TMI Blog2017 (7) TMI 392X X X X Extracts X X X X X X X X Extracts X X X X ..... lso the demand is not sustainable. In case of revenue neutrality, demand is not sustainable. The revenue could not establish, beyond doubt the charge of clandestine removal against the appellant. Therefore the demand of duty penalty and interest confirmed against the appellant is not sustainable - appeal allowed - decided in favor of appellant. - E/3148 & 3149/06 - A/87659-87660/17/SMB - Dated:- 2-6-2017 - Shri Ramesh Nair, Member ( Judicial ) Shri Rajesh Ostwal, Advocate for Appellant Shri S.V. Nair, Assistant Commissioner (A.R) for respondent ORDER The brief facts of the case are that the appellant are engaged in the manufacture of mild steel drums on job work basis out of the raw material supplied by the principal M/s Hindustan Petroleum Corporation Limited (for brevity HPCL). The manufacturing unit of the appellant is adjacent to the factory of HPCL. The appellant also availing the modvat credit on the raw material supplied by the principal and discharging the excise duty on the job worked goods while clearance of the same to the principal HPCL. The steel drums manufactured by the appellant is meant for use by the HPCL for packaging of their final pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s that since the supplies are only to HPCL who is a Public Sector Undertaking, it is impossible to make a clandestine removal. He submits that the drums supplied by the appellant are modvatable input for HPCL therefore there is no question of clearance of the drums without payment of duty as the excise duty paid by the appellant is reimbursed by HPCL over and above job charges. He further submits that the manufacturing of drums is on job work basis for which the raw material that is steel sheets were supplied by HPCL. Therefore there is no question of the goods manufactured out of the Steel Sheets supplied by HPCL, can be cleared clandestinely. The HPCL had strict control over the quantity of material supplied to the appellants as the same was property of HPCL. Input output ratio is stipulated in the contract between the HPCL and appellants. No discrepancy was ever raised by HPCL regarding the mismatch of input output ratio. The mode of supply of drum is that being the factory of the appellant adjacent to the plant of HPCL the drums are cleared from the factory on the conveyor belt belonging to HPCL and for the entire quantity cleared GP1 prescribed under Rule 52A of erstwhile Cent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osing stock of drums at the end of the year 1992-1993 is ex-facie incorrect. It is impossible to work for HPCL refinery with nil closing stock of drum and he submits that if all the MRRs are taken into account the closing stock would be in thousands. Therefore the letter of HPCL cannot be relied upon for the alleged difference between the GP.1 and MRR. He submits that the appellant never admitted that the difference is due to clandestine removal of goods. The appellant has specifically retracted the aforesaid statement vide letter dt. 11.8.1997 as the same was taken in duress and continuous threat to arrest, as Shri Ashok Patel was subsequently arrested. This was also observed by the Hon ble High Court in its order. The impugned order has conveniently ignored the report of HPCL which shows that figures in MRR reflect number of drums filled. Therefore the quantity of drums filled and the quantity supplied by the appellant as per GP.1 can never be the same, therefore quantity of MRR cannot be taken into account to conclude the alleged clandestine removal. He alternatively submits that the entire exercise of demanding duty is revenue neutral as the duty, when paid, would have been imm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tely retract these statements. Therefore, the show cause notice be dropped as against him. 15. As against this version, the company also had indicated that it was undertaking a job work. M/s. HPCL will not allow its raw material to be utilized for the manufacture of drums for others or to allow to dispose of the production of drums in any manner other than to supply them. That is how the allegations in paragraph 22 of the show cause notice regarding deliveries of drums to undisclosed parties was denied and termed as imaginary. Once the job work was the activity undertaken and there was a denial of the liability to pay duty, so also on the above material that the least that is expected of a last fact finding authority, viz., the Customs, Excise Service Tax Appellate Tribunal is to consider this aspect in detail. That it is factual but necessarily requires and merits its consideration goes without saying, else, a party like the appellant has no opportunity to satisfy any authority that the adjudication is not in accordance with law and that there is a perversity in the order-in-original. If as an Appellate Authority, the Tribunal does not wish to examine this, then, its refu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sioner also indicated that the appellant have cleared the drum clandestinely to HPCL. It is beyond my imagination that the HPCL being a Public Sector Undertaking is indulged into clandestine receipt of the drums. Since the department accepted that the goods have allegedly been clandestinely removed to HPCL by the appellant then detailed investigation with the HPCL regarding receipt of clandestinely removed goods should have been conducted. From the record, I observed that not a single question was put up to any of the officers of HPCL that what has happened to the clandestinely receipt of drums or whether they have received clandestinely removed drums. It is obvious that if the charge of clandestine removal was made by the department on the basis of HPCL's MRR then what has prevented the investigating officer to enquire about the payment transaction towards such alleged clandestine removal; which is very vital aspect to conclude the offence of clandestine removal. By not conducting such enquiry, the case of revenue could not be established. Therefore, the allegation of clandestine removal of the department is far from the truth in the above circumstances. The entire case was ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to 31.3.94 the GP1 quantity is more than the MRR quantity. As per the above comparative quantities, it is absolutely clear that comparison between the quantity of MRR and GP.1 has no meaning as MRR quantity does not represent the actual quantity of drums received from the appellant by HPCL. Hence MRR cannot be made the basis for the clandestine removal. I also observed that the Ld. Commissioner alleged that clandestine removal of drum was made to HPCL in terms of para 30 of the impugned order which is reproduced below: As against the actual dispatch of 10,37,048 drums by the notice and received by M/s. HPCL, the notice had paid duty, in terms of the GP1s pertaining to the relevant period (1.3.1992 to 31.03.1993), only on 9,10,306 drums. The most obvious implication of this mismatch was that the differential 1,45,743 drums delivered to M/s. HPCL had been removed without payment of duty and without bringing them on record in prescribed Central Excise documents. This is what had been alleged in the show cause notice. But I do not find any reason for clandestine removal on the strong basis that as per the contract between the HPCL and appellant. The HPCL undertook to reimburs ..... X X X X Extracts X X X X X X X X Extracts X X X X
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