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TMI Blog2015 (11) TMI 1477X X X X Extracts X X X X X X X X Extracts X X X X ..... vinder Jain, a consignment agent of RIL, respectively. By this order, the Commissioner also appropriated an amount of Rs. 50 lakhs deposited by the appellant company during to investigation. The facts, in brief, leading to filing of these appeals along with stay applications are, in brief, as under: 1.1 The appellant company in their manufacturing unit at A-2, South Side of G.T. Road, Ispat Nagar, Ghaziabad, manufacture stainless steel ingots/ billets (SS Ingots/ Billets) and stainless steel flats (SS Flats) chargeable to Central Excise Duty under Chapter 72 of Central Excise Tariff. SS Flats are manufactured from SS billets. The period of dispute in this case is from 2003-2004 to 2005-2006. On 09/03/2006, the factory premises of RIL, residential premises on Arun Rathi, Shri Ravinder Jain and some other dealers were searched simultaneously, in course of which a number of incriminating documents were found. 1.2 The duty demand of Rs. 102, 94,75,732/- is based on the assumption that the chromium content of SS Billets/SS Flats being manufactured by the appellant is 13.4 per cent which is based on testing of the samples of SS Billets/flats by Central Revenue Control Laboratory and al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , ld. Counsel for the appellant company and its MD, Shri Arun Rathi, pleaded that the impugned order has been passed in gross-violation of the principles of natural justice inasmuch as all the relied upon documents (RUDs) and the non-relied upon documents (NRUDs) asked for by the appellants have not been supplied; that while the appellant had requested for cross-examination of certain crucial witnesses, even that has not been allowed; that in terms of the Commissioners affidavit dated 6/1/2014, the required documents were supplied to the appellant in two lots during pendency of the matter before the Tribunal from which it is clear that those documents had not been supplied to the appellant prior to adjudication; that in terms of judgment of Hon'ble Bombay High Court in the case of Silicon Systems Vs. CCE reported in 2006 (204) ELT 247 BOM supply of even the supply of NRUDs which had been seized from the assessee and whose supply had been requested, is a must and non-supply of the such documents would result in violation of principles of natural justice; that the Apex Court in the case of Kothari Filament reported in 2009 (233) ELT 280 and in case of Bhimji Vs. Commissioner, Centra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urned up for receiving the NRUDs and therefore, the Captain Kapil Chaudhary, Deputy Director, DGCEI under his letter dated 16/10/2008 addressed to Shri Arun Rathi, Director of RIL reminded him that while copies of all the RUDs meant for RIL as well as their for their Director were delivered to their authorized representative on 25/8/2008, the NRUDs have not been collected by him which are occupying the available office space unnecessarily and Shri Arun Rathi was requested to collect the NRUDs at the earliest; that when there was no response from the RIL, the Additional Director, DGCEI, Delhi under his letter dated 14/11/2008 addressed to Commissioner Central Excise Commissionerate, Meerut informed him that while all the RUDs mentioned in the Annexure to show cause notice had been delivered to the appellant under proper acknowledgement, NRUDs have not been collected by the appellant; that in this regard, the appellant had been contacted repeatedly at their factory address as well as residence of the Director for taking delivery of the NRUDs, but the letters are being received back without acknowledgement; that it appears that the assessee are deliberately delaying the receipt of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant could not submit effective reply to the show cause notice and not only this, even the Commissioner did not receive all the RUDs but still he has gone ahead with the adjudication. 