Commissioner Of Central Excise, ... vs A.K. Udyog

(Arising out of Order-in-Original No. 96/PKA/Th-II/2004 dated 10.3.2004 passed by Commissioner of Central Excise, Thane-II)

For approval and signature:

Honble Mr. P.K. Jain, Member (Technical) and Honble Mr. Ramesh Nair, Member (Judicial)

======================================================

1. Whether Press Reporters may be allowed to see : No the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?

2. Whether it should be released under Rule 27 of the :

CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?

3. Whether Their Lordships wish to see the fair copy : Seen of the Order?

4. Whether Order is to be circulated to the Departmental : Yes authorities?

======================================================

Commissioner of Central Excise, Thane-II Appellant Vs. A.K. Udyog Respondent

Appearance: Shri Ashutosh Nath, Assistant Commissioner (AR), for appellant Shri A.D. Maru, Advocate, for respondent

CORAM: Honble Mr. P.K. Jain, Member (Technical) Honble Mr. Ramesh Nair, Member (Judicial)

Date of Hearing: 30.4.2015 Date of Decision: 30.4.2015

ORDER NO

Per: P.K. Jain

This is an appeal filed by the Revenue. The respondent-assessee was engaged in the ship-breaking business. A case was made against the respondent-assessee which resulted in the issuance of a show cause notice dated 25.11.2003. In the show cause notice, a demand of Rs.66,20,706/- was issued. The details of the demand are indicated in Annexure B to the show cause notice. The case was adjudicated by the Commissioner vide the impugned order dated 10.3.2004. The Commissioner in his order confirmed the demands as under:-

ORDER

27. Therefore taking in to consideration all the facts & circumstances, I pass the following Order:

(i) I confirm the Central Excise duty amounting to Rs. 28,78,138/- (Rupees Twenty Eight Lakhs Seventy Eight Thousand One Hundred Thirty Eight only) on MS scrap obtained from ship breaking manufactured & cleared clandestinely by M/s. A.K. Udyog, Nallasopara under first proviso to sub section (1) of Section 11A of Central Excise Act, 1944 as shown above for the period from 28.11.1998 to 09.04.1999 & order recovery under Section 11A(2) ibid after adjusting, however, the amounts paid by the assessee towards duty & the Modvat credit available to them;

(ii) I also Impose a penalty of Rs. 28,78,138/- (Rupees Twenty Eight Lakhs Seventy Eight Thousand One Hundred and Thirty Eight only) under Section 11 AC of CEA 1944 against M/s. A.K. Udyog for the period from 28.11.1998 to 09.04.1999. As the Proprietary company & the Proprietor are a single legal identity, I refrain from imposing a separate penalty on Shri Amit Kumar Agrawal under Rule 209A of CER 1944 & on M/s. A.K. Udyog under Rule 173Q of CER 1944 as the same is not applicable once penalty is imposed under Section 11 AC ibid;

(iii) I also order recovery of interest at the appropriate rate on the amount of duty determined to be leviable & recoverable under the provisions of Section 11AB of CEA 1944 against the assessee;

(iv) I impose a penalty of Rs. 1,50,000/- (Rupees One Lakh Fifty Thousand only) on Shri Pankaj Kumar Agrawal, Supervisor & authorized signatory, Rs. 50,000/- (Rupees Fifty Thousand only) on Suresh Vithal Chogule, Excise Clerk, & Rs. 1,50,000/- (Rupees One Lakh Fifty Thousand only) Shri Ram Naresh Yadav of M/s. A.K. Udyog under Rule 209A of Central Excise Rules, 1944 for being personally responsible for the aforesaid contraventions of CEA 1944 & the rules made thereunder leading to the evasion of huge amount of Central Excise duty.

