TMI Blog2011 (12) TMI 610X X X X Extracts X X X X X X X X Extracts X X X X ..... inst demand of duty of ₹ 4,29,95,446/- along with interest and imposition of penalty of equal amount under Section 11AC and further penalty of ₹ 42 lakhs under Rule 25 of the Central Excise Rules, 2002 by the Order-in-Original No.14/2007 dated 28/9/2007 passed by the Commissioner. 1.5 Appeal No.E/70/2008 is by Shri H.S. Nataraj, Managing Director of TAG challenging the penalty of ₹ 5 lakhs imposed under Rule 26 of the Central Excise Rules 2002 by the order No. 14/2007 dated 28/9/2007 passed by the Commissioner. 1.6 All the above five appeals arise out of common investigation, involve common evidences and also a common appellant and therefore, are being disposed of by this common order. 2. Heard Shri K. Parameshwaran assisted by Ms. Amudha for the appellants and Shri P.R.V. Ramanan, Special Counsel for the Department. The matter was heard extensively on 8/9/2011, 14/9/2011 and 15/9/2011. Both sides have filed written submissions / additional submissions in the course of hearings. 3.1. TAG is a manufacturer of gutkha (with brand name Super Gem / Siddu ) falling under chapter sub-heading 2404.49 of Central Excise Tariff Act, 1985. 3.2. The re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... encies. 3.7 In pursuance of show-cause notice dated 31/1/2007, duty of ₹ 4,29,95,446/- along with interest stands demanded and penalty of equal amount under Section 11AC and further penalty of ₹ 42 lakhs under Rule 25 of the Central Excise Rules, 2002 stand imposed. A penalty of ₹ 5 lakhs stands imposed on Shri H.S. Nataraj, Managing Director of TAG under Rule 26 of the Central Excise Rules 2002. 4. The learned Advocate for the appellants assails the orders of the Commissioner on various grounds. The important grounds can be summarized as follows:- a. Allegations that huge quantities of raw material were purchased form M/s. Sanjay Enterprises and the same were not accounted in the books of account of TAG are not correct. The bills recovered from Sanjay Enterprises, Pune were in the name of Shri Lingaraju, Ex. Director of the Company who relinquished as Director before the date on which bills were raised and in the name of Shri Amitbhai an employee of TAG. No statements of representative of M/s Sanjay Enterprises, Shri Lingaraju and Shri Amitbhai have been recorded. Under these circumstances, it is merely an assumption that the purchases made from s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... learing small quantities of samples without payment of duty cannot be treated as admission about the quantities arrived at by the Department as clandestinely removed based on assumptions and presumptions. h. The finding of unaccounted production based merely on one raw material or one packing material without letting in any evidence of procurement of other major raw materials required for production of gutkha cannot be sustained. i. The demand was proposed adopting 3 different methods as per the show-cause notice. However, the entire demand has been confirmed based on capacity of production and based on formula given by the Managing Director. Mere presence of pouching machines cannot lead to the conclusion that the same were actually put to use for manufacture of pouches of gutkha. j. TAG was selling their products only through M/s. Embee Agencies. Dealers were buying only from Embee Agencies and not directly from TAG. Seizure of goods from the dealers which were presumed to have been received without bills or not corresponding to particulars with bills produced cannot lead to a presumption that the said goods have been removed from the factory premises of TAG. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Tri.-Bang.)] (xiii) T.G.L. Poshak Corporation Vs. Commissioner of C. Ex., Hyderabad [2002 (140) ELT 187 (Tri.-Chennai)] (xiv) Chawla Enterprises Ltd. Ors. Vs. CCE, New Delhi and Vice Versa [2004 (61) RLT 982 (CESTAT-Del.)] (xv) Commissioner of Customs, Kandla Vs. Dimple Overseas reported in 2005 (190) ELT 58 (Tri.- Mumbai)] 5.1 The learned Special Counsel supporting the orders of the Commissioner made the following submissions : (a) TAG was regularly purchasing raw materials like arecanut, tobacco pathi, khatar, lime, packing materials such as multilayer laminated plastic films and canvas bag and diesel for generation of electricity and was not accounting substantial quantities in the statutory records; for such unaccountal purchases, payments were made in cash. Such purchases are evident from documents recovered from M/s Sanjay Enterprises, Pune (from whom kimam, tobacco pathi, blend, methnol and mix blend were purchased), M/s Montage Enterprises, Jammu (from whom multilayer laminated plastics films were purchased), M/s Arun Agencies (from whom petroleum products were purchased), M/s Divya Enterprises (from whom canvas bags were purchased). Such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g decisions : (i) Gulabchand Silk Mills Pvt. Ltd. [2005 (184) ELT 263] (ii) CCE, Surat Vs. Neminath Fabrics Pvt. Ltd. [2010 (256)ELT 369 (Guj.)] (iii) CCE, Chandigarh Vs. Sahara Steel Rolling Mill [2008 (224) ELT (307)] (iv) Commissioner of C. Ex., Mumbai-V Vs. Champion Confectionery [2010 (262) ELT 865 (Tri.-Mumbai)] 6.1 We have carefully considered the submissions from both sides and perused the records. In this case, TAG has accounted during the period from 1.4.2002 to 19.6.2005 totally 32,25,500 pouches of gutkha. However, the department has treated the production as 13,41,48,000 pouches during this period and demanded duty over ₹ 4 crore on differential quantity of 13,09,22,500 pouches. 