9911796707
TMI Blog1999 (11) TMI 294X X X X Extracts X X X X X X X X Extracts X X X X ..... tion No. 175/86, dated 1-3-1986 and holding L-4 Central Excise Licence. On 30-3-1990, the officers of the Central Excise Preventive unit at Vapi visited the factory and conducted search operations and seized the documents, registers, papers and records on 30th and 31st May, 1990. The statutory records for the period 1987 to 1990 such as RG 1 Register, RG 23 Part I and II register of input and final goods, gate passes, copies of sales invoices, were also seized by them, and taken to their custody. The statements of the appellant M.J. Mistry and K. Soni, proprietor of the security agency supplied to the appellant's factory and M/s. M.K. Koli, the owner of the tempo vehicle and Mr. Ashok Kulkarni, authorized representative of Pushpam corporation were recorded. The show cause notice was issued on 5-8-1992 by the Collector of Central Excise and Customs addressed to the appellant, making allegations concerning non-maintaining of the excise records by the unit, the novel modus operandi employed by the appellant for the illicit removal of finished goods and taking wrong credit in RG 23A Part II register, resulting in the evasion of excise duty. The specific allegation was made about - (1) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ption fine of Rs. 1 lakh. Hence these two appeals. 3. The facts leading to the above are : on the detailed checks conducted by the officers it was found that the security department of the factory had maintained the goods out register at the factory gate. It contained various details of despatches namely, date of removal, challan no., description of goods, consignor, quantity, vehicle no., time of removal etc. and the such entries of despatch found to have been attested by the driver or carrier and the security guards of the unit and on comparing of the statutory gate passes there was no Central Excise gate pass for several entries. The Managing Director of the appellant company stated in his statement that M/s. Pushpam Corporation was a labour contractor for packing the ACT and that the packing materials as well as the caps were produced by them on the loan account. According to the statement of authorized representative of the said company, it is a partnership concern engaged in the capping activities on the empty ACT and they had got contract with Rossel Pharmaceuticals India Ltd. for the same and this capping activity was done by them on contract basis for caps capping a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... these have wrongly availed the Modvat credit of Rs. 56,417.62. 4. Investigation discloses that the appellant by recourse to different modus operandi engaged themselves in unauthorised receipt of raw materials and production of finished excisable goods which in turn was processed by them and illicitly removed in a manner otherwise those as provided under the Central Excise Act. The appellant also availed Modvat credit even on the finished goods and utilised the same towards clearance on other goods. The appellant also evaded the Central Excise duty by undervaluation of their goods. The appellant had deliberately and with mala fide intention to evade Central Excise duty adopted novel methods contrary to law on large scale which is calculated and shown in Annexure A to H enclosed to the show cause notice. The appellant could not show a single instance in which they could prove the bona fides. The appellant did not avail the opportunity to explain and clarify the irregularities pointed out. The appellant failed to determine the duty liability and to pay duty on the goods which are removed illicitly and failed to prepare gate passes in proper form for removal of excisable goods ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iation of these material and the conclusion arrived at by the adjudicating authority that the entries in the goods out register set out in Annexure A to the show cause notice did not tally with the statutory registers maintained by the appellants is not proper and correct. Central Excise gate passes is maintained by the appellant regarding the clearance recorded in the goods out register. The finding of the Collector contrary to it is not correct The appellant had provided complete and satisfactory explanation including the details of the gate passes as well as the invoice numbers in the reconciliation statement annexed to the reply to the show cause notice, in respect of the 4 instances examined by the Collector in the order while dealing with Annexure A, but has failed to appreciate it. The finding of the Collector that the date of the delivery challans and the entries made in the goods out register being different and the appellant had affected double clearance against one set of gate passes is beyond the scope of the show cause notice. It is silent that the appellants had made double clearances with one set of duty paying documents. On the other hand, the departments' case as p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... maintained, it would have reflected both the lawful clearance under the gate pass as well as the clearance for the second time illicitly under the same gate pass. Neither the show cause notice nor the impugned order sets out a single instance of such thing. The theory of double clearance stands repelled by the contents of the goods-out-register relied on by the department. The entries in the goods-out-register, represented illicit clearance, if assumed, amounts to the appellants having manufactured 22,26,711 aluminium tubes during the period January