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TMI Blog2011 (9) TMI 930X X X X Extracts X X X X X X X X Extracts X X X X ..... found that the appellants had availed Modvat credit on copper foils by declaring the same as one of the raw materials. Shri Sanjay Shantilal Mardia, Managing Director of the company, in his statement dated 4-12-2003, explained that the entry of finished goods could not be made in RG 1 register as the clerk responsible for making entry was on leave for last 2-3 days. As regards availment of credit on copper foils, he explained that they have taken the credit on the basis of Central Excise invoices without actually receiving the copper foils. He also reversed the credit of Rs. 8,35,000/- involved in respect of copper foils during the period from 11-4-2001 to 2-9-2003. Distinguished 3. On the basis of the above, the appellants were issued a show cause notice dated 22-4-2004, proposing confiscation of excess found copper pipes totally valued at Rs. 2,27,252/- involving duty of Rs. 36,360/-; denying Cenvat credit of Rs. 20,74,449/- availed in respect of copper foils; to confirm interest on the wrongly availed Cenvat credit and for imposition of penalty upon the appellant. The said show cause notice was adjudicated by the original adjudicating authority confirming the allegations m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is no other evidence to show that the goods were either in the process of being removed or were meant for clandestine removal. Tribunal, in number of cases, has held that mere non-entry of production in RG-1 register by itself is no proof that the goods were meant for clandestine removal, unless there is evidence reflecting upon the same. 8. Tribunal in the case of C.C.E., Rajkot v. M/s. Amrut Ceramics as reported in 2007 (209) E.L.T. 390 (Tri.-Ahmd.), has observed that mere non-entry of the goods in RG-1 register will not amount to non-accountal of the goods unless it is supported by past conduct of the assessee in removing the goods or the raw material used in the manufacture of such finished goods have not been accounted for in record. To the similar effect is the Tribunal's decision in the case of M/s. Shree Precoated Steel v. C.C.E., Pune as reported in 2006 (203) E.L.T. 506 (Tri.-Mumbai). The two decisions - one in case of C.C.E., Chandigarh v. M/s. H.S. Indus. Co. as reported in 2004 (163) E.L.T. 455 (Tri.-Del.) and another in the case of Collr. of C.E., Jaipur v. M/s. Mittal Laminates (P) Ltd. as reported in 1999 (105) E.L.T. 408 (Tribunal) - relied upon by the Comm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing into account the labour charges, etc., and they have made some profits on the sale price of copper pipes. As such, submits the learned advocate that no conclusive view can be taken merely based upon the comparison of the copper foils price and copper pipe price, without any other evidence to that effect. 11. The learned advocate has further contended that the consideration for the price of the foils was made to the supplier by cheque. Not only that, even the payments to the transporter were made by cheque. The copper foils in question were duly entered in their Annexure IV register. The said foils were subsequently sent to their job workers under delivery challans for melting and extrusion. The same were received back by the job workers under the cover of delivery challans/debit note. The conversion charges were made to the job workers which are duly reflected in their record. He draws our attention to the fact that all above statutory documentary evidences were placed before adjudicating authority which have not been considered and appreciated. Reliance by the adjudicating authority on the sole statement of the Managing Director is not justified inasmuch as the same is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spect of goods sent to M/s. Shri Ram Tubes (P) Ltd. clearly indicate that the same are for melting and extrusion i.e. both processes of melting and extrusion. Further, reference to one of the fact made by the adjudicating authority to the effect that verification of the ledger account of Metal Jems, does not include some challans, cannot be made the basis inasmuch as the maintenance of record by the job worker cannot reflect upon the nature of inputs used by the principal manufacturer. 13. We further find that the strong reliance stand placed by the adjudicating authority on the statement of the Managing Director. Apart from the fact that the appellants have strongly contended that such statement of Managing Director was under pressure, the question which arises is as to whether the said statement can be made the sole basis of concluding against the assessee, in view of the statutory evidences produced by them. It already stand recorded that the payments to the suppliers and transporters were made by cheque, no investigations were conducted either at the supplier's end or at the transporter's end, there is no allegation of flow back of money from the supplier's end to the app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue whether copper pipes found in excess at the time of visit of the officers are to be confiscated and penalty imposed or not later. 19. During the visit of officer on 4-12-2003 and during the scrutiny of records, it was noticed by the officers that copper foils were used in the manufacture of copper pipes by the appellants. In the presence of pancha witnesses, Shri Sanjay S. Mardia, the Director was asked about utilization of copper foils in the manufacture of finished goods and he confessed that they were only receiving the Cenvat invoices for availing and accumulating Cenvat credit and in the presence of pancha witnesses, officers worked out the total Cenvat credit availed on such invoices amounting to Rs. 20,74,449. Shri Sanjay S. Mardia readily debited the amount of Rs. 5,35,000/- on the same date in the presence of pancha witnesses on the spot. A statement was recorded from him under Section 14 of Central Excise Act, 1944 and in the statement also, he confessed to non-receipt of copper foils and agree to reverse the credit or to pay back the credit taken by him. Show cause notice was also