(v) I also impose a penalty of Rs. 3,00,000/- (Rupees Three Lakhs only) on Shri Narsing Das Agrawal, Partner of M/s. Maharashtra Sai Udyog & M/s. Vishwas Steel Limited, maternal uncle of Shri Amit Kumar Agrawal & Rs. 6,00,000/- (Rupees Six Lakhs only) on M/s. Maharashtra Sai Udyog for aiding and abetting the assessee & its Proprietor in their day-to-day working & also for receiving the MS scrap without duty paying documents & not recording the receipts, thereby facilitating the evasion of huge amount of Central Excise duty. However, I refrain from imposing penalty on M/s. Vishwas Steel Limited, Tarapur, Dist: Thane as no positive evidence has been brought in the SCN against them due to its closure.

The impugned SCN is disposed off accordingly.

2. Further, the duty payable i.e. Rs.28,78,138/- was computed as per the details given in the table in para 25.5.4. In brief, the Commissioner has confirmed the demand of Rs.56,48,791/- and further taken a view that the respondent-assessee has paid a duty of Rs.20,128/- in PLA, Rs.10,00,000/- by TR challans and modvat credit of Rs.17,50,525/- totaling Rs.27,70,653/-. After deducting the said amount, an amount of Rs.28,78,138/- was confirmed. The Revenue has come in appeal against the said order and the grounds of appeal are stated as under:-

7.1 The adjudicating authority observed that the duty payable by the assessee works out to Rs.5648791/-, after taking into consideration the duty paid by TR6 Challan in PLA and also Modvat credit. The adjudicating authority confirmed the duty of Rs.2878198/- and accordingly ordered for penalty under Section 11 AC and interest under Section 11AB of the Central Excise Act, 1944. The Adjudicator has considered that Rs.20128/- as paid through PLA and Modvat credit of Rs.1750525/ In-this connection, Rs.20128/- and Rs. 1140188/- on account of duty paid through PLA & Modvat has already been adjusted in the amount of duty demanded under Section 11A in the Show Cause Notice. This has resulted in the adjustment of the paid amount twice.

7.2 It has also been noted that though the adjudicator has observed that the assessee are eligible for Modvat credit against payment of CVD, the same is disallowed by OIO dated 09.10.01, passed by the Additional Commissioner, Central Excise, Mumbai-lll. As such the adjustment of Modvat credit against duty payable is not correct.

7.3 The adjudicating authority also allowed 10% deduction towards erecting and fitment for constructing the Ship's cabin crew etc by observing it as an accepted fact that entire ship of 5960 MT was not consisting of M.S. In this connection the adjudicator has not taken into consideration the allowance of 326.740 MT given for Firewood. Though he has observed that there is no documentary evidence to support the contention of the assessee that it contained 326.740 MT Firewood The duty on the Firewood is not demanded in the Show Cause Notice.

7.4 In view of the fact, it appeared that the adjudicating authority should have confirmed the entire demand of Rs.6620706/- and should have appropriated the amount of Rs.10,00,000/- paid by the assessee. only from the confirmed amount. The adjudicator should have ordered for penalty and interest accordingly.

3. The learned AR submitted that the Commissioner has incorrectly extended the benefit of Rs.20,128/- as paid through PLA and modvat credit of Rs.17,50,525/-. It was submitted that out of the said amount of Rs.17,50,525/-, an amount of Rs.11,40,188/- was already utilized by the respondent-assessee for computing the duty as per Annexure B(I) of the show cause notice. The same is appearing in serial No.B of the table, i.e. to say that the quantity of ship scrap cleared as reflected in factor records on which the duty liability of Rs.9,41,109/- is indicated in the show cause notice as also the impugned order is after deduction of Rs.20,128/- and Rs.11,40,188/-. Since the said amount has already been taken into consideration for demanding the duty on the ship scrap as reflected in the records, the benefit of the said payment cannot be given again after computing the duty liability. (This duty liability already excludes the duty paid). This has resulted in the adjustment of the paid amount twice.