to March, 1990 in addition to the actual production of 37,08,504 tubes, which is physically impossible at the appellants unit as evident from the certificate dated 24-3-1994 of M/s. Nike Corporation Chartered Engineers. The raw materials purchased, the power consumed and the labour force employed and the capacity of the production of such a large number of tubes could not possibly justify the said figure. In the absence of any evidence in the record illicit removal is not established. No excess stock of raw material, finished goods or packing material was found other than that of statutory excise records during the surprise visit on 30- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts issued by the appellant's Supervisor to the security guards and other department which are reconcilable by the correlating duty paying documents. Scrutiny of the relevant gate pass and the other duty paying documents which show the payment of excise duty by the appellants in respect of the entries in Annexure C, for which a detailed reconciliation statement corresponding to the invoice and the duty paying documents are filed by the appellants under exhibit L. The gunny bags used to remove the aluminium scrap were not of uniform standard size. The entry no. 11 in annexure D of the show cause notice in respect of 191 bags shows a corresponding weight of 1076 kgs. which works out to 5.63 kg. per bag whereas in the impugned order the average weight is taken as 11.6 kgs. on the basis of the gate pass No. 231, dated 1-3-1990. The confirming of the demand of duty of Rs. 56,082/- in respect of aluminium scrap illicitly cleared as per the particulars to Annexure D to show cause notice is not correct. As per the allegation in the show cause notice approx. 16.19 tons of aluminium scrap would have been illegally cleared between 24-1-1990 to 24-3-1990 which could have been generated in the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... complete knowledge in that regard. The invoking of the extended period beyond 6 months is not proper. The demand under Annexure G was also with regard to the capping work carried out by Pushpam Corporation just like Annexure E, that demand should have been dropped. The goods delivered under the delivery challan No. 15 & 16 dated 31-5-1989 and 12-3-1989 respectively could be reconciled to duty paying documents and the corresponding gate passes. The excise duty with respect to the tubes available with the challan No. 15 were cleared under the invoice No. 12 dated 31-5-1989 and gate pass No. 43 of the same date. With respect to delivery challan no. 16, initially clearance was sought to be made to the gate pass No. 23 which came to be cancelled due to non-availability of the transport, and the goods were subsequently cleared under another gate pass. Disallowing the Modvat credit holding it as a serious offence is not proper and correct. The 9 entries contained in Annexure H in respect of rejected goods received back of which Central Excise duty has been paid and reverse entries were passed in the register upon the return of the rejected goods. There is no dispute that the subject good ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orts the case of the department. The adjudicating authority has upheld the contention of the appellant that Pushpam Corporation is not a dummy unit, and is legal entity in existence has a separate place of business, the sales tax registration etc. The undervaluation alleged by the department is negatived by the adjudicating authority. There is an admission regarding the procedure lapse by the appellant. The bona fides are pleaded and pointed out. Annexure A to G are considered under separate headings in the light of the allegation in the show cause notice and reply by the a0ppellant and the documents and the statements. It is further contended by the ld. JDR that register No. 13 maintained by the security guard/gatekeeper did not tally with the gate passes in the Statutory Central Excise records for the details of despatch of the ACT. No such passes were issued by the appellant. 10. In the course of the reply, the ld. Counsel for the appellant has contended that the appellant has properly maintained the records and the unit was frequently audited by the department and no irregularities were found prior to this visit. There is no evasion of payment of duty by the appellant an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the same is supported by other evidence such as the raw material consumed, goods actually manufactured and packed (paragraph 2 & 4). We have taken note of the contention of both the sides. 13. From the facts and circumstances of the case as depicted in the reply to the show cause notice by the appellant and the statement of the witnesses namely the appellant Mahesh J. Mistry and Ashok Kulkarni, authorized representative of Pushpam Corporation and statement of K.R. Soni, the contractor of security agent and M.D. Kolhi, the transporter, it is seen that the appellant in both the cases have denied the charges of non-payment of Excise duty and the wrongful availment of Modvat credit and the clandestine removal of the product. They have admitted that there are some clerical errors on the records in the maintenance of RG 1 and adopted wrong procedure. It is stated that - "when the rejected goods were returned from the buyers, the credit was taken of duty paid earlier without knowledge. Pushpam Corporation, a partnership firm, under the deed of 14-5-1985, as a job worker of M/s. Roussel Pharmaceuticals Ltd. under a contract, with an independent existence, and have paid rent