TMI Blog2017 (5) TMI 85X X X X Extracts X X X X X X X X Extracts X X X X ..... hank yarn to RR. Reeling Unit-II. Revenue has thus has been able to satisfactorily established that there is no evidence for movement of hank yarn from the job worker’ to the factory of STL and that entries in RG-1 register to the contrary are doctored to cover up their actual modus. Extended period of limitation - Held that: - there has been unaccounted/clandestine removal of cotton yarn y STL subterfuge, suppression and wilful misstatement and collusion with BARU and RR Reeling Unit; with the sole intention of evading legitimate duty payable to the exchequer - invocation of extended period of limitation in the notice under proviso to section 11A of the Central Excise Act and its affirmation in the impugned order is very much in order. Appeal dismissed - decided against appellant. - E/376/2006, E/319/2006 & E/345/2006 - 40539-40541/2017 - Dated:- 24-3-2017 - Shri D.N. Panda, Judicial Member And Shri Madhu Mohan Damodhar, Technical Member Shri T. Ramesh, Advocate, For the appellant Shri K. Veerabhadra Reddy, JC (AR), For the respondent ORDER Per: Madhu Mohan Damodhar The facts of the case are that M/s. Sivagurunathan Textiles Ltd., the first na ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9444.3 NIL 9444.3 Total duty payable on the excisable goods so found short was worked out as ₹ 10,42,361/- towards which STL paid ₹ 3,25,050/-. It subsequently emerged that despite recording of facts in the mahazar dated 21.09.2001 that the last invoices issued by STL dated 20.09.2001 was invoice No.265 dated 20.09.2001, STL had raised invoices Nos.266-269 dated 20.09.2001 subsequently, purportedly to show that goods therein were transported in vehicle Nos.TN-32-2667, TAL-6604, TAN-7844 and TN-04-2995. However, evidences gathered from the lorry arrangers for the above said lorries appeared to indicate that the so called despatches of hank yarn were bogus. It further appeared that STL had diverted cheese yarn which were purported to be cleared for job work conversion, to local market with the connivance of job workers and evade payment of duty. It further appeared that STL had mis-declared the stock position in their stock account, monthly R.T. 12 returns and financial accounts etc. and had indulged in clandestine removal of excisable goods without payment of duty. 3. From further investigations, it emerged that STL ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the SCN, and also imposed the following penalties: a) Penalty of Rs.75,73,534/- on M/s. STL under Section 11 AC of the Central Excise Act, 1944 b) Penalty of Rs.15,00,000/- on M/s. STL under Rule 25 of the erstwhile Central Excise (No.2) Rules, 2001. c) Penalty of Rs.2,00,000/- on Shri V.Ramakrishnan, Proprietor of M/s. R.R. Reeling Unit, Erode d) Penalty of Rs. 1,00,000/- on Shri E.L. Gunasekar, Proprietor of M/s. Bannari Amman Reeling Unit and Sri Dhanalakshmi Yarn Agencies under Rule 209A of CER,1944 and under Rule 26 of CE (No.2) Rules, 2001. Aggrieved, these three appellants are before this forum. 5. Hearing of these appeals was held on 16.11.2016, on which day, the submissions of ld. Counsel Shri T. Ramesh were recorded in the proceedings as follows: Opening the argument, learned counsel says that on two counts the demand was made in the adjudication. The first count of demand related to document and description under Annexure-I to the show cause notice which emanated from para 3.1 thereof depicting a table showing the discrepancy found during physical verification. The second count of demand arose in respect of Annexure-II and III of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not consider the statements recorded during the cross examination. e) Appellant produced all the evidences for the supply of goods to the job working units for the conversion into hank yarn and such job working units intimated the receipts, verified by the central excise officers and acknowledged the receipt by job working unit and such job working units have also produced the accounts with regard to the conversion process. f) The clearances are exempted by virtue of 11C Notification and the Board Circular. As per 11C Notification, the major portions of the clearances are covered upto 1 st July, 2001. As per the Board s Circular, for the entire period goods of duty cannot be demanded for any reason. Admittedly, the present case the goods were cleared by following 96E procedure for conversion into hank yarn. Departmental officials have verified the clearances and thus had the full knowledge about the transaction carried out during the disputed period and therefore, the appellant is entitled for the benefit of notification under Section 5A as well as 11C Notification. g) The entire demand is barred by limitation. There is no suppression in the present case in as much ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rkers and buyers of hank yarn (who are found to be fictitious) and in the absence of evidence of lorry receipts indicating cone yarn/hank yarn movement by the appellant, the extended period is rightly invokable and the demand is sustainable on extended period. 8. Heard both sides and gone through the records. 9. Only the demands raised in Annexures I, II and III of the SCN are presently under dispute. We intend to analyse each of them in detail. 10.1 In Annexure-I , the demand emanates on shortages in physical stock of finished goods found at the factory premises of STL on the day of visit of the departmental officers on 21.09.2001. It is pertinent to note that the mahazar was drawn by the officers on 21.09.2001 in the presence of Shri N. Subramanian, Deputy General Manager of STL, verifying the physical stock available and the discrepancy of shortage noticed. It is also been recorded in the mahazar that the last invoice issued by STL was invoice No.265 dated 20.09.2001. However, STL had raised invoice Nos.266-269 subsequently claiming that they too had been issued on 20.09.2001. When this controversy emerged, statement of one Kum. Malarvizhi, working as Clerk in STL ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 21.09.2001 was also admitted by Shri N. Nainar, Director of STL. This being so, the aforesaid contentions of STL in this matter do not carry any merit. Their claim of shortages as attributable to pilferage also does not appeal to common sense since, no prudent business entity would turn a blind eye to shortages of yarn as much as 142539 Kgs, approximating to 143 metric tons of yarn from the premises. In the event, were are of the considered opinion that the demand of ₹ 10,42,361/- made against STL on account of the aforesaid shortages will necessarily sustain. 