TMI Blog2006 (12) TMI 150X X X X Extracts X X X X X X X X Extracts X X X X ..... 73Q the penalty has been imposed. The learned counsel submitted that whenever penalty is imposed, the particulars of the provision which have been violated must be furnished in the show cause notice and without furnishing those particulars penalty cannot be imposed. Learned counsel in support of the said contention relied on the judgment in the case of Amrit Foods v. Commissioner of Central Excise, U.P.[ 2005 (10) TMI 96 - SUPREME COURT] . From a perusal of the said judgment it appears that the Tribunal has set aside the order of the Commissioner on the ground that neither the show cause notice nor the order of the Commissioner specified which particular clause of Rule 173Q had been allegedly contravened by the appellant. The Apex Court held that the finding of the Tribunal is correct. The Apex Court also found that Rule 173Q contains six clauses and the contents of which are not same. Therefore, it was necessary for the assessee to be put on notice as to the exact nature of contravention for which the assessee was liable under the provisions of Rule 173Q. Since this has not been done, the finding of the Tribunal cannot be faulted. Unfortunately in the instant case the imposi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alleged shortage of the raw materials between the two sets of records. Without considering the explanation furnished by the Company, the Tribunal's finding cannot be sustained in the eye of law. As such, this Court answers the first question in the affirmative and in favour of the Company and the second question in the negative and also in favour of the Company. In view of this Court's answer on these questions, the other two questions need not be answered. All the three reference cases are answered and disposed of accordingly. - A.K. Ganguly and I. Mahanty, JJ. [Order per : A.K. Ganguly, J.]. - These three reference cases being CE REF Case Nos. 10 of 2003, 11 of 2003 and 12 of 2003 were heard analogously as they arise out of a common final order dated 28th January, 2003 passed by the Customs Excise and Gold (Control) Appellate Tribunal. East Zonal Bench, Kolkata (hereinafter referred to as "Tribunal"). By the said final order, by a majority decision, the three appeals filed by the J.K. Corporation Limited (hereinafter referred to as "Company") were rejected. Certain questions of law were framed in the statement of cases forwarded by the Tribunal. But when hea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ivision of the Company at Dhenkanal, Orissa. 3. For Manufacturing of the aforesaid items, certain raw materials are required which are known as Mono Ethylene Glycol (hereinafter referred to as "MEG"), Purified Terephthalic Acid (hereinafter referred to as "PTA") and Polypropylene Chips (hereinafter referred to as "PP Chips"). All these items are falling under the First Schedule to the Central Excise Tariff Act, 1985. 4. The Company's case is that it availed of Modvat credit in respect of the duty paid on these raw materials used in or in relation to the manufacture of the final products in accordance with the relevant statutory provisions at the material point of time. 5. Three reference cases are in respect of three different raw materials. CE REF Case No. 10 of 2003 is in respect of MEG, CE REF Case No. 11 of 2003 is in respect of PP Chips and CE REF Case No. 12 of 2003 is in respect of PTA. 6. On 5th March, 1996 the Company received a show cause notice dated 1st March, 1996 issued by the Commissioner, Central Excise and Customs, Bhubaneswar in respect of MEG. The allegations in the said show cause notice, inter alia, are the actual consumption of MEG as per the Shift E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tral Excise Rules, 1944. 8. Being aggrieved by the said order of the Commissioner, Central Excise Customs, Bhubaneswar, the Company preferred an appeal before the Tribunal which was registered as Appeal No. E/604 of 2000. Along with the said appeal, as required under Section 35F of the Central Excise Act, the Company also filed an application for stay before the Tribunal and thereafter by order dated 22nd May, 2001 the Tribunal allowed the stay petition unconditionally pending the disposal of the appeal. 9. In so far as raw materials of PP Chips are concerned, the Company received a show cause notice dated 7th January, 1997 issued by the Commissioner of Central Excise Customs, Bhubaneswar. In the said show cause notice, it was alleged that the Company had allegedly availed Modvat credit on 256.025 MTs of PP Chips during the period from May, 1994 to January, 1995 without having used the same in the factory for manufacturing operation and had allegedly disposed of the same in a manner which is not provided under the Central Excise Rules. It was also alleged that the Company had evaded Central Excise Duty to the tune of Rs. 57,60,563/- and contravened the provisions of Rules 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not so utilized had been diverted elsewhere without following the due procedure laid down in Rule, 57F of Central Excise Rules and the duty involved worked out to Rs. 72,13,259.60 calculated at 20% based on the value in Invoice No. 0031990 dated 26-6-1995. As such, the Company was called upon to show cause why it shall not pay the Central Excise amounting to Rs. 72,13,259.60 under Section 11A of Central Excise Salt Act read with Rule 9(2) and under Rule 57-I of the said Rules and penalty should not be imposed under Rule 9(2), 173Q, 209 and 226 for violation of Rule 9(1), 52A read with Rule 57F, 173F, 173G and 226 of the said Rules. On 3rd December, 1997 the Company gave its reply to the show cause notice whereupon a personal hearing was held. By order dated 25th September, 2000 the Commissioner confirmed the duty demand of Rs. 41,75,460/- and also imposed penalty of Rs. 7 lakhs upon the Company under Rule 173Q of the said Rules. Being aggrieved by the said order of the Commissioner, the Company preferred an appeal before the Tribunal which was registered as Appeal No. E-612 of 2000 and the Company also filed a petition for stay. By order dated 14th February, 2001 the Tribunal all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned counsel for the Company urged that it has been correctly held by the Member (Technical) that the variance between the private records and statutory records is negligible and must be considered to be permissible in the context of the manufacturing process. In other words, it has been contended that the quantities of final products manufactured from the inputs in question were in accordance with the input and out put ratio of the machinery in use. Therefore, there is no reasonable basis for holding that any part of the raw materials had been clandestinely removed since the production of final goods from the raw material used substantially tallies with the input and out put norms. It was pointed out that the Member (Technical) considered the explanation which was furnished by the Company and came to a correct finding that "the differences between quantities of consumption entered in statutory records and private records have been statutorily explained by the assessee", but the opinion of the Member (Judicial) has been to the contrary. Criticising the views taken by the Member (Judicial), the learned counsel urged that in Paragraph-16 of the order, the Member (Judicial) held that " ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der but in the said order Member (Judicial) found that the explanation offered by the Company makes out a strong prima facie case. But the same explanation which has been offered has not at all been considered at the final stage when the appeal was heard. 