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TMI Blog2023 (11) TMI 885X X X X Extracts X X X X X X X X Extracts X X X X ..... anufacture of final product viz., Asbestos Cement Sheet. The appellant was availing the duty exemption in terms of Notification No.6/2002-CE dt.1.3.2002 on the finished products. 2. As per notification 6/2002 at serial no.158, for goods falling under Chapter heading 68 of CETA, 1985, the duty to be paid is 'Nil' if the goods are manufactured by use of not less than 25% by weight of fly ash or phosphogypsum or using both of these. The notification states that Condition 36 has to be fulfilled. As per the notification Condition 36 reads as under: "If the manufacturer maintains proper account in such form and in such manner, as the Commissioner of Central Excise having jurisdiction may specify in their behalf, for receipt and use of fly ash or phosphogypsum or both, in the manufacture of all goods falling under Chapter 68 of the First Schedule and files monthly return in the form and manner, as may be specified by such Commissioner of Central Excise, with the Deputy Commissioner of Central Excise or the Assistant Commissioner of Central Excise, as the case may be, having jurisdiction". 3. The department was of the view that the appellant has wrongly availed the exemption as per the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to have stated in their private records about the (bogus) excess supply of fly ash purportedly made from MTPS. Statement was recorded by the Officers from Shri D. Manickavasagam, Works Manager of M/s. Visaka lndustries Ltd. and from Shri. N. Santhosh Kumar, Proprietor of NEC. It appeared that though they were aware of the actual quantity of fly ash lifted, NEC has connived with the appellant and prepared faulty/bogus consignment notes and raised them for dispatch of fly ash over and above the actual quantity of fly ash lifted from MTPS. 3.3 As per the data provided by MTPS, it was noticed that if the excess quantity of fly ash recorded by the appellant as received by them for the year 2003-04 & 2004 05 was reduced, the actual fly ash content percentage in final products would fall well below 25%. Thus, the investigation and scrutiny of the various documents recovered, revealed that there was bogus fly ash receipt accounted as received from MTPS to the tune of 2251.311 MT during the year 2003-04, and 7957.690 MTs for the year 2004-05. The average percentage of fly ash recorded in the statutory record Form B and Form C for the years 2003-04 & 2004 05 was 27.91% & 26.65% respectivel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d receipt of fly ash." 4.1 The gist of the reply filed by co-noticee, M/s. Natesan Engineers & Contractors (Appellant in Appeal No.40390/2021) is stated in para 5.02 of the impugned order. Relevant part is extracted as under: * Small units and brick manufacturers who are in existence only in paper also get allotment from MTPS and many of such units will not use the allotted quota of fly ash but sell it and make profit out of it. From such units, they procured fly ash allotted by MTPS and diverted to M/s. Visaka Industries Ltd., because they are actual users. * Perusal of the purchase orders would reveal that two types of supplies i.e., delivery from MTPS quota to M/s. Visaka Industries Ltd., and another type was delivery of fly ash by them from the quota allotted to others by MTPS. The unloading of fly ash at Sankari Yard is known to MTPS. Further in the Sankari Yard not only the fly ash lifted from MTPS by them on behalf of M/s. Visaka Industries Ltd., but also fly ash lifted on behalf of other units was unloaded, packed and removed to the respective units. So the allegation of diversion of materials meant for M/s. Visaka Industries Ltd., is incorrect. * They have collect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and after hearing the submissions made by both sides, we are of the considered opinion that the appellant has to be given a further chance of contesting the case with the support of these documents. They have consistently pleaded in the reply to the notice as well as in the appeal that they have received supply of fly ash not only from MTPS but also from various other sources. In fact, the appellant has stated in the reply as under : 2. At the outset, we thank the Hon'ble Commissioner for allowing cross-examination of Sri N. Santhoshkumar as witness in this case. During the cross examination held on 19/11/2008 Sri N. Santhoshkumar inter-alia started that M/s.Natesan Engineers & Contractors and Natesan Construction Products are agents to many fly ash utilization companies like cement companies ACC, Asbestos Companies like Visaka, Readymix concrete plants like ACC RMC, RMC India Ultratech Readymix, R.B.S Readymix, Ganesh Concrete etc., and brick units like Sakthi Interlock and others; that