TMI Blog2001 (10) TMI 870X X X X Extracts X X X X X X X X Extracts X X X X ..... sub-section (2) of section 11A of Central Excise Act, 1944 read with sub-section (1) of Sec. 11A of CE Act, 1944. However, an amount of Rs. 5 lakhs paid by BEC shall be adjusted towards the duty payable as determined above; (ii) I also demand an amount of Rs. 7,72,693 differential duty payable in respect of clearances made during the period from July, 97 to November, 97 by BEC under sub-sec. (2) of Sec. 11A of Central Excise Act, 1944 read with sub-section (1) of sec. 11A of Central Excise Act, 1944 since BEC is not eligible to avail SSI benefits for the year 1997-98 as proposed in the show cause notice issued under C. No. V/84/15/206/97, dt. 5-1-98 (OR No. 25/98-Hyd-III/Adjn.); (iii) I also demand an amount of Rs. 31,38,596/- being the differential duty payable in respect of show cause notices OR No. 142/98, dated 30-10-98 (Rs. 6,51,003), OR No. 32/99, dated 19-2-99 (Rs. 4,66,017), OR No. 128/99, dated 13-7-99 (Rs. 70,671), OR No. 153/99, dated 2-11-99 (Rs. 9,92,191) and OR No. 48/2000, dated 22-3-2000 (Rs. 9,58,714) during the period April, 98 to February, 2000 under sub-section (2) of Section 11A of Central Excise Act, 1944 read with sub-section (1) of Section 11A of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Para 68 supra, under the provisions of Rules 173Q of Central Excise Rules, 1944. However, BEC can redeem the same on payment of a fine of Rs. 1,000/- (Rupees One thousand only). The allegation made against the appellants have been brought out in the brief facts of the case by the Commissioner in Paras 1 to 12 which is reproduced below : BRIEF FACTS OF THE CASE : M/s. Beaver Engineering Corporation, Kushaiguda, Hyderabad (hereinafter referred to as BEC/assessees ) are the manufacturers of parts of drilling rigs, such as tungsten carbide button bits (hereinafter referred to as Bits/Button Bits ) falling under Chapter sub-heading No. 8207, attracting duty @ 15% and down-the-hole hammer assemblies (hereinafter referred to as hammers ) and parts thereof, falling under chapter sub-heading Nos. 8430.00 and 8431.00 respectively, attracting duty @ 13% of Central Excise Tariff Act, 1985 and are availing exemption under Notification No. 1/93, dated 28-2-93 as amended by Notification No. 7/97, dated 1-3-97, No. 16/97, dated 1-4-97 and No. 8/98-C.E., dt. 2-6-98. 2. On gathering intelligence that BEC are indulging in clandestine manufacture and clearances of excisable goods, the off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the said goods at the respective places mentioned at (i) to (iii) above. 5. On the basis of further intelligence, the officers searched the residence of Shri E.V. Subba Reddy, clerk of BEC on 29-6-97 and recovered certain private records. 6. BEC, DEW, VE and CI are all manufacturers of button bits and hammers. CI was also manufacturing truck mounted drilling rigs. BEC, DEW and CI have obtained Central Excise registration and VE remained within the exemption limits. The value of clearances of button bits and hammer assemblies and parts thereof from BEC, CE and VE for 1995-96 1996-97 is as under : Value of clearances Name of the Unit 1995-96 (Rs. in lakhs) 1996-97 (Rs. in lakhs) 1.BEC 73.60 98.46 2. DEW 55.58 69.67 3. CI 21.13 13.15 4. VE 27.09 15.98 7. To manufacture T.C. buttons, alloy Steel of EN 19 grade and tungsten carbide buttons are the main raw material. Alloy Steel of EN 36C grade and Rolled Steel rounds and tubes are the main raw material to manufacture hammer assemblies. Manufacturing process of TC buttons involve the operation of turning, forging, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b workers, raw material suppliers etc. with endorsements of Shri Madhusudhan Reddy. (viii) Note Books 3 and 4 October, 96 to June, 97 Party-wise ledger and day book respectively prepared by Shri Subba Reddy on the basis of daily sheets (c) Records recovered from the residence of Shri G. Ram Murthy, Manager of BEC. (ix) Note Book Nos. 1 and 6 96 - 97 Details of purchases of alloy Steel (x) Note Book Nos. 4 Oct., 95 to Apr., 96 Details of purchases of T.C. Buttons and alloy steel and payments