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2015 (10) TMI 985 - ALLAHABAD HIGH COURT

2015 (10) TMI 985 - ALLAHABAD HIGH COURT - 2016 (331) E.L.T. 219 (All.) - Clandestine removal of goods - manufacturing of carbon black - excess weight over and above weight of packing material - excess weight over and above standard excess weight - Duty demand u/s 11A - Penalty imposed under Rule 209A - tribunal observed that, matter was remanded only to ascertain the trade practice of over-filling bags in respect of carbon black, but the appellants could not bring any material to show that such .....

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amount for the excess quantity of carbon black was received by the appellants. The Adjudicating Authority merely referred to certain opinions or statements that it was possible to fill the exact weight since packing process was automatic but it completely overlooked the fact that the appellants themselves had stated that they were over-filling a little quantity of carbon black in excess of the standard weight so that there may not be any complaint from the purchasers for receiving lesser quantit .....

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ave any revenue significance. - impugned Final Order of the Tribunal dated 19.10.2004 cannot be sustained and is hereby set aside. To do justice, the matter is remitted back to the Tribunal - Decided in favour of assessee. - Central Excise Appeal No. - 31 of 2005 - Dated:- 14-10-2015 - Hon'ble Tarun Agarwala And Hon'ble Surya Prakash Kesarwani, JJ. For the Appellant : Gaurav Mahajan,Bharatji Agrawal,Nishant Misra,Piyush Agrawal For the Respondent : C.S.C.,K.C. Sinha,S.K. Rai,V.K.Singh Ra .....

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weight) the Tribunal was not justified in confirming the demand with reference to the weight of packing material also? B. Whether in view of the directions in the earlier order of remand regarding denovo adjudication, the entire matter was at large for denovo adjudication and not only the question where excess weight over and above standard excess weight was part of the trade practice of Industry manufacturing and selling carbon black? C. Whether the order passed by the Central Excise and that o .....

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ht, which only represent weight of the packing material being entirely different than weight of excess quantity of Carbon black, the Tribunal was not justified in not deciding the said question while confirming the demand? E. Whether no additional consideration having been admittedly received by the appellant in respect of the alleged excess quantity hence no duty was paid following the trade practice and various judgments of the Tribunal and hence no penalty can be legally imposed?" 3. Lea .....

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#39;the Tribunal') arbitrarily and incorrectly dismissed the appeal of the appellants on the ground that findings regarding removal of excess carbon black were confirmed in the earlier Final Order of the Tribunal dated 19.10.2000 and the matter was remanded for limited purpose to examine the trade practice of slightly over-filling carbon black. He further submits that the finding of the Tribunal with regard to trade practice of over-filling of bags in respect of carbon black being without an .....

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s quantity to avoid any complaints of the customers for short supply. He further submits that in an invoice of 10 M.Ts. of carbon black, the net weight brought on record was 10.240 M.Ts. Out of this, 0.240 M.T. excess weight, 0.160 M.T. was packing material and 0.080 M.T. was the excess quantity of carbon black, but the respondents had demanded duty, both on 0.160 M.T. of packing material as also on 0.080 M.T. of carbon black filled in bags. He, therefore, submits that the impugned order of the .....

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is not based on any evidence on record. 4. In support of his submissions, he relied upon the judgment of Hon'ble Supreme Court in the case of Mann Aluminium Vs. Commissioner of Central Excise, Indore, 2015 (322) E.L.T. 184 (S.C.) and the judgment of Privy Council in the case of M.R. Ramanujam Vs. King Emperor (1935) ILR 58 PR 523. 5. Learned counsel for the respondents submits that the impugned order of the Tribunal does not suffer from any infirmity inasmuch as by the earlier Final Order da .....

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ns of learned counsel for the parties and perused the record. 7. Briefly stated, the facts of the present case are that the appellants are engaged in the manufacture of carbon black falling under Sub-Heading 2803.00 of the Schedule to the Central Excise Tariff Act,1985 on which duty is payable on ad valorem basis. Central Excise Officers visited their factory premises on 30.05.1996. On physical stock taking of the finished goods and raw material, certain discrepancies were found and certain reco .....

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of ₹ 85,57,626/- under Section 11A of the Central Excise Tax (hereinafter referred to as ''the Act') and imposing penalty of ₹ 85,57,626/- was passed. Penalty was also imposed under Rule 209A of the Central Excise Rules, 1944 (hereinafter referred to as ''the Rules'). Being aggrieved the appellants preferred Central Excise Appeal No.E/832-34/1999-NB before the Tribunal, which was disposed of by Final order No.A/907-909/2000-NB (DB), dated 19.10.2000 observing .....

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o reconcile this difference, the party has advanced the defense that the precise measurement of the quantity of carbon black manufactured and stored in the silos is not possible. Therefore, the daily production (work in progress material) is calculated on the basis of raw material consumed which is cross checked with dip measurement of carbon black stored in silos. They have also stated that approximately the input output ratio between carbon black feed stock and the carbon black was to the orde .....

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t' is to denote the difference between the gross weight and the tare weight and therefore, net weight is exclusive of the packing material namely the empty paper bags and wagon liners. They however contest the findings that the tare weight would represent only the weight of empty truck. The difference between the gross weight and the tare weight being the net weight, such a net weight would include weight of the packing material and the weight of the paper bags/ wagon liners that are used fo .....

