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2015 (11) TMI 1477 - CESTAT NEW DELHI

2015 (11) TMI 1477 - CESTAT NEW DELHI - TMI - Waiver of pre deposit - Duty demand - Clandestine removal of goods - Shortage of goods found - violation of the principles of natural justice - copies of all the RUDs and NRUDs had not been supplied with the SCN - Held that:- As regards the supply of RUDs and NRUDs, there is no dispute that the same are very large in number and probably for this reason only, the appellants were asked to collect the same from the office of Delhi Zonal Unit of DGCEI, a .....

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GCEI Delhi Zonal Unit informed 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.

Since they, in .....

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ct of the service transactions also, the service recipient have denied they had any dealing with the appellants. In view of this, burden of proof proving that the income shown from trading in iron and steel items, share trading and service transactions had actually been received from such transactions would be on the appellant, but the appellant have failed to produce any evidence in this regard. We are, therefore of the prima facie view that on this point, the appellant have not able to establi .....

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on without actual payment. Therefore, at this point, the appellant do not have prima facie case in their favour. - it is seen that in a number of cases the goods had been supplied by the appellant through Shri Ravinder Jian to certain persons and those persons also have admitted the receipt of the consignment while in respect of those sales, goods no Central Excise invoices had been issued by the appellant company. Therefore, at this stage it is difficult to say whether confirmation of this duty .....

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Per: Rakesh Kumar These appeals along with stay applications have been filed against order-in-original no. 34/COMMR/GZB/2009 dated 4/11/2009 passed by Commissioner, Central Excise, Ghaziabad by which the Commissioner has confirmed the duty demand of ₹ 147,28,01,547/- against M/s. Rathi Ispat Limited, A-2, G.T. Road Ispat, Ghaziabad (hereinafter referred to as RIL) along with interest on it under section 11AB of Central Excise Act, 1944 and besides this while imposing the penalty of equal a .....

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nder: 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 .....

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0 per cent burning loss of Ferrochrome and further there is loss of 1 per cent in conversion of SS Billets into SS Flats. The chromium added to steel to make SS Billets is in form of ferrochrome. However, for calculating the consumption of chromium, the consumption of Ferrochrome has been treated as consumption of chromium and on the basis of the chromium content of the stainless steel billets/flats and the quantity of ferrochrome consumed, the quantity of SS Billets/Flats manufactured has been .....

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9,76,17,448/- for the period from 2003 to 2004, 2004 to 2005 and 2005 to 2006 is based on allegation of under valuation of finished products. This allegation is based on the fact that during this period, while the appellant company was selling its finished product- SS billets / flats at a price much below the cost of production, they had shown substantial income from trading in iron and steel products, purchase and sale of shares and providing certain services, which on enquiry were found to be .....

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tock taking done at the time of officers visit to the factory of RIL. 1.6 It is in view of the above investigation that after issue of show cause notice, the order-in-original mentioned above was passed by the Commissioner. 2. Heard both the sides in respect of the stay applications. 3. Shri Prabhat Kumar, Advocate, 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 a .....

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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. Com .....

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uested by the assessee, would result in violation of principles of natural justice; that in view of this, on the ground the non-supply of RUDs and NRUDs and not permitting of the cross-examination of the witnesses which had been requested, the impugned order has to be set aside and the matter has to be remanded to the Commissioner for de-novo adjudication. 4. Shri B.K. Singh, Advocate, ld. Special Counsel for the department, pleaded that as is clear from para 2.3 of the impugned order-in-origina .....

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sed to Additional Director General, DGCEI, Delhi Zonal Unit , R.K. Puram, had informed the DGCEI that they have authorized their employee- Shri Shyam Narayan to receive the copies of the RUDs as well as NRUDs on its behalf as well as on behalf of Shri Arun Kumar Rathi and in this matter the attested signatures of Shri Shyam Narayan were also enclosed; that as per the remarks of Shri Shyam Narayan on this letter, he received the photocopies of all the RUDs as detailed in Annexure R to the show .....

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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 .....

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eceived back without acknowledgement; that it appears that the assessee are deliberately delaying the receipt of the NRUDs so that they get excuse for hampering the adjudicating proceedings; that the DGCEI s letter requested the Commissioner to contact the assessee immediately to visit the DGCEI office and take delivery of all the NRUDs; that subsequently only by January, 2009, the appellant deputed their employee, Shri Shyam Narayan to receive the NRUDs and the same were taken over by Shri Shya .....