made therefor. (xi) File No. 7 (Page No. 25) 11-3-96 Delivery challan No. 64, dt. 11-3-96 of M/s. Steel Stores (India) Agency, Hyd. issued to BEC for 9.59 MT (unaccounted) (D) Records recovered from the residence of Shri N. Rama Rao, Area Sales Manager, M/s. Drillco Metal Carbides Ltd. (xii) Note Book Nos. 1, 3 and 4 95-96 and 96-97 Details of supplies of T.C buttons to BEC and Shri Madhusudhan Reddy of value Rs. 64,04,252 and payments of Rs. 39,75,371 received therefor from BEC. 9. Scrutiny of the private records recovered from the factory premises o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i S. Raghvendra, Sr. Sales Manager of M/s. Rapicut Carbides Ltd., Hyderabad. (k) Statements dated 4-7-97, 7-7-97 and 31-7-97 of Shri K.S. Narayana Swamy, Assistant Manager of M/s. Indicarb Ltd., Secunderabad. (l) Statement dt. 11-8-97 of Shri K. Sreeramulu, Partner of M/s. Precision Metal Treaters, Kushaiguda, Hyderabad. (m) Statement dated 7-8-97 of Shri G.V.V. Satyanarayana, Managing Partner, M/s. Ram Tulasi Metal Treaters, Kushaiguda, Hyderabad. (n) Statement dt. 6-8-97 of Shri N. Ranage Rao, Managing Partner, M/s. Bharat Thermal Engineering Kushaiguda, Hyderabad. (o) Statements dt. 27-6-97 and 5-8-97 of Shri A. Bhagirath, Proprietor of M/s. B.S. Metallurgicals, Balanagar and M/s. Bharat Heat Treaters and Analysts, Fathenagar, Hyderabad. (p) Statement dt. 22-8-97 of Shri K. Purnachadra Rao, Authorised signatory of M/s. Manjeera Machine Builders (P) Ltd. Patancheru. (q) Statement dt. 20-8-97 of Shri Madar Saheb, Managing Partner of M/s. Maruti Forgings, Jeedimetla. (r) Statement dt. 11-8-97 of Shri M. Chandran, Commission Agent at Tiruchengode. (s) Statement dt. 16-8-97 of Shri A. Mohan Reddy, Company Representative of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terms of Section 11AC of the Central Excise Act, 1944. (d) interest @ 20% per annum on the duty amount mentioned above should not be paid by them as envisaged in Section 11AB of the Central Excise Act, 1944 read with Notification No. 34/96-C.E. (N.T.), dated 9-10-1996. (e) the 26 Nos. of button bits and hammer assemblies valued at Rs. 2,44,600/- seized at the factory premises of BEC, under panchanama dated 8-7-97 and the 8 Nos. of button bits, valued at Rs. 24,000/- seized at M/s. Precision Metal Treaters, Kushaiguda (job worker) should not be confiscated under Rule 173Q of Central Excise Rules, 1944. (f) land, building, plant and machinery of BEC which are used in connection with manufacture and clandestine clearances of the excisable goods afore-mentioned should not be confiscated to the Government of India under Rule 173Q(2) of the Central Excise Rules, 1944. (g) penalties should not be imposed on them under Rules 9(2), 52A(8), 173Q and 226 of the Central Excise Rules, 1944. 2. The appellants filed their reply denying all the charges. The statements which they had given were all retracted and a very strong plea was taken by them that the whole ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceived mostly from BEC without bills and they used to hand over the sale proceeds to Shri Madhusudhan Reddy or Sri G. Ram Murthy of BEC alone and not to other persons belong to DEW, CI VE. 55. The second contention is not acceptable since the retractions were all belated, not supported by any material. As regards threat and coercion at no point of time has it been mentioned as to which officer had threatened and how coercion was used. It is pertinent to note that different Officers recorded the statements on different dates. When the deponents did not mention the manner of coercion or the time of coercion and the Officers involved it is a futile attempt to contend that there was coercion, after issue of show cause notice. In this regard since no material evidence was given in support of the contra-submission made at the time of cross-examination of several persons these are clearly an afterthought and are not acceptable as evidence. 56. The statements given by Shri M. Madhusudhan Reddy and the job workers are clear admissions only. It was held in the case of Ayodhya Prasad v. Bhawani Sankar, AIR 1957 A41 that : the effect of an admission of a fact by a party is to shift th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsider the claim of trading. 