3.1 The second submission of the learned AR was that the department has already denied the modvat credit against payment of CVD vide order-in-original No. 45/KPS/2001 dated 9.10.2001 passed by the Additional Commissioner. Further, the respondent assessee has filed appeal against the said order-in-original and the Commissioner (Appeals) vide order-in-appeal No. PKA/172/M-III/2002 dated 28.3.2002, dismissed the appeal for non-compliance of Section 35F of the Central Excise Act, 1944. The respondent-assessee then preferred an appeal with this Tribunal. This Tribunal, vide order No. CB/279-80/2002/WZB dated 13.11.2002, disposed of the appeal with the direction to the appellant to deposit the amount of Rs.4.50 lakhs within a period of six weeks from the date of the order and if the amount is not paid within the time granted, the appeal will stand dismissed and the Commissioners order under challenge will stand confirmed. The assessee has not paid the said amount.

4. The learned counsel for the respondent-assessee has orally stated that they had filed an appeal against the said order before the Honble High Court and the Honble High Court has dismissed the same. However, he was not in a position to produce the copy of the High Court order. It was also submitted that so far they have not paid the said amount of Rs.4.50 lakhs.

5. The learned AR further submitted that the adjudicating authority has allowed 10% deduction towards erecting and fitment for constructing the ships, cabin crew etc. It was submitted that while issuing the demand notice, allowance of 326.740 MT was already given for firewood. Even though there is no documentary evidence to support the contention of the assessee that it contained 326.740 MT of firewood. Learned AR further submitted that the penalty amount needs to be increased correspondingly.

6. The learned counsel for the respondent-assessee submitted that their bill of entry was provisionally assessed by the Customs, which is not finalized even today. It was further submitted that the respondent-assessee has only imported one ship and is no more in the ship-breaking business. On query from the Bench regarding the details given in the impugned order, he had nothing to state.

7. Heard the rival submissions. On carefully going through annexure B(I) of the show cause notice, we observe that while issuing the demand notice, payment of Rs.20,128/- through PLA as also modvat credit of Rs.11,40,188/- has already been taken into consideration. The demand in respect of the said clearances amounting to Rs.9,41,109/- has been arrived after extending the said benefit. Thus, we agree with the contention of the Revenue that this has resulted in the adjustment of the paid amount twice. We, therefore, order that the duty paid should be considered as Rs.10,00,000/- + Rs.6,10,337/- (Rs.17,50,525/-  Rs.11,40,188/-) extending the said benefit, the net duty leviable will be Rs.40,38,454/-.

8. The Revenue has also filed appeal on the grounds that modvat credit against payment of CVD cannot be extended as the same had been disallowed by order-in-original dated 9.10.2011. We have seen the said order-in-original. In the said order-in-original, the Revenue has already proposed recovery of the said amount. The respondent-assessee has taken the credit of the said amount only once. We, therefore, do not see there is any adjustment of modvat credit against duty payable. The plea is, therefore, rejected.

9. The third issue raised by the Revenue is relating to the 10% deduction towards erection and fitment for construction of ship, cabin crew etc. It is accepted fact that the entire ship does not consist of M.S. alone and the Commissioner has given a deduction of 10% towards erections and fitments for constructing ship, cabin crew etc. The Revenue is submitting that in the calculation, a benefit of 326.740 MT of firewood has already been given. Firewood and erection and fitments for constructing ships cabin crew etc. are different things. A lot of wood is used in the ship even for proper storage of the goods etc. In view of the said position, we do not find any merit in the contention of the Revenue to disallow 10% deduction towards erecting and fitment for constructing ship cabin crew etc. Accordingly the said plea of the Revenue is rejected. In brief, the duty confirmed will go up to Rs.40,38,454/- which is confirmed.

10. We also find that penalty under Section 11AC has been imposed which is required to be equal to the duty imposed. Accordingly the penalty imposed under Section 11AC is also increased to Rs.40,38,454/-.

11. The Revenues appeal is allowed in above terms.

(Pronounced in Court)

(Ramesh Nair) Member (Judicial) (P.K. Jain) Member (Technical)

tvu 1 9