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cise Commissionerate-Ghaziabad, it is clear that the appellants plea of non-receipt of all the RUDs and NRUDs is only an excuse to delay the adjudication of the matter, that all the RUDs and NRUDs which were relevant to the issues raised in the show cause notice had been supplied and the documents in respect of which the appellant plead that they have not have received have little relevance; that though when the issue regarding non-supply of certain RUDs and NRUDs was raised before the Tribunal .....

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hat the appellant s employee Shri Shyam Narayan had wrongly given the acknowledgement regarding receipt of all the RUDs and NRUDs and that for this reason, he had subsequently been removed from service. He emphasized that at the time of adjudication of this matter by the Commissioner, all the RUDs and NRUDs had not been supplied and hence, the matter should go back to the Commissioner for de-novo adjudication. Shri Prabhat Kumar, also pleaded that as a result of non-supply of all the RUDs and NR .....

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hat out of the total duty demand of ₹ 147, 28,01,547/- confirmed against the appellant, the duty demand of ₹ 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 .....

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by the officers at the time of visit to the appellants factory on 9/3/2006. Accordingly, Shri Prabhat Kumar, was directed by the Bench to submit his arguments on the duty demands of ₹ 39.76 crores on the allegation of under valuation, duty demand of ₹ 4.49 crore on the basis of the allegation of clandestine removal and the duty demand of ₹ 8 lakhs on the shortage of finished goods (SS Flats) found in the appellants factory on 9/3/2006. 8. With regard to the duty demand of &# .....

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lar activities of the appellant company and on enquiry, those transactions had been found to be bogus, that no enquiry has been made about the price of identical goods manufactured by other manufacturers and no enquiry has been made with the customers buying the SS Billets /Flats from the appellant company to ascertain as to whether they had paid any amount over and above the invoice price; that in view of this, just because the appellant had sold their goods at prices below the cost of producti .....

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uthority has no jurisdiction to enquire into those transactions and allege that those transactions are bogus and the income from those transactions 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 .....

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e 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 from a third party- Shri Ravinder Jain., the allegation of clandestine removal cannot be made against the appellant company; that the Commissioner .....

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n to the appellant company; that third party records cannot be made the sole basis for making allegation of duty evasion against an assessee and confirming the duty demand against him based on the same without corroboration from other independent evidence and in this regard he relies upon the judgments of the Tribunal in the cases of Rhino Rubbers Pvt. Limited Vs. CCE Bangalore reported in 1996 (85) ELT 260 and Rama Shyama Papers Limited Vs. Commissioner of Central Excise Lucknow reported in 200 .....

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some other persons. Shri Prabhat Kumar, therefore, pleaded that duty demand of ₹ 4,49,06,976/- has also prima facie not sustainable and in respect of this duty demand also, the appellant have strong prima facie case in their favour. 10. With regard to the duty demand of ₹ 8,01,391/- based on the alleged shortage of finished products in the factory of the appellant company on 9/3/2006, Shri Prabhat Kumar pleaded that the alleged shortage was not real shortage as the quantity of the f .....

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d 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 p .....

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production of the goods and the total sale price realized from the sale of the goods manufactured the price realized from the sale of the goods manufactured being much lower than the cost of production; and (b) during the same period, the appellant had shown huge income from trading of goods (iron and steel products), trading in share and rendering of service, while on enquiry, those transactions were found to be bogus and for which no explanation has been given by the appellant company. He plea .....

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ziabad, and M/s. Shiva Traders Ghaziabad were found to be non-existent; that M/s. Barelli Exports Pvt. Limited was found to be closed since long and on enquiry its Managing Director Shri Baljit Singh stated that his firm did not conduct any business with RIL; that M/s. Ashoka Enterprises were also found to be closed since long and on enquiry through sales tax authority, it was revealed that this firm was trading in electrical goods and stationary and had subsequently submitted a request for incl .....

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hased from these companies at lower prices and that in other words these five companies have sold the goods to RIL (appellant company) at the price which was lower than the price at which the same goods were subsequently purchased by them which is not possible. Shri B.K. Singh, also pointed out that the appellant company has claimed to have provided certain services such as supervision of production, sales, packing etc to M/s. Shadi Lal Industries and Chemicals to M/s. Pankaj Gas Cylinders durin .....