11.1 In Annexure-II , demand raised pertains to duty on cotton yarn allegedly cleared by STL to M/s. RR Reeling Unit-II for conversion into hank yarn but diverted to Erode market without being converted into hank yarn. Ld. Counsel has contended that notwithstanding the earlier statements made by the Proprietor of M/s. RR Reeling Unit-II, admitting that they have not converted cotton yarn into hank yarn, in cross-examination they have confirmed the fact of such conversion. Appellant also contends that goods were sent under cover of duly authenticated AR-3A forms to RR Reeling Unit-II, who in turn filed D-3 intima ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntled in order to sell them for repayment of loan. He could also not able to produce any material evidence during cross examination as to how they made expenses towards wages, power, maintenance etc., in connection with the job work. We therefore are unable to hold any quarrel with the adjudicating authority s holding that deposition of such person during cross examination does not merit any consideration. It is also interesting to note that the proprietor of RR Reeling Unit, or for that matter STL themselves, are silent about the procedure and the documentary evidence under which hank yarn was converted and disposed of from the job worker s premises. 11.4. In the event, we are of the considered opinion that there is no infirmity in the demand of ₹ 44,22,202/- confirmed by the adjudicating authority being duty on cotton yarn cleared by STL from its factory premises, purportedly for conversion into hank yarn to RR. Reeling Unit-II. 12.1 In Annexure III to the SCN, the demand raised pertains to duty on cotton yarn allegedly removed to Bannari Amman Reeling Unit (BARU). Allegations in the SCN are that BARU had not done conversions of yarn sent by STL, but that they wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed himself during cross-examination by stating that he did not know English. I find it very strange that a man who has written his statement in his own handwriting in English says that he does not know English. This only proves that during cross-examination he does not want to tell the truth and wants to help the notices and himself. 24.7 He, in his statement dated 15.10.2001 as proprietor of M/s. BARU had stated that 2 oil engines were used only during power cuts. In his further statement dated 19.04.2002 had stated that electric motor of 3 H.P. was used to run the reeling machines and electric motor of 1.5 H.P. was used for running bundling machine. He further added that 2 oil engines were used only during power cuts and diesel was used as fuel for the running of oil engines. But during cross-examination, he had stated that power was used for lighting purposes only. Apparently, what he had deposed during cross-examination was far from truth for the simple reason that running oil engines for 14 to 15 hours a day by using diesel would not be economically viable. Further, he was silent about the use of bundling machine during cross-examination. Bundling is an important process ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in RG-1 register to the contrary are doctored to cover up their actual modus. STL have also contended to have entered removal of converted hank yarn to buyers at Erode in their RG-1 register and that they had raised Central Excise invoices for such removals. However, there is no truth in these purported removals as found in the verification with the buyers of yarn from STL. Even in respect of some of the buyers who have claimed to have purchased only hank yarn from STL, the said assertions are found to be suspect in the face of other investigations. 12.5 Therefore, neither STL nor BARU have been able to convince that there was indeed movement of cotton yarn for conversion from STL to BARU, that the entire quantity had been converted into hank yarn and that post conversion, the hank yarn was returned to STL or that such returned hank yarn after conversion, had been again transported to various buyers. 12.6 In the event, the demand of ₹ 27,09,840/- being central excise duty evaded on clandestine removals of cotton yarn in cheese form under the pretext of conversion to hank yarn, finds credibility. For this reason, we uphold that there is no infirmity in the confirmati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at claimed conversion by RR Reeling Unit and BARU, they are returned under D-3 intimations, the entries in RG-1 register at STL, and purported hank yarn to buyers was only a paper exercise without any such actual movement of goods for conversion. In the light of these discussions, what comes to the fore is that, the purported clearances of goods under AR 3As and D3 intimations made to the jurisdictional Central Excise office were only a sham purported by STL to create a paper trial. Filing of these intimations are only a procedural requirement to assist, manufacturers and it is not required by the central excise officers to physically ascertain the quantities sent out, or for that matter received in AR-3A and D-3 respectively, especially when the assessee is working under self-removal procedure. It is also not the contention of the appellant that the clearances/receipts had been checked/verified by the central excise authorities. Appellants have made alternative plea that old interalia proceedings are hit by limitations since the department has issued the SCN 18 months after the visit of officers. These contentions would have held merit, if there was no controversy on the crede ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n his appeal Shri V. Ramakrishnan interalia referred to retraction of the statement given on 13.10.2001. He has further contended that it has been proved by documentary evidence that he had not entirely undertaken the conversion job and has argued that when all records have been seized he was not in a position to produce any material evidence during cross-examination as how he made the expenses towards wages, power etc. However, he has also submitted that he is only a sales agent of STL and indicates the latter decided to sell cheese yarn under the guise of hank yarn, they only would be involved and hat he plays no role in it. 15.5 Similarly, Shri E.L. Gunasekar in his grounds of appeal has alluded to cross-examination retractions and his statement thereon that he was indeed carried out conversion of cheese into hank yarn and that he had the sufficient machinery. He has further submitted that the finding of Commissioner that running oil machines for 14 to 15 hrs. a day would not be economically viable is erroneous. 15.6 We find the roles played by Shri V. Ramakrishnan and Shri E.L. Gunasekar have been sufficiently established by Revenue. The adjudicating authority has also co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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