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by the party reflected the weight of paper bags i.e. packing material in addition to the weight of carbon black. Therefore, if the contention that the total excess quantity included the weight of the standard excess weight of the carbon black and the packing material is correct then the sum of the weight of the packing material and the weight of carbon black, should conform to the total quantity removed, which, however, is not the case. Based on these facts, the Commissioner has arrived at the c .....

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ucted investigation with one of the purchasers namely Modi Tyres who had confirmed that no excess amount was paid for the excess quantity. It is also not disputed by the Commissioner that the party had not received any excess amount for excess quantity of carbon black. Thus, it is contended that even assuming that the difference between the standard quantity and the gross weight represented the weight of carbon black, no further duty would be payable. In support of this proposition, the appellan .....

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It is observed that the appellants did raise the contention before the adjudicating authority that the carbon black packed and stored in bags for despatch was incapable of precise measurement and it was impossible for them to precisely weight 25 kg. of carbon black. Consequently they were slightly over-filling the bags so that in instance of weighment of bags by customers, the bag of less than 25 kg. of material could not be found. The Commissioner has dismissed this proposition by observing tha .....

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aspect needs to be looked into in depth by the original authority. We accordingly set aside the order of the Commissioner and remand the matter to him for de novo consideration. The appellants, within one month of the receipt of this order, should furnish to the Commissioner the facts and figures relating to the cu-mulative excess quantity or supply of carbon black to the buyers by way of overfilling of the bags vis-a-vis the total quantity of these goods cleared by them on payment of duty duri .....

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tober, 2000, it is clear that two points were raised by the appellants before the Tribunal. The first point was with regard to the excess quantity of carbon black, which was decided against the appellants and the finding of the Adjudicating Authority in this regard was upheld in paragraph-6 of the order. The second point raised by the appellants was that the duty on carbon black was on ad valorem basis and they had not received any excess amount for excess quantity of carbon black, therefore, ev .....

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recorded in the Order in Original dated 05.01.1999 and remanded the matter to the Adjudicating Authority only with respect to second point. 9. Pursuant to the aforesaid Final Order of the Tribunal dated 19.10.2000, the Adjudicating Authority again considered the matter and passed the Order in Original No.07, dated 31.03.2004 crystallising in para 7.1.1 and 7.1.2 of the order the two issues as under: "(i) Whether there exists a trade practice of over filling of bags in respect of carbon blac .....

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gned Final Order dated 19.10.2004 observing that the matter was remanded only to ascertain the trade practice of over-filling bags in respect of carbon black, but the appellants could not bring any material to show that such a trade practice did exist in respect of carbon black. Being aggrieved, the appellants filed the present appeal. 11. The first point as reproduced above was considered by the adjudicating authority in para 7.2 to para 7.3.5 and it was held that the assessee's contention .....

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storage tanks. He also relied upon the statement of Sri Shambhu Shah-warehouse incharge dated 13.04.1998 (RUD7). Before the Tribunal, the assessee raised several contentions including the violation of principles of natural justice by the Adjudicating Authority by not affording any opportunity against the alleged inquiry reports. We find from perusal of the order in original that the Adjudicating Authority neither confronted the assessee with the alleged inquiry report nor afforded any opportunit .....

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l was passed in violation of the principles of natural justice. 12. With regard to the point No.(ii) as noted in para (9) above, we find that the Adjudicating Authority held in para 7.4.4. and para 8.1 that the excess quantity shown in the show cause notice has been found to be that of carbon black only hence no contrary view to the earlier finding of the Commissioner of Central Excise Meerut-I recorded in the earlier order in original dated 05.01.1999 is taken in which it was held that the good .....

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ve that where the assessment is linked to value, the realisation of the price is the same even if packed quantity is slightly more than the quantity projected then this would not have any revenue significance. In the case of Commissioner of Central Excise Mumbai vs. Fiat India Pvt. Ltd. 2012 (283) ELT 161 (S.C.) Para-24, the Hon'ble Supreme Court held as under: "24. Section 3 of the Act provides for levy of duty of excise and Section 3(i) thereof states that there shall be levied and co .....

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and the value is further defined in express terms by the said Section. In every case, the fundamental criterion for computing the value of an excisable article is the normal price at which the excisable article is sold by the manufacturer, where the buyer is not a related person and the price is the sole consideration. If these conditions are satisfied and proved to the satisfaction of the adjudicating authority, then, the burden which lies on the assessee under Section 4(1)(a) would have been d .....

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e excise duty on carbon black had been paid on ad valorem basis. No evidence was brought on record by the Department that the appellants had received any amount as additional consideration in respect of overfilled excess quantity of carbon black. 14. It is not the case of the respondents that the report of investigation conducted by the department with one of the purchasers, namely, M/s Modi Tyres, who confirmed that no excess amount was paid for the excess quantity, was not on record. In the Or .....

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filling a little quantity of carbon black in excess of the standard weight so that there may not be any complaint from the purchasers for receiving lesser quantity of carbon black which sticks with the packing bags. This factual aspect of non-receipt of any additional consideration had neither been denied nor could be disproved by the respondents. Neither the Adjudicating Authority considered the submissions of the appellants and the details furnished by them as briefly noted in paragraph-6 of t .....

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