Customs, Excise and Gold Tribunal - Tamil Nadu
M/S. Annapurna Industries Ltd. vs Cce, Hyderabad-I on 16 May, 2001
Equivalent citations: 2002(139)ELT630(TRI-CHENNAI)
ORDER
Shri S.L.Perran
1. Both these appeals arise from a common Order-in-Appeal No. 57/99 (H-ii) CE Dated 31.8.99 by which Commissioner (appeals) has disposed of Order-in-Original No.3/97 dated 5.11.97 passed by Commissioner of Central Excise, Hyderabad confirming duty demand of Rs. 10,95,740/- under 9(2) of Ce Rules read with proviso to Sub section 1 of the Section 11A of CE Act. There is a penalty of Rs. 50,000/- on Shri T. Vinayaka Ravin Reddy under Rule 209 A of the C E rules, 1944 besides penalty of Rs. 2,00,000/- on the appellant company.
2. Ld. consultant Shri Sarbheswara Rao took us through the Order-in-Original and pointed out that the Additional Commissioner in the Order-in-Original has based his findings on the bills recovered from Vinayaka Agencies and M/s. DCM who are the agents and the wholesale dealers to confirm higher quantity of aerated water and cool drinks said to have been received by DCM and which was reflected in their accounts. It is his contention that this cannot be the ground at all to confirm clandestine manufacture and removal of goods as alleged in the show cause notice. The appellants' of the Production Manager as well as Production chart have been obtained by the investigating authorities. His personal diary which noted even the productions both entered in RG-I as well in the private registers were also taken and found that there was no discrepancy therein. When that was the position, the question of the Additional Commissioner basing his findings on the supposed receipt by the retail dealers cannot be a ground for confirmation of such huge damages. Ld. Consultant points out that the goods which they had removed to the dealer M/s. DCM had been fully accounted for and the accounts fully tallied. Both the adjudicating officers have correctly come to the conclusion that in so far as the removal of the manufacturer to their wholesaler DCM to the agents were found to be the reason for confirming the clandestine removal. He submits that the salesman who sold these goods to the respective dealers have not been examined to substantiate the charge that the invoices were made out by the DCM in excess of the receipt of the goods from the appellants's factory. He further submits that in order to manufacture the extent of final goods as alleged in the show cause notice, appellants ought to have received the "Essence" from the from M/s. Parely Co. to whom the appellants were the franchisee manufacturers. Without the receipt of the "essence", and also the purchase of the raw materials like sugar, Co2, crown corks, there would not have been production and removals. He points out that the department ought to have established the case by showing that the appellants had received the quantum of "essence" from the supplier namely M/s. Parely Ltd. besides having purchased Co2 and crown corks. He points out day these are the factors which have been taken into consideration in large number of judgements and in all those cases on which the cases were booked were on the same lines were set aside by the Tribunal on the ground that the department had failed to establish the manufacture and clandestine removal of the final goods as in the following cases.
i) Krishna Bottles, Vijayawada Pvt. Ltd. Vs. CCEm Guntur [1999(84) ECR 245 (SRE)
ii) CCE Meerut Vs. Moon Everages Ltd. [1999 (33) RLT 153].
He also files a list of citations to show that in order to establish clandestine removal, the department has to show that the appellants have purchased raw materials used, that much quantum of electricity and finances for manufacture and removal of the final product, as alleged. He submits that in the present case, the entire evidence is based on the receipt of invoices by dealers from the appellants's wholesale dealer. There is no evidence of the goods sent by appellants to the dealer or to the retailers and as there is not evidence, the impugned orders are required to be set aside and appeals to be allowed. He points out that the Commissioner (appeals) did not go into all the details of the case but merely confirmed the Order-in-Original on the premise that appellants's Finance Manager on behalf of the appellants had admitted the discrepancy and had paid the amounts. He submits that due to certain pressing circumstances and department having pressurised the appellants, they were forced to pay the amounts. But it do not imply that they had manufactured and removed clandestinely the final products. He submits that the Commissioner (Appeals) has not given any finding on any of the materials produced and arguments adduced before him except to note that the appellants had admitted about the payments made in cash and on that basis has confirmed the Order-in-Original and thus the order is not also a seeking order. He further submits that the department compelled them to make payments accordingly. Although they were forced to sign on the computerised statement and they made the payments, it does not establish clandestine manufacture and removal of the goods. He submits that this was before the issue of show cause notices and they had been asking the department to establish the clandestine removal. The same has not been done till date, but they proceeded only on the basis of the statement of the dealers and alleged admission made by the Finance Manager which cannot be a ground for confirmation of clandestine removal in the matter. He further submits that the penalty imposed on the Managing Director is not sustainable as he is not involved in the matter and Rule 209A cannot be invoked in this case.
3. Ld. D.R. shri S. Arumugam took us through records and pointed out that there were clear admissions on behalf of dealers with regard to the receipt of the final goods from M/s DCM who was the wholesaler of the appellants. Therefore, M/s. DCM would not have supplied to the dealers unless he had received that much of quantity from the manufacturers. The Additional Commissioner in the impugned order has clearly recorded his findings as to how the case is based with these circumstantial evidence and that is sufficient for purpose of confirmation of demand. He also pointed out that Bill numbers have also been cited in the Order-in-Original establishing the case. He submits that there is no infirmity in both the orders and seeks for confirmation of the same.