issued on 22-4-2004 i.e. within about five months since no investigation was c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation to a chart, which was also produced to the adjudicating authority based on actual purchase invoices of foils and sales invoices of pipes for all the three years. It was submitted that according to the chart, cost of the final product is higher even after taking into account the labour charges etc. This claim was also verified by me. In the chart produced by the appellants, the net cost of copper foils was indicated as Rs. 171.80, Rs. 142.92 and Rs. 147.25 from 2001-2002 to 2003-2004 respectively. However, on verification of the record of the firm, it was found that the dealer price was calculated by the appellant on the basis of Cenvat credit taken and not on the basis of actual price charged. In fact, since all the copper foils were purchased from a dealer, the dealer price was not equal to the cum-duty price of the manufacturer. A revised table prepared in which the net price was calculated by deducting actual credit availed from the invoice price of the dealer, the net cost to the appellants came to Rs. 190.32, Rs. 158.90 and Rs. 158.06 for the years 2001-2002 and 2003-2004. On a review of the challans selected randomly from the record submitted by the appellants, it was n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ization and not having any income by way of donations, they could not have carried on like this. In fact, coupled with the investigation and statement given under Section 14 and admission made before the pancha witnesses and the debit made before the pancha witness, in my opinion, this is sufficient to come to the conclusion that appellants did not receive copper foils for conversion to copper tubes/pipes. 24. Another claim made was that copper foils purchased by them was of sub-standard quality. Original adjudicating authority has clearly observed that this could not be so because appellants themselves had sold copper foils as such at Rs. 220/- per kgs., vide invoice No. 31, dated 7-5-2003. According to the appellants, the average price of the copper foils, as per the dealer's price was Rs. 156.64 net of duty. Further it was also noticed during the purchase invoice that appellant had purchased imported copper foils from the dealers. 25. Learned advocate had cited decisions of the Hon'ble Supreme Court in the case of Dagdu v. State of Maharashtra in support of his contention that mere confession statement is not enough and uncorroborated investigation cannot be relied u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clearly show that appellants did not receive copper foils, no further investigation (sic.). Once there is an admission by the Director coupled with the facts as discussed above, which is within the knowledge of the appellants, the burden shifted to the appellants to show that they had actually manufactured the copper pipes/tubes from copper foils. Instead of doing that the appellants have chosen to brazenly make incorrect statements and show a non-profitable activity as profitable one. Even to a lay man without any experience in cost accounting technique, the manufacturing activity in this case straightaway is non-profitable leave alone a cost accountant. 27. It was stated by the learned advocate that department case is based on assumptions and presumptions. What I have found on verification of records and the verification of statements is that it is the defence of the appellants which is based on assumptions and presumptions and not the case of the department. 28. Another point mentioned by the adjudicating authority and contested by the learned advocate is that documents produced by the appellants did not inspire confidence. It was noticed from the records produced t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ression of facts on the part of the appellants, therefore penalty under Section 11AC also has to be upheld. Penalty has to be imposed on Shri Sanjay Shantilal Mardia since it was he who was present during the search, it was he who admitted the liability and this shows clearly that he was the person responsible for availment of irregular credit. However, penalty of Rs. 5 lakhs appears to be excessive and therefore, same is reduced to Rs. two lakhs. Further while I uphold the penalty equal to duty under Section 11AC of Central Excise Act, 1944, I find that option to pay duty demanded, interest and penalty to the extent of 25%, within 30 days has not been extended to the appellants. Therefore, appellants have to be extended this option in terms of decision of the Tribunal in the case of M/s. Swati Chemicals Industries & Others being Order No. A/1556-1576/WZB/AHD/2009, dated 21-7-2009 - [2009 (248) E.L.T. 421 (Tri.). Accordingly, I extend the option to pay duty demanded with interest and penalty to the extent of 25% of duty within 30 days. It is made clear that if any of the three elements is not paid, the penalty liability shall be equal to duty. The department is directed to intimate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... need be demanded. The value of the total quantity confiscated is Rs. 2,27,252/- only and duty involved is only Rs. 36,360/-. Therefore, the fine in lieu of confiscation of Rs. one lakh imposed is harsh. Accordingly, while confiscation and imposition of fine is upheld, fine in lieu of confiscation is reduced to Rs. 25,000/- (Rupees twenty five thousand only). Difference of Opinion 1. Whether credit of Rs. 20,74,449/- taken on copper foils by appellants is admissible as held by learned Member (Judicial) or not admissible as held by Member (Technical). 2. Whether penalty of Rs. 20,74,449/- is imposable under Section 11AC of Central Excise Act, 1944, as held by Member (Technical) or no penalty is imposable as held by learned Member (Judicial). 3. Whether extended period is invokable for demanding irregular Cenvat credit of Rs. 20,74,449/- or not. 4. Whether penalty of Rs. two lakhs is imposable on Shri Sanjay Shantilal Mardia, Director of M/s. Nissan Copper Private Limited as held by Member (Technical) or no penalty is imposable as held by learned Member (Judici ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ii) Whether interest at appropriate rates applicable is required to be paid by the appellants as held by Member (Technical) or no interest is to be paid as held by Member (Judicial). 