Custom, Excise & Service Tax Tribunal
Kirloskar Pneumatic Co Ltd vs Commissioner Of Central Excise, Pune ... on 7 January, 2010
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT NO. Appeal No. E/1203/08 Mum (Arising out of Order-in-Appeal No. PIII/184/08 dated 25.09.2008 passed by Commissioner of Central Excise & Customs (Appeals), Pune III.) For approval and signature: Honble Mr.P.G. Chacko Member (Judicial) ======================================================
1. Whether Press Reporters may be allowed to see : No the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the : __ CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
3. Whether Their Lordships wish to see the fair copy : Seen of the Order?
4. Whether Order is to be circulated to the Departmental : Yes authorities?
====================================================== Kirloskar Pneumatic Co Ltd Appellant Vs Commissioner of Central Excise, Pune III Respondent Appearance:
Shri Prakash Shah with Shri Jitu Motwani, Advocates, for Appellant Shri Manish Mohan, S.D.R, for Respondent CORAM:
Honble Mr.P.G. Chacko Member (Judicial) Date of Hearing: 07.01.2010 Date of Decision: 07.01.2010 O R D E R NO..
1. In this appeal filed by the assessee, the short question arising for consideration is whether the decision of the lower authorities to demand duty on a certain quantity of inputs for the period 2005-06 and to impose equal amount of penalty on the assessee is sustainable on the facts of this case. A senior auditor of the department on 8.12.2006 made on an audit report, wherein the following figures were entered with regard to aluminium ingots (input):
Opening balance as on 1.4.05 - 1260 kgs Receipts in 05-06 48,419 kg Total 49,617 kgs Issue in 05-06 61,083 kg Closing balance (-) 11,412 kg
The senior auditor himself worked out Rs 3,22,525/- to be the total amount of CENVAT Credit said to have been availed by the assessee on aluminium ingots weighing 13,724 kgs in 2005-06. Reproducing the above figures, the department issued a show-cause notice to the assessee on 21.5.2007 seeking to recover duty of Rs 3,22,525/- from them with interest thereon under Section 11AB as also to impose a penalty on them under Rule 25 of the Central Excise Rules, 2002. In their reply, the assessee presented their own worksheet containing the following information:
Opening balance as on 1.4.05 - 245 kg Receipts in 05-06 490,015 kg
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Total 49,260 kg ------------------------------------------------- Issues in 05-06 48,278 kg Closing balance 982 kgs
In support of this account, they also furnished certificate from their Chartered Accountant, wherein it was certified that the assessee had a closing balance of 982 kgs of aluminium ingots for the year ended 31.3.06. That certificate was issued on the basis of verification of the assessees books of accounts and stock records. Alongwith the above certificate, the assessee also furnished, what was claimed to be the print-out of computerized CENVAT Account of inputs for the relevant period. After hearing the assessee, the original authority adopted the auditors report and entered the finding that the assessee had availed inadmissible CENVAT Credit to the extent of Rs 3,22,525/-. On this basis, the proposed demand was confirmed against the party and equal amount of penalty was imposed on them. The order of adjudication was upheld by the Commissioner (Appeals). Hence the present appeal of the assessee.
2. After hearing the learned Counsel for the assessee and the learned SDR for the Revenue, I find that the demand raised on the assessee is not sustainable on facts or in law and, consequently, the penalty imposed on them is also liable to be set aside. There are more than one reasons.
3. Firstly, the show-cause notice was issued purely on the basis of audit objections without the necessary investigation which must precede action under Section 11A of the Act. In this connection, I may usefully refer to two decisions cited by the Counsel, viz., (i) Swastik Tin Works vs Collector 1986 (25) ELT 798 (Tri); and (ii) Ram Steel Rolling and Forging Mills vs Commissioner 2006 (204) ELT 87 (Tri-Mumbai). In the former case, one of the reasons stated by the Tribunals Special Bench for holding the demand of duty to be unsustainable, was that the demand had been raised on the basis of audit objections and without investigations. In the latter case also, it was found that the demand of duty in question had been raised on the basis of audit objection and without gathering evidence by way of investigation. The internal auditors of the department are not investigators. They are rather fact-finding experts, whose practice it is to verify records and cull out the relevant facts. The department, has an investigating agency of its own, whose job is to book cases against suspects and gather the relevant facts by way of investigation including examination of witnesses. There is a clear distinction between the two jurisdictions. A show-cause notice under Section 11A (1) of the Central Excise Act and, for that matter, one under Section 28 (1) of the Customs Act should result from the successful conclusion of investigations rather than from a mere report of an auditor. This is the settled law on the subject.
4. Secondly, the show-cause notice in this case is arithmetically blunderous inasmuch as it repeats the auditors blunder. Both the auditor and the author of the show-cause notice chose to add the figure 2312 kg to the closing balance (-) 11,412 kg of aluminium ingots to arrive at the total figure of 13,724 kg as the alleged excess quantity of input issued to the floor of the factory during 05-06.
5. Thirdly, the lower authorities also chose to repeat the mistake of the auditor in application of Rule 9 (5) of the CENVAT Credit Rules, 2004. Apparently, it was presumed that the burden of proof regarding the admissibility of CENVAT Credit to the extent of Rs 3,22,525/- lay on the assessee. The indisputable fact is that, in this case, the assessee consistently denied having taken any such credit. The department, in the absence of CENVAT Account, did not make out a fool-proof case of such credit having actually been taken by the assessee, either. The case of the assessee, as putforward by their Counsel today, is that, had a quantity of 13,724 kg of aluminium ingots been issued to the floor of the factory in 05-06 as alleged in the show-cause notice, it would have resulted in the production of a corresponding quantity of final product and, had any credit been taken on the said quantity ingots, the same would have been utilized for payment of duty on the finished goods. In any case, it is premature for the department to have raised a demand of this kind.
5. I am convinced of the need to set aide the impugned order for the reasons already noted.
6. The order is set aside and this appeal is allowed.
(Dictated in Court.) (P.G. Chacko) Member (Judicial) rk 4