no documents are given by MTPS for them for transport; that they are using their own consignment note for those companies to whom they are supplying fly ash; that they are collecting fly ash ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 of the Order-in-Original that the quantity delivered to the assessee as per the MTPS records was found to be reflected in the private register of M/s. Natesan Engineers and Contractors and that there was no dispute over this. The dispute, therefore, appears to be with regard to the quantity received from outside allottees by M/s. Natesan Engineers and Contractors. Mr. Santhoshkumar, Managing Director deposed in his cross examination held on 19.11.2008 that he had evidence to show the procurement of fly ash from other sources. The explanation given by the assessee was that those were third party documents and therefore, they took some time to get those documents. 26. In paragraph 3.1 of the order passed by the Tribunal, this submission of the assessee as placed on record. That apart, with regard to the discrepancy in the vehicle numbers, the assessee produced certain records to show that an error had occurred. Similarly, we find that in paragraphs 23.01, 23.02(i), 23.02(x), 23.02(xvi), 23.02(xxii), 23.02(xxv) and 23.02(xxvi), there were references to the stand taken by the assessee. Therefore, in our considered view, the Tribunal was justified in remanding the matter to the Adju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly) (BED Rs.13,12,20,280/-& Education Cess Rs.11,65,094/-) towards the Central Excise duty liability on Asbestos Cement Sheets cleared by them during the years 2003-04 & 2004 05 under Section 11A(2) of the Central Excise Act, 1944, from M/s.Visaka Industries Ltd., (ii) I demand appropriate interest under Section 11AB of the Central Excise Act, 1944 on the amount demanded at SI.No.(i) above; (iii) I impose a penalty of Rs.13,23,85,374/-(Rupees thirteen crores twenty three lakhs eighty five thousand three hundred and seventy four only) under Section 11AC of the Central Excise Act 1944 and Rule 25 of Central Excise Rules 2002 on M/s.Visaka Industries Ltd.,, and (iv) I impose a penalty of Rs. 19,00,000/-(Rupees nineteen lakhs only) on M/s.Natesan Engineers and Contractors under Rule 26 of the Central Excise Rules, 2002. 8. The very same duty demand, interest and penalties were again confirmed after re-adjudication also. Aggrieved, the appellants are once again before the Tribunal. 9. The Learned Counsel, Shri. Raghavan Ramabhadran appeared and argued for the appellant. His submissions are summarized as under: 9.1 M/s Visaka Industries Limited ('Appellant') is a manufacturer of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... * MTPS direct allotment of fly ash was supplied to Appellant through transport operator-NEC ** Cement Companies supplied fly ash to Appellant through transport operators like NEC, Guru Traders, etc. *** NEC procured Fly Ash from bricks companies and in turn supplied to the Appellant, etc. 9.5 Since the Appellant was using more than 25% fly ash in manufacture of asbestos sheets, the Appellant cleared the asbestos sheets at NIL rate of duty under the NN 06/2002 for the year 2003-04 and 2004-05. The Appellant maintained proper records for receipt and use of fly ash and filed the monthly returns promptly as required under the NN 06/2002. There was no dispute raised by the Department when the monthly returns were filed by the Appellant. The Appellant continued to use more than 25% fly ash in asbestos sheets even after the NN 06/2002 was rescinded in 2006. Proceedings initiated against the Appellant 9.6. The present dispute has a chequered past. The series of events leading upto the present Appeal are tabulated hereinbelow: S No Date Event Annexure Reference 1. 07.04.2008 SCN No. 32/2008 proposed to deny the benefit of NIL rate of duty claimed under NN 06/2002 alleging tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stos sheets do not contain 25% or more than 25% fly ash because the source of fly ash could not be substantiated. A.3. The Appellant submits that such denial is alien to the NN 06/2002. The NN 06/2002 requires the Appellant to account for and furnish monthly receipts of fly ash to demonstrate that the asbestos sheets contained not less than 25% fly ash. A.4. The impugned order has required the Appellant to also identify the source from where they procure fly ash when there is no requirement to prove the source of the supplier. A.5. In Paragraph-16.01, the impugned order has held that the Appellant has not proved the sources of fly ash procured by the brick companies, Sakthiguhan Construction Products and SIAR Traders and therefore has held the Appellant to be ineligible for exemption under the impugned notification. These findings are wholly irrelevant to the NN 06/2002. The Appellant