6.2 The production determined by the department is more than 40 times of the production accounted. Is it a case of evasion of unprecedented scale or is it a case of production arrived at by the department based on fanciful assumptions and presumptions? 6.3 To find answer to the above, we proceed to analyze whether the company had capacity to produce the quantity alleged to have been produced and cleared, whether there are evidences regarding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... factory explanation for the number of machines which was in their possession and for the substantial and periodical increase in the number of such machines. We are not able to believe that these additions made for ornamental purpose! 7.6 Therefore, we have no hesitation to conclude that their capacity of production is manifold when compared to their accounted production. Procurement of raw materials/packing materials/consumables 8.1 Documents recovered form M/s Sanjay enterprises indicated supply of kimam, tobacco pathi, methnol and mix blend. It is claimed that the bills were in the names of Shri Lingaraju, Dirctor of TAG and Shri Amitbhai, a sales representative of TAG at Delhi. It is not disputed that TAG was purchasing these materials from M/s Sanjay Enterprises, Pune. In fact, it has been claimed on behalf of TAG that out of four consignments covered by four bills issued by M/s Sanjay Enterprises, three of them were found accounted and only 1750 Kgs of Tobacco pathi covered by an invoice dated 21.3.2004 was not accounted. This admission clearly shows that they were purchasing from M/s Sanjay Enterprises and not accounting the purchases fully and correctly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the premises of M/s Arun Agencies indicated supply of 1,08,692 Ltrs and 60972 Ltrs of diesel during the years 2004-2005 and 2005-2006 respectively. The bills though were raised in the name of GMS, it was stated by cashier of M/s Arum Agencies that the said quantities of diesel were supplied to the factory of TAG. It has also been claimed that GMS stands for an abbreviation of G.M. Siddeshwar, Director of TAG. The TAG has not disputed they did not have power connection and that they had DG Set and that one of the Directors is by name Shri G.M. Siddeshwar. Further, M/s Arun Agencies is undisputedly, a firm run in the name of Aunt of one of the Directors of TAG by name Shri G. Arun Kumar. Further, no evidence has been produced to show that they have procured diesel from other resources and that the same was reflected in their accounts. 8.5 From the above, it is seen that TAG has involved in procuring different materials without bringing into accounts and such procurements are obviously for use in the production of unaccounted gutkha with a view to clear the same without payment of duty. Unaccounted clearances 9.1 The M.D. of TAG has clearly admitted that only production of two ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2005 Procurements from Montage Enterprises; Sai-lami Pack Pvt. Ltd., Silvasa; Jenith Laminators Pvt. Ltd., Delhi; Divya Enterprises, Delhi, etc. Shri Amit, representative of New Delhi makes payment to suppliers in cash as per direction. They may have made purchase of 1500 2000 bags from M/s Divya Enterprises without invoices. Arcanut purchased mentioned in the book maintained by staff may not have been totally accounted. Statement dated 2.12.2005 The small bag, means one cotton canvas bag containing 3000 pouches. They have not maintained account of free samples cleared by them. The department may take the number of bags cleared as free samples as 200 numbers comprising both the brands. That the statement dated 5.9.2005 regarding purchase of 1500 to 2000 bags without invoices may be modified as only 150 to 200 bags cleared without invoices. They do not account total purchase of katha. The production is carried out with the power generated by DG set in other premises. Diesel purchased from the local petrol bunk on cash basis. 10.2 The dealers have admitted that accounted purchases were made from Embee Agencies. In particular, Shri Praka ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e shall be those left in spite of the best care taken by the persons involved in such clandestine activity. In such a situation, it is settled law that the entire facts and circumstances of the case have to be looked into and a decision has to be arrived at on the yardstick of preponderance of probability and not on the yardstick of beyond reasonable doubt . Analysis of Case Laws Relied upon : 13. Several decisions have been relied upon on behalf of the appellants to contend that no allegation of clandestine removal can be sustained as held by the Commissioner. It would be appropriate to analyze the decisions as follows : (a) The Tribunal in the case of Radheshyam Kanoria Vs. Commissioner of Central Excise, Thane-II reported in 2006 (197) E.L.T. 130 (Tri.-Mumbai) has held that statements by some dealers about unaccountable purchase could be due ulterior motive. In the absence of admission by the assessee such statements not reliable. (b) The Tribunal in the case of Vidya Laminates Pvt Ltd. Vs. Commissioner C. Ex., Ahmedabad-II reported in 2006 (197) ELT 260 (Tri.