17. Learned counsel drew the attention of the Court to the specific explanations offered in respect of three items in the written notes filed on behalf of the Company. But the learned counsel for the Company submitted that those explanations have not been considered at all. 18. This Court finds that there is some substance in the aforesaid contention of the learned counsel for the Company. In fact the following explanation has been offered in so far as MEG is concerned. MEG consumption as per photocopy supplied by the Department for the period from October, 1991 to October 1995 (both duty paid and non-duty paid) MEG consumption as per photocopy supplied by the Department for the period from October, 1991 to October 1995 (both duty paid and non-duty paid) 21,278.430 M.T. Consumption as per show cause notice for both duty paid and non duty paid 21,186.911 M.T. Difference ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er consideration of increase/decrease in floor stock) 14776.709 M.T. Input/output Ratio of PTA/ POLYMER- (14776.709/17147.025) 861.765 M.T. Input/Output Ratio of PTA/Polymer as per Collaboration agreement. 0.865 M.T. The aforesaid analysis shows that all the PTA shown in RT-5 Returns was used during the material period and no part of the PTA was removed as alleged. 21. The learned counsel for the Company relied on the judgment of the Supreme Court in the case of Union of India v. Indian Aluminum Co. Ltd. reported in 1995 (77) E.L.T. 268 (S.C.) and contends that exact mathematical equation cannot be achieved between the quantity of manufacture of the final products and consumption of raw material for the said products. In paragraph-14 of Union of India (supra) the learned Judges came to the following conclusion; "…In the course of manufacture, a certain quantity of raw material may be lost because of the very nature of the process of manufacture or some small quantity of raw material may form part of wastage or ashes. This does not mean that the entire raw material was not used in the manufacture of finished exercisable products. An exact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be vitiated by an error of law. In the instant case also we find that the explanation given on behalf of the Company was not considered by the appropriate fact finding quasi judicial authority as pointed out above. So without a proper consideration of those explanations, the conclusions arrived at cannot be sustained. On this aspect reference can be made to the judgment in the case of Durga Trading Company v. Commissioner of C.Ex., Lucknow reported in 2002 (148) E.L.T. 967 on the question of clandestine removal. In that case reconciliation between sales and purchase bill was not arrived at. The learned Judges held that on that basis no inference of clandestine removal could be drawn legally. Nor any conclusion can be drawn that the goods were cleared after manufacture without payment of duty. The learned Judges held that a charge of clandestine removal has to be based on concrete and tangible evidence and not on inferences involving unwarranted assumptions and in coming to the said finding, the Tribunal relied on the ratio in the case of Oudh Sugar Mills Ltd. (supra). This Court has been informed that the decision of the Tribunal in Durga Trading Company has been affirmed on ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court finds that the ratio is squarely applicable to the facts of the case. 27. In so far as other penalty provision is concerned, namely, imposition of penalty under Rule 173Q, learned counsel for the Company submitted that neither in the show cause notice nor the order of the Commissioner indicated under which clause of Rule 173Q the penalty has been imposed. The learned counsel submitted that whenever penalty is imposed, the particulars of the provision which have been violated must be furnished in the show cause notice and without furnishing those particulars penalty cannot be imposed. Learned counsel in support of the said contention relied on the judgment in the case of Amrit Foods v. Commissioner of Central Excise, U.P. reported in 2005 (190) E.L.T. 433 (S.C.). 28. From a perusal of the said judgment it appears that the Tribunal has set aside the order of the Commissioner on the ground that neither the show cause notice nor the order of the Commissioner specified which particular clause of Rule 173Q had been allegedly contravened by the appellant. The Apex Court held that the finding of the Tribunal is correct. The Apex Court also found that Rule 173Q contains six claus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in such a case its finding can be set aside by the High Court. These observations have been made by the learned Judges at Page-170 of the Report. The learned counsel also relied on the judgment of the Supreme Court in the case of Achutananda Baidya v. Prafullya Kumar Gayen and others reported in (1997) 5 SCC 76 and reliance was also placed on paragraph-9 where the learned Judges held that if the appellate authority does not consider the materials on record having a bearing on its finding, such finding of fact arrived, without consideration of relevant materials on record, cannot be sustained in law. Though the aforesaid observations were made in the context of the power of the High Court under Article 227 of the Constitution, on principle the same guidelines are to be followed by all fact finding authority. Reliance was also placed on the decision of the Supreme Court in the case of Commissioner of Income Tax, Punjab v. Indian Woolen Textile Mills reported in (1964) 51 ITR 291. In that case the learned Judges of the Supreme Court came to a conclusion that the if the appellate Tribunal does not consider the evidence covering all the essential matters and bases its finding upon some ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