has gone above and beyond to prove that the exemption claimed is in consonance with the Notification by collating all their sources of fly ash from MTPS and independent suppliers. The RTI also attests to this fact. A.6. In a case where the Notification and the SCN do not require the Appellant to p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fy the Department since there is no corroborative evidence produced by NEC in the form of Sales Tax Registration, Sales Tax returns, Ledger A/c, P&L A/c, Income Tax Return to prove the genuineness of transactions. B.4. It is submitted that all the aforesaid findings are beyond the scope of the SCN and merits to be set aside. It is well settled that an order cannot travel beyond scope of SCN. Reliance in this regard is placed on the following decisions: B.4.1. Caprihans India Ltd. v. CCE [2017 (51) STR 239 (SC)] B.4.2. Saci Allied Products ltd. v. CCE, Meerut [2005 (183) ELT 225 (SC)] B.4.3. CC Mumbai v. Toyo Engineering India Ltd. [2006 (201) ELT 513 (SC)] C. The impugned order has misunderstood the scope of remand directed by this Hon'ble Tribunal. C.1. The Appellant submits that the adjudicating authority has totally misunderstood the scope of the remand and has proceeded on an incorrect basis. C.2. The Tribunal vide Final Order No. 40339-40340/2018 dated 06.02.2018 had remanded the matter to the Commissioner on the basis of documents produced by appellant to prove that the Appellant has procured fly ash from sources other than MTPS. The Appellant had produced 9 box set ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e As per SCN (B/A * 100) 24.54% As per the Appellant (considering only 1295 MTs in excess of B) (C/A* 100) 26.50% D.3. In light of the above, even without considering the procurements from Sakthiguhan Construction Products and Shri Karthikeyan Transports, the Appellant is eligible for exemption. E. The Appellant is eligible for exemption for the year 2004-05 E.1. During the year 2004-05, the Appellant had procured fly ash indirectly from the following sources: Source Quantity (in M.T.) Chettinad Cement Corporation Ltd. (CCCL) 2957.85 MSM Transports 2480 ACC RMC 2482.015 SIAR Traders 30.06 Sakthiguhan Construction Products 13.26 Total 7963.185 E.2. When the above sources are considered, the consumption of fly ash is more than 25% and the Appellant is eligible for exemption. The said computation is as below: Source Quantity (in M.T.) Quantity of Asbestos sheet manufactured (as per SCN) (A) 76,687.08 Quantity of fly ash consumed in production As per SCN (excluding the alleged bogus quantity) (B) 12,479.06 As per the Appellant (considering only 7963.185 MTs in excess of B) (C) 20,442.25 % of fly ash consumed in manufacture As per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Appellant submits that assuming without admitting that the disputed quantity of fly ash was not received by the Appellant, the Department ought to have proved as to how the final product was manufactured by the Appellant. F.3. In any case, the only substitute to fly ash, is cement which is significantly more expensive. Therefore, it is commercially not viable to manufacture asbestos without fly ash. Business prudence and best practises demand that the Appellant use fly ash to manufacture asbestos sheets. G. The impugned order has been passed mechanically and with a pre-conceived mind. There is no positive evidence shown by the impugned order to reject the sources of procurements established by the Appellant. None of the evidence produced by the Appellant has been considered in proper light. H. Entire demand is barred by limitation. Consequently, demand fails. H.1. The impugned order has invoked extended period on the ground that the Appellant has not maintained proper records for receipt of fly ash and that they have shown bogus receipt which was unearthed and came to the knowledge of the Department. H.2. It is an admitted fact even as per paragraphs 2.01 and 2.04 of the SCN ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ief Engineer, of MTPS. The Officers visited MTPS on 6.10.2005 to verify the actual quantity of fly ash effected to appellant M/s.Vishaka Industries. The Superintending Engineer, of MTPS vide letter dated 6.10.2005 answered that the allotted quantity is 2000 tons/month and that no contract is made with TNEB. The month-wise details of lifting of fly ash by M/s.Vishaka Industries were furnished. 10.4 As per Board Circular 477/43/99-CX dt.10.8.1999, the percentage by weight of fly ash has to be calculated taking into account the weight of fly ash used with reference to the weight of the finished product in dry condition, i.e., weight of fly ash x 100/weight of Asbestos Cement Products. 