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M/s. Asia Metals, Shri Pratik Gandhi - Partner of M/s. Asia Metals, Shri Satish Jadeja, Shri Dharmendrasing Chudasama, M/s. Vitrag Impex, Shri Anil Sohanlal Jain Power of Attorney Holder M/s. Vitrag Impex, M/s. Sai Flipped Coil Pvt. Limited, Shri Kishor Purohit Manager of M/s. Sai Flipped Coil Pvt. Limited Versus Commissioner of Central Excise & ST., Ahmedabad

2015 (4) TMI 69 - CESTAT AHMEDABAD

100% EOU - whether demand of Central Excise duty alongwith interest and penalty and confiscation of the quantity of 31.537MT of Aluminium ingots and 64.902MT of finished goods cleared by the assessee to M/s. Sai Flipped Coil Pvt. Limited and M/s. Vitrag Impex, respectively, manufactured out of duty free raw materials are sustainable - Held that:- Assessee obtained permission from the Central Excise authorities to supply the goods to M/s. Sai Flipped Coil Pvt. Limited. As per sale contract, the g .....

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oner based on the purchase order placed on the appellant by M/s. Reza Overseas Metal Trading of UAE for delivery of goods to M/s. Vitrag Impex. It is important to note that the said sale was made on full payment of duty. No justification to raise demand of Central Excise duty on the goods supplied to the said Companies. So, the demand of Central Excise duty alongwith interest and confiscation of goods and imposition of redemption fine in respect of supply of materials to the said two parties are .....

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on 11AC of the Act, 1944 is justified. But, the goods were not available for confiscation and, confiscation of goods and imposition of fine was not proper and legal. As the demand of duty and confiscation of goods are not sustainable, imposition of penalties on the appellants are not warranted.

Impugned order is modified to the extent the demand of duty alongwith interest and imposition of penalty of equal amount of duty as determined on 5.867MT Zinc Scrap found short as per Panchnam .....

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thirty days from the date of receipt of this order. Failure to which, the assessee shall pay the penalty of equal amount of duty as determined. - Decided partly in favour of assessees. - Appeal No. E/571,641-647/2009 - Order No. A/10284-10291/2015 - Dated:- 27-3-2015 - Mr. P.K. Das,J. For the Appellant : Shri J.C. Patel, Shri Rahul Gajera and Ms. M. A. Gogia, Advocates For the Respondent : Shri Alok Srivastava, Authorised Representative ORDER Per : Mr. P.K. Das These appeals are arising out of .....

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xcise officers from the Department of Revenue Intelligence (DRI) visited the factory premises of the assessee, conducted stock verification and found shortage of 5.867 MT Zinc Scrap. The said officers also visited the premises of Appellant No. 5 and 7 and recorded the statements of various persons, partner of the assessee, transporters, Shri Kishorbhai Purohit, Manager of M/s. Sai Flipped Coil Pvt. Limited (Appellant No.8) and Shri Anil Sohanlal Jain, Power of Attorney holder of M/s. Vitrag Impe .....

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cation of goods and imposition of penalties on the assessee and other appellants. By the impugned order, the adjudicating authority passed the order as under:- (a) Confiscation of the raw materials weighing 203.428MTs imported duty free and utilised in finished goods removed clandestinely, and as the goods were not available for confiscation, imposed redemption fine of ₹ 15,80,000/-. It has confirmed the demand of Customs duty of ₹ 24,87,261/- alongwith interest on the said raw mater .....

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ral Excise duty of ₹ 8,62,306/- alongwith interest on the said finished goods and imposed penalty of equal amount of duty under Section 11AC of the Central Excise Act, 1944, on the assessee. (c) Confiscation of 5.867MTs of Zinc Scrap found short as per Panchnama dated 27/ 28.04.2005 and as the goods were not available for confiscation imposed redemption fine of ₹ 37,500/- and also confirmed demand of Central Excise duty of ₹ 51,732/- alongwith interest on the said goods and imp .....

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ule 26 of the Central Excise Rules, 2002 each on Appellant No. 5 and 7 and penalty of ₹ 2,00,000/- and ₹ 1,00,000/- each on Appellant No. 6 and 8. 4. Learned Advocate on behalf of the appellants submits that as per Para 4.1.11 of the Foreign Trade Policy- 2004-2009, with the permission of Central Excise authorities, the assessee were allowed to supply the goods to the holder of advance license M/s. Sai Flipped Coil Pvt. Limited. Further, as per Para 6.9(b) of the policy, the assessee .....