for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot shown in this chits. So the conclusion of the raiding party about the assessable value appealing in chits/goods-out-register is quite surprising. Chits by this are not sufficient in proving the charge. It has to be corroborated by some other document such as gate passes, invoice, and delivery challan. Demand of duty on such corrugated box is not just and proper. No penalty can be imposed for technical or vinyl breach. There is a bona fide error with the irregularities and there was no intention to evade duty." 14. It is further stated in 1989-90 upto June, there were 2 doors to go to one section to another in the factory. To bring any corrugated sheets and corrugated partition for aluminium tubes, the section packaging supervisor used to maintain chits for issue of goods from one section to another by way of transport. To enable the security guard to allow outside the factory for the removal of the same, chits were issued. The investigating officer had not applied his mind. There was a waste to the tune of 16,185 kg. during 24-1-1990 to 24-3-1990 against the background of the quantity manufactured the raw material received and maintained in the statutory records. It is on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oods from the security guard. From the above discussion, it is clear that as contended by the appellant a new case is made out from the show cause notice. Regarding the basis on which the claim is made under Annexure A to the show cause notice, there is no mention of this allegation in the show cause notice. The stand of the department was that there is no gate pass for the removal of the same as cleared from the heading of Annexure A. 16. In. the tabular column under Exhibit I by way of reply under Annexure A of paragraph 6 of the show cause notice, the appellant has disclosed the delivery challan No. and date, invoice number and date, GP number and date, quantity of box and number of ACT and its value, and the basic and special duty paid thereon, and RG 23A Part II entry No. and date in the column 1 to 7 under the details of clearance of ACT of payment of Central Excise duty, covering 47 items which is shown in Annexure A to the show cause notice. This gives the complete picture in response to the annexure A to the show cause notice, establishing the fact of payment of excise duty on the goods covering under delivery challan and the existence of gate passes and invoice. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itional endorsement. In the absence of it cannot be connected. This finding of the Commissioner appears to be proper and correct. In the absence of any documentary evidence regarding proving of job work, the case of the appellant is rejected. In that regard, the department's case deserves to be accepted. So the finding for the demand in Annexure B is upheld. 19. Annexure C is a statement saying the details of ACT removed without payment of duty and gate passes as per duplicate pad enlisted at 16 & 17 of annexure of 30-3-1999. This statement contains the chit no. and date and variety of ACT and quantity, the number of tubes and boxes, and the designation of consignee, vehicle no., assessable value, the rate of duty, both special and basic, and total duty amounts. The column No. 2 regarding the variety of ACT goods the names shown are binaca, close up, nirma toothpaste, beta pharma cap, bincoin of 10 gms. The period is from 28-9-1989 to 16-2-1990 under 31 items. The appellant has submitted his reply with statement in tabular column under Exhibit L giving the details of clearance of tubes under gate pass no. and date, and invoice no. and date, covering the items under Annexure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... page 103 and 104 in the light of the contention of the appellant and has examined the chits and out turn register, and has held that it is meant for removal by the appellant unit outside the factory, without issuing any statutory documents. The existence of 2 doors of the factory during 1989 and 1990 upto June, to support the explanation of the appellant that the packing supervisor used to maintain chits for issue of goods from one section to another is not supported by any evidence. No documentary evidence is shown for the destruction of the scrap if any. The fact of corrugated scrap is true as chit No. 84/22/1/90 and 81/27/1/90 shows that the security was asked to allow to carry such scrap by tempowala. This is also a fact that the chits mentioned in Annexure D, there are instructions to security to allow tempowala to carry aluminium scrap. The aluminium scrap is cleared without payment of duty, and so it is confirmed at Rs. 56,800/-. 21. The appellant has challenged the finding in the grounds No. 41 to 45 that gunny bags used to remove aluminium scrap were not of uniform standard size. Regarding the average weight per bag on the basis of GP 231/01.03.90, as 11.6 bags is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... if any, and the date and time of removal, and the rate of duty and duty recoverable as basic duty, special duty and total duty are given in column 1 to 10. In response to this, the appellant has produced the statement under Exhibit N at page 139 and 140 giving the gate pass no., date, the bill no. and the date under which they are cleared. In the impugned order it is considered in page 104, 105. The contention of the appellant in that regard is considered and after examining the relevant gate passes, and has found the entry relating to debit of duty in PLA is kept blank. He has quoted 173(2)(vii) according to which when any gate pass is to be cancelled, after debiting duty on the goods on this account he shall send the intimation in writing to the proper officer not later than the working day next following day on which gate pass is cancelled and may thereupon take credit of the duty in that account. According to him, no evidence is produced in that regard and the duty is not debited. So the duty of Rs. 89,121.92 is confirmed. 