10.5 From the data furnished by MTPS, it was noticed that if the excess quantity of fly ash recorded by appellant which is shown as received in their records and returns is reduced, for the year 2004-05 the actual fly ash content percentage in the finished product would fall below 25%. From the data received from MTPS as well as documents recovered from M/s.Natesan Engineers and contractors, co-noticee and the appellant herein, it was noted that the fly ash lifted from MTPS was correctly accounted in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rds carefully. 12. The issue to be considered is whether the duty demand, interest and penalties imposed on the appellants denying the exemption under notification 6/2002 dt.1.3.2002 is sustainable or not. 12.1 The undisputed fact is that the quantity of fly ash received by the appellant, viz, M/s.Vishaka Industries under direct allotment from MTPS tallies with the quantity of fly ash accounted by appellant as well as Natesan Engineers and Contractors, their transport contractor, in their books of account. According to department, this quantity would not be sufficient for the appellant to manufacture and remove cement asbestos sheet during the disputed period of 2003 to 2005, with fly ash content/use of not less than 25%. 12.2 The appellant counters the allegations by submitting that, besides receiving fly ash from MTPS as per direct allotment, they have also received fly ash from Cement companies, and others, for which they furnished documents. It is argued by appellant that though they raised this contention before the adjudicating authority in the earlier adjudication, it was not considered at all. The fly ash received from others has been used to manufacture cement asbestos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellant. 12.8 In para 16.01, the adjudicating authority has recorded his discussions and findings after examining the documents submitted by appellant, with regard to procurement of fly ash from other sources. The table in para 16.01 of the impugned order has summarized the procurements explained by the appellant : 2003-04 Name of Supplier Quantity (MT) Mode of procurement Chettinad Cement Corporation Ltd 1295.000 The party got direct allotment of fly ash from MTPS and the assessee directly procured from the party. Shri Karthikeyan Transports 1322.235 The party got fly ash bricks manufacturers. In turn NEC purchased fly ash from this party and supplied to the assessee Sakthiguhan Construction Products 21.750 Directly procured by the assessee from the party TOTAL 2638.985 2004-05 Name of Supplier Quantity (MT) Mode of procurement MSM Transports 2480.000 The party got fly ash from fly ash bricks manufacturers. In turn NEC purchased fly ash from this party and supplied to the assessee ACC RMC 2481.930 ACC RMC got direct allotment of fly ash from MTPS. AMC RMC appointed Alliance Carriers as transport contractors. Alliance Carrier authorized NEC as tran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Corporation Ltd. This letter is extracted as under : 12.9.3 In spite of this document there is no finding as to the procurement made from CCCL. The contention put forward by the appellant about the quantity of fly ash procured through M/s.Karthikeyan Transports is discussed as the letter dt. 20.12.2003 issued by M/s.Karthikeyan Transports which has been referred to by the adjudicating authority. The same is enclosed in the appeal paper book. As per these documents, M/s.Karthikeyan Transports have informed their interest to supply fly ash to M/s.NEC and it is stated in this letter that it is the fly ash from MTPS allotted to brick manufacturing companies. The names of the brick manufacturing companies who have allotments from MTPS, Mettur Dam, for lifting fly ash is also mentioned in this letter. Out of the 2162 MTs on two bills raised by M/s.Karthikeyan Transport on M/s.NEC, a quantity of 1322.235 MTs has been sold by M/s.NEC to appellant. This evidence has not been accepted by the adjudicating authority by observing that appellant has not produced copies of allotment order to these brick companies. The adjudicating authority has not been satisfied by the document showing the sou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made to seven brick companies which was indicated in the letter. From the documents, it is seen that the appellant had procured 2480 MTs of fly ash on various dates during February 2005. The appellant had furnished all documents evidencing the procurement through NEC from M/s.MSM Transport. So also, they produced the allotment orders of all the seven brick companies. The adjudicating authority though noted all these evidences produced by appellant has again opted to be silent as to why these procurements are to be considered as not bogus. The duty demand has been confirmed disregarding these documents and supply of 2480 MTs of fly ash. 12.9.9 In the case of ACC RMC, the appellant vide letter dt. 18.9.2003 appointed Alliance Carriers