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DTA sales. It is contended that both the parties have admitted the receipt of the goods and the demand of Central Excise duty is not sustainable. It is further contended that according to the Department, the raw materials were used in the finished goods, which were diverted in the local market. As the demand of Central Excise duty were raised on the finished goods and therefore, demand of Customs duty on raw materials can not be sustained. He relied upon various decisions, as under:- (a) CCE vs .....

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ion under the advance license and duty can not be demanded. He relied upon the following decisions:- (a) CCE vs. Nirmal Kumar Aggarwal 2008 (230) ELT 47 (b) CCE vs. Nirmal Kumar Aggarwal 2011 (270) ELT A91 (c) CCE vs. Shakti Roll Cold Strips P. Ltd 2008 (229) ELT 661 (d) Commissioner vs. Shakti Roll Cold Strips Pvt. Limited 2009 (242) ELT A83 Learned Advocate also submitted Written Submission. He fairly submits that they are not contesting the demand of duty on the shortage being a small amount, .....

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d materials, in the local market in contravention of the Policy and exemption notification. 7. After hearing both the sides and on perusal of the records, I find that the main issue involved in this case is whether demand of Central Excise duty alongwith interest and penalty and confiscation of the quantity of 31.537MT of Aluminium ingots and 64.902MT of finished goods cleared by the assessee to M/s. Sai Flipped Coil Pvt. Limited and M/s. Vitrag Impex, respectively, manufactured out of duty free .....

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per invoice dated 28.12.2004 and 12.01.2005, issued by the assessee. No voucher related to the payment of freight made in respect of the consignment received from the assessee, was found during the search. Shri Anil Sohanlal Jain, Power of Attorney Holder of M/s. Vitrag Impex (Appellant No.6), in his statement dated 27.2.2006 stated that the goods covered under various invoices issued by the assessee in their favour, were not received at all by them; that the said transactions were made at the .....

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ticed that in some cases, the duty free materials were diverted into local market without payment of duty. 9. As regards the clearances of goods to the quantity of 31.537MT of Aluminium ingots to M/s. Sai Flipped Coil Pvt. Limited, it is submitted by the appellant that they supplied the materials to M/s. Sai Flipped Coil Pvt. Limited, advance license holder, as per Para 4.1.11 of the Foreign Trade Policy, with the permission of Central Excise authorities. The relevant portion of the said Policy .....

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s from EOU (i.e. the assessee). It is seen from the impugned order that the Appellant No. 8 in his statement dated 30.11.2005 stated that they purchased Aluminium Ingots and Scraps from the assessee under proper invoices. He also confirmed the receipt of goods vide invoice dated 28.12.2004 of 16.730MT and Invoice dated 12.01.2005 fro 14.847MT of Aluminium Ingots, which are the subject matter of the present appeals. It is also stated that they received the goods alongwith ARE-3 issued by M/s. Asi .....

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the appeal) of M/s. Sai Flipped Coil Pvt. Limited that the said invoices were duly recorded in the license and Customs authorities put note Statement of Export verified. It is further seen that the assessee by letter dated 11.01.2005 requested the Assistant Commissioner of Central Excise, Rajkot for permission of excess clearance of 2.00MT of Aluminium Ingots to the Advance License holder M/s. Sai Flipped Coil Pvt. Limited. By letter dated 12.01.2005, the Assistant Commissioner of Central Excis .....

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is reproduced below:- 6.9 Other Supplies in DTA : Following supplies effected from EOU/EHTP/STP/BTP units to DTA will be counted for the purpose of fulfilment of positive NFE:- (a) . (b) Supplies effected in DTA against payment from the Exchange Earners Foreign Currency (EEFC) Account of the buyer in the DTA or against foreign Exchange remittance received from overseas. 10.1 The assessee by letter dated 15.3.2004, sought permission from the Development Commissioner, Kandla Special Economic Zone, .....

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d receipt of materials from the assessee on behalf of M/s. Reza Overseas Metal Trading. I find from the records that the assessee paid the duty in respect of the invoices as mentioned in the impugned order. 10.2 It is seen from the adjudication order that the assessee was allowed to cross-examine Shri Anil Sohanlal Jain (Appellant No.6) of M/s. Vitrag Impex. During the cross-examination, Shri Anil Sohanlal Jain was put to a question by the Commissioner that whether he stands by his statement dat .....

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id statement. Shri Anil Sohanlal Jain denied the contention of statement dated 27.2.2006, which was relied upon by the adjudicating authority. Shri Anil Sohanlal Jain was also asked to clarify the mode of payment to M/s. Reza Overseas Metal Trading, Ajman, for which he clarified that the payment is made by cheque. 11. It is seen from the record that Shri Dharmendrasinh Chudasama, Partner of the assessee (Appellant No.4), in his statement dated 28.4.2005 stated that they cleared the goods manufac .....