4. On a careful consideration of the submission and on perusal of records, we notice that the Additional Commissioner, as submitted by Ld. Consultant, has proceeded to examine the records of the dealer and the wholesaler and the bills pertaining to them and their records. He has not examined any of the evidence pertaining to the manufacture and clearance from the appellants' factory. In order to establish clandestine removal, the department has to establish the manufactured and made surreptitious removals. In similar matters, it had been noted that the most important ingredients for manufacture of the final product, i.e. cool drinks, the quantum of "essence" which the franchisee receives from M/s. Parley, one sugar, crown corks, Co2 etc. These are the factors which have been taken into consideration to arrive at the assumption of compelled them to make payments accordingly. Although they forced to sign on the computerised statement and they made the payments, it does not establish clandestine manufacture and removal of the goods. He submits that this was before the issue of the show cause notice and they had been asking the department to establish the clandestine removal. The same has not been done till date, but they proceeded only on the basis of the statement of the dealers and alleged admission made by the Finance Manager which cannot be a ground of confirmation of clandestine removal in the matter. He further submits hat the penalty imposed on the Managing Director is not sustainable as he is not involved in the matter and Rule 209A cannot be invoked in this case.
3. Ld. D.R. Shri S. Arumugam took us through records and pointed out that there were clear admissions on behalf of dealers with regard to the receipt of the final goods from M/s. DCM who was the wholesaler of the appellants.Therefore, M/s. DCM would not have supplied to the dealers unless he had received that much of quantity from the manufactures. The Additional Commissioner in the impugned order has clearly recorded his findings as to how the case is based with these circumstantial evidence and that is sufficient for purpose of confirmation of demand. He also pointed out that Bill number have also been cited in the Order-in-Original establishing the case. He submits that there is no infirmity in both the orders and seeks for confirmation on the same.
4. On a careful consideration of the submission and on perusal of records, we notice that the Additional Commissioner, as submitted by Ld. Consultant, has proceeded to examine the records of the dealer and the wholesaler and the bills pertaining to them and their records. He has not examined any of the evidence pertaining to the manufacture and clearance from the appellants' factory. In order to establish clandestine removal, the department has to establish the manufactured and made surreptitious removals. In similar matters, it had been noted that the most important ingredient for manufacture of the final product, i.e. cool drink the quantum of "essence" which the franchisee receives from M/s. Parley and sugar, crown corks, co2 etc. These are the factors which have been taken into consideration to arrive at the assumption of manufacture and removal clandestinely by the manufacturer of final goods, as held in Krisnha Bottlers Vijayawada Ltd. case supra. In the present case, the appellants' production chart and Production Manager's diary were taken by the investigating officers. There is not reference to any of the material placed by the appellants and the electricity details and receipt of other registers maintained by them to co-relate the total extent of production and clearance made by them, and as to how the excess clearance were made to M/s. DCM. There is no co-relation or sufficient evidence brought out in both the orders and hence we are of the considered opinion that both the orders suffer from serious infirmity. In fact, the Commissioner (Appeals) has not given any findings on various grounds including the plea taken before us. He has proceeded mainly on the ground that the Manager of AIL on behalf of the President of the appellants' unit and the Accounts Officer of DCM in their statements had clearly accepted about the discrepancies about the receipt of excess stocks, On that basis he has confirmed the order. This has been seriously contested by the appellants. They had stated that at the time of visit of officers, the department had generated a computer statement and forcibly taken their signature and also directed the appellants to deposit the amounts. However, the appellants had been insisting for scrutiny of all their records and to issue show cause notice to establish the clandestine removal. We have gone through the reply to the show cause notice wherein the appellants have challenged all the material facts raised in the show cause notice. They have also annexed Annexure-A to the show cause notice to reply to show cause notice wherein they have given the number of visit made by the officers and having checked the RG-I and Form 4 records. Even on the pleas raised by the appellants, there is no finding recorded by both the authorities and therefore, we are of the considered opinion that as both the orders are not speaking orders, it is not proper therefore for us to set aside the orders on the ground that department has not established the case of clandestine removal. We notice that the order-in Original having suffered from basic infirmity in proceeding only on the evidence of the dealer without looking into the records of the appellants. Hence the matter has to go back to the original authority for de novo consideration. The original authority shall grant an opportunity of hearing to the appellants and reconsider the entire case in the light of the evidence adduced by the department on clandestine manufacture and removal of goods. The statements of dealers made can only to be taken as corroborative evidence and it cannot be the main evidence on which the demands can be confirmed as has been held in large number of Tribunal judgments. The judgments given by the Tribunal in Krishna Bottlers case and CCE Vs Moon Beverages (supra) may be taken into consideration while disposing of the matter. The appellants are at liberty to put such other evidence as is necessary to establish their innocence in the matter. Further plea that there cannot be penalty under Rule 209A on the Managing Director is required to be reconsidered by the original authority. Thus the impugned orders are set aside and mater remanded for de novo consideration.
(Pronounced & dictated in open Court)