35. Heard Shri V.M. Doiphode, ld. Counsel and Shri R. Nagar, ld. SDR for the respective parties. 36. Ld. Counsel submits that there are two issues involved in this appeal. (a) Denial of Cenvat credit on the ground that the appellants had not received the material along with invoices. (b) Whether the finished goods which were lying in the factory premises are liable for confiscation and consequent penalty thereon. 37. He would draw my attention to the show cause notice. It is his submission that in the entire show cause notice, there is no other evidence other than the statement of Managing Director, which can lead to a conclusion that Cenvat credit has been availed only on the invoices and inputs were not received. It is his submission that the appellant had recorded the inputs received in their statutory books and dispatched the same to the job worker for further manufacture of copper tubes. It is his submission that Revenue is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vate records. It is his submission that in the absence of mens rea, confiscation as upheld by ld. Member (Technical) is incorrect. 40. Ld. SDR, on the other hand, submits that the judgment of Hon'ble Supreme Court in the case of C.C.E., Mumbai v. Kalvert Foods India Pvt. Ltd. - 2011-TIOL-76-SC-CX = 2011 (270) E.L.T. 643 (S.C.), which settled the law to the effect that statements which are recorded by Central Excise officers should be relied upon. It is his submission that in its judgment, Hon'ble Supreme Court has very clearly indicated that when statements which are made by the Managing Director of the company and other persons containing all details about the functioning of the company, which could be made only with personal knowledge of the persons and therefore could not have been brushed aside and should be looked into and relied upon. After this submission, he reads the statement of the Managing Director of the appellant company in this case before me. It is his submission that the Managing Director, in his statement, has categorically stated that they have taken credit of duty paid on the invoices and goods mentioned in the invoices have not been received by them and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d excisable goods in Daily Stock Register, as required under the above Rules of Central Excise Rules, 2002. Further, all such acts of contravention on their part appear to have been admitted by them by recourse to fraud and suppression of material facts from the department with an intent to evade payment of Central Excise duty which constitute an offence of the nature as described in Rule 25(1) of the Central Excise Rules, 2002 and thereby rendering themselves liable for penal action under said Rule with Section 11AC of the Central Excise Act, 1944. The Central Excise duty @ 16% of seized goods valued at Rs. 2,27,252/- comes to Rs. 36,360/- leviable on unaccounted finished goods seized by the Central Excise officers in presence of panchas under panchnama dated 4-12-2003, is required to be recovered from them under proviso to sub-section (1) of Section 11A of Central Excise Act, 1944. 8. In view of the facts and circumstances discussed in foregoing paras and material facts available on records, it appears that the unit has not followed the provisions of Rules 3, 4 and 7 of Cenvat Credit Rules, 2001 and 2002, inasmuch as the unit had not received the inputs physically but they ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 116) 45. It can be seen from the above reproduced list of documents/records relied for the purpose of issuance of show cause notice other than Panchnama and the statement of Managing Director, the authorities have resumed to RC 23A Part I & II and invoices for the period in question. It is also seen that the invoices on which credit was availed were a part of the documents which were withdrawn. On perusal of the said invoices which were annexed to appeal paper book clearly indicate the name of registered person and also the details of purchases made by such registered persons/dealers of copper foils. Nothing prevented the Revenue authorities from carrying out further investigation with the said suppliers of the copper foils who were within the jurisdiction of the officers at Gujarat. They could have carried out the investigation by summoning the dealers/registered persons who have supplied the goods to the appellant. It seems that the Revenue authorities have not conducted any further investigation in this regard. In the absence of any evidence that the appellant had not received the goods indicated in the invoices and the invoices having been issued by registered person regi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds without any duty paying documents, separate parallel set of invoices in the factory premises and finished goods lying in the factory premises. All this factual matrix were confirmed by the statements of Managing Director and other persons and hence it was held that statements need to be relied upon for upholding the demand of duty and penalty. In the case in hand, as reproduced earlier herein above, there is evidence to show that there was movement of the goods/inputs to job worker, which would indicate that definitely there was receipt of inputs, which travelled to the job worker for further processing. On this factual matrix, I am of the considered view that the Revenue has not been able to prove that the appellant had not received the inputs on which the credit was availed. In view of this, I am in agreement with the views taken by ld. Member (Judicial). 49. As regards confiscation of finished excisable goods viz. copper pipes, weighing 1567.256 kgs., it is not in dispute that the said goods were finished and ready in the factory premises. It is also to be seen that there is no dispute that the goods were not entered in RG-I record. The claim of ld. Counsel that the dec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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