reason advanced by the company for the shortage is quite different and contrary to the reasons advanced at the time of stock verification. He found that they had taken subsequent defence in the face of the admissions without retraction is not acceptable. Because of the various reasons given by the Collector on this aspect of the matter, we do not find any substance in the arguments raised and hence we confirm the findings both in regard to liability to duty of an amount of Rs. 710.99 and also order for confiscation of 43,339 tin containers found excess, and imposing redemption fine of Rs. 20,000/-.
11. The Second issue dealt with by the Collector pertains to clandestine removal of Tin containers. We have heard the learned Counsel on this point. We find that this is merely a general grievance and no arguments have been raised by the learned Counsel on the detailed admissions made by all the officers including the MD of the appellants company on this point. No grounds have been raised on the various debit notes and the seized documents showing the clandestine removal of the goods. It is difficult to understand the arguments raised against the clear admissions and meticulous and enormous documentary evidence found by the investigation officers. In fact the General Manager Shri A. Rajagopal in his statement dated 20.12.1986 clearly admitted that the payment of duty has not been done in respect of such clearances and he would prevail upon the management to pay the duty on this score. He also admitted about non-payment of duty on the various discrepancies noticed, in his statement. Therefore, there is also evidence in support of the department by the statement given by Shri V. Srinivasan, Proprietor of M/s. Venson Transport and also that of the Factory manager and the General Manager of the appellants who have also come out with clear admissions. In view of these clear-cut, admissions it is difficult to accept any other plea raised by the appellants in regard to the clandestine removals of the goods. There is also statement given by S/Shri Murty, N. Prakash of M/s. ITI, Bangalore, Shri RSA Khan G.M. of M/s. HVOC, Madras who also admitted about this aspect of the matter. Therefore, the finding arrived at by the Collector that the entire statements of each other persons being corroborative in nature the charge against the appellants cannot be doubted.
12. The Collector's rejection of the subsequent plea raised that the goods consignments noted have not been taken twice is justified. He has noted that he had verified Annexures D-5 and D-7 and GC notes referred to therein. The details covered by these two annexures are entirely different and are not same. Annexure D-5 finds the value of tin containers removed clandestinely and Annexure D-7 finds the value of components of tin containers removed clandestinely. Therefore, his finding that the evidence on record proves clandestine removal is required to be accepted. There is nothing on record from the appellants to suggest that there has been no clandestine removals and hence we are not convinced by the argument in regard to this portion of the order of the lower authority.
13. The next issue raised by the appellants is pertaining to confirmation of duty on corrugated cartons the value of which is Rs. 44,24,806.29. In this regard the learned Counsel has relied upon a large number of judgments of the Tribunal, High Courts and the Supreme Court to plead that value of corrugated cartons used for packing tin containers cannot be added to the assessable value. He relied upon order No. 1753 dated 16.7.1997 in the case of CCE, Bangalore v. India Tin Industries Pvt. Ltd. i.e. their own case wherein the Tribunal has rejected the Revenue appeal on the same issue by holding that the cost of durable and returnable packing material supplied has to be deducted from the price of the goods for the purpose of assessable value in terms of the judgment rendered by the Hon'ble Supreme Court in the case of Hindustan Polymers . The Collector has noted the evidence on record wherein the Company had filed price list in Part II and had declared the price to be inclusive of the packing charges. He noted that it is evident from the contract copies enclosed along with the price list that tin containers are packed in corrugated boxes. He also noted the statement of the Managing Director and the General Manager who have admitted about not including the cost of corrugated boxes. He has also noted the statement of Manager, Technical, of Faruk Anwar & Co. He noted that the appellants have totally suppressed from the department the transaction with the customers with regard to the packing of tin containers and confirmed duty demand of Rs. 1,96,124.50 and the value of Tin containers have been worked at Rs. 44,34,806.29. The Collector has further analysed Section 4 and has noted that price list filed in part II is inclusive of the packing charges and the contract copy was enclosed along with the price list. It is mentioned that packings have been made in corrugated boxes. He holds that this is accepted by the officers of the company in their statements. But the debit notes for the value of the corrugated boxes, freight and forwarding charges have not been made known to the department. He has also held that goods cannot be sold unless they are packed, otherwise they are likely to be damaged. Therefore, this being a primary packing, the value of which is required to be added.
14. We have perused the pleas raised by the appellants in this regard. We note from the admissions that in some cases, the appellants have packed the goods in durable corrugated boxes. In some cases, they have taken the value of such corrugated boxes. In terms of the judgement cited, value of secondary packing and those of durable and returnable packing is required to be excluded. In this case, a detailed working out has to be done with regard to those corrugated boxes which are durable and returnable and with regard to those which have been supplied after collecting the charges. In view of the large number of judgements, and non consideration of this aspect of the matter, it is proper to remand the issue for de novo consideration to decide this point in the light of the judgements.
15. The next allegation is pertaining to inclusion of escalation charges in the assessable value. The learned Counsel has admitted that the party has already paid Rs. 1.21 lacs against the total payable amount of Rs. 7,69,191.50. In this regard the learned Counsel stated that the point raised has not been considered. However, on consideration of the submissions, we notice that on this point, a detailed working out has been made by the department, and a detailed finding has been given by the Collector on the basis of the evidence on record. The learned Collector has admitted that the Company has admitted duty liability to the extent of Rs. 1.5 lacs. The only dispute raised is with regard to Rs. 1,21,147.50. On verification of records, he found that the demand has been correctly raised and there is no error in the quantification made in the show cause notice. He noted that the appellants did not produce any evidence to prove that freight expenses as claimed have been actually incurred by them. He has noted that the excess amount so worked out is not actually spent and he has worked out the excess amount so collected to the tune of Rs. 1,81,828.77 and duty is payable on this amount.
16. On consideration of the submission and on going through the records, we find that there is no infirmity in the order on this aspect and hence we confirm the same.
17. The next issue is pertaining to debit notes issued in favour of Ganesh Flour Mills and also the debit notes raised to Faruk Anwar & Co. for caps and liners. We notice that there is clear admission about this point and the General Manager himself has stated that he was persuading the management to pay the duty on this account. The statement given by other persons also corroborated his statement. The Collector also noted the admissions made by D.J. Yagnik, Manager (Technical) of M/s. Faruk Anwar & Co. that the cost of plastic caps and liners were not included in the price of tin containers. The learned Collector has noted that the tin containers is covered with corrugated liners and body of the tin is printed and top and the bottom components are produced in press shop. The entire tin is fabricated on a conveyor line and plastic cap is fitted on to the circular opening to prevent dust entering into the tin. He noted that these accessories are a must and go along with the containers as part of the finished goods and hence cost of plastic caps and corrugated liners should form part of the assessable value. We do not find any infirmity in the reasoning of the Collector and hence we confirm the same.
18. The next point is pertaining to manufacture and clearance of Balvikas boxes falling under erstwhile tariff item 68 and chapter 8001.00 of the CET 1985 to Vysya Bank Ltd., duly fitted with plastic lock, keys and legs. Detailed finding has been given by the Collector. He has noted that these have been removed by separate debit notes for the plastic components which has not been intimated to the department and thereby the party has suppressed the facts from the department and they are liable to pay duty. The learned Counsel did not seriously contest this issue and hence we confirm this portion of the order.
19. We find that detailed finding has been given by the Collector on each of the charges. We do not find there is any substantive evidence to disprove the same and hence we confirm the same.
20. The learned Counsel argued that penalty and redemption fine and confiscation of plant and machinery should not have been ordered including imposition of personal penalty.
21. We notice that personal penalty of Rs. 3 lacs has been imposed on the appellants under Rule 173Q of the CE Rules, 1944. In view of the relief the appellants are likely to get on returnable containers we reduce the penalty to Rs. 2 lacs (Rupees Two lakhs). With regard to confiscation of plant and machinery used for illicit manufacture and clandestine removal of the goods under Rule 173Q(2) of CE Rules, we note that the officers of the appellants have clearly admitted about the various offences committed in view of the large scale clandestine removal of goods without payment of duty, for which the appellants are liable to confiscation and personal penalty. However, the redemption fine of Rs. 5.00 lacs is excessive and we reduce the same to Rs. 3 lacs (Rs. Three lakhs).
22. With regard to personal penalty of Rs. 10,000 each on the officers of the company, we find that they have deliberately committed the offence with full knowledge with intention to evade payment of duty and hence they are liable to personal penalty and the penalty imposed on them is not excessive and the same is confirmed.
23. In the result, the order of the learned Collector is modified to the extent indicated above. For the purpose of duty on corrugated boxes, the matter is remanded to the lower authority for de novo consideration in the light of the judgment cited by supra. Thus the appeals are disposed of in the above terms.
(Pronounced in open Court on 13th August, 1998).