TMI Blog2011 (9) TMI 875X X X X Extracts X X X X X X X X Extracts X X X X ..... t of duty. However, the benefit of MODVAT claim cannot be considered and allowed in the absence of duty paying documents for procurement of the raw materials. It is not as if that the raw materials could be procured only from duty paying sector - Duty demand penalty imposed is reduced - Decided partly in favour of assessee. - E/490, 494 and 495/2005 - Final Order Nos. 555-557/2011 - Dated:- 6-9-2011 - Shri S.S. Kang and M. Veeraiyan, JJ. Shri M.G. Varadarajan, Advocate, for the Appellant. Smt. Sudha Koka, Addl. Commissioner and Shri V. Srinivas, Supdt. of Central Ex., for the Respondent. ORDER The details of the appeals under consideration are given below :- Sl. No. Appeal No. Name of the parties Amount involved 1. E/490/2005 M/s. Ramachandra Rexins Pvt. Ltd. v. CCE, Bangalore-I Duty : Rs. 1,60,52,506/- Penalty : Rs, 5,00,000/- Redemption Fine : Rs. 50,000/- + Rs. 20,000/- 2. E/494/2005 Shri N.A. Jayaram, Director v. CCE, Bangalore-I Penalty : Rs. 1,00,000/- 3. E/495/2005 M/s. S. Subramanya Company v. CCE, Bangalore-I Penalty : Rs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation. 3.4 In pursuance of the remand order, the Commissioner has passed the impugned order dated 11-3-2005. He confirmed demand of duty of Rs. 1,60,52,506/- for the period from 1-6-1987 to 9-10-1991 under proviso to Section 11A(1) from the appellant company and imposed a penalty of Rs. 5 lakhs on the appellant company. 176 rolls of CCF valued at Rs. 2 lakhs was held liable for confiscation and a fine of Rs. 50,000/- imposed and similarly 178 rolls of CCF valued at Rs. 1,10,000/- was confiscated but allowed to be redeemed on payment of fine of Rs. 20,000/-. Two vehicles used belonging to the appellant company were confiscated but allowed to be redeemed on payment of fine of Rs. 1 lakh. A penalty of Rs. 1 lakh was imposed on Shri N.A. Jayaram, Director of the appellant company and a penalty of Rs. 1 lakh was imposed on M/s. Subramanya Co. 4.1 The learned advocate appearing for the appellants assailed the order of the Commissioner on the following main grounds :- (a) Though they had infrastructure capable of producing goods as mentioned in the show-cause notice, the appellant company was working only at 50% of the capacity; and that they were mostly working on one shift a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1989. If they procured the inputs, they could have been eligible for MODVAT credit to the tune of about Rs. 1.25 crores. (g) No investigation was carried out by the department with the concerned State Transport Corporations who are the major buyers. No evidence of sale proceeds being received in cash from any party has been relied upon. (h) The declarations/statements given to various agencies for purposes like to secure more quota of coal, kerosene, bank credit which indicated inflated figures of sales cannot be relied upon for alleging unaccounted production and clandestine removal in the absence of other corroborative evidence. (i) As an alternate submission, the learned advocate submits that a demand of Rs. 1,18,14,028/- has been made based on Annexure-E-1 to the show cause notice which alleged clandestine removal of goods manufactured by the appellant-company. It has also been held that Subramanya Co., a partnership firm with family members of the Directors of the company as partners was used as conduit for selling the unaccounted goods. A further demand of Rs. 42,48,373/- has been made based on the variation in purchased quantities from the appellant company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tants, admission statement of the Director himself, admission statement of transporters and admission statement of dealers. (b) In addition to variation in stock of PVC resins, referring to para 24 of the Commissioner s order, it was submitted that about 9 lakh meters of cotton fabrics were not accounted. The claim of the appellant that the said quantity was due to the reason of waste was not substantiated. If this has to be accepted as waste, the same will be to the extent of 30%, which is contrary to norms in this particular industry. (c) That there was excess production is evident from the fact that when the appellant company has not shown any production in RG-I during the period from 4-9-1991 to 20-9-991, there have been issues of all raw materials required for production and batch-wise production of coated cotton fabrics were found recorded in the private records. During this period, Shri Ashok Reddy, the Production Manager accepted that the production figures were being maintained in katcha papers. (d) Regarding the prevalence of practice of assigning parallel roll numbers, it was submitted that roll numbers in katcha papers in the name of some parties were fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us records with the able assistance of both sides. At the outset, we note that the matter is before the tribunal for the second time having been remanded to the original authority vide order dated 31-3-2003 and the dispute relates to period before two decades. 6.2 The show-cause notice alleged that the appellant-company had infrastructure capable of producing goods in excess of the accounted production. This is not being disputed by the appellant-company. Their submission is that they were working only at about 50% of the installed capacity and that they were working mostly one shift and only occasionally, on two shifts. Therefore, the finding of the Commissioner that the appellant-company had capacity to produce in excess of the accounted production can be treated as not in dispute. 