Custom, Excise & Service Tax Tribunal
Gautam Ferro Alloys, A Unit Of Bihar ... vs Coms.C.Ex - Ranchi on 17 December, 2019
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE
TRIBUNAL, KOLKATA
EASTERN ZONAL BENCH : KOLKATA
REGIONAL BENCH - COURT NO.2
Excise Appeal No.584 of 2009
(Arising out of Order-in-Original No.11/MP/Denovo/Commr/09 dated 30.07.2009
passed by Commissioner of Central Excise, Ranchi.)
M/s. Gautam Ferro Alloys
A unit of M/s.Bihar Foundey & Castings Limited)
(Ramgarh Industrial Area, Ramgarh Cantt., At & P.O. Marar,
Distt. Hazaribagh, Jharkhand, Pin-829 117.)
...Appellant
VERSUS
Commissioner of Central Excise, Ranchi
.....Respondent
(Central Revenue Building, 5, Main Road, Ranchi-834001.) WITH
(i) Excise Appeal No.585 of 2009 (Shri Hari Krishna Budhia); (ii) Excise Appeal No.586 of 2009 (Shri A.D.Singh); (iii) Excise Appeal No.590 of 2009 (Commissioner of Central Excise, Ranchi);
(Arising out of Order-in-Original No.11/MP/Denovo/Commr/09 dated 30.07.2009 passed by Commissioner of Central Excise, Ranchi.) APPEARANCE Shri Kartick Kurmy, Advocate for the Appellant (s) Shri S.S.Chattopadhyay, Authorized Representative for the Respondent (s) CORAM: HON'BLE SHRI P. K.CHOUDHARY, MEMBER(JUDICIAL) HON'BLE SHRI BIJAY KUMAR, MEMBER(TECHNICAL) FINAL ORDER NO. 76919-76922/2019 DATE OF HEARING : 25 October 2019 DATE OF DECISION : 17/12/2019 P.K.CHOUDHARY :
These four appeals arise out of Order-in-Original No. 11/MP/De Novo/Commr./09 dated 30-07-2009 passed by Ld. Commissioner, Central Excise & Service Tax, Ranchi. The Department is in appeal challenging dropping of central excise duty demand of 2 Excise Appeal Nos.584-586 of 2009 & 590 of 2009 Rs.2,34,62,483/- for the period from 1997-98 to 2001-02 (upto Oct' 2001) on grounds of undervaluation of Silico Manganese, being appeal no.E/590/2009. The assessee is in appeal challenging confirmation of central excise duty demand of Rs.13,60,488/- along with interest for the period Jan' 2001 to Aug' 2001 and imposition of equal penalty under Section 11AC of the Central Excise Act, 1944 on the ground of undervaluation of their final product i.e. Silico-Manganese for the period from January 2001 to September 2001 and shortage of 10.005 MT of Silico Manganese being appeal No.E/584/2009. The Managing Director, Sri Hari Krishna Budhia and Sri A.D. Singh, Authorised Signatory have filed separate appeals challenging imposition of personal penalty of Rs.5,00,000/- and Rs.2,00,000/- respectively under Rule 209A of the Central Excise Rules, 1944/ Rule 26 of Central Excise Rules, 2001, being appeal nos.E/585/2009 and E/586/2009.
2. The brief facts of the case are that the appellant assessee in the instant case is engaged in the manufacture of Silico-Manganese classifiable under CH 7202.00 of the Central Excise Tariff Act, 1975. A search was conducted on 07-09-2001 at the factory and head office of the appellant assessee in which one private diary for the period from 12-01-2001 to 05-09-2001 (almost 8 months) was seized from the head office containing entries of purported sales written by the Managing Director Sri H.K.Budhia showing higher realisation. In the course of investigations, statements were recorded form Sri Hari Krishna Budhia, M.D., Sri P. S. Mishra, Sri S. K. Jaiswal, Sri A. D. Singh and Sri M. Srinivas, all employees of the assessee company. Further, statements were also recorded from four numbers of buyers i.e. M/s. K Steel, M/s. Stan Commodities, M/s Ravi Hi-Tech Limited and M/s. Bharat Ingots and Steel Pvt. Ltd. in respect of entries for those 8 months found in the private diaries.