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7; 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 wi .....

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iron and steel items and provision of service is actually their income from manufacturing activity; that in the background of these facts the burden of proof is on the appellant company to prove that the income shown to have been earned from trading in iron and steel products, share trading and provision of service is actually from these sources and not from manufacturing activity, but the appellant have failed to provide any cogent evidence in this regard. Shri B.K Singh, therefore, pleaded th .....

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of Shri Ravinder Jain, stock of SS Bilates/flats was found in the premises of several buyers and cutters who admitted that those goods had been received from the appellant company without any bills or invoices; that the documents recovered from Shri Ravinder Jain are in the form of the account maintained of the goods received from various manufacturers including the appellant company as their consignment agent; that Shri Ravinder Jain used to maintain datewise and party wise account of the good .....

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cured 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 ₹ 4,49,06,976/- is on strong footing. 12.2 As regards the duty demand of ₹ 8,01,391/- Shri B.K. Singh pleaded that this duty demand is i .....

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n 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 ₹ 39,76,61,448/-, 4,49,06,976 and 8,01,39/- are based on the concrete evidence on records and hence, pre-deposit of these demands is must for compliance with the provisions of section 35F and as such the amount of ₹ 50 lakh already paid by the appellant company during investigation is not sufficient to safe .....

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50 lakhs paid by the appellant during investigation may be treated as sufficient for compliance with the provisions of section 35F. 14. We have considered the submissions from both the sides and perused the records. 15. The preliminary objection of Shri Prabhat Kumar, and Shri Navin Malik ld. Counsels for the appellants is that the adjudication proceedings are vitiated by the fact that the order has been passed in gross violation of the principles of natural justice inasmuch as copies of all th .....

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appellants were asked to collect the same from the office of Delhi Zonal Unit of DGCEI, as such a large number of documents cannot be sent by post along with show cause notice. The show cause notice had been issued on 5/5/2008 and the show cause notice itself requested the appellants to collect all the RUDs and NRUDs from DGCEI s office. The show cause notice also had an Annexure - R which gave a complete list of the RUDs. From the records it is seen that the appellant took their own time in rec .....

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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 .....

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DGCEI officers addressed a letter dated 14/11/2008 to the Jurisdictional Commissioner, Central Excise -Ghaziabad informing him that it appears that the assessee is deliberately delaying the receipt of NRUDs from this office so that he gets an excuse for hampering the adjudication proceedings; that the RUDs are large in number of and are occupying the considerable space unnecessarily in the office which is creating problems and that in view of this, assessee may be directed to immediately visit D .....

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ea that they have not received all the RUDs and NRUDs lacks credibility. Though in this regard they had made this plea before the Tribunal from time to time and some directions were issued to the department to supply all the RUDs and NRUDs as requested by the appellant, the fact remains that as per the acknowledgement given by Shri Shyam Narayan of appellant company on 25/8/2008 all the RUDs have been received and as per his acknowledgment dated 22/1/2009 all the NRUDs had been received. Moreove .....

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they cannot insist on cross-examination. In view of this the appellants plea that the order suffers from gross violation of principles of natural justice is prima facie not acceptable. 17. Out of the duty demand of ₹ 147,28,01,547/- confirmed against the RIL, duty demand of ₹ 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 .....

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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) on investigation, the transactions of shares trading in iron and steel ite .....

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abad, M/s. Jagdamba, M/s. Shiva Traders, M/s. Bareilly Exports and M/s. S.M. Corporations Ghaziabad, the sale to M/s. S.M. Trading Corporations being worth ₹ 13, 19, 967/- only, they have shown purchases of steel items worth ₹ 12, 88, 15, 554/- from the same person M/s. Ashoka Enterprises, M/s. V.K. Industries, M/s. Jagdamba, M/s. Shiva Traders and M/s. Bareilly Exports. Thus, it appears that the goods purchased from these five traders have been sold to them at the higher price. Th u .....

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e non-existent or they denied having dealt in the shares mentioned by the appellant. In respect of the service transactions also, the service recipient have denied they had any dealing with the appellants. In view of this, burden of proof proving that the income shown from trading in iron and steel items, share trading and service transactions had actually been received from such transactions would be on the appellant, but the appellant have failed to produce any evidence in this regard. We are, .....

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prima facie case in their favour. 20. As regards the duty demand of ₹ 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 p .....

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