TMI Blog2017 (10) TMI 394X X X X Extracts X X X X X X X X Extracts X X X X ..... cords relating to procurement of raw materials, suppression of the account of the exisable goods manufactured in their statutory records and clearance of the same without payment of duty. Thus there is no doubt on the factum that evasion of excise duty was taking place rampantly. The dispute appears to be in the quantification of such duty evaded resulting in the demand to be confirmed Scope of SCN - Whether the adjudicating authority or the Tribunal in the earlier round of litigation, has confirmed the demand of excise duty going beyond the reasons appended in the SCN? - Held that: - the show cause notice / SoF is silent on how the duty demand was to be increased from above ₹ 2.82 crores to ₹ 4.29 crores. No work sheet has been attached to show cause notice to indicate for which period the production norms has been adopted and for which period other evidence have been used to determine the duty liability. - the demand raised in Show cause notice is beyond the reasons given in SOF. It is settled position of law that before confirming the demand of Central Excise duty, the assessee is required to be put to notice not only on the extent of duty demand but also evid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cal ) Sh. S Jai Kumar, Advocate for the Assessee Sh. P R V Ramanam, Special Counsel for the Revenue ORDER Per : V. Padmanabhan This is the 2nd round of litigation before the Tribunal. In the previous round of litigation the various appeals were decided by the Tribunal vide Final Order number 793 to 797 dated 01.12.2011. The said Final Order was set aside by the Hon ble High Court of Karnataka vide their judgement dated 25.02.2016 and the matter was remanded back to Tribunal for passing a denovo decision. 1.1 Appeal No. E/559/2008 is by M/s. Trishul Arecanut Granules Pvt. Ltd. (TAG for short) challenging confiscation of goods (allowed to be redeemed on payment of fine of ₹ 50,000/-), demand of duty of ₹ 2,85,634/- and penalty of ₹ 50,000/- imposed on them. 1.2 Appeal No. E/825/2008 is by M/s. Wahab Stores against imposition of penalty of ₹ 10,000/-. 1.3 Appeal No. E/826/2008 is by Shri Prabhu Deva of M/s. Embee Agencies against imposition of penalty of ₹ 20,000/- (The above three appeals arise out of common Order-in-Original No. 11/2008 (Denovo) dated 28.4.2008 by the Commissioner passed in pursuance of show-cause notic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oner instead of to the Asst. Commissioner. 2.5 After further examination of records and further investigation including an experiment regarding production capacity (conducted on 30/12/2005), a show-cause notice dated 31/1/2007 proposing demand of duty of ₹ 4,29,95,443/- from TAG and proposing imposition of penalties on TAG and the Managing Director of TAG was issued. 2.6 In pursuance of show-cause notice dated 17/12/2005, duty of ₹ 2,85,634/- along with interest stands demanded; the goods valued ₹ 4,59,515/- stands confiscated but allowed to be redeemed on payment of fine of ₹ 50,000/-. Penalties of ₹ 50,000/- on TAG, ₹ 20,000/- on M/s Embee Agencies. ₹ 10,000/- on M/s. Prakash Stores, ₹ 10,000/- on M/s. Wahab Stores, ₹ 1000/- on M/s Amud Stores and ₹ 3000/- on M/s Veerbadrappa Sons stand imposed. Against this Order-in-Original, appeals stand filed by three parties viz. TAG, M/s Wahab Stores and M/s. Embee Agencies. 2.7 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 ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was omitted. Again it was inserted on 14.5.1997 but, again omitted on 11.5.2001. The said Section 3-A again came to be inserted on 10.5.2008 and thereafter has continued. In any case) it is undisputed position that, during subject period, the said provision of Section 3A was not on the statute book during the subject period of 2002-03 to 2004-05 or up to not even for 2005-06 and carne to be inserted only on 10.5.2008. 13. It is by now well settled that all taxing statutes are to be strictly interpreted. Further in normal circumstance, when there is conscious omission on the part of the Parliament for charging the excise duty based on the production capacity by virtue of Section 3-A, it will have the repercussions for such a course to be made available to the assessing authority. Further, even 8.3 per Section 3-A, the goods are required to be notified for the purpose of charging excise duty on the basis of production capacity. As such, it is a pure question of law as to whether the recourse under Section 3-A under these circumstances, is available to the Assessing Authority for levy of Excise duty on the basis of production capacity or not. However, it appears from the order of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sidered. It may fall in the arena of observance of not only the principles of natural justice but, may also fall in the arena of self contradictory stand resulting into ultimate no sufficient opportunity to meet with the same. When the question arise for observation of the principles of natural justice, it would be a question of law though may be it is based on certain factual premise. 