59. The fourth contention is not acceptable since the duty demand is not based on the production capacity of the unit. The goods produced by the assessees involve many operations viz. turning, forging, cutting, drilling, milling, heat treatment, button grinding and button fixing. Most of these operations such as milling, turning, drilling, etc. can be done in any small workshop or a lathe machine. On record two operations viz. heat treatment forging is being done through job workers viz. M/s. Manjeera Machine Builders (P) Ltd., M/s. Maruti Forgings, M/s. Precision Metal Treaters, M/s. Rama Tulasi Metal Treaters, M/s. Bharat Thermal Engineering and M/s. B.S. Metallurgicals M/s. Bharat Heat Treaters to complete the manufacturing process required for finished goods. The same was also admitted by Shri Madhusudan Reddy vide his statement dated 7-10-97. As such, consideration/non-consideration of production capacity of BEC alone does not arise. The contention put forth by the assessees is only to side track the issue. 60. It is also observed that BEC has procured T.C. buttons valued of Rs. 2.13 crores during 95-96, 96-97 and 97-98 and Rs. 2.11 crores w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Murthy or Shri Madhusudhan Reddy. Shri G.V. Satyanarayana, Managing Partner, M/s. Rama Tulasi Metal Treaters, Kushaiguda in his statement dated 7-8-97 stated that though materials were actually not received, they were asked by Shri G. Ram Murthy to prepare challans/ bills as if they done it. He stated that the person concerned with VE, CI, DEW, BEC is Shri G. Ram Murthy and he was receiving all the payments from Shri G. Ram Murthy only. (vi) As could be seen from the letter dated 27-1-98 filed by Shri V.J. Shankaram, Advocate wherein he has requested for extension of time to submit written replies, he has submitted vakalats for : (a) BEC, (b) M. Madhusudhan Reddy, Managing Partner, (c) Shri G. Ram Murthy, Manager, BEC, and (d) E.V. Subba Reddy, Supervisor, Authorised Signatory. Shri G. Ram Murthy singed the vakalat in the capacity of Manager, M/s. BEC and the same was accepted by the learned advocate. (b) From the above, it is amply clear that Shri G. Ram Murthy is closely associated with the manufacturing activity and day to day transactions of BEC. It is noteworthy to mention that Shri G. Ram Murthy has acknowledged the receipt of SCN (OR No. 48/97, dated 17-12-97) on d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... many times to participate in cross-examination but did not do so. As regards Shri G. Ram Murthy who was also an employee of BEC has also been intimated about personal hearings and to participate in cross-examination. He has replied that he was suffering from high B.P. and sugar and requested for postponement of the personal hearings. Since both of them are the employees of BEC, BEC could have produced them. 64. On the question of cross-examination of certain individuals, the department has made its best efforts by informing the personal hearing intimations/issuing summons to the concerned and all efforts to serve summons on the said persons proved futile. Therefore, I hold that the denial of opportunity of cross-examination of certain individuals and employees of BEC has not resulted in miscarriage of justice. 65. The learned Counsel of BEC has cited a catena of decisions of the Hon ble Supreme Court/Tribunal in support of their submissions. It is necessary to peruse the case laws cited by the Counsel. The case laws submitted have been carefully considered. The ratio of the decisions of those cases cannot be applied to the instant case for the reason that the facts and circumst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itted in the written submission at the time of personal hearing held on 7-4-2000, that the goods were in process or were the raw material in stock. Here the question is 26 Nos. of button bits and hammers were manufactured and not entered in the RG 1 stock. The goods in process or the raw material stock does not relate to 26 Nos. of finished goods of button bits and hammers. They are liable to be entered in RG 1 register immediately on completion of the job. As such, 26 Nos. of button bits and hammers assemblies ae liable for confiscation. 