3. On the basis of the aforesaid investigations Show Cause Notice dated 27-03-2002 was issued by Ld. Commissioner, Ranchi invoking 3 Excise Appeal Nos.584-586 of 2009 & 590 of 2009 extended period of limitation alleging that the assessee has resorted to undervaluation of their final products i.e. Silico Manganese on the ground that as they have never manufactured Silico-Manganee Chips but have only manufactured Silico-Manganese Lumps and thereby cleared those lumps in the guise of chips during 1997-98 to 2001-02 and have short paid central excise duty of Rs. 2,34,62,483/- by resorting to undervaluation. Further, on the basis of entries found in the private diaries (kucha entries) for the period 12-01-2001 to 05-09- 2001 (almost 8 months) it is alleged that the assessee has short paid duty of Rs. 13,36,476/- resorting to undervaluation and duty demand of Rs. 24,012/- is confirmed on shortages of 10.005 MT of Silico- Maganese found in the physical stock verification. Accordingly, the assessee was required to show cause why central excise duty of Rs.2,48,22,971/- should not be demanded U/s 11A of the Central Excise Act, 1944 along with interest and why penalty should not be imposed for purported contravention of the Act/Rules. Sri Hari Krishna Budhia, M.D. and Sri A.D. Singh are also required to show cause why personal penalty should not be imposed upon them under Rule 209A of the Central Excise Rules, 1944/ Rule 26 of Central Excise Rules, 2001 for their abetment in the said offences.
4. The Ld. Commissioner vide Order-in-Original dated 03-02-2006 confirmed the demand as proposed in the SCN aggrieved against which the assessee approached this Tribunal by way of Appeal in the first round of litigation. This Tribunal vide Order dated 17-11-2008 (Page 397) had set aside the earlier Order-in-Original dated 03-02- 2006 and remanded the matter back to the adjudicating authority for de novo adjudication.
5. This is the second round of litigation before the Tribunal. Now, by the Impugned denovo adjudication Order dated 30-07-2009 the Ld. Commissioner has confirmed duty demand of Rs.13,36,476/- along with interest and imposed penalty under Section 11AC on grounds of 4 Excise Appeal Nos.584-586 of 2009 & 590 of 2009 undervaluation on the basis of the entries in the private diary pertaining to the said 8 months and has confirmed duty demand of Rs.24,012/- on shortage of 10.005 MT of Silico Manganese. However, the Ld. Commissioner has dropped duty demand of Rs. 2,34,62,483/- for the period 1997-98 to 2001-02 (upto Oct' 2001) on grounds of undervaluation finding no evidence of flow back of funds.
6. Being aggrieved, the Department has preferred appeal challenging dropping of demand of Rs.2,34,62,483/- while the assessee is in appeal challenging confirmation of duty demand of Rs.13,60,488/- along with interest and penalty. Sri Hari Krishna Budhia and Sri A.D. Singh have filed separate appeals challenging imposition of personal penalties.
7. The Ld. Authorised Representative for the Department submits that the Ld. Commissioner erred in dropping the demand by ignoring the fact that during 1996-97 the assessee had charged Rs.21,000/- PMT for Silico Manganese and therefore quoting lower rates of Rs. 5000/- per metric tonne for the same final product in the succeeding year reveals that there was undervaluation. It is submitted that Sri Hari Krishna Budhia, Managing Director, in his statement has agreed to pay the differential duty as per figures in the private diary. He further refers to the decision of this Tribunal dated 21-09-2017 vide Order No. F.O/77425-77426/2017 in the case of Bihar Foundry & Castings Ltd. vs. Commissioner of Central Excise, Ranchi in Appeal No. E/173 & 174/2006 which were based on the same investigation and entries in the same private diary wherein this Tribunal has upheld the duty demand and penalty on the assessee. However, the personal penalty on Sri H.K. Budhia was reduced. The Ld. AR further relies on the judgment of the Allahabad High Court in the case of Somani Iron and Steels Ltd. vs. CESTAT reported in 2011 (270) E.L.T. 189 (All.) and judgment of the Hon'ble Madras High Court in the case of Lawn 5 Excise Appeal Nos.584-586 of 2009 & 590 of 2009 Textile Mills P. Ltd. Vs. CESTAT reported in 2018 (362) E.L.T. 559 (Mad.).