16. We would have considered the matter strictly as to whether such a contention should be examined by this Court, when the contention was not so raised before the Tribunal. However, considering the peculiar circumstances that, as referred to herein above, on the aspects of availability of Section 3-A and on the aspects as to whether goods were so notified for the purpose of charging excise duty, when we have found it proper to remand the matter to the Tribunal, we find that it would be just and proper to allow the party to raise the contention even on the aspects of the show cause notice as referred to herein above before the Tribunal and the Tribunal shall examine the same in accordance with law. 17. In View of the aforesaid observation and discussion, we find that, on the aforesaid two ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his statement cannot be relied upon as evidence as has been held by the Hon ble Punjab and Haryana High Court in the case of Ambika International reported in2016-TIOL-1238-HC-P H-CX. iv) The Ld. counsel finally submitted that on the basis of evidences cited by the revenue, the total demand cannot exceed above ₹ 48 lakh. 7. The ld. Special Counsel, Sh.R.V. Ramanan argued the case on behalf of revenue and made the following main submissions: i) The remand by the Hon ble High Court is limited to only the two aspects mentioned in the order of the Hon ble High Court. He submitted that the mandate given to the Tribunal in the de novo proceedings is not to reappraise the evidence. He emphatically added that the demand in the present case has not been made in terms of section 3A of the Central Excise Act. The demand has been raised on the basis of evidence in the form of records recovered during the search operations. Only for the period 08/2004 to 03/2005, the demand stands confirmed on the basis of an estimate of production based on the production norms confirmed by the MD of the appellant. ii) The special counsel further added that the breakup of duty demand was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , therefore, fall within the framework of this scheme. (ii) Revenue has not taken recourse to the provisions of section 3A at all in determining the clandestine production and clearances effected by TAG. The SCN sought to arrive at the differential duty i.e. the amount of duty short levied, in terms of Section 11A of the CEA, 1944. In several decided cases this method of determining clandestine clearances has been upheld by the Tribunal and Courts. (iii) In the present case, the searches, based on intelligence, revealed large scale CX duty evasion through clandestine production and clearances, which were admitted in clear terms by the MD of TAG. Even such admission was found to be understated as it was contrary to the regular and substantial augmentation of machines during the subject period. It is in this context, and the fact that TAG could not produce the production records- as the same were lost! destroyed as per the MD- and raw material accounts, the investigating unit adopted the basis of production norms taking into account the number of machines, 5 working hours/day for 14 days in a month, to determine the likely quantity of clandestine clearances for the period f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 28,16,880 -DO- 09/2007 to 31/07/2004 8,33,150 4,16,575 2,54,944 -DO- 08/2004 to 02/2005 6,63,70,500 3,31,85,620 2,03,09,373 Based on no. of cotton canvas bags purchased 03/2005 94,81,500 47,40,750 31,85,784 -DO- 04/2005 and 05/2005 1,48,97,140 74,48,570 50,05,439 Based on production books maintained at the factory TOTAL 13,90,48,635 6,95,43,318 4,29,95,443 NA (iii) As stated earlier, the Tribunal, in its final order, applied production norms also for the period from August 2004 to March 2005.This was because it was found that estimated clandestine clearances as per the number of cotton canvas bags purchased from dealers was far in excess of the quantity arrived at based o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re is a catena of decisions holding that demand of duty cannot be based only on consumption of electricity. In particular the appellant relied on the following case last in support of their contention: a) CCE Meerut Vs. RA Castings Pvt. Ltd. 2011 (269) ELT 337 (ALL). b) Union Enterprises Vs. UOI 2014 (306) ELT 216 (Cal.) vi) Finally the appellants submitted that the impugned order merits to be set-aside. 