6. Since, the Bench was not prima facie convinced with the appellants plea regarding non-supply of all the RUDs and NRUDs, both the sides were asked to make the plea on the prima facie merits of the case. 7. On the merits of the case, Shri B.K. Singh, Advocate, ld. Counsel for the department stated that out of the total duty demand of Rs. 147, 28,01,547/- confirmed against the appellant, the duty demand of Rs. 102, 94, 75,732/- is based on the alleged clearance of SS Billets/flats without payment of duty and this allegation, in turn, is based on the quantity of ferrochrome used in the manufacture of stainless steel and the chromium content of the stainless steel and that he is not contesting the appellants plea with regard to this duty demand. Shri B.K. Singh, stated that he would be contesting the appellants plea only in respect of the duty demand of Rs. 39.76 crores based on the allegation under valuation, duty demand of Rs. 4.49 crores based on the allegation of clandestine removal which, in tu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is actually the income from manufacturing activity; that in this regard he relies upon the Tribunals judgment in the case of R A Casting reported in 2009 (237) ELT 674 which has been affirmed by Hon'ble Allahabad High Courts vide judgment reported in 2011 (269) ELT 337 (Allahabad) and the Allahabad High Court's judgment has been affirmed by the Apex Court vide judgment reported in 2011 (269) ELT-A108 (SC); that same view has been taken in the case of Trikoot Iron and Steel Casting Ltd. Vs. Commissioner of C. Ex., Meerut reported in 2015 (315) ELT 65 (Tri- Del) and that in view of this, duty demand of Rs. 39,76,17,448/- is without any basis and as such the appellant have very strong prima facie case in their favour in respect of this demand. 9. With regard to the duty demand of Rs. 4,49,66,976/- based on the allegation of clandestine removal which, in turn, is based on certain documents recovered from the appellants companys consignment agent-Shri Ravinder Jain, Shri Prabhat Kumar pleaded that no documents regarding clandestine removal have been recovered from the premises of the appellant company or its Managing Director; that merely on the basis of certain documents recovered f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dy paid by the appellant company during investigation may be considered as sufficient for hearing of their appeal and the requirement of pre-deposit of balance amount of duty demand, interest and penalty by the appellant company and the requirement of the pre-deposit of penalty by Shri Arun Rathi may be waived for hearing of their appeals and recovery thereof may be stayed. 11.1 In respect of requirement of penalty by Shri Ravinder Jain, his counsel Shri Naveen Malik, Advocate, reiterating the submissions of Shri Prabhat Kumar pleaded that there is no evidence on record to prove that Shri Ravinder Jain as consignment agent of RIL had dealt with any clandestinely cleared goods and hence, the requirement of pre-deposit of penalty may be waived for hearing of his appeal and recovery thereof may be stayed. 12. Shri B.K. Singh, Advocate, the learned Special Counsel for the department, pleaded that so far as the duty demand of Rs. 39,76,17,448/- is concerned, the same is based on the allegation of under valuation, which, in turn, is based on the facts that- (a) during the period of dispute as per the Cost Audit Reports filed by the appellants with various authorities, there was huge di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s supervision of production, sales, packing etc to M/s. Shadi Lal Industries and Chemicals to M/s. Pankaj Gas Cylinders during 2000-2001 and have shown substantial amount of income from these service transactions but on enquiry with M/s. Shadi Lal Industries and Chemicals works and M/s. Pankaj Gas Cylinders, it was found that no such services had been provided by the appellant company to them and that they had issued the cheque/demand draft to RIL and subsequently they had received the amount in cash. With regard to the income of Rs. 57.28 crores earned by the appellant company during 2003-2004 and income of Rs. 90.24 crores earned by the appellant company during 2004-2005 from the Share trading, Shri B.K Singh, pointed out to Commissioners findings in para 5.2.6 of the impugned order and pleaded that these transactions are shown to have been made through Share Broker M/s. B Aggarwal and Company, M/s. Keshav Shares Stock Limited and M/s. M.S. Shares & Stock brokers; that the letters addressed to M/s. B. Aggarwal and Company and M/s. M.S. Shares and stock brokers were received back undelivered with the remark of portal authorities that it was an incomplete address; that on enquiry ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en procured by Shri Ravinder Jain, he had received the commission and in respect of those sales also there are no invoices; that in number of cases, enquiry was made with the end users to whom the goods had been sold and they admitted that the goods had been received from RIL without any invoice. Shri B.K. Singh, therefore, pleaded that the duty demand of Rs. 4,49,06,976/- is on strong footing. 