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TMI Blog2000 (5) TMI 849X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 crores on the first appellant company, penalty of Rs. 3 lakhs on Shri S.S. Khaitan who was the Managing Director of the first appellant company from 1-4-86 to 31-12-88, a penalty of Rs. 5 lakhs on Shri S.K. Khaitan, Commercial Manager of the first appellant company during the entire period of demand, penalty of Rs. 1 lakh on Shri Anil Khaitan, Managing Director of the first appellant company from 1-1-89 onwards and a penalty of Rs. 25,000/- on Shri N.K. Vasu, Deputy Manager(Excise and Despatch). 2. The brief facts of the case are that on 26-12-88, the Preventive staff of Central Excise Collectorate, Chandigarh visited the factory premises of the first Appellant company who are engaged in the manufacture of various types of paper falling under Chapter 48 of the Schedule to the Central Excise Tariff Act, 1985. Scrutiny of the records revealed that the company was availing the benefit of concessional rate of duty in respect of paper (Packing grade) classified under sub-heading 4805.90 in terms of Notification 138/86 on the ground that such paper was manufactured out of pulp containing not less than 50% by weight, of pulp made from materials (other than pulp....). The paper wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned Senior Counsel appearing along with Shri R. Sudhindher, Advocate and Shri A.K. Agarwal learned DR. 5. Let us first examine the allegation of the department that out of 15,22,301/- kgs of waste paper and White cutting No 1 shown to have been purchased and received back and utilized in the manufacture of uncoated paper by the appellants during the relevant period, only a quantity of 63,555 kgs was actually received in their factory premises and balance quantity of 14,58,746 kgs was not actually received. This allegation is based on four factors :- (1) enquiries with some of the parties from whom waste paper or waste cutting were reported to have been purchased by the appellants, do not exist at the given addresses; (2) enquiries from the Sales-tax barriers showing that trucks on which waste paper or waste cutting was transported and used by the appellants never checked in at the transport barriers for entry to Barotiwala; (3) persons responsible for running the transport companies and transporting white cutting or waste paper stated that they did not actually transport any white cutting or waste paper and that such transport companies existed on paper with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ination that their firm did not sell any white cutting to the appellants as claimed by them and although cheques had been issued against supply of white cuttings, cheques were given back to whoever brought them on behalf of the appellants and no cutting paper was actually supplied. Shri Pawan Kumar of M/s Pawan Provision Store also confirmed in his cross-examination that he never supplied waste paper or white cutting to the appellants. 7. Further there is evidence on record that three firms namely M/s. ABC Enterprises, M/s. Swastik Enterprises and M/s. Rama Paper Mart, all of Delhi, were not found to exist at the given addresses. Regarding the contention of the appellants that records of sales-tax of multipurpose barriers, Baddi and Derowal cannot be relied upon for creating duty liability as the challans dated 20-2-1987 showed that truck loaded with paper treatment had checked in at Ramgarh Sales-tax barrier and also at Maranwala, both in Haryana and another truck had checked in at Panchkula. It is inconceivable that the trucks carrying only waste paper/white cutting No. l would jump the sales-tax barrier to avoid sales tax. The Adjudicating authority has recorded in para 79 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 138/86 C.E. Col. 11 12067285 Production of other papers on which no concession under notification 138/86C.E. availed Col. 12 2904884 Total paper produced (Col. 11+12) Col. 13 14972169 As seen from the process of manufacture of pulp from raw materials given on page 5 of the Appeal, the raw materials namely, teased old gunny cuttings, teased old hemp rope cuttings, Jute cuttings and Hemp are required to be converted into pulp. Thus, the total pulp available for manufacture of paper is given hereunder : Kgs 1. Imported Wood pulp 13024909 2. Pulp obtained from: - a) Teased old gunny cuttings 5452 b) Jute cuttings 373206 c) Teased old hemp rope cuttings 55104 d) Hemp 630482 1064244 3. Bagasse pulp 272178 4. White cutting No. 1 (Purchased from outside) 1436903 Sub total 15798234 5. Waste paper (Broke) originated in the factory (recycled) 7343907 Total 23142141 The appellants submit that they procured and consum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of which quantity of 1,49,72,169 kgs of paper could easily be manufactured. 10. The appellants further submit that as per their records, 1522301 kgs of Waste paper and White cutting No 1 was purchased and received at its factory. The said quantity was also entered in Central Excise Form IV registers. Out of the receipted quantity, 1436903 kgs were consumed and the entry for the same also appears in Form IV register. Thus there would be a closing balance of 85,398 kgs of Waste paper/White Cutting No. 1 as on 30-6-1989. This balance quantity was also consumed during the period from 1-7-89 onwards. However, the Central Excise Department did not raise any doubts about the closing balance of 85,398 kgs of Waste paper/White cutting No. 1 as on 30-6-1989 appearing in Form IV register which was consumed during the period 1-7-89 onwards. This clearly implies that the department had accepted that the aforesaid quantity was received and consumed otherwise,' the department would have also included the period in which the balance quantity of 85398 kgs was consumed, while raising their demand when the show cause notice was issued. 10.1. The appellants have further contended that a q ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Total paper produced on 1,20,67,285 kgs which concession availed They submit that from the figures as stated above, the wastage percentage works out to only 25.08% as against 33.6% which has been confirmed and accepted by Central Excise Department in the show cause notice itself and further, while calculating the figures of unconventional material pulp, instead of deducting 1373448 kgs (1436903 - 63555) the Collector has deducted the entire quantity of 1436903 kgs of white cutting No. 1. 