8. Shri Kartik Kurmy, the learned Advocate appearing on behalf of M/s. Gautam Ferro Alloys, Sri Hari Krishna Budhia, M.D. and Sri A.D. Singh submits that in the process of manufacturing of Silico- Manganese, Manganese Ores, Coke/Coal, Dolomite and Quartz are charged into the Submerged Arc-Furnace where it is melted and the molten metal is tapped out in laddles and poured into sand bed in which process ingots of 1.5 MT to 2 MT are manufactured which are first broken with bigger hammers to smaller pieces and then with small hammers to make it of marketable size of 25 mm to 150 mm which are sold as lumps. The Silico-Manganese pieces between 1 mm to 25 mm are sold as chips. In the process of breaking of ingots, the attached sand and slags are separated which becomes part of the chips. The lumps are the prime metal while the chips are contaminated with slag and sand and are of smaller sizes so it fetches much lesser price compared to Lumps. The Ld. Advocate further submits that in the instant case for the entire demand as per Show Cause Notice, there is no evidence of flow back of any funds. He relies on the decision of the Tribunal in the case of Hunsur Plywood Works Pvt. Ltd. vs. CCE reported in 2006 (133) E.C.R. 204 (Tri.- Bang.). He further submits that there is no confession of guilt by Sri Hari Krishna Budhia, M.D. or any other employee of the assessee company. In the course of investigation, buyers were examined who have declined to have paid any amount over and above the amount indicated in the invoice. In the Impugned Order the Ld. Commissioner has relied upon the statements of two buyers i.e. M/s. K. Steel and M/s. Stan Commodities. Sri A.K. Sheel, Authorised Signatory of M/s. K. Steel Pvt. Ltd. in his statement dated 04-10-2001 has stated that he does not look after the rates of the goods purchased which is done by the registered office. Sri S.B.S. Chouhan, Commercial Officer of M/s Stan Commodities, in his statement dated 03-10-2001 did not utter a single 6 Excise Appeal Nos.584-586 of 2009 & 590 of 2009 word about undervaluation. Sri Bipin Kumar, AGM (Commercial) of M/s. Ravi Hi-Tech Ltd. in his statement dated 03-10-2001 stated that they have never paid any amount over and above the amount indicated in their invoice. Sri Ajay Kumar Jha, Authorised Signatory of M/s. Bharat Ingots and Steel Company Pvt. Ltd. in his statement dated 04-12-2001 stated that cheaper rated material supplied by any party are sub-standard in quality. The Ld. Advocate further took us through the statements of Sri Hari Krishna Budhia recorded on 15-11-2001, in which it is stated by him that Silico-Manganese Chips are contaminated with slag. In respect of a specific query about the entries in the diary he stated that he has no idea but if any duty is determined, the assessee will bear the same. He further stated that it is late in the evening and he is a heart patient under constant medical attention and he has to travel back from Jamshedpur to Ranchi. The Ld. Advocate took us through the medical prescriptions of Dr. S.C. Jain, M.D., Appollo Hospital dated 03-11-2001 to demonstrate the cardiac ailment of Sri Budhia. He further took us to the Discharge Summary of Appollo Hospital as per which Sri Budhia was admitted on 18-11-2001, underwent bypass surgery on 19-11-2001 and was discharged on 29-11-2001. The Ld. Advocate submits that while tendering his deposition on dated 15-11-2001 Sri Hari Krishan Budhia, M.D., just 4 days before his bypass surgery, he was not in a physical and mental state to tender deposition and therefore without testing his statement in accordance with Section 9D of the Central Excise Act, 1944 the said statement cannot be a relevant piece of material. The Ld. Advocate relies on the judgment of the Hon'ble Chhattisgarh High Court in the case of High-Tech Abrasives Ltd. vs. CCE reported in 2018 (36) E.L.T 961 (Chh.).With respect to the decision of this Tribunal in the case of Bihar Foundry & Castings Ltd. dated 21-09-2017 in Appeal No. E/173 & 174/2006, the Ld. Advocate submits that in matter of facts no generalization is possible and further in the said case the demand was never contended by the assessee and therefore it cannot be a precedent for the case in hand. He further submits that merely on 7 Excise Appeal Nos.584-586 of 2009 & 590 of 2009 the basis of private diary and that too for 8 months pertaining to the period Jan' 2001 to Sept' 2001, demand cannot be confirmed for the period 1997-98 to 2001-02. He relies on the decision of the Tribunal in the case of K. Rajagopal vs. CCE reported in 2002 (142) E.L.T. 128 (Tri. - Che.), Sharma Chemical vs. CCE reported in 2001 (130) E.L.T. 271 (Tri. - Kol.) and Good Kare Medico Pvt. Ltd. vs. CCE reported in 2019 (366) E.L.T. 133 (Tri. - All.) to contend that merely on the basis of entries in private diary without other corroborative evidence of flow back of fund etc., serious charge of undervaluation cannot be sustained.