68. 8 Nos. of button bits valued at Rs. 24,000 were seized at M/s. Precision Metal Treaters. Theses button bits were sent by BEC without issuing any job work challans. At the time of drawing panchnama, Shri K. Sreeramulu, Partner of M/s. Precision Metal Treaters could not produce any job work challans in respect of 8 Nos. of bits of BEAVER make. Shri K. Sreeramulu, in his statement at 11-8-97 stated that they undertaken job work of heat treatment to BEC and CI among others and further stated that they had received 8 Nos. of BEAVER make button bits for job work from BEC without any documents. Shri M. Madhusudhan Reddy, in his statement dt. 7- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ollected/imposed in this case from October, 1996 to June, 1997. During the said period Rs. 73,84,544/- differential duty was demanded. Further, the assessees are also liable for mandatory penalty of Rs. 7,72,693/- for the period 7/97 to November, 97 and of Rs. 31,38,596/- for the period 4/98 to 2/2000. I rely on the following case laws in support. M/s. Lakshmi Packaging (P) Ltd. v. CCE, Coimbatore, 1998 (98) E.L.T. 91 (T), M/s. Maruti Udyog Ltd. v. CCE, New Delhi, 1998 (101) E.L.T. 675 (T) and M/s. Marchandy Prasad Radhakrishna Prasad (P) Ltd. v. CCE, Calcutta-II, 1998 (102) E.L.T. 705 (T). It has also been proposed for confiscation of land, building, plant and machinery used in connection with the manufacture of the impugned goods under Rule 173Q of Central Excise Rules, 1944. However, I do not contemplate the confiscation of the same as the relevant provisions under Rule 173Q of Central Excise Rules, 1944 are not existing at present. 71. In so far as the penalty on Shri M. Madhusudhan Reddy, Managing Partner, BEC, Shri E.V. Subba Reddy, clerk of BEC and Shri G. Ram Murthy, Manager of BEC is concerned, I note that the entire spectrum of operations of procurement of raw material ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... since the basis is the SCN No. 49/97, dated 17-12-97 which alleges clandestine production and removal and the findings of which clearly reveals the strategy adopted by BEC as elaborated herein before. The annexures only show the computation of the differential duty involved since SSI exemption will not be available to BEC and not for clubbing of the companies involved. No further evidence/ submissions have been given by BEC to controvert this save and except challenging the basis of the subsequent SCNs. The findings pertaining to SCN No. 49/97 therefore applies mutatis mutandis to the subsequent SCNs also and deserve to be confirmed. 3. Arguing for the appellants Shri V.J. Sankaram and Shri J. Sankarraman, ld. Advocates point out that there was a clear violation of principles of natural justice in not giving an opportunity to cross-examine the main witnesses namely G. Rammurthy and E.V. Subba Reddy. Ld. Counsel points out that the Commissioner has clearly erred in holding that the appellants should have produced them. They contend it was practically impossible to produce them when they were suffering from illness and completely bed ridden. Commissioner s view that G. Rammurthy s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evidence brought on record - Allegation not established - Appeal rejected. (3) 1999 (84) ECR 245 (Tribunal) - Krishna Bottlers (Vijayawada) Pvt. Ltd. v. CCE, Guntur Demand - Clandestine removal - Evidence - Burden of proof - Burden to prove clandestine removal on Revenue - Show cause notice based on assumptions and presumptions, and not on any evidence, is not maintainable. The so-called unsigned information referred to as letter has no evidentiary value. In this view of the matter, there is also no case for its remand to the jurisdictional authority for de novo consideration - ratio of Supreme Court, High Court and various Tribunal judgments. Impugned order set aside. (4) 2001 (130) E.L.T. 344 (T) = 2001 (94) ECR 684 (Tribunal) - MTK Gurusamy Anr. v. CCE, Madurai Demand - Clandestine removal - Evidence - Seizure of private register maintained by a private part time employee - Demand cannot be confirmed on basis of such an unauthenticated document without corroborative evidence, such as seizure of clandestinely removed goods or invoice or purchase of raw materials, etc. - Ratio of Supreme Court judgment in the case of Triveni Rubber Plasti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al of products recovered from a person whose name not appearing in list of workers in statutory records cannot be relied upon to support the charge- No other corroborative evidence - Charge not proved - Rules 9(2) and 173Q of Central Excise Rules, 1944. Clandestine manufacture and removal - Evidence - Charge of clandestine removal - Cannot be sustained on presumption that persons entrusted with such a job are not usually shown as employee - Rules 9(2) and 173Q of CER, 1944. Clandestine manufacture and removal - Burden of proof - Revenue is required to proved beyond doubt factum of clandestine manufacture - Rules 9(2) and 173Q of Central Excise Rules, 1944. Natural Justice - Cross-examination - Entire case of clandestine removal depending on a person from whom note book of entries of production and removal of products recovered - Revenue claiming him to the employee of assessee and assessee denying the same - Denial of request of assessee to cross-examine him violated principles of natural justice - Rules 9(2) and 173Q of CER, 1944. Clandestine manufacture and removal - Evidence - Entries in a private notebook of record of production a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s whose clearances have been taken into consideration for confirming duties were not put to notice and as such, the proceedings are totally vitiated as held by this Bench in DON Fire Works Factory Ors. v. CCE, Madurai reported in 1999 (31) RLT 104. Ld. Counsel submits that this aspect of the matter has not been referred to in the order at all. He submits that for the purpose of proving clandestine removal, the Revenue is required to prove (a) the extent of raw material purchased, (b) electricity consumed, (c) funds utilised, (d) number of employees employed and (e) the final product having been sold in the market to the person concerned. He points out that in the absence of all these evidences, the charge of clandestine manufacture and removal solely based on the private registers is not sustainable in the light of the judgment cited supra. Therefore, he submits that as the Revenue has not discharged their burden of proving the clandestine manufacture and removal and that the Commissioner has solely proceeded on the assumptions and presumptions, the impugned order is required to be set aside by granting wavier of pre-deposit at this stage itself. 5. Ld. DR submits that the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on and the production capacity of the Company. In this regard, two vital pieces of evidences have been relied by the appellants and that is the report of the State body like Andhra Pradesh Productivity Council and the Report from the Chartered Engineer Shri Venkata Rao. The Commissioner does not want to discuss their evidences which clinches the issue one way or the other. When such rebuttal evidences with regard to the production capacity has been produced the Commissioner ought to have taken these pieces of evidences into consideration. Failure to record or analyse these pieces of evidences certainly has resulted in violation of principles of natural justice. In that view of the matter, the prayer for waiver and stay of recovery made in the stay applications is required to be accepted. Hence, the stay applications are allowed. 7. We notice that the procedure of Tribunal is that at the time of hearing the stay application if it has been pointed out that there is a clear violation of principles of natural justice, then the Tribunal at stay stage itself takes up the matter for final hearing. Therefore, keeping with the Tribunal s practice, we take up the appeals for final disposal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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