13.1. We agree with the learned SDR that the figures mentioned in para 64 of the impugned order had been taken from the relied upon records which were seized from the factory premises of the appellants. The records relied upon have been detailed in the list of relied upon documents attached to the show cause notice. The figures mentioned against Sl. No. 1 to 100 at pages 21 to 24 of the order appealed against have been taken from the raw materials consumption registers maintained by the appellants for the period 1-4-1986 to 30-6-1989. As regards the difference in percentage of the wastage of 25.08% as against 33.06%, it is seen that the appellants have worked out the percentage as 25.08% t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the various Central Excise records such as RG 1 Form IV and that no discrepancies in the stock of various material including Waste paper/white cutting No. 1 was noticed except for a small difference in the bonded go down for which a separate show cause notice was issued. If the department had any doubts about the receipt of waste paper/white cutting No. 1, they should have physically verified the receipt of quantities of those materials from 27-12-88 onwards. 16.1. The above contention is not correct. In the course of physical verification of finished products held on 26-12-88, excess stock and short stock in different varieties was noticed for which a separate snow cause notice was issued. On the date of the visit, the raw material account in Form IV register was not found written upto 27-11-1988 and 8-11-1988 respectively. Thus, no stock of raw material was verified on 26-12-88 when the officers visited the appellants factory. 17. We find that while working out the demand, benefit has been extended to paper manufactured out of various raw materials received in the factory and satisfying the conditions of Notification No. 138/86 has already been extended. The demand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duty demand has been confirmed, was not manufactured out of pulp containing not less than 50% of pulp made by materials (other than bamboo, hard woods, soft woods, reeds or rags) as required in terms of second proviso to Notification 138/86- C.E., dated 1-3-86 and that the demand is not hit by time bar and that penalties on the appellant company and its officials is sustainable. We, therefore, confirm the entire duty demand and confirm penalties to the extent indicated in the previous paragraph. 21. Subject to the above modification only in respect of penalty, we uphold the impugned order and reject the appeals. Sd/- (Jyoti Balasundaram) Member (J) [Contra per : S.K. Bhatnagar, Vice President]. - With due respects to Hon. Member (J) my views and orders are as follows :- 22. I have gone through the submissions of both the sides and the impugned order. I broadly agree with the analysis and valuation of my Ld. Colleague and the conclusion that records were manipulated and the appellants were guilty of suppression, concealment and mis-statement with intent to take undue benefit or evade duty and the demand is not time barred. Further insofar as the demand is conce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt's contention is that the case has been made out after checking their accounts and detailed enquiry and we find that the department has been able to show that it has proceeded on the basis of process of manufacture, re-cycling of waste paper originated in the course of manufacture of paper, the quantity of pulp which has admittedly been re-cycled. It is noticed that the appellants have given figures for a period even beyond the present show cause notice which cannot be allowed because the case is to be restricted to the period covered by the show cause notice; It is in this connection also noteworthy that in respect of three so called suppliers M/s Rama Paper Mart, Delhi; Swastik Enterprise, Delhi; ABC Enterprise, Delhi, the appellants have themselves indicated in annexure E to their written submissions that the parties were not traceable. This at once shows on one hand the extent of manipulation and on the other hand the fact that in such a case where records have been manipulated the department can only proceed on the basis of enquiry taking into account only such part of the record as is satisfactorily explained, the statements of various persons recorded and it is the test of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ges were also noticed during this physical verification and in respect thereof a separate show cause notice had been issued therefore that aspect has to be dealt with in separate appropriate proceedings. 24. The department's contention that allowance has already been given for the quantity which satisfies the condition of the notification and the demand has been restricted only to those quantities shown in the annexure to the show cause notice w.r.t. which the appellants could not satisfy the conditions, therefore appears to be correct. 25. As aforesaid therefore I agree with my Ld. Colleague that the appellants had wrongly availed of the benefit of the notification 138/86 by manipulation, suppression and mis-statement, therefore not only the demand was required to be confirmed but the appellants were also liable to penalty. However, insofar as the question of confiscation and quantum of penalty is concerned with due respects, I have reasons to differ from the findings of my Ld. Colleague in view of the following:- 26. The charges are serious and have been brought home, therefore, the penalty imposed by the Collector is required to be upheld except to the extent, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p; whether in the facts and circumstances of the case the contention of land, building, plant and machinery should be upheld or set aside (alongwith consequential redemption fine)? 3. whether in the facts and circumstances of the case the penalties imposed on the other appellants should be reduced or upheld? 32. In this case, the demand of duty is confirmed on ground that the appellants, by manipulating statutory record, wrongly availed the benefit of notification no. 138/86 C.E. and they were also found guilty of suppression and concealment of facts with intent to evade payment of duty. The differential duty amounting to Rs. 68,21,417.95P. is confirmed by the adjudicating authority. The issue referred to the 3rd Member is only in respect of quantum of penalties imposed on the company as well as on the individuals. Heard both sides. 33. In this case the demand of Rs. 68,21,417.95 P. is confirmed and it has also come on record that the appellants, by manipulating the statutory records, wrongly availed the benefit of notification no. 138/86. Taking into consideration the facts and circumstances of the case, as without involvement of in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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