6.3 The appellant company has clearly admitted that the production and figures given to other agencies like Banks were on the higher side. However, it was sought to be explained claiming that the same were intended for the purpose of getting loan from the bank or other facilities like more quota of coal, kerosene. It was also contended that the declarations given for different purposes cannot be re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manipulated the raw material accounts and have not truthfully maintained the same as found by the Commissioner. The unexplained excess use of cotton fabrics in the manufacture is a clear indicator of unaccounted production. 6.5 There is an allegation of assignment of parallel roll numbers in respect of goods manufactured by them. The appellant-company has not disputed the existence of same roll numbers in the invoices/delivery challans relating to different parties. The company sought to explain the same by saying that some of the consignments supplied by them to different customers have been rejected by them and the same were returned and re-sold through their sister concerns like Subramanya Co. It is surprising that when several consignments are claimed to have been returned, no correspondence from any of their buyers indicating rejection of the consignment sent to them or evidence for transport of the returned consignment either to their factory or to Subramanya Co. or directly to a third party has been produced. Therefore, it is clear that the appellant-company has used parallel numbers in respect of batches of consignments produced and sold to different customers. The pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unting the bills in the bank. In other words, it was claimed that in respect of these katcha invoices, though supported by LRs, there were no actual clearance of the goods to the customers mentioned therein. These submissions are clearly devoid of merits. The details in the so-called katcha and packka invoices widely differed in matters relating to dates, quantity cleared and the names of the consignees. Such wide variation clearly demolishes the claim and apparently an after-thought. At any rate, even if the goods were to be cleared from the factory to their office, the legal requirement is that the gate-passes are required to be prepared indicating the consignment as meant for self and cleared only on payment of duty. 6.9 As already mentioned, on the date of visit, certain quantity of coated cotton fabrics manufactured was found unaccounted as they were not entered in RG-1 and that a few days earlier, a consignment was found cleared without preparing gate-pass and without payment of duty, as admitted by Shri N. A. Jayaram (para 17.6 of the Order-in-Original refers). 6.10 It is also noticed that the transporters have clearly stated that whenever they have issued LRs, the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Regarding the claim of the appellant that the demand under Annexure-E.1 has not taken into account the reconciliation statement furnished by them, the same is not acceptable in view of the evidences of unaccounted production and clandestine removal discussed in the earlier paragraphs. The submissions on behalf of the department that the demands have been raised only in cases where the gate-passes were not available corresponding to the invoices prepared by the appellant-company deserves to be accepted. The Commissioner has rightly rejected the reconciliation statement submitted belatedly by the appellant-company. 7.1 The learned advocate relied on several decisions. In one of the decisions, it has been held that solely based on reports indicating inflated figures of sales for bank loans, demand alleging clandestine removal cannot be raised. Inflation of sales figures for the purpose of getting undue bank loan may be possible though not permissible. No doubt, merely based on such statement to the bank, demand cannot be raised. When clandestine removal is alleged, no doubt, evidences like procurement of excess inputs, use of excess inputs, etc. are to be looked into. Private recor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nted production. (b) There are clear indications of unaccounted procurement of raw materials and unsubstantiated claim of excess wastage of cotton fabrics, one of the main raw materials for manufacture of coated cotton fabrics. (c) Presence of stock of finished products not accounted in the RG-1 on the date of visit by the officers, the practice of assigning parallel roll numbers for the goods manufactured by the appellant-company, non-accounted of production for several days in the RG-1 during September, 1991 while there were issue of raw materials and production entered in private records, the admission statements of concerned persons clearly indicate unaccounted production by the appellant-company. (d) The presence of katcha invoices, corresponding LRs and packka invoices without corresponding gate-passes in respect of several consignments and substantially higher quantum of sales by Subramanya Co. which was highly disproportionate to quantity purchased indicate unaccounted clearances by the appellant-company. (e) The demand in terms of Annexure-E.2 to the show-cause notice is not proved to be for quantity of coated cotton fabrics different from the quant ..... 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