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TMI Blog2016 (3) TMI 1048X X X X Extracts X X X X X X X X Extracts X X X X ..... r-in-Appeal Rs.3,52,838/- Rs.8,13,651/- (as computed by Department after issue of Order-in-Appeal) Extended period invoked Yes Yes Extended period Upto 31.12.2003 Upto 31.8.2003 Notional shortage of Sulphuric acid due to weighment difference Nil 208.406 MTs. Notional shortage of Phosphoric acid due to weighment difference 153.827 MTs. 351.062 MTs. 2. The appellants represented by learned advocate Mr. Sandeep Gopalakrishnan inter alia submits as follows: (i) They are one of the Government of India Public Sector Undertaking mainly engaged in the manufacture of fertilizers. (ii) Fertilizers manufactured were not dutiable during the period of dispute. (iii) They procured sulphuric acid and phosphoric acid from M/s. Sterlite Industries (SIIL), Tuticorin (distance is 340 Kms). These inputs are procured at zero rate of duty by availing the benefit of Chapter X Procedure of the erstwhile Central Excise Rules, 1944 and Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 2001. (iv) Department raised the demand of duty on notional shortage exclusively basing the demand on the credit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regard. i. 1996 (86) ELT 6 (All.) UP State Cement Corporation Ltd. vs. Union, approved by Supreme Court in 1999 (112) E.L.T. A44 (SC). The High Court held that shortage (loss) of clinker during transit of cement clinker (transported to Churk plant located at a distance of 128 kms) is to be regarded as due to natural cause; hence demand under Rule 196 of Central Excise Rules, 1944 was not sustainable. ii. 2000 (126) E.L.T. 1072 (Tri.) National Organic Chemicals Indus Ltd. vs. CC (Import), approved by Supreme Court in 2002 (142) E.L.T. A 280 (SC). The Tribunal held that importer/actual user cannot be called upon to pay duty on the quantity of difference of about 1% between quantity of raw naphtha as per discharge certificate from the ship and the quantity as per the consumption certificate issued by Central Excise; the substance being volatile carried for distance of about 50 kms and there being no allegation of any unauthorized diversion. (h) Shortage is due to weighment (no actual loss); there is no allegation of unauthorized diversion. Demand under Rule 196 cannot be sustained as goods otherwise have not been diverted or lost. (i) Supplying company having not r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er (Appeals) saying that the appellants are accountable for the transit loss and are liable to pay duty on the same. i. The learned AR for the Revenue has also mentioned that in case of Appeal No.634, the loss of 153.827 MTs accounted towards the difference in weighments at two weighbridges is to the extent of 0.71% of the total quantity procured by the appellants. He submitted that Clause (4) of the specimen purchase order mentioned in Commissioner (A)s order reveal that appellants could recover the shortage in excess of 0.5% but the appellants did not do so. The appellants thus did not account for the difference and as per Rule 6 of Central Excise (RGCRDMEG) Rules, 2001, they are liable to pay the duty on the same. ii. In case of Appeal No.635/2006, Revenue has further argued that FACT procured sulphuric acid from Sterlite Industries, Tuticorin without payment of duty under Chapter X Procedure of erstwhile Central Excise Rules, 1944 and under provisions of Rule 6 of Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 2001. After receipt of these goods, FACT ascertained the net weight of each consignment and based on this s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commissioner (A)'s Orders-in-Appeal No.165/2006 dated 10.3.2006 and 249/2006 dated 29.3.2006 respectively. 4.2 In case of appeal No.634/2006 vide Order-in-Original No.6/2005 dated 21.2.2005, Addl. Commissioner confirmed the demand of Rs. 8,59,103/- along with interest and imposed equivalent penalty under Section 11AC of the Central Excise Act, 1944 on the appellants. Against this order, the appellants had filed appeal before Commissioner (A). In the Order-in-Appeal No.165/2006 dated 10.3.2006, Commissioner (A) held that appellants were liable to pay the duty of Rs. 3,52,838/- on 153.827 MTs of phosphoric acid along with interest but the penalty imposed by Order-in-Original was set aside by the Commissioner (A). The Department fixed the duty liability of Rs. 3,52,838/- for said 153.827 MTs of phosphoric acid held liable to duty by Commissioner (Appeals). 4.3 In case of appeal No.635/2006, in the Order-in-Original No.07/2005 dated 21.2.2005 Additional Commissioner confirmed the demand of Rs. 42,57,590/- along with interest and also imposed equivalent penalty under Section 11AC of Central Excise Act, 1944 and further imposed penalty of Rs. 4 lakhs under Rule 25 of Central Excise Rul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t did not show any physical loss of the goods. On the other hand, Revenue contends that the appellants regularly filed D-3 intimations and other returns which were duly submitted to Central Excise Officers where they never mentioned any notional shortage of the goods. But when the appellants commercial accounts were audited, it was noticed that their commercial accounts indicated a different picture indicating that they had been receiving less quantity of the goods (as pointed out by the Department) on which there has been statements also from the company persons, and the appellants have been making payments for less quantity of goods i.e., after taking into account of said notional shortage of goods to the supplier viz., M/s. Sterlite Industries (SIIL). Thus, the appellants have been paying to the suppliers for the less quantity of the goods, the receipt of which were shown in their Commercial accounts. 6.1 The argument by the appellants that commercial accounts and agreement were their internal arrangement between the supplier and the appellants and that was for determination and settlement of the price of the goods despatched and no reliance could be placed on the same for all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom both the impugned orders passed by the Commissioner (A), we find that in both the cases mandatory penalty for the cases where there was allegation of willful misstatement or suppression of facts with intent to evade payment of duty imposed under Section 11AC were set aside. In other words, ingredients or elements holding the appellants liable for willful default in payment of duty with the intention to evade, to cover their case under the provisions of willful misstatement or suppression of facts with intent to evade payment of duty, which are part of proviso to Section 11A(1) of Central Excise Act as well as under the provisions of Section 11AC of Central Excise Act, have not been found to be existing on record by the Commissioner (Appeals). Though under both the appeals, the duty has been demanded for the period beyond one year, in case of appeal No.634/2006 for the period 1.4.2001 to 31.3.2003 and in appeal No.635/2006 for the period of 1.4.1999 to 31.3.2003 invoking the extended period i.e., the period beyond one year. In these cases, show-cause notices were issued on 15.9.2004 (appeal No.634/2006) and 21.1.2004 (appeal No.635/2006). When the ingredients of willful miss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellate Commissioner is unsustainable and is quashed. Appeal is allowed with no order as the costs." 7.2 Further from the facts on record and the findings given by Commissioner (Appeals), the Revenue has failed to prove the mala fides of the appellants to state that they had willfully suppressed the facts with intent to evade payment of duty of Central Excise. It is also a point that the appellants are a Public Sector (Government of India) Enterprise; and whose employees normally would not deliberately and willfully like to contravene the laws with the intention to evade the payment of good revenue as there cannot be any personal profit motive for them unless otherwise proved on record by the Revenue authorities, which they have failed to do. Rather the employees of PSU very well know that if there has been any contravention of laws/rules, knowingly or unknowingly, they would be liable to vigilance/penal action. It is reiterated that the facts and investigations have not clearly and convincingly indicated any such mala fide involvement of the appellants and their employees. 7.3 The appellants have quoted the decisions of Hon'ble Supreme Court in the case of UP State Cement Corpo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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