9. Heard both the sides and perused the appeal records.
10. We find that the Ld. Commissioner in the Impugned Order under Para 75 has clearly held that there is no evidence available on record to substantiate charges of undervaluation in respect of duty demand of Rs. 2,34,62,483/-. We find that in absence of evidence of flow back of funds over and above the invoice price, which are missing in the instant case, the charge of undervaluation cannot be sustained. There is no material on record to prove that the material supplied by the assessee were not of inferior quality but were prime material. The Department failed to cull out evidence in investigation with the buyers in support of the charge as none of the buyers have accepted payment of any amount over and above the invoice price nor receipt of prime quality materials in the guise of inferior quality material. Further, the entries found in the private diaries were only for the period Jan' 2001 to Sep' 2001 i.e. eight months. On facts as stated and under the circumstances, we have no hesitation to hold that the order of the Ld. Commissioner is in accordance with law and hence upheld and the Department Appeal is devoid of any merits.
11. We find that in the Impugned Order, the Ld. Commissioner has confirmed duty demand of Rs.13,36,476/- under Para 60 on the basis 8 Excise Appeal Nos.584-586 of 2009 & 590 of 2009 of 40 entries in the private diary as per which the appellant assessee supplied goods to buyers Bal Mukund, Ganesh Foundry, Mongia, etc. who were never identified or examined to cull out evidence. Under Para 61, statement of Sri A.K. Sheel, Authorised Signatory of M/s. K. Steel and Sri Shankar Baksh Singh Chouhan, Authorised Signatory of M/s. Stan Commodities is relied upon by Ld. Commissioner. We have gone through the statements of the said two buyers. In their statements they have nowhere accepted payment of any amount over and above the invoice price to the assessee. In the case of Hunsur Plywood Works Pvt. Ltd. vs. CCE cited supra, the Tribunal has held that in absence of flow back of additional consideration, the allegation of clearance of goods of higher value in the guise of lower value is not sustainable. In the case of Sharma Chemicals vs. CCE cited supra, the Tribunal under Para 14 has held that entries in the private notebook may give rise to suspicion but that is not sufficient to uphold the allegations in absence of independent corroborative evidence. In the case of K. Rajagopal vs. CCE cited supra, it is held that entries in the private notebook is not a conclusive evidence to prove clandestine transactions in absence of other corroborative evidences. In the case of Good Kare Medico Pvt. Ltd. Vs. CCE cited supra, it is held that order based on rough entries made in two sheets recovered from Director's residence in his own handwriting, when there is no other corroborative evidence, hence merely on the basis of such rough entries without corroborative evidence, clandestine activities cannot be alleged. Since in the instant case the duty demand of Rs.13,36,476/- is upheld by Ld. Commissioner merely on the basis of entries in the private diary maintained by the Managing Director who never confessed the guilt and whose statement is not tested in accordance with Section 9D of the Central Excise Act, 1944. We accordingly set aside the said demand of Rs. 13,36,476/-. However, we uphold duty demand of Rs. 24,012/- on shortage of Silico-Manganese.
9Excise Appeal Nos.584-586 of 2009 & 590 of 2009
12. In the result, the Department Appeal fails and the Assessee's Appeal is partly allowed. The Appeal filed by Sri Hari Krishna Budhia, Managing Director and Sri A.D. Singh, Authorised Signatory challenging imposition of penalty under Rule 209A of the Central Excise Rules, 1944/ Rule 26 of Central Excise Rules, 2001 are allowed and the penalty is set aside.
13. All the four appeals are disposed in the above terms.
(Order pronounced in the open court on 17 December 2019.) SD/ (P.K.CHOUDHARY) MEMBER (JUDICIAL) SD/ (BIJAY KUMAR) MEMBER (TECHNICAL) sm