Customs, Excise and Gold Tribunal - Mumbai
Laxmi Board & Paper Mills Ltd. vs Commissioner Of Central Excise on 3 April, 2003
ORDER G.N. Srinivasan, Member (J)
1. These two appeals have been filed, one by the assessee and the other by the department. In the impugned order, the Commissioner has held that the show cause notice dated 26 June 97 invoking the proviso to Section 11A of the Central Excise Act, 1944 alleging suppression and misstatement was not an order and is not maintainable and therefore the demand is hit by time bar for non maintenance of proper records of the assessee with its yield and usage of the bagasse pulp to establish the exemption claimed. The order imposed a penalty of Rs. 2.50 lakhs on the assessee. The assessee has filed Appeal E/917/98 and the department has filed Appeal E/2506/99 challenging the correctness of the impugned order passed by the Commissioner.
2. The facts of the case are that the assessee is engaged in the manufacture of waste paper based kraft paper and bagasse based kraft paper at Kalyan. As far as bagasse based kraft paper is concerned, the assessee was claiming full exemption from payment of duty in respect of bagasse based kraft paper under Notification No. 48/91 dated 25.7.1991. It is the case of the appellant that in terms of the said Notification, the paper manufactured out of bagasse base kraft paper is exempt from payment of duty is weight of bagasse pulp used in the manufacture of such paper is not less than 75%. It is further the case of the assessee that during the relevant period they were maintaining the statutory records like RG1 register for finished product form IV register for raw materials in their factory recording on them the stock of finished product and that of the raw material. It is the further assertion of the appellant made in the Appeal that the production and clearance of bagasse based kraft paper in respect of which the dispute is raised in the proceedings were fully accounted for in the RG1 register and raw materials are used for manufacture of the product was fully accounted for in the form IV register. The officers of the Central Excise Department visited the factory on 12.12.1996 and started questioning the appellant as to how they could claim exemption in respect of the product under Notification No. 48/91. The statements of the Managing Director D.C. Patel, General Manager G.N. Bhatt and V.P. Kaushal, Production Manager were recorded on various dates resulting in issuance of a show cause notice dated 26.6.1997. In the show cause notice the department made on 8.12.1996 to the effect that the assessee were claiming exemption under the Central Excise Notification No. 48/91 on such quantity of bagasse based kraft paper containing 75% bagasse pulp and in 1994 they have used some quantity of bagasse board manufactured of paper and no exemption claimed. The show cause notice dated 26 June 97 also refers to Kaushal's statement on 12.12.1996 that the assessee was also manufacturing kraft paper with less percentage of bagasse 5-6% and the rest of the ingredients were waste paper either indegenuous/imported and that the use of bagasse vary from 30% to 40% depending upon the raw bagasse received from the sugar mills. On this basis the notice claimed duty for the period June 1993 to January 1994 of Rs. 1,00,78,230/- and also proposed penalty. The assessee filed its reply on 22.9.1997 making elaborate explanation as to how they were entitled to claim exemption under Notification No. 48/91. They also invited the attention of the assessing authority to the actual words used by V.P. Kaushal in his statement dated 12.12.1996 to the effect that in the kraft paper the composition of the raw material was bagasse pulp was 75 to 80%. The assessee also challenges invocation of the larger period when the classification list was approved and RT12 returns were cleared finally by the adjudicating authority. Therefore, both on merits as well as on limitation they have an excellent case.
3. The adjudicating authority after hearing the party by the impugned order imposed a penalty on the assessee for not maintaining the records but agreed with the assessee's contention regarding the invocation of the larger period. The department has filed an appeal for confirmation of the duty and the assessee has filed the appeal against imposition of penalty.