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favour of M/s. Sai Flipped Coil Pvt. Limited against advance license and transportation was arranged by them for the supplies effected. 11.1 Shri Chhaganbhai Garg, partner of M/s. Sai Flipped Coil Pvt. Limited in his statement dated 25.11.2005 stated that he did not know the name from where the goods were purchased as Shri Kishorbhai looked after the same. Shri Kishor Purohit, Manager of M/s. Sai Flipped Coil Pvt. Limited (Appellant No.8) in his statement dated 26.11.2005 and 30.11.2005 stated .....

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issued from the ICD, Ahmedabad, where the licences were registered; based on which they sent them the goods as mentioned above; they also made entries of receipt in the respective statutory registers; they paid them the amount for the supply they received; the transportation charges were to be paid by them and they paid. In his statement dated 30.11.2005, it was further stated that they purchased raw materials for their factory from M/s. Asia Metals under four bills, details of which given in hi .....

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d the goods were sent to them. The transport was arranged by the assessee and the cost of the transportation was included in the invoice value of the goods. 11.3 Shri Pratik Gandhi, Partner of the assessee (Appellant No.2) in his statement dated 13.09.2005 stated that he knew Shri Aashiq of M/s. Reza Overseas Metal Trading, who was on the visit to India and whom he met in Rajkot; Shri Aashiq gave them the purchase order, which was submitted by them to the Development Commissioner; on being permi .....

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cise duty as required under the Policy. They have also collected foreign exchange from overseas. In the case of supply to M/s. Sai Flipped Coil Pvt. Limited, they availed exemption and obtained EODC from Joint Director General Foreign Trade authority. Buyers have admitted the receipt of the goods and authenticity and genuineness of these documents were not disputed by the department. In my considered view, such documents can not be brushed aside merely on the basis of non-corroborative statement .....

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collected through investigation and brought on record. In the said case, the Respondent took a stand before the adjudicating authority in response to the show cause notice and submitted reply as under:- (1) There is no evidence with the Department that the raw material has been directed to some other destination, instead of being transported to the manufacturers factory/premises. (2) The payments were made through cheques/demand drafts. (3) Inputs in question have been used in the manufacture o .....

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in the show cause notice stands established against the respondents who in connivance with one another, defrauded the Government of its legitimate revenue and imposed the penalty on the respondents. Revenue filed appeal before the Honble Supreme Court against the aforesaid decision of the Honble Punjab & Haryana High Court. The Honble Supreme Court dismissed the appeal filed by the Revenue as reported in 2011 (270) ELT A91(SC). 12.2 In the case of Commissioner of Central Excise, Chandigarh v .....

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red dealer could have received the goods without a godown, also non-fulfilment of the conditions of transit sales also point in the direction of issue of invoices without actual movement of goods. The Honble High Court observed that Tribunal had recorded the findings that inputs supplied by the Respondent were duly received by the manufacturers and were used in the goods manufactured, which were cleared on payment of duty. It has also been observed that the department has not been able to prove .....

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n 2009 (242) ELT A83 (SC). 13. In the present case, the assessee obtained permission from the Central Excise authorities to supply the goods to M/s. Sai Flipped Coil Pvt. Limited. As per sale contract, the goods were delivered on FOB Rajkot. The said Company also admitted receipt of the goods. In any event, it is the responsibility of the advance license holder to fulfil the conditions. It is significant to note that advance license holder has provided EODC certifying discharge of export obligat .....

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demand of Central Excise duty on the goods supplied to the said Companies. So, the demand of Central Excise duty alongwith interest and confiscation of goods and imposition of redemption fine in respect of supply of materials to the said two parties are not sustainable. 14. The other issue in these appeals is the demand of duty on the raw materials under the Customs Act and confiscation of the said goods and imposition of redemption fine. I find force in the submissions of the learned Advocate .....

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mited vs. CCE Surat 2007 (220) ELT 289 (Tri. Ahmd.), in respect of clandestine manufacture and removal by 100% EOU, held that duty has been demanded on the diverted goods, the question of demand of duty on the inputs, which has gone into the finished goods, is not sustainable. In the case of CCE, Surat vs. Sanjari Twisters 2009 (235) ELT 116 (Tri. Ahmd.), the Tribunal rejected the demand raised by the department on raw materials imported by EOU and used in the finished goods and cleared to DTA. .....

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shed goods were received by the said two parties and therefore, the demand of customs duty on raw material falls through. Hence, the demand of duty on the raw materials alongwith interest and confiscation of the goods and imposition of redemption fine are not warranted. 15. In view of the above discussion, demand of duty alongwith interest and imposition of penalty as well as confiscation and imposition of redemption fine on the raw materials and the finished goods except shortage of 5.867MTs of .....

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