10. We have heard both sides at length and have also perused the records including the written submissions filed by both sides. 11. The Hon ble Karnataka High Court while remanding the matter to this Tribunal has directed to pass de novo decision after considering all the appeals in the light of the observations of the Hon ble Court. The 1st aspect highlighted by the Hon ble High Court s was whether recourse under section 3A is available to the adjudicating authority for the levy of excise duty on the basis of production capacity and whether any notification was available under this Section for gutkha, during the period covered by the appeals. 12. Section 3A of the Central Excise Act empowers the government to notify commodities which are to be assessed to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cation of such duty evaded resulting in the demand to be confirmed. The appellant has argued before the Hon ble High Court as well as before us in the present proceedings that the amount quantified goes beyond the reasons recorded or appended to the SCN. This is discussed next. 16. The second aspect on which the Hon ble High Court has directed the Tribunal to re-examine, is whether the ultimate amount quantified in the Show cause notice goes beyond the reasons recorded or the reasons appended to the Show cause notice. During the course of hearing of appeal, the learned Counsel for the appellant submitted that the show cause notice has raised the demand for ₹ 4,29.95,446/- . The same amount has also been confirmed by the adjudicating authority . It is the submission of learned Counsel that the Statement of Fact attached to the show cause notice, indicated the duty calculated on the basis of consumption of lime for the period April and May, 2005 which is worked out to ₹ 46,77,703/-. Further, on the basis of purchase of cotton canvas bags, duty demand has been worked out to ₹ 2,38,17,528/- and in para 50 of the Statement of Facts, the duty required to be demanded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was ₹ 2,84,95,231/-. After deducting the amount of ₹ 2,88,375/- towards the duty involved on seized goods, the Central Excise duty payable on clandestine clearance was worked out to ₹ 2,82,06,656/-. (iii) To estimate the production capacity of the appellants unit, an exercise was carried out by the officers on 30.12.05 to ascertain the number of pouches packed per unit per packing machine. This was carried out in the presence of Shri H S Nataraj, Managing Director. This was found to be approximately 20 pouches per minute. Taking this as the basis, the total production was estimated for the period of dispute assuming that machines were working for 5 hours per day for 14 days in a month, as stated by the Managing Director. On this basis, the total production was estimated and the duty liability of ₹ 4.03 crores was worked out. However, the show cause notice / SoF is silent on how the duty demand was to be increased from above ₹ 2.82 crores to ₹ 4.29 crores. No work sheet has been attached to show cause notice to indicate for which period the production norms has been adopted and for which period other evidence have been used to determine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... learance estimated on the basis of number of cotton canvass bags, works out to much more than what can be produced on the basis of production capacity as ascertained by the department. Therefore, the Tribunal has directed that the production needs to be reworked and restricted to that arrived on the basis of production capacity as has been ascertained for the period April, 2003 to June 2004. 24. Duty calculation on the above lines will further bring down the duty liability of the appellant and hence we have no hesitation in adopting this part of the Final Order passed by the Tribunal. 25. The demand of duty of 2,85,634/- on the goods seized on the date of search should be held part of the overall demand and as they relate to goods cleared on or before 19.6.2008, there is no chance for separate confirmation of the same. 26. 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 limitation for demand of duty in the show-cause notice dated 31.1.2007 was not justified. In this regard decision of the Supreme Court in the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 relevant date and as to whether the show cause notice has been served within a period of five years therefrom Penalties 27. TAG has ..... X X X X Extracts X X X X X X X X Extracts X X X X
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