23. In paragraph 46 to 52 of the appeal memorandum the appellant has challenged the finding that the copies of the letter regarding the cancellation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the claim of the appellant and ordering that Rs. 90,849.90 is not recoverable from the appellant. In view of this position, no order is called for on this finding in the absence of any cross-objection by the department. 25. Annexure G is the statement showing the details of ACT removed without payment of duty and without Central Excise gate pass by the appellant through Pushpam Corporation during the period March 1987 to 30-3-1990 asking duty on the basis of the delivery challan to Pushpa enlisted at Sr. No. 33 of statement dated 30-3-1990. This gives the description of the delivery challan no. and date, name of the consignee, particulars of ACT quantity cleared rate per 1000 tubes, value, rate of duty recoverable of both basic and special of total duty and the remarks in column 1 to 12 Rs. 50,500/- is the duty recovered regarding delivery challan No. 15/31-5-1989 No. 16/12-3-1989 to RP issued by Pushpam. On the perusal of the impugned order at pages 107, 108 internal page 23 & 24 it is seen that the appellant had not produced the document, nor submitted anything in the course of the personal hearing, about this claim and the delivery challan were examined by the adjudicat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. So the contention of the appellant in that regard is rejected and the demand for Rs. 50,500.12 is upheld. 27. Annexure H is the statement showing the details of credit taken on the receipt of rejected finished products ACT by the appellant worked out on the basis of the file listed on Sr. No. 12 of annexure to statement dated 30-3-1990 and file produced under statement dated 9-8-1990. The statement gives the description of the goods and the name of the consignor and the original gate pass no. and date, quantity RG 23A part I entry and date, the amount of credit taken under basic duty and special duty RG 23A Part II entry and date name of the consignee under column 1 to 10 of 9 items during the period from 25-8-1988 to 30-6-1989. The pages 108 & 109 (internal pg. 24 & 25) of the impugned order deals with this annexure. According to the appellant, there is only a procedural lapse and there is no wrong credit. The Collector has examined the file No. 12 with Annexure H and found that the gate pass mentioned refers to the product being rejected goods and the credit was taken of the duty paid on the finished goods mentioned in Annexure H. He has held that under Rule 57A of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the goods out register and chits and delivery challan are sufficient to show that the unit has suppressed their production and removed excisable goods for which no satisfactory explanation is offered by the appellant, and no documentary evidence is produced that the duty is not evaded. It is proved on record that the appellant has suppressed the fact of removal of goods with an intent to evade Central Excise duty and so the extended period has to be applied. In that regard the appellant has challenged the finding in paragraph 64 of the appeal memo contending that there is no question of clandestine removal or suppression of fact or misdeclaration on the part of the appellant and all clearances were made to the knowledge of the department and the appellants had maintained statutory records and made an allegation of illicitly removed were fully reconcilable with duty paying document and in fact had been reconciled by the appellant. This contention does not hold good in view of the discussion in the above paragraphs on the goods out register, delivery challan and chits. There is an admission in the statement under Section 14 of the Central Excise Act by the appellant about the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any and Rs. 1 lakh on the unit. In view of the discussion above, and the fact that material placed on record shows the liability of the appellant to pay the duty of Rs. 15,950.13 under Annexure B, Rs. 50,500/- under Annexure G and Modvat credit of Rs. 56,470.62 under Annexure H which comes to about Rs. 1,22,920/-, the penalty imposed requires reduction. The ends of justice will be met by reducing the penalty from Rs. 5 lakhs to Rs. 1 lakh on the company, and from Rs. 1 lakh to Rs. 20,000/- on the Director, looking to Exhibit L and Exhibit N and page 114 in response to Annexure A, C & E about the reconciliation of the demand. In view of these conclusions, the point raised is answered in the affirmative to the above extent. Hence the following order. ORDER For the reasons discussed above, the appeals are allowed in part. The impugned order is modified confirming the demand for duty for Rs. 1,22,920/- (Rupees One lakh twenty two thousand nine hundred twenty only) on the ACT and the Modvat amount, and penalty on the appellant Mistry Extrusion is reduced to Rs. 1 lakh, and penalty on the Director Mahesh J. Mistry to Rs. 20,000/-, and confiscation of land, building, plant and machinery ..... X X X X Extracts X X X X X X X X Extracts X X X X
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