for transportation of fly ash from MTPS to ACC RMC, Bangalore. Alliance Carriers vide letter dt. 10.9.2003, had appointed NEC for the purpose of transportation of fly ash from MTPS to ACC RMC Bangalore. Dring the year 2004-05, NEC lifted 24,921 MTs from MTPS and supplied 21667.184 MT to ACC RMC, Bangalore. Out of the quantity of 2557.84 held as stock by NEC, 2482.015 MT was supplied to appellant. This is established by the letter dt. 12.5.2005 issued ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bsp;M/s. Chettinad Cements Corporation Ltd. ('CCCL') Pg. 57, 58: 1295 MT Pg 58: No findings. MTPS→ CCCL→ Visaka Pg 504 & 505: Letters issued by CCCL confirming the supply of fly ash to Visaka. Pg: 144: CCCL is listed in MTPS's RTI response as a recipient of fly ash for the year 2003- 04 vide serial number 9 in table (a). M/s Shakthiguhan Construction Projects ('SCP') Pg. 57, 58: 21.75 MT Pg 59: No records as to show the source of SCP. MTPS→SCP→ Visaka Pg 513 to 520: Goods Receipt Report prepared by Visaka and invoices received from SCP for the supply of fly ash to Visaka. Pg. 144: SCP is listed in MTPS's RTI response as a recipient of fly ash for the year 2003- 04 vide serial number 15 in table (a). M/s. Shri Karthikeyan Transports ('SKT') Pg. 57, 58: 1322.235 MT Pg 58: Visaka has not produced the allotment orders in favour of the 6 Brick Companies from whom SKT procured the fly ash. MTPS→ 6 Brick Companies*→ SKT→ Visaka Pg 509: Letter issued b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es. MTPS→ACC RMC→ Alliance→ Visaka Pg. 543: Letter issued by M/s. Alliance Carriers confirming the supply of fly ash to Visaka through NEC. Pg 527: ACC RMC issued letter to MTPS authorizing M/s. Alliance Carriers to collect and transport fly ash from MTPS. Pg. 528: M/s. Alliance Carriers issued a letter authorizing NEC for collection and unloading of fly ash. Pg. 543: M/s. Alliance Carriers confirms the supply of fly ash to Visaka through NEC. Sakthiguhan Construction Products ('SCP') Pg. 58, 60: 13.260 MT Pg. 60: No records to show the source of SCP. MTPS→ SCP →Visaka Pg. 546: Acknowledgement receipt of Visaka accepting fly ash from SCP. Pg. 547: Bill raised by SCP against the supply of fly ash to Visaka. Pg. 147: SCP is listed in MTPS's ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re the Hon'ble High Court. The same contention was put forward by the department before the Hon'ble High Court. After taking note of the argument put forward by the Ld. Standing Counsel for department, the Hon'ble High Court while upholding the order passed by CESTAT held as under : "25. In the instant case, the Adjudicating Authority has recorded in paragraph 23.01 of the Order-in-Original that the quantity delivered to the assessee as per the MTPS records was found to be reflected in the private register of M/s. Natesan Engineers and Contractors and that there was no dispute over this. The dispute, therefore, appears to be with regard to the quantity received from outside allottees by M/s.Natesan Engineers and Contractors. Mr.Santhoshkumar, Managing Director deposed in his cross examination held on 19.11.2008 that he had evidence to show the procurement of fly ash from other sources. The explanation given by the assessee was that those were third party documents and therefore, they took some time to get those documents. 26. In paragraph 3.1 of the order passed by the Tribunal, this submission of the assessee was placed on record. That apart, with regard to the discrepancy in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bogus quantity of fly ash was actually received in their factory and used in the manufacture of final product. In such circumstances, the allegation that appellant has contravened the condition of the notification 6/2002 dt. 1.3.2002 in as much as their final products did not contain 25% of fly ash is without any factual basis. The demand therefore cannot sustain and requires to be set aside. Ordered accordingly. 15. As we have concluded that the allegation of bogus quantity is factually wrong, the penalty imposed on the appellant in E/40390/2021, NEC alleging that NEC abetted / connived in creating bogus receipts also cannot sustain and requires to be set aside. The issue on merits is found in favour of appellants and against the department. 16. The Ld. Counsel has argued on the ground of limitation also. The entire case is set up on the basis of facts. It is alleged that appellant accounted bogus quantity with intention to wrongly avail the exemption benefit of the notification. As we have already held the issue on merits that the quantity accounted is not bogus and that the appellant is eligible for benefit of exemption of notification 6/2002 dt.1.3.2002, we do not find any g ..... X X X X Extracts X X X X X X X X Extracts X X X X
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