12.2 As regards the duty demand of Rs. 8,01,391/- Shri B.K. Singh pleaded that this duty demand is in respect of the shortage in the stock of finished goods which was detected at the time of officers visit to the factory of the appellant company on 9/3/2006, Shri B.K. Singh pleaded that the stock taking had been done in presence of the representative of the appellant company and at that time no complaint had been made that the stock had been determined without actual payment and on eye estimation basis. Shri B.K. Singh, therefore, pleaded that this is real shortage and more important, it is an evidence of duty evasion being indulging in by the appellant company by clandestine removal of the finished goods. 12.3. Shri B.K. Singh, therefore, pleaded that duty demands of Rs. 39,76,61,448/-, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nformed DGCEI office that they have deputed their employee Shri Shyam Narayan to receive the RUDs and NRUDs. In the records of the case, there is an acknowledgement dated 25/8/2008 of Shri Shyam Narayan acknowledging that he has received and taken delivery of photocopies of all the RUDs as detailed in Annexure 'R' to the show cause notice dated 5/5/2008 issued to M/s. RIL and its Director and that two sets of the records RUDs have been received. However, on that day, the NRUDs were not collected and in this regard, there is a signed note of Shri Shyam Narayan stating that on that day, due to paucity of time, he is not in a position to take over the delivery of NRUDs and that he will take the same after two to three days. However, Shri Shyam Narayan did not turn up after three days. The officers of DGCEI apprehending that the appellant using non-receipt of NRUDs as an excuse want to delay the adjudicating proceedings, addressed a letter dated 16/10/2008 to Shri Arun Rathi, Director of the appellant company informing him that in spite of the repeated requests, both in verbal and in writing, no authorized representative has turned up to take the NRUDs which are occupying the office sp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mand of Rs. 147,28,01,547/- confirmed against the RIL, duty demand of Rs. 102,94,75,732/- is on the basis of chromium content of the SS Billets/Flats and quantity of ferrochrome used for manufacture of SS Billets/flats. Shri B.K. Singh, ld. Special Counsel for the department, states that he is not contesting the duty demand of Rs. 102,94,75,732/- at this stage. 17.1. Thus, for the purpose of determining the quantum of pre-deposit for compliance with the provision of section 35F only the remaining duty demand of Rs. 44,33,25,815/0 has to be examined. 18. Out of the duty demand of Rs. 44,33,25,815/- the duty demand of Rs. 39,76,16,447/- for the period from 2003-2004, 2004-2005 and 2005-2006 is on the basis of allegation of under valuation. Allegation of under valuation is based on the following evidence - (a) During 2003-2004, 2004-2005 and 2005-2006, as per the Cost Audit Report submitted by the appellant company to various authorities, the cost of production of SS billets/flats was much higher than the sale price realized, (b) The appellant company have has shown huge income from trading activity trading in iron and steel items share trading and provision of service, and (c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t will have to be presumed that this income is from manufacturing activity. Therefore, in respect of the duty demand of Rs. 39,76,16,448/- the appellant do not appear to have prima facie case in their favour. 20. As regards the duty demand of Rs. 4,01,391/- based on the shortage in the stock of finished goods, appellants plea is that this was not real shortage and that the same had not determined by the actual payment. However, from the records, it is seen that stock taking had been conducted in presence of the appellants representative and at that time no complaint had been made by him that the weight had been determined by the eye estimation without actual payment. Therefore, at this point, the appellant do not have prima facie case in their favour. 21. As regards, the duty demand of Rs. 4,49,06,976/-, this demand is based on certain documents regarding receipt of finished goods recovered from Shri Ravinder Jain, a consignment agent of the appellant company and also the statements of certain buyers who have admitted to receive certain consignments of SS Flats from the appellant company either directly or through Shri Ravinder Jain. In respect of this demand, the appellants p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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