4. The learned counsel for the assessee Shri Prakash Shah along with Shri S.P. Mathew, the learned advocate, argued that the grounds of appeal made by the department regarding confirmation of demand is wrong in law. It is the statement dated 12.12.1996 of V.P. Kaushal which has to be looked into in toto to understand what is the quantum of the raw material namely bagasse based pulp, the percentage of raw material used in the manufacture of final product. He states that no doubt Mr. Bhatt states in his statement dated 12.12.1996 that records were not available, one has to look into the aspect in a proper perspective. Every month RT12 returns were filed and were approved finally. When that is the position here merely relying on the statement of the General Manger who in his statement dated 3.12.1996 is wrong in law. No doubt he stated that no records were kept. Shri Prakash Shah argued that when the RT12 returns have been approved, no person would keep the records for future reference regarding raw material purchased. He therefore states that reference to certain types of guesses mentioned in the statement of Bhatt may not be correct. It is the case of the assessee that once the exemption notification has been clearly granted in finalising the RT12 returns assessment the department has to prove with sufficient materials later on as to how the assessee wrongly claimed the exemption. It is further contended by the learned counsel for the assessee that once the initial burden of claiming the exemption has been made with sufficient evidence then burden shifts on to the department to prove as to how the benefit of notification cannot be availed of by the assessee.
5. The department in its appeal contends that the statement made by Mr. Bhatt as reflected in paragraph 4 would itself justify the acceptance of the appeal of the department.
6. We have considered the rival submissions. Paragraph 4 of the show cause notice reads as under:
"Shri V.P. Kaushal Production Manager, in his statement dt. 12.12.96 recorded under Section 14 of the Central Excise Act 1944 stated, interalia, that during the years 92-93 & 93-94, they were engaged in the manufacture of Kraft paper using bagasse; that Kraft paper consisted of bagasse, indigenous waste paper and imported waste paper; that in the said Kraft paper the composition of raw materials was Bagasse pulp 75% - 80% and waste paper pulp 20-25% (indigenous or imported waste paper); that they were also manufacturing Kraft paper with less percentage of Bagasse (5 - 10%) and the rest of the ingredients were waste paper either indigenous/imported, and that the yield of bagasse varies from 30-40% depending on the raw bagasse received from sugar mills whether wet or dry."
7. In the statement of G.N. Bhatt made oin 30.12.1996 he states as follows:
"Since the above mentioned records are not being available, I do not product the same. No records are maintained in the factory about moisture content, pitch blending proposition of bagasse pulp & waste paper pulp and test reports perytaining to the above are not available. After being shown the records 13322 M.T. of bagasse is used in the year 1992-93 80% of this was used for waste paper based product on which duty is paid... Taking into consideration of yield of 35% the cleaner of the bagasse based paper should have been 2106 MT whereas the actual clearance is 2477.71 MT hence the excess clearance of 371.71 MT of bagasse based paper we have cleared 1044.71 MT during the years 92-93 and 93-94 on which we cannot claim exemption from payment of duty. However, we undertake to pay the same immediately."
8. In the statement dated 12.12.1996 V.P. Kaushal, Production Manager of the assessee specifically states that in the kraft paper the composition of raw materials was bagasse 75%-80% + 20-25% waste paper indigenous/import depending upon the quality required by the customer. The crux of the case of the appellant is that Bhatt is not competent to give the yield of the bagasse because he was dealing with general administration but however we have to state that the production manager in this case has stated that bagasse pulp was to use to the tune of 75% in terms of the notification. There is certain amount of peculiar aspect arising in this case regarding non maintenance of the records as reflected in Bhatt's statement but this has to be seen in the light of the fact that RT12 Returns have been regularly approved without questioning. The period in dispute is from June 1992 to January 1994 and the show cause notice is dated 26.6.1997. When this is state of affairs, we are of the view that invocation of the larger period of limitation under the circumstances of this case is wrongly made. As far as the merits of the case is concerned, when the assessee has proved its case by filing RT12 Returns which were regularly approved, the larger period of limitation cannot be invoked, and the question of demanding duty by the department in its appeal and imposition of penalty under the circumstances is not warranted. Hence the Appeal of the assessee is allowed and the Appeal of the department is dismissed.
9. The appeals are disposed of in the above terms.