-Mumbai) has held that in a case of clandestine manufacture and removal, Revenue has to prove the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... missioner of Customs, Calcutta Vs. South India Television (P) Ltd. reported in 2007 (214) ELT 3 (S.C.) has held that strict rules of evidence do not apply to adjudication proceedings though adjudicating officer has to examine probative value of documents. (l) The Tribunal in the case of Sapthagiri Cements Pvt. Ltd. Vs. Commissioner of C. Ex., Visakhapatnam [2005 (183) ELT 385 (Tri.-Bang.)] has held that suppression of production and clandestine removal could not be sustained on the basis of discrepancy between the quantities of raw material in Form-IV Register, and private documents when such discrepancy has been satisfactorily explained. (m) The Tribunal in the case of T.G.L. Poshak Corporation Vs. Commissioner of C. Ex., Hyderabad [2002 (140) ELT 187 (Tri.-Chennai)] has held that charge of clandestine removal based merely on note books maintained by workers and other private accounts, not sustainable unless supported by corroborative evidence with regard to purchase of raw materials, manufacture of final goods, flow back of money, or any seizure or statements from purchasers. (n) The Tribunal in the case of Chawla Enterprises Ltd. Ors. Vs. CCE, New Delhi an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting and without preparing invoices. Some of the dealers have also accepted buying the goods without bills and on payment of cash. The statements are also not retracted. If the totality of all these facts and circumstances are taken into account, the ratio of none of the decisions relied upon on behalf of the assessee are applicable to this case. Quantum of duty involved 15.1 In view of the foregoing, we have no hesitation to conclude that TAG was involved in systematic manipulation of records relating to raw materials procured, suppressing the production of excisable goods in their statutory records and clearance of the same without payment of duty and, therefore, there is evasion of excise duty. Now, we proceed to consider whether the Commissioner has adopted correct methods in arriving at the duty demand. 15.2 TAG has manipulated the statutory records relating to procurement and use of raw materials. The private records were available only in bits and pieces. For example, evidences of unaccounted purchase of arcanut for three months for the period 31.12.2004 to 31.3.2005 and unaccounted purchase of cotton canvas bag for the period August 2004 to January 2005 were avail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of machines for the period from April 2003 to July 2004, (c) based on cotton canvas bag for the period August 2004 to March 2005; and (d) based on note book Titled BNV for the period April May 2005. As per the work sheet appended to the notice, the break of the duty demanded is as follows: S. No. Year No of pouches Ass. Value Total duty Rs. 1. 2002-03 32,20,745 16,10,373 9,66,224 2. 2003-04 3,48,56,000 1,74,28,000 1,04,56,800 3. 4/04 to 9/7/04 93,89,600 46,94,800 28,16,880 4. 9/7 - 31/7/04 8,33,150 4,16,575 2,54,944 5. 8/04-2/05 6,63,70,500 3,31,85,620 2,03,09,373 6. 3/2005 94,81,500 47,40,750 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cotton canvas bag being at wide variance from production based on packing machines, the demand deserves to be restricted to production based on production capacity, as has been done for the immediately preceding 16 months from April 2003 to July 2004. 16.4 The demand of ₹ 50,05,439/- for the period April 2005 and May 2005 (up to 19.5.2005) has been based on consumption of lime as per the entries in the note book titled BNV . This production figures adopted are below the production figures estimated based on production capacity of packing machines as recorded in para 54 of the Order-in-Original. Therefore, the demand for this period appears reasonable and calls for no interference. 16.5 The demand of duty of ₹ 2,85,634/- on the goods seized on the date of search should be held to be part of the above demand as obviously they related to goods cleared on or before 19.6.2005 and there is no justification for separate confirmation of the same. 17. A submission has been made on behalf of TAG that show-cause notice dated 31.1.2007 relies upon substantially the same evidence as the show-cause notice dated 17.12.2005 and therefore, invoking extended period of lim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vided for a fixed period of limitation. It is equally well settled that it is not open to the Court while reading a provision to either rewrite the period of limitation or curtail the prescribed period of limitation. 18. The Proviso comes into play only when suppression etc. is established or stands admitted. It would differ from a case where fraud, etc. are merely alleged and are disputed by an assessee. Hence, by no stretch of imagination the concept of knowledge can be read into the provisions because that would tantamount to rendering the defined term relevant date nugatory and such an interpretation is not permissible. 19. The language employed in the proviso to sub-section (1) of Section 11A, is, clear and unambiguous and makes it abundantly clear that moment there is non-levy or short levy etc. of central excise duty with intention to evade payment of duty for any of the reasons specified thereunder, the proviso would come into operation and the period of limitation would stand extended from one year to five years. This is the only requirement of the provision. Once it is found that the ingredients of the